Free Lanka Capital Holdings - Prospectus

8/6/2019 Free Lanka Capital Holdings - Prospectus

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FREELANKA CAPITAL HOLDINGS LIMITED

F r ee L a nk a C a p, ro Ia l dm g s L I d - l n il i QI P u /) ! Jc O f f e r

IN IT IA L PUBL IC OFFER

Offer for Subscription of 300,000,000 Ordinary Voting Shares at the

Share Offer Price of Rs.5/- each

List ing on the Diri Savi Board of the Colombo Stock Exchange

The delivery of this Prospectus shal l not under any circumstances constitute a representation or

create any implication or suggest ion that there has been no mater ial change inthe affai rs of the

Company since the date of this Prospectus.

I fyou are inany dou bt regarding the contents of this document you shouIdconsuI tyour stockbro-

ker,bank manager, lawyer, registrars to the offering, managers to the offering or any other profes-

sional advisor.

For fur ther inqui ries please contact Taprobane Holdings Ltd or John Keells Capital ,

Managers to the Offering.

This Prospectus isdated 1st February 2011

OFFER AT A GLANCE j

Securities to be Issued Ordinary Voting Shares

Listing Di ri Savi Board of the CSE

Number of Sharesto be Issued 300,000,000

Offer Price per Share Rs.5.00

Issue Opening Date March I7, 20 I I

Issue Closing Date April OS , 20 II or on the date

the issue isoversubscribed,

whichever isearl ier

Minimum Subscription 2,000 shares (l.e, Rs . 10,000/-)

(Minimum subscription will be Applications in excess of 2,000

allotted to all subscribers of the shares should be in mul tiples of

Company's share Issue.) 1,000 shares

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iv

f re e L an ka C ap it o! H oJ dl ng s L Id - !IliliQ! Pu /) !J cOf fe r

This Prospectus isdated 1st February 2011 T ABL E OF CONTEN TS

The Colombo Stock Exchange (the "(SE") has taken reasonable care to ensure ful l and fai r d isclosure of

information in this Prospectus. However, the CSEassumes no responsibil ity for accuracy of the statements

made, opinions expressed or reports included in this Prospectus. Moreover, the CSEdoes not regulate the

pri cing of the shares offered herein. The Share Offer Pri ce w il l be determined in terms of the provisions

contained in Section 5.5(Consideration)

1.0 Corporate Information .

2.0 Relevant parties to the Offering 2

Responsibi I i ty forthe Content of the Prospectus 3.0 Glossary of Abbreviations used in the Prospectus 3

ThisProspectus has been prepared from informat ion provided by FreeLankaCapital Holdings l imited (FLCH)and

f rom publi cl y ava il ab le sources.The Directors of the Company, col lect ivel y and ind iv idua ll y, hav ing made all

reasonable enquiries conf rmto the Managersto theOffering, that to the bestof their knowledge and bel ief , that this

Prospectus containsaIIinformation with respect to the Company,which ismaterialin the context of the Offeringi that

the informat ion contained herein ist rue and correct inal l material respects and isnot misleadinq. that there areno

other mater ia l f ac ts , t he omiss ion of which would , make any sta tement conta ined herein mis lead ing; that the

opinions and intent ions expressed herein arehonest ly held and have been reached after considering all relevant

circumstances and are basedon reasonable assumptions.

4 .0 Def in it ions & Abbreviat ions of terms related to the Offer ing 4

5.0 Particulars of the Offering 5

5.1 Invitation to subscnbe 5

5.2 Objectives of the Offering 5

5.3 Natureof the Offered Shares 7

5.4

5.5

ShareOffer Priceand Minimum Subscription 7

Consideration 7

The Directors of FLCHaccept responsibility for the information contained in this Prospectus. While FLCHhastaken

reasonable care to ensure ful l and fai r d isclosure of information, i t does not assume any respons ib il it y for any

investment decisions made by investors based on information contained herein. In making an investment decision,

prospect ive investors must rely on their own examinat ion and assessmentsof the Company including the risks

involved.

5.6 Allotment 7

5.7 Listing 8

5.8 Subscript ionL is t& ClosureDate 8

S.9 Registrationof the Prospectus 8

6.0 Industry Overview 9

ThisProspectus hasnot been registered with any authority outside SriLanka. 6.1

6.2

6.3

6.4

Plantation Sector 9

Mini-Hydro PowerSector 11

Tourism& LeisureSector 12

Construction, RealEstate,Propertyand Housing Sectors 13

Allresident applicants should indicate in the application for shares,their NICnumber or the Company registration

number (asthe casemay be).Thepassport number may be indicated only i f the applicant does not havea NIC

number.

7.3 Group Structure asat date of Prospectus 15

7.4 Shareholder Information 16

7.4.1 Information Pertainingto the mainShareholdersof FLO-l...................................................................6

7.4.2 Top 10Shareholdersof FLCH 16

7.5 Subsidiary! AssociateInformation 17

7.6 Thedegree of dependence on keycustomers! suppliers 25

7.7 FutureStrategies,Risksassociatedwith FutureStrategies,Assumptionson which they

arebased& RiskMitigants (if any) Adopted by the Company 27

7.7.1 FutureStrategies 27

7.7.2 Risksassociatedwith FutureStrategies,Assumptionson which they arebased

& RiskMitigants (ifany) adopted by the Company 29

7.8 Taxation 32

7. 0 Profi le of the Ent ity 14

7.1 Overv iew 14

As per the Directi ve of the Secur it ies and Exchange Commiss ion made under C ircu lar No. 08 I 2010 dated

November 22, 2010and Circular No. 13I 2010 issued by the CentraI Depository System(Private) Limited dated

November 30, 2010, all sharesshall direct ly be uploaded to the CDS,all applicat ions should indicate the CDS

account number. Applicants who do not have aCDSaccount are advised to either open a CDSaccount prior to

making the application or immediately thereaf ter, inorder to facil itate the uploading of allot ted sharesto the CDS.

7.2 MainL inesofBusiness 14

Pleasenote that upon the a llotment o f sharesunder thi s i ssue, for app li cants who have ind icated the ir CDS

account details in their application form, THEALLOTTEDSHARESWOULDBECREDITEDTOTHEAPPLICANT'SCDSACCOUNTso indicated. PLEASENOTETHATSHARECERTIFICATESWILLNOTBEISSUED.

Forapplicants who have not indicated their CDSaccount details inthe application form, the allotted shareswould

ONLYbecredited to the Applicant's CDSaccount, subsequent to the applicants opening such account. Inorder to

facilitate the crediting of allotted shares,such applicants arerequired to forward the details of their CDSaccounts

to the Registrarto the Issueimmediately upon opening of the CDSaccounts.

You can open a CDS A/C through any Member I Trading Member of the CSEas set out in the Annexure A or

through any of theCustodian Bankssetout inAnnexure Bof this Prospectus.

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F r ee L a nk a C a p, ro Ia l dl n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap i/ al H al di ng s L Id -IMol Pub l ic o n e .

TABLE OF CONTENTS ( C oma . .) TABLE OF CONTENTS (Contd. . . )

7 .9 T ak e- o ve r O f fe rs _ ._. .._ ._ ._ . _. .. . . ._ . _. . _ _ . . _._ _._ _ _._ ._ . _ . ._ . _. . _ _ . . _._ _._ _ _._ ._ . _ . ._ . _. . _ . 3 2

7.10 Management Ag reements 33

7.11 Litigation, D isputes and Contingent Liabilities 33

7_12 Materia l Contracts .___ __ __ ___ __ __ ___ 33

7.13 Tra nsac nons related to Property 33

7.14 Deta ils of Com missions & Benef ts pa id 33

'2.0 S ta tu to ry an d o th er G en eral in fo rm atio n _ _ __ ._.__._ _,,___ __ _ __ ._.__._ _,,_ __ __ 54

12.1 Articles of Association 54

12.2 Inspection of Documents 54

12.3 Hosting of P rospectus and A pplication Form o n t he W eb __ __ ___ 54

12.4 Brokerage 54

12.5 CO S tof the Issue _ _ _.....................4

12 .6 Unde rw r it ing _ . _. . _ . . _ .__._ __._ ._ . _ . ._ . _ . . _ . . _ .__._ __._ ._ __._ ._ . _ . ._ . _ . . _ _ . . _ .__._ __._ ._ . _. . .. . ._ ..__5 4

8.0 D i recto rs 34

8.1 Details of the Board of D irec tors 34

8_ 2 Direc tor's 5 tatement _ _ _ _._ _ _ _ _._ 41

8.3 D irec tors' S hareholding 41

8.4 S ales and purchases o f shares made b y [he Directors 41

85 A gg re ga te e mo lu me nt s i nc lu di ng B on us a nd lor Profit s haring payments ,,_ _ __ ._ 41

8.6 D irec tor's interest in any assets and contracts 41

8.7 Corporate Governance Practices 41

8.7.1 Remuneration comm ittee .. __ __ _ __ __ __ _ __ ___ 42

8.7.2 Audit com m ittee 42

1 3 .0 S ta tu to ry D ec la ra ti on s 55

13.1 S tatutory Declaration by the D i recto rs ___ __ __ _ __ __ _ 55

13.2 S tatutory Declaration by the M anagers t o the offering 56

13.3 S tatutory Declaration by the Company 56

1 4. 0 F in an ci al S ta te me nt s a nd A u di to rs ' R ep or t 57

1 4. 1 A cc ou n ta n t's report fo r inclusion i n the Prospectus 57

14.2 Two y ear su m ma ry of the Financial S tatements __ " _ _ ___ __ " _ _ ___ 59

1 43 A ud it r ep or t a nd F in an ci al S ta te me nt s f or t he Y IE 31 st March 2010................................................................2

1 4. 4 I nte r im F in ancla I S tateme nts a s at 35t Dece m ber 2010 119

9. 0 Ke yMa n a g em en t P e r so n n e l _ " . _ . " . " _ _ " . _._ _._ _, ,_ __ . ,_ _ , ,. _ . ,, . " _ _ " . _._ _._ _, ,_ __ . , . _. ,_ _ , ,. _ . ,, . ". __43

9 .1 M an ag in g D ire cto r I CEO __ __ __. 43

9.2 S enior ma nagemen t 43

93 Emoluments of the S enior Management ___ __ " _ _ _ __ __ 44

9 .4 T ra ns ac ti on s w it h K ey M an ag em en t P er so nn el 44

9.5 Huma n C apita I o f t h e G r ou p 44

A nn ex ur e A - Procedure for Application __ __ 127

A n n ex u r e B - Extracts f rom Artic les of A ssociation of t he Com pa ny __ " __ ___ ___ 135

A n ne xu re C - Collection Points 143

10.0 S tated Capita l __ __ __ 45

1 0. 1 C ap it a I Strue ture 45

10.2 S hareholding S tructure of t he entity as at date of p rospectus .." __ ___ __ " __ 45

1O J PartiC l!lars of debt and loan capita l 46

1 0J .1 D eb t a nd L oa n C a pi t aI of the Compa ny 46

10 . 3 _ 2 D eb t a nd L oa n C a pita l o f t he G ro u pa s a t 3 1 st M a re h 2010 "___ .__.__"___ . ,__ , , . _ . , , . , , ____ 46

10.4 Div idend PoliCY __ __ __ 48

10.5 O uts tand ing convertible debt 48

10.6 S hares subscribed or sold privately __ " _ _ _ __ __ " _ _ _ __ 48

10.7 S tatutory restrictions on t he f ree transferability of shares 48

A n n ex u re D - Annual Rain Fall Data __ __ 148

A n ne xu re E - Custodian B anks ." __ ___ __ " __ ___ __ " __ ___ __149

A n ne xu re F - Forecasted Financ ial S tatements 1S O

A n ne xu re G - Extracts from Feasibility S tudies .. __ " 163

1 1 .0 Op e ra ti o n a I a n d F i na n c i a I O v e rv ie w _ _" . " _ _ , , . _ , , . _._ _._ _, ,_ __ . ,_ _ , ,. _ . " . " _ _ , , . _._ _._ _, ,_ __ . ,_ _ , ,. _ __ 49

11.1 D iversification of the G roup __ __ 49

11 .2 Plantation S ector 50

113 Hyd ro Powe r S ector __ " __ ___ __ " __ ___ __ 51

11.4 Key Performance Indicators .. 53

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F r ee L a nk a C a p it o ! H a ld l ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H a ld in gs L Id -IMol Pu b l i c O i f 2 1

1 . C OR PO RA TE IN FO RM AT IO N 2. RELEVANT PARTI ESTO THE OFFER ING

Issuer Free Lanka Capital Holdings Ltd Managers to t he Offering Taprobane Holdings limited.

No.10, Gothami Road,

Colombo 08.

Tel: 532810Q5328195 Fax: 5328109

Legal Form A Private limited liability Company i ncorporated in Sri Lanka in 2008

under the Companies Act No. 07 of 2007 asFree Lanka Plantation

Holdings Co.(Pvt)Ltd andon 30th August 2010 changed the name to

Free Lanka Capital Holdings ( Pvt) Limited. The Company

subsequently, was converted to a Public Limited l iabi li ty Company

on 31stJanuary 2011.

John Keells Capital

A Division of John KeellsHoldings PLC

P IO Box76,

No, 130,Glennie Street,

Colombo 02.

Tel: 2306167 Fax:2306160

Company Regist rat ion Number PV 64165PB

Date of Incorporation 22nd May 2008

Placeof Incorporation ColomboRegist rars t o t he Of fering SSPCorpor ate Ser vices L imited.

No.101, Inner FlowerRoad,

Colombo 03.

Tel:2S73894,2576871 Fax:2S73609

Registered Office Level03, Prince AlfredTower,

No.1 0,Alfred HouseGardens,

Colombo 03.

Tel:4523643,4523635 Fax:4523653

BusinessOffice No. 168, Negombo Road,

Peliyagoda.

Tel: 7990001/7891010 Fax: 7990060

Lawyers to the Offering Nithya Partners

No.97A, GalleRoad,

Colombo 03.

Tel:4712625,4712628 Fax:2695223

Company Secretaries SSPCorporate Services Ltd.,

No.101,Inner FlowerRoad,

Colombo 03.

Tel: 2573894,2576871 Fax:2573609

Auditors to the Offering BOOPartners

No.65/2, SirChittampalam A.Gardiner Mawatha,

Colombo 02.

Tel: 2421878,2421879 Fax:2336064Auditors to the C ompany BDO Partners

No. 65/2, SirChittampalam A.Gardiner Mawatha,

Colombo 02.

Tel: 2421878,2421879 Fax:2336064 Bankers to the Offering Seylan Bank PLC

Millennium Branch

No.90, GalleRoad,

Colombo 03.

Tel:2456135,2452502 Fax:2452506

Bankersto the Company PanAsiaBank PLC

Wellawatte Branch,

No. 150,GalleRoad,

Colombo 6.

Tel: 4374196 Fax: 2362399

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f r ee L a nk a C a pi /a J H o Jd in g s L I d -IMo! Pub l ic Oif21 fre e L anka C apito! HoJd lng s L Id - !IliliQ! Pu /) !J cOf fe r

3. GLOSSARY OF ABBREVIATIONS USED IN THE PROSPECTUS 4. DEFINITIONS & ABBREVIATIONS RELATED TO THE OFFERING

CBS l Cen tral Bank o f S ri lanka A p p l i c a t io n FQ rl il i\ r A p p lj ca t io n

CEA The Central Environmen tal Authority

T he A pp lic at io n F or m th at c on stit ut es a p art o f th is P ro sp ec tu st hr ou g h w h ic h t he in ve st or s m a y a p pl y f or o ff er ed s ha re s. T h e e x a cts iz e p h o t oc o pi es o f t h e A p p li ca t io n F o rm w il l a ls o b e p e rm i ss ib le

cm C e yl on E l ec tr ic it y B o a rdT h e O f f er IThe O f f e ri 'ng ITh.e I s sue

Cess A lo ca l l ev y o n a c om m od it y I p ro d uc t f or a s pe ci al p ur po se

R e la te s t o t he t hr ee h un d re d m il li on ( 30 0 ,0 0 0, 00 0) o rd in a ry s ha re so ff er ed t o t he p u bl ic b y w a y o f t h is i ni ti al p ub li c o ff er in g a t t h e O f fe rp r ic e o f R s . 5 1 - each

I n it ia , 1Pub l ic O f f e rj ng I IPO I O f f e - - r for

Subscr ipt ionIS Commonwea lth oflndependent S tates

R ela te s to th e in vita tio n fo r s ub scrip tio n o f sh are s a s p er th e

p r ov is i ons o f t h is P r ospec t us

CO P Cost of P roduction Can side ration Relates to the sha re O ffer p rice o f R s.5 /- each

FAG Food a nd A griculture O rganization of the United Nations M a rk et D a y

O rd in ary v ot ir. 1g s ha re s o f th e C om pa ny ; a s p er t he Artitles ofA s so c ia t io n o f t h e C om pa n y

GDP Gross Domestic P roduction O f d in a ti Y S ha res /Issued an d P a id u rp

Ordinary Shares I O r d in a ry V o ti ng Shares

A n y d a y o n w h i c h t he C ol om b o S t o ck E xc ha n ge i s o pe n f o r t ra d i n g

GW pState.d Capi ta l

i ga W a tt H ou r

Kg Ki lograms Prospectus

'LO I Letter' O f Intent

T h e S t a t e d C a p it a l o f F re . eL a n ka C a p it a l H o ld in g s L t d

Th i sP r ospec tus da t ed 1 s t F e b ru a ry 2 0 1 1 i s s ue d b y F re e L a n k aC a p i ta lH o ld in g s L td a n d r eqls t er ed w it h t he R e gi st ra r o f C om p an ie s i n S r iLanka

lTG 'EP Long-term G eneration E xp an si on P la n T h e B o a rd I B e a rd o f D ir ec t or s I B O[) T he B oa rd o f D ire cto rs o f F re e L an ka C a pita l H old in gs L td

lK R / R s. Sr i Lankan Rupees T he C o mp a n y !l :C H / T n e I E n t it y

MH R Mini H y dr o P la n t

F re e L an ka C ap it al H ol di ng s L td [ Pr ev io us ly k no wn a s F re e L an kaCap it a l H o l d ings (Pvt) L t d, F re e L a n ka P l an t at io n H o ld in g s C o . ( P v t)Ltd)

T h e G ro upMW Meg.aWatt

---·1·ubsidiaryCRE Non C onventiona l R enewab le Energy

NSA Net S ales AverageSub - s u b s i di a ry A c om pany t ha t i s a s u b s id ia ry o f a s ub si di ar y o f a h o l d) n g c o m pa n y

PUCSL P u b li c U t il it ie s C om m issio n o f S r i L a n kaAssoc iates

T h e S e c u n t ie s a n d E x ch a n ge C omm i s s io n o f S r i L a n k a

IF r eeLanka Cap i ta l H o l d ings L t d , i t s s ubs id i a ri e s, s ub -s ubs id i a ri e s andassoc iates

A co mp an y w ho se v otin g sto ck is m ore th an 5 0% co ntro lle d b ya n ot h er c om p a n y , u s u a ll y r e fe rr e d t o a s t h e p a r e nt : com p an y

RS S R ib b ed S m o ke d S h ee ts

S EA S u s ta t na b le E n e rg y A u th o ri tyS EC

T h eC o l omb o S t o ck E x ch a n geSESPPA , Small P ow er P u rc h as e A g re em en t s

CD S

T he C o m p a ni es A ct N o .7 o f 2 0 0 7UD A U r ba n D e ve lo pm en t A u th o ri ty

TheCompenies Ac t

N a ti on a l I d en t it y C a rdUS . o U n it e d S t a te s D o ll a r

A c om p an y i n w h ic h a n ot he r c om p an y o w ns a s i gn if ic an t p o rt io n o fvoting shares, u su al ly 2 0% - 5 0%

C en tr a l D e p os it o ry S y s tem s (Pvt) Limited

VA T V al ue A d de d T a xPO A Power o f Attorney

YO Y Year O n Year FCBU

Secu r it i es I nv estmen t Ac countEDB Janatha Esta te Deve lopment Board S IA

R u p ee A c co u n t f o r N o n -r e si d en t S r i L a n k an I n ve s tm e n tl!.SPt S r i L a n k a S t a te P l an t at io n C o rp o ra t io n RANS I

F o re ig n C u rr en c y B a n ki ng U n it

PHDT Pia ntation Hu ma n Developmen t T rus t _S_u_P_s L S r i L a n ka I n te r B a n k P a ym e nt S y s tem

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F r ee L a nk a C a p it o ! H a ld l ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi ta l H a ld in gs L Id -IMol Pu b l i c O i f 2 1

This invitation represents anopportuni ty to part icipate inthe future growth prospects of FreeLankaCapital

Holdings Ltd (FLCH),awel l diversi fied Company operat ing in Sri Lanka.Since i ts incorporat ion in 2008, the

Company has gradually expanded its investment interests to diverse sectors through i ts subsidiaries, sub -

subsidiaries and associates. Presentlythe subsidiaries of the company areinto plantations and hydro power

generat ion and would be expanding into other sectors such asleisure and real estate development in the

future.

II

Name of Subsidiary Mini Hydro Power Project Capacity

Free Lanka Power 2 (Pvt) Ltd Rakwana I 1.0MW

fh~b;wan!il·1I } , .O . MW- -

Free Lanka Power 3 (Pvt) Ltd Ensalwatte I (LOI obtained) O.5MW

Ensalwatte II (LOI obtained) 1.0MW

Ensalwatte T ea Factory ( LOI obtained) 0.2MW

Aninkanda 2.0MW

·Beverly 0.75MIN

5. PARTICULARSOF THE OFFERING

S .l IN VIT AT IO N T O S UB S CR IB E

Pursuant to the resolut ion passed by the Boardof Directors of FLCHon 13th December 2010, FLCH hereby

wishes to make an inv it at ion in respect o f Three Hundred Mil li on (300,000,000) Ord inary Sharesof the

Company to the general public at the ShareOffer Priceof Rs.5/-pershare,through this Prospectus.

FreeLankaPower2 (Pvt)Ltd,would purchase outright the private lands,where RakwanaI andRakwanaII MHPs

would bedeveloped. All theother MHPswould belocated inlands of Maturata Plantat ions, where FreeLanka

Power 3 (Pvt) Ltd would sub-lease the lands forthe project f rom Maturata Plantat ions Ltd.

Contained in this document, a prospective investor will find detailed information about FLCHand its business

in addition to other statutory information relating to the Offering. TheBoardof Directors ofthe Company urges

the investing public that the Prospectusbe readcarefully prior to making an investment decision.

The sta tus w ith regard to the requisi te approva ls o f the above pro jects inc luding the power purchase

agreement with the CEB(SPPA)sgiven inSection 7.7.1of the Prospectus anddue to the past experience of the

Group,the subsidiaries areconf ident of obtaining all the required approvals forthe new projects. However in

theevent the required approvals arenot obtained for any of the above projects, the funds of the IPOwould be

aIIocated to approved hydro power projects of theg roup,whichwouIdthereby reducethefuture borrowings

of the subsidiaries.Asmentioned above,the LOIshaveaIreadybeen0btained for the threeEnselwatte MHPsof

FreeLankaPower3 (Pvt)Ltd. Also asdisclosed in Sections 7.5,the LOisfor the two Halgran - OyaMHPsof Free

Lanka Power1, asub-subsidiary of the GrouphasaIsobeen obtained. Moreover theCEAandSEAclearancesfor

these two MHPsare due to be obtained dur ing March 2011, fol lowed by PUCSLapproval i n Apr il 2011.

Consequently theSPPAsfor thesetwo MHPsare scheduled to besigned in May2011with the CEB.

S .2 O B JE CT IV ES O F TH E O F FE RI NG

The Company ant icipates generati ng Rs.1.Sbi I lion from the Offering andafter set t ingof f the costsof the IPO

(given inSect ion 12.5), the funds would beut i lized asgiven below. During the interim period of receipt of IPO

funds and the actua l u ti li za ti on , the funds would be invested in interest bearing ins truments of f inancialinstitutions and/ or government securities.

Order of Utilization Purpose Estimated Utilization lime of L ikely Uti"lization

Priority (Rs.) of fundsI

1st Towards new hydro p ower projects 600 million From April 2 011

(No te 1)

2nd Towards the development of two 250 million From April 2011

boutique stVlehotels (Note 2)

3rd Towards commercial property 600miliion FromApril 2011

eie'r.lBloment project . ( N : 6 t > e . 3)

Total 1ASO million

Forecastedinformation pertaining to the subsidiaries involved in the power sector isdisclosed in Annexure F.

Extracts from the feasibility studies of the newhydro power projects arerepresented in Annexure G.

Note 1- The Company through its subsidiaries that areinvolved inthe power sector wil l bedeveloping seven

new MHPsin order to harness further the existing hydro potential. Thenew MHPsin aggregate will contribute

7.4SMWof power to the nat ional grid. The est imated costof developing all seven MHPsisRs. l .2 bil lion, out of

which Rs.600mill ion would befunded through the IPOproceeds, whi le the remainder would bef inanced by

bank borrowings and/or internal ly generated funds. The MHPsdeveloped by each of the subsidiaries are

out lined below, whi le further details of the proposed projects are disclosed in Sections 7.7.1and 11.3of the

Prospectus.The IPQfunds of Rs.600mil lion allocated towards the projects would be in l ieu of sharesin the

subsidiar ies.

Note 2 - The Company through TeaLeaf ResortHolding (Pvt)Ltd, one of i ts subsidiaries, plans to develop two

boutique style hotels in scenic locat ions of Pussel lawa Plantat ions. Whi le Tea Leaf Resort Holding (Pvt) Ltd

would own and manage the two hotel s, t he lands perta in ing to these hotel s would be sub-leased f rom

Pussellawa Plantations Ltd.The hotels would be located in Giragama in Kandy and Ayr in Padukka and would

each comprise of 58 and 34 rooms respectively and will bedeveloped to three-star classestablishments. This

additionaI revenuesourceisexpected to cost asum of Rs.800miIIionto develop andwill bejointly undertaken

by FLCH,Sierra CablesPLCand PussellawaPlantat ions Ltd with equity contributions of 40%,40% and 20%

respect ivel y, whi le the balance funds requi red for the pro ject w il l be rai sed by way of bank borrowings.

According ly the Rs.2S0mil li on of IPO funds a llocated for the pro ject would represent the 400,6equi ty

contribut ion of FLCH.The work on this project isexpected to commence from April 2011and the hotels are

expected to open for commercial operat ions from November 2012. In the event, the required regulatory

approvals from relevant authorities (ReferSection 7.7.2of the Prospectus)for the hotelsdevelopment projects

are not obtained, then theIPQfunds allocated forthe projects would beut il ized for other commercially viable

projects to beident if ied bythe Company inthe future.

5 6



7

F r ee L a nk a C a p, ro Io l di n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap i/ al H ol di ng s L Id -IMol Pu b l i c O i f 2 1

Forecastedinformation pertaining to TeaLeafResort Holding (Pvt) ltd isdisclosed inAnnexure F.Extractsfrom

the feasibility studies of the leisuresector projects arerepresented inAnnexure G.

Investors who apply for up to a maximum of 10,000shares (including 10,000shares)wil l bedeemed asRetail

Investors,whiIe investors wh0apply in excessof 10,000shareswiIIbe deemed asNon-Retaillnvestorsfo rshare

allotment purposes.

Note 3 - The Company has incorporated a separate ent ity - FreeLanka Capital Propert ies (Pvt)Ltd for the

purpose of bui lding and operat ing a commercial bui lding complex in Borrel ia with 80,000 sq.ft of rentable

space. The bui lding would belocated in land owned by FreeLanka Capital Propert ies (Pvt)Ltd and the total

estimated cost of this project isRs.800million and IPOproceeds of RS.600million would beinvested by wayof

sharecapital inthis highly lucrat ive venture, whi le the remainder of the project would befunded via pre-sales

and bank borrowings. Construction isscheduled to commence in April 2011 and the project isexpected to

commence commercial operations from April 2012. In the event, the required regulatory approvals from

relevant authorit ies (ReferSection 7.7.2of the Prospectus) for the commercial development project is not

obtained, then the IPOfunds allocated for the project would be utilized for other commercially viable projects

to beidenti fied bythe Company inthe future.

The allocat ion of sharesbetween the two categories stated above may besubject to adjustment, inorder to

accommodate probable over subscription scenarios.

In the caseof anunder-subscription of anycategory specified above,the quantum of sharesunder subscribed

may be redistributed and allocated to the other category that may beoversubscribed and the redistribution

w il l be car ri ed out in a equ it ab le manner a t t he d is cret ion o f t he Boa rd o f D irec to rs o f t he Company .

Redistribution will not apply inthe event of oversubscription of both categories stated above.

Forecastedinformation pertaining to FreeLankaCapital Properties (Pvt)Ltd isdisclosed inAnnexure F. Extracts

from the feasibi li ty study of the realestate project isrepresented inAnnexure G.

In theevent of anoversubscript ion of anyone or both categories stated above,the basisof allotment wil l be

decided bythe Boardof Directors of the Company beforeth eexpiryof seven(07) MarketDaysfrom the closure

of the Subscript ion L is tand immedia te ly not if ied to the CSE.These a llotments w il l be made in a fai r and

equitable manner.

5 ] L IS T ING

5 .3 N AT UR E O F T HE O F FE RE D S H A RE STheOffering herein contemplated comprises ofThree Hundred Million (300,000,000)Ordinary Sharesoffered

to thepubIic. TheOffered Ordinary Sharesamounts to 21.93%of the issuedand paidup OrdinarySharesof the

Company subsequent to the Offering.

The Offered Sharesshal l rank pari passu with the exist ing Ordinary Sharesof the Company with ful l vot ing

rights andthe right to participate inany dividend declared to Ordinary Shareholders bythe Company after the

allotment of the Offered Sharesand the right to anequal share inthe distribution of the surplus assetsof the

Company in the event of liquidation.

An Application has been made to the CSE,seeking permission for a l isting of One Bil lion Three Hundred and

Sixty Eight Million (1,368,000,000)Ordinary Sharesbeing the entirety of issuedand paid up Ordinary Sharesof

the Company subsequent to the Offering. Upon the successfulcomplet ion of the Offering and sat isfying the

requirements of theCSEListing Rules, the Company wil l bel istedon the Did SaviBoardof the CSE.

5 .4 S H AR E O F F ER P RIC E A ND M IN IM UM S U BS C RIP TIO N 5 .8 S UB SC RIPT IO N LIS T & C L O SURE DA T E

Applicat ions should be made fora minimum of two thousand (2,000)sharesand applications exceeding the

minimum should bein multiples of 1,000shares.Theminimum subscript ion of 2,000 shareswi ll beal lotted to

allsubscribers of the Company's share issue.

TheSubscription List for the Offered Shareswill open at 9.00a.m,on March 17,2011 and shallremain open for

fourteen (14)Market DaysuntiIcI osureat 4.30 p.m.April OS , 2011The Board reservesthe discretionto cI osethe

Subscript ion l ist onanyMarket Daywithin the period of fourteen (14)Market Daysirrespective of the number

of sharessubscribed to under this issueby providing one (01)Market Day'sprior not ice to the CSE.

TheOffer price will be Rs.5/-each.

Applicationsfor lessthan 2,000sharesorfor a number,wh ichisnot in multi pies of 1,000shareswiIIbe rejected.

Inthe event of anover subscript ionof theOffered Sharespriorto the date scheduled astheclosingdate of the

per iod for subscript ion, the Company sha ll i nform the CSEin wri ti ng immedia te ly o f such fact and the

Subscript ion Listwi ll beclosed at4.30p.rn,on the sameday,with the not if ication to the Exchange.

5 .5 C O NS ID ER AT IO N5 . 9 REG IS T R A TI O N O F T HE P RO SP EC TU S

The Board of D irec tors of FLCHare of the opinion that the Offer pri ce of Rs.5/ - i s fai r and reasonable to the

Companyand to aIIexisting sharehoIdersof the Company.

A copy of this Prospectushasbeen registered with the Registrarof Companies in SriLankain accordance with

the Companies Act No.07 of 2007. The fol lowing documents were attached to the copy of the Prospectus

delivered to the Registrarof Companies in SriLanka:

1) The wri tten consent by the Managers, Auditors and Report ing Accountants, Lawyers, Bankers andRegistrarsto the Offering for the inclusion of respective names inthe Prospectus;5 _6 A LL O TM EN T

The Board of Directors of the Company intends to distribute 300,000,000 sharesbetween the two investor

categories outlined below

2) Adeclaration to the effect that the Managers, Auditors and Report ing Accountants, Lawyers,Bankers

and Registrarsto the Offering, have not withdrawn their consent referredto above, prior to the delivery

of the Prospectusto the Registrarof Companies inSri Lanka.

Category No. of Shares Percentage

Retail Investors 150,000,000 50%

Non-Retail Investors 150,000,000 50%

Astatutory declaration interms of theCompanies Act, to theef fect that theDirectorsof the Company areheld

individually and collectively responsible for the accuracy of the information herein contained and that the

l ist ing rules of the CSEand the Companies Act have been compl ied with, has been f iled for the purpose of

registration of the Prospectus.

8




6. I NDUSTRY OVERV IEW Rubber

6 .1 PLANTATION SECTOR

Globa ll y the pri ce of natural rubber has c limbed to record h igh levels, dri ven by supply shortages due to

worsening weather conditions of keygrowers such asThailand and Indonesia, surging crude oil prices, rising

demand from countries such asChina, India, Malaysiaand ageing plantations that produce lower yields.

Commencing from the Bri tish Colonial era, the plantation sector has been an integral part of the economy.

Apart f rom i ts valued contr ibut ion to the GOP, the sector a lso remains among the largest employers

accountingfor more than 300,6of the country's employment andth erefore isundoubtedIy interwoven into the

socio-economic fabric of the island.

In the wake of the g loba l market dynamics, Sri Lanka 's rubber industry has witnessed soaring pri ces

accompanied by increasing output . The local rubber prices have nearly doubled over the average prices

recorded in2009.During the f irst nine months of 2010,the price of RSS1more than doubled to Rs.378/-perkg,

while the price of Latex Crepeaveraged Rs.422/-per kg representing a 130%increment over the comparative

period in 2009. The domestic product ion has improved considerably with 98.1 mil lion kgs produced fromJanuaryto August2010,a yoy increment of 9%.

Tea

Theglobal teaproduction isprimarily concentrated infour countries - India, China,Kenyaand SriLanka.India

and China,despite being the largest tea producing nations have considerable domestic consumption, which

has paved the path for Kenyaand SriLanka to become the largest exporters of this commodity. Eventhough

SriLanka had historically dominated the exports, in 2007 Kenyaovertook this position and sincethen Kenyan

production hasbeen rising rapidly, driven by itsexpanding hectarage and improving production skills.

Sri Lanka isamong the ten ranking rubber exporters in the world and exports 40% of i ts rubber production,

while the remainder isused up by the local industries for auto-rickshaw tyres, mattressesand other products.

The country boasts an average annual rubber product ion of 137 mil lion kgs,of which 42% issold assheet

rubber.

SriLanka'searnings from teaexports, avaluable component to the country's GOPcontributed USD747 million

(Rs.85billion) for the firstten months of 2010, surpassing the contribution recorded of Rs.71biIIion during the

correspond ingperiod Iastyear,by aImost 20%.Thetea production forthe f i rst ten monthsof thisyeargrew by

17% to 274 mil li on kgs,w ith medium grown teasrecord ing the h ighest yoy growth of 28%.The low grown

segment saw productio n rising by17%yoyto reach163mill ion kgs,whi lethe highgrown segment witnessed

a9% yoygrowth inoutput. Thehigherproduction couIdbe attributed to favou rableweather cond itions, better

useof fert il izers and lackof labour unrest that af fected production lastyear.

With the global rubber supply shortages expected to continue to the next three to four years, this segment

exhibits high potential and plansare underway to increasethe localrubber production and improve marketing

efficiency. Accordingly in areas like Moneragala, Badulla and Anuradhapura, an additional 2,000 hectares are

soon to come under rubber plantation.

Coconut

However the increased tea product ion in Sri Lanka has resulted in subduing prices, where tea prices have

dropped by approximately 10%since the beginning of this year.Thehigh grown teawitnessed a 24% drop,

whi le medium and low grown pricesdeclined by S%and 14% respect ively from the beginning of this year.

However, sofar during the month of December, tea prices have moved encouragingly with higher volumes

traded.

Coconut palm isgrown throughout the tropical world for culinary and non-culinary purposes asvirtually every

part of the tree hassome usage.The economic l ife spanof a palm isabout 60- 70yearsal though much older

trees are known to exist and yield wel l. The coconut t ree thrives on sandy soi land ishighly tolerant of sal inity,

humidity, sunlight and regular rainfall.

Ceylon tea has tradit ionally been ranked among the world's best and assuch the prices at the Colombo tea

auct ions haveconsistent ly outperformed that of other major auct ions inthe global arena suchas Mombasa,

Jakarta, Chittagong etc.The demand for SriLanka'slow-grown tea stems mainly from CIScountries, especially

the Russianmarkets. During therecent past the higher income levelsandresul tant riseindemand from these

count ri es have pushed up the pri cesof low-grown tea. Over SO%of the total t ea exports o f Sri Lanka are

dominated bybu lk tea of which the main export destina tion was Europe, inc luding UK. However w ith the

European marketsshifting their preference to value added teas,the middle-eastern region, whose demand for

tea has been expanding rap id ly on the wake of the strong o il p ri ces, has now become the predominant

importer of bulk tea from SriLanka and accounted for almost 47% of the tea exports in 2009. Russiawasthelargest individual im porter of tea from SriLanka and accounted for 15%of the teaexports (US$161miI l ion)in

2009.

InSriLanka.except forthe higherelevat ions, coconut isgrown inmost partsof the island.however i ts growth

is primari ly concentrated in Puttalam, Kurunegala, Gampaha districts popularly known as the "coconut

triangle" of SriLanka,while Kaluthara andColombo districts too have anabundance of coconut trees.

Coconut isSriLankasth irdmajor agricuIturaIexpo rt crop and lastyearthe earnings from this sector accounted

for approximately 1.3%of GOP.A total of 363,000 hectares areunder coconut cultivation, while approximately

2.8 bil lion nuts are produced each year. Going forward, the government intends to increase the coconut

production to 3.Sbillion nuts peryear,by providing subsidiesfor new planting, re-planting, inter cropping and

productivity improvements aswell asallocating additional funds for curtailing cropdiseasesin affected areas.

Timber

The FA a forecasts that the global product ion of black tea,supported by healthier yields, would risearound

1.7%p.a. unt i I 2014. Growth ispr imari I y expected to be f rom the Afr ican reg ion, lead by Kenya,whose

production isexpected to increase by 2.4%,whereas Sri Lanka'sgrowth isestimated to expand at 1.9%p.a,

Consumpt ion isexpected to bedriven by imports into the CISregion, along with domest ic consumption of

Ind ia and China.Thisyear Sri Lanka 's tea exports a lone are expected to bring in c lose to US$ 15 bil li on in

foreign exchange.

With the realizat ion of the value of t imber asaneconomic crop, several plantat ion companies haveventured

into thi s industry, t ransform ing i t i nto one of the fastest growing industr ies in Sri Lanka. Based on the ir

utilization, timber species canbe categorized asraw material for construction purposes or furniture purposes.

9 10




6.2 M INI-H YD RO P OW ER S EC TO R

ELEctRfClTY UN IT S GENERAT ED BY 'S O URCE

1200@~------------------------------1

10000,--- -- -- -- -- -- -- -- --.::.~_,,-,.'-~.~--T---I:25: 8000S.~ 6000 Ir~·----·--_

c:::::l

Apart f rom this, based on their market value, t imber isc lassi fied as"super luxury' ; " luxury" "special c lass '; "class

1 '; "class I I" and "class I II ': Teak , Nadun and Ebony are h igh valued super luxury t imber used for t he furni tu re

i ndustr y. Mahogany and J ak a re va lued l uxu ry t imber a lso used f or the manuf ac tu re o f fu rn itu re , doo r and

window frames. Eucalyptus Microcorys, a special c lass t imber and Eucalyptus Grandis , ac lass I t imber grown in

up-country estates , are both used w idely in t he const ruct ion indus try f or beams , raf te rs and asasubs ti tu te f or

impor ted Malaysian T imber. C lass I I and I II categor ies compr ise of l ow cos t t imber such as treated rubber used

f requentl y in t he furni tu re indus try and A lb iz ia popular ly used for p lywood in the const ruct ion indus try. The

f inal by-product of t imber isused asf irewood.

f re e L an ka C ap it o! H oJ dl ng s L Id - !IliliQ! Pu /) !J cOf fe r

Present ly , t hermal has become the dominat ing source in power generat ion contr ibut ing to 60% of t he total

energy generat ion. However, according to Sri Lanka's Long-term Generat ion Expansion Plan 2005 (LTGEP)also

cal led the BaseCase Plan, oil -f ired thermal generat ion, would be phased out to provide lessthan 10% of energy

by 2020, whi le coa l- fi red thermal generat ion i sest imated to reach 70.9% by 2020. Going forward contribution

f rom NCRE sour ces such as hyd ro , wind, so la r and bi omass i s ta rgeted to se rve 10% o f gr id el ect ric it y

requirement by 2015 and develop further thereon.

FUTUR6 ELECTRII1:IT'i GENERATION MIX IN SR i lANKA

60%"

Dur ing the pas t f ew decades the fores t cover inS r iLanka has been contin uously dec I in ing and between 1990

to 2010, Sri Lanka lost 20.9% of i ts f ores t cover , or around 490,000 hec tares. I n order t o address thi s i ssue,

several environmental protection laws and regulations have been imposed upon this industry. Alsopar tici pants have to p repa re a f ive -y ea r f or es tr y management p lan and obta in app rova l fr om the Fo rest

Depar tment. Thereaf te r annua ll y each par ti ci pant has to submi t t he ir t imber harvest ing program asper t he

f ive -year p lan and obt ai n app rova l f rom the Pl an ta ti on Management Monit or in g Divi si on o f the Mi ni str y o f

Plantation Industries.

40% --

. --

. -

20~:

The cu lti va tio n o f timber i s i n- expensiv e and wit h the g rowth o f the post-wa r const ru cti on i ndust ry in Sr i

Lanka, t he demand for t imber has been colossa l. The S ta te T imber Corpora ti on , as the sole suppl ie r t o t he CEB

and the Rai lway Authori ty i sa key p layer in t he indus try.

O ' l - l . ! ·

2007 2010 2015

CoaHlred thermal2029'

Energy supply inS r iLanka ismain Iy based on prima rysourcesof hyd roe lect ri ci ty , b io massand pet ro leu m w it h

coal power added on recently. With the end of the three - decade war in May 2009, the Sri Lankan tourism industry displayed a remarkable

rev ival l eading upto a 45.7% growth in tourist arrivals asatend of November 2010, surpass ing the half a mil lion

ma rk du rlng the f rst week of Novem ber .The earn ings der ived f rom touri smfor t he f rst t en months of t he yea rrose by 62% t o US$ 438 million.

B lessed w it h an abundance of natural beaut y and att ract ions , S ri Lanka has been selec ted asone of t he e ight

UNESCOworld heritage sites, one of the 34 b io -d ive rsi ty hot spots o f the wo rl d and i s home to one o f t he few

remaining v irgin rain f ores ts in t he world. The New York T imes has rated Sri Lanka as the number one touri st

desti na ti on wh il e Na ti ona l Geog raph ic r at ed S ri Lanka t he 2nd best tour ist desti na ti on in the wor ld and

recently the island made it to the Kuoni 's top ten all inc lusive hol iday destinations.

Wi th t he r el axi ng o f t ra ve l advi so rie s to Sr i Lanka by the US, Japan, UK , and o the r Eu ropean coun tr ies ,

e xt rao rd inar y g rowt h i n a rr iva ls we re r eco rded f rom t hese c oun tr ie s a long wi th t he Mi dd le East, In di a and

China. By the end of Ju ly 2010, t he room occupancy rate inc reased by 26.5% i ncompar ison wi th Jul y 2009.

Sou r ce : E lec t r ic i t y Ac t 2009

6.3 TO UR IS M & L E ISURE SECTOR

*Wi ndpowe r gene ra tio n th r oughou t has been wi th i n t he r angeo f 2GWh - 4GWh.

So u rc e : C BSL A n n u a l R e p o rt 2 0 0 9 I dent if ied asa p ivotal sec tor under t he government' s nat iona l l ong- term development programme, Sri Lanka

is t o bet ransformed into the foremos t lei sure des ti na ti on in t he South Asian reg ion. The program env isages on

achieving 2 mi ll io n t ou ri st a rr iv al s b y 2016, tar geting upscale fr ee independent travellers who arecomparati ve ly h igh spende rs, maki ng tour ism S ri Lanka 's th ir d l ar ges t fo re ign exchange earne r and

tr ansf ormi ng t he secto r to be t he fa st est jo b cr ea to r on t he i sland . The rec en t budge t pr oposa ls have a lso

encouraged the indus try in t he form of income tax concess ions , VATand dut y concess ions on raw mater ia l and

machinery not ava il ab le inS r iLanka, h igher cap it al a ll owances for new inves tments etc . Recentl y ina move to

d ri ve the i ndust ry fu rther , th e gove rnment a lso l ift ed the p revi ous ly imposed ban on i ssu ing new l iquo r

l icenses and relaxed a hos t o f o ther res tr ic ti ons in t h is area.

According to indus try data, t here are 88 MHPs w it h a total i ns ta ll ed capac it y o f 181 MW, contr ibut ing to 546GHW or 4% of t he nat iona l demand and agreements have a lready been s igned for another 113 MW of hydro

power w it h t he CERThe economica ll y f easible small hydro potenti al i n S ri Lanka isest imated at 400 MW.

In 2009 86% of t he hyd ropower wasgenerated f rom (EB owned power s ta ti ons, wh iI e the remainder was f ro m

p ri va te ly owned sma ll h yd ro powe r pl an ts . T he Sma ll P owe r Produce r (SPP) p rogr am , in tr oduc ed by the

Government in 1996 further incentivized the industry by extending standardized power purchase agreements

and s tandardi zed tar if f s truc tures for N (RE based power p lant s w it h capac it y less than 10 MW.

11



f re e L an ka C a pi /a l H o ld in gs L Id - IM lo J P u bl ic O i f2 1

MON [H7 IL Y ARR IVAL /)90~000

80,@00

'"70,000

"'iij60,000.~

~ 56,000

.~40,'000

:i~ 30,000

-----:;-r--+.

_ _ - ; - = - 1 __ - .- ;-

._ ,. . . . .

1 1 - -0,000

10,000 ~I

o , . - 1~ ~ : 1 > < : A

" ,' : : : ' , : ; j\ '1> ' v _ e ?

I~- --

,.I

Sou r ce : Sf ! L a n ka T o u n5m De v el o pme n t Au rh o fi fY - M o nt hl y S ta u su c a! B u ll et in ( D ec e m be r 2 0 I O J

6 .4 C O N S TR U CT IO N , R E AL E S TA TE , PR O P ER TY A ND H O U S IN G S E CT O R S

The post war reconst ruct ion and rehab il it at ion requi rements in Sri Lanka, the ant ic ipated growth in the

tourism sector and the general economic revival isexpected to set the stage for aconstruct ion sector boom

over the next f ive years.Present ly the construction sector contributes around 6.5%to the island'sGOPand

duringthe lastth reeyearsthe construction sector hasgrown atan average of 7.5%.Over the next five yearsthe

average growth isexpected to exceed 8% asover Rs.700bi ll ion worth of construct ion related projects are

being planned bythe government during the next 2~3years.The recent budget provides allocations of RS.413

b il li on towards inf rast ructure development pro ject s a long with incenti ves in the form of income tax

concessions,VATand Duty concessions for imported machinery, increase in capital allowances, simplification

of the approval processof the UOAetc. Apart f rom this the private sector and informal sector too isexpected

to generate a large quantum of construction related work inthe future.

14

f re e L an ka C a p, ro Io ld in gs L Id - JIliliQJ Pu /) !J cOf fe r

7. PROFILE OF THE ENTITY

7.1 O VER VIEW

FLCH,incorporated in May 2008isan investment company that hasinterests inthe plantation sector and the

power sector of the country. In future. the Company plans to diversi fy into other lucrat ive areassuch asthe

leisureand realestate sectorsin order to capitalize on the rising opportunities from these sectors.

7. 2 M A IN L IN ES O F B US I NE S S

FLCHisa holding company diversified into severalsectors and derives investment income, dividend income

and capital gains from itsgroup companies.

Presently FLCH'smain revenue source isfrom itstwo plantation sector subsidiaries~FreeLankaPlantation Co.

(Pvt) Ltdand FreeLankaManagement Co.(Pvt)Ltd, who arethe managing agents of Maturata Plantations and

Pussellawa Plantations respectively. Further details of the revenue generated from the plantation sector are

given in Section 11.2of the Prospectus.

Apart f rom this, income isalso derived from its power sector subsidiary FreeLanka Power Holdings (Pvt)Ltd,

which holds a 34% stake in Hydro Power FreeLanka PLC.Further detai ls of the revenue generated from the

hydro power sector aregiven in Section 11.3of the Prospectus.

Asgiven in Section 7.7.1of the Prospectus, the diversification of FLCHinto other sectorswould, infutu reyield

returns to the Company from the leisuresector and the real estate and commercial property developmentsectors.

Generallydue to cashflow constraints the local contractors areunable to provide competitive bids,thus losing

contracts to their international counterparts, especially on foreign donor-funded projects. However with the

ant icipated revival of the industry, a substantial part of thework would f il ter down byway of sub-contracts to

the local contractors and the value of construction projects awarded to local contractors and sub-contractors

areexpected to grow by50% - 60% annually over the next three years.Present ly almost 500,000 workers are

employed in the construct ion sector, however with the expected boom inthe sector, industry facespossible

labour shortages given the lesspermanent nature of the work with more migratory type of labour involved

coupled with seasonaldemand.

With the reset tl ement o f nor thern and eastern reg ions, the expanding res idential propert y sector in the

overcrowded commerciaI capita1of the country,the substantia Idecrease in interest ratesand the growth of the

construction sector.the realestate, property and housing construction sectorstoo aregeared to rebound over

the next f iveyears.

13



16


7 .3 G RO U P S T RU CT UR E A S A T D A TE O F P RO S PE CT US

\I)

0'1C

:Bo

: : : ct t I " " C:!:: Q. 1

c .. . ~a Et t I : . : : : i

. . : : . : : :cttl...J

Q. 1

Q. 1.. .LL

cft-+-___,g

-d

'" " ' " '3:~'" c= 0O J . _

'" " ' " ''" '"> " '"'a . . . c

'":: :

'"II •L . . ' ! : ' " " EQ-_J

: : = c: _ _ _

w w ">: : : ; ' ; : ~ a . . .~~

15

F re e L a nk a C ap it o! H oJ dl ng s L Id - !IliliQ! Pu /) !J cOf fe r

7.4 SHAREHOLDER INFORMATION

7 .4 .1 I N FO R MA TIO N P ER TA I N IN G T O T H E M A IN S H AR EH O L DE RS 0 F F L C H

F re e L a nk a C a p it al ( Pv t) L td B ro wn s I nv es tm en ts ( Pv t) L td P er pe tu al H o ld in gs L td

No of S hares 747,600 ,000 43 ,978,217 43,953 ,090

Percen tage of Ho lding 70% 4 .12% 4 .12%

P rin ci pa l B u s in es s I nv es tm e nt a nd m a na ge m en t I nv es tm e nt a nd m a na ge m en t M an ag em e nt o f i ts P la nt at io n

o f its Subsidia ries o f its Assoc ia tes & Subs id i a ri es Compan ies

a nd Po r tf o li o Managemen t

Directo rs M r. K. A loysius M rs. R.L Nanayakkara

M r. G.A . A loysius M r. N.M . Prakash M r. K. A loysius

M r. J.M .5 . de M el M r. R.P .S ugathadasa M r. G.A . A loysius

Mr . UX Devasurendra M r. P.R .S ald in M r. GJ. Aloysius

Mr . A . L . Devasurendra

Mr. l .C. Nanayakkara

Mr. D.5-K .Amarasekara

M r . S . Fu r kh an

Mr. A .G .Weeras inghe

M r . N . Fe rn ando

S hareholders Browns I nvestm ents (Pvt) L td Brown & Co. PLC - 50% M r. K . Aloysius - 14.29%

-50% Taprobane Hold ings L td - 50% Ms. J. A loysius -14 .29%

Perpe tua l Ho ld ings L td - M r. GA A loysius - 28 .57%

49.999998% Mr. GJ. A loysius - 42.85%Mr . K . A l oy s i u s - 0 . 00 0001%

M r . G A A lo y si us - 0 .0 0 00 0 1%

7 .4 .2 T O P 1 0 S HA RE HO LD ER S O F F LC H

;;lihari!iiDJ~.e,r· NQ " 'bf11;i is i res ~:ifi!)fHehn~g

Free Lanka Capita l: (Pvt) L td 747,600 ,000 7Q .00%

B rowns I n ve s tmen t s (Pvt) Ltd 43 .978 .217 4.12%

Perpetua l Hold ings L td 43 ,953,090 4.12%

Lanka OR IX Leasing Company PLC 21,276 ,596 1 .99%

Next Ventures L td 10,640 ,000 1 .00%

Mr. l.C . Nanayakkara 10,638 ,298 0.99%

Mr . AL. Devasurendra 10,638 ,297 0.99%

Bartlee t Finance Ltd 10 ,638 ,297 0.99%

Mr . SV. Somasundaram 10,000 ,000 0.94%

Thurston Investments L td 5 ,325,000 0.50%

Others 153 ,312,205 14 .36%

1,068 ,000,000 100%



17

F r ee L a nk a C a p it o ! H o ld i ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H o ld in gs L Id -IMol Pu b l i c O i f 2 1

I ni ti al ly FLCHowned 55% of Free Lanka P lantat ions Company . On 16th September 2010, w it h t he convers ion

of i ts preference shares to equity, the ownership stake of FLCHincreased to 95.34%.

5na'reholders-

Ordinar't. Shares No. ofShares Percentaqe ofHoldinq

Free Lanka Plantat ions Co. (Pvt) Ltd 25,200,000 72.00

Secretary to the Treasury, Government of SriLanka 7,806,020 22.30

Employees of the Company 1,993,981 5.70

Total 35,000,001 100.00

Preference Shares

Free Lanka Plantat ions Co. (Pvt) Ltd 2,000,000 39.44

Free Lanka Capital Holdings Ltd (FLCH) 1,535,581 30.28

The Cricket Club Cafe (Pvt) Ltd 1,535,581 30.28

Total 5,071,162 100.00

7 .5 S U BS ID IA RY / A S S O C IA TE I NF O R MA TI O N

» Free Lanka P lantat ions Co. (Pv t) L td

Free Lanka Plantat ions Co. (Pvt) Ltd is the holding company of Maturata Plantat ions, and acts asthe Managing

Agent subje ct to a management f ee o f 20% o f ea rn ings bef or e c hargi ng dep reci ati on, i nte re st , gai n on f air

value of t imber s tockand appl lca b le t axes .

Date 'o f incorporati6n 06th May 1998

Re'gistration No PV 18888

Re'gistered Address Level 3, Prince Alfred Tower,

No. 10, Alf red House Gardens, Colombo 03.

Directors Mr.K. Aloysius (Chairman) Mr. G.A.Aloysius

Mr. J .M.5. de Mel Mr. G.J.Aloysius

Mr. D.5,K. Amarasekara

SharehQl"i;lers

Ordinact. Shares No. of Shares Percentage ofHolding


Thurston Investments Ltd 4,500,000 4.66

Total 96,052,838 100.00

Preference Shares

The Cricket Club Cafe (Pvt) Ltd 986,000 100.00

Total 986,000 100.00

» Rain Fores t Eco Lodge (Pv t) L td

Maturata P lantat ions holds 20% of t he i ssued cap it al o f Rain Fores t Eco Lodge (Pv t) L td in considera ti on of

t he provi sions of l easeho ld r ight s o f t he land where Rain Fores t Eco lodge opera tes.

Maturata Plantat ions isa public company having 35,000,001 ordinary shares and 8%cumulat ive preference

shares amount ing to 5 ,071 ,162 . Mat ur ata Plant at io ns manages 19 t ea /r ubbe r pl an ta tio ns wi th a to ta l

extent of 11,577 hectares on 53-year leasehold rights commencing from 1992. The Secretary to the Treasury

of Govern ment o f S ri Lanka holds aGolden Share

(," I • 11th December 2003ate 0 IhC(!ltpOratlon

~e~ist'ration No PV 3733

Re:glstere-d Address No 45, Braybrooke Street

Colombo 02.

Directors Mr. Prema Cooray (Chairman)

Mr. Hiran Coo ray Mr. Malin Hapugoda

Mr. Gehan Perera Mr. Godfrey Alloysius

M r. Jayanti ssa Kehe lpanna la Mr . Di lh an Fe rnando

Mr. Preethi Jayawardena Mr. Abbas Esufally

Mr. Sherad Amlean

Mr. Sri lal Mit tapala (Air Director to Mr.Abbas Eassufalfy)

Mr. Damin ique Nordrnan (Aft Director to Abbas Eassufally)

Shareholders

Ordiaary. Shares No. ofShares Percentage ofHolding

Chemanex PLC 7,812,500 24.42

Maturata Plantations l td 6,399,375 20.00

Lighthouse Hotel PLC 4,375,000 13.67

MAS Holdings (Pvt) Ltd 4,375,000 13.67

Aitken Spence & Co. PLC 2,500,000 7.81

Ceylon TeaServices Ltd 2,500,000 7.81

Habarana Walk Inn Ltd 2.500,000 7.81

Serendib Hotels Ltd 333,334 1.04

Hotel Sigiriya Ltd 333,333 1.04

Stafford Hotels Ltd 333,333 1.04

Other 535,001 1.67

Total 31,996,876 100.00

» Maturata P lantat ions Ltd

'Date of lneerporatiert 22nd June 1992

R.e;gis~ra(jon No PB214

Regist'er.edl A!3i:n'es~s Level 3,Prince Alf red Tower,

No. 10, Alf red House Gardens, Colom bo 03.

Diretten Mr.K. Aloysius (Chairman) Mr. J .M.5. de Mel

Mr. G.A. Aloysius Mr.l.C. Nanayakkara

Mr. A L Devasurendra Mr. A .H.5. G unawardena

18



F r ee L a nk a C a p, ro Io l di n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap it al H ol di ng s L Id -IMol Pu b l i c O i f 2 1

The Tea Leaf Resort Holding (Pv t) l td );> Pussellawa Plantat ions Ltd.

T hi s company was in co rpor ated fo r t he purpos e o f own ing , deve loping and managi ng two bou ti que styl e

hotel s in Kandy and Padukka s it ua ted in Pusse ll awa P lantat ions . The hotel s would be of 3 s tar c lass s tandard

and o ff er ac commoda ti on fo r a to ta l o f 92 r ooms. Si er ra Cabl es PL (' o ne o f the p ri nci pa l shar eholder s wil l

handle the const ruct ion process through the ir const ruct ion arm.

Pusse ll awa P lantat ions i sa pub li c company hav ing 23,846,1 S4ordinary shares w it h t he Sec re tary t o t he

Treasury of t he Government o f S ri Lanka holding a Golden Share . Pusse ll awa P lantat ions Ltd manages 24

tea/rubber p lantat ions w it h ato ta l extent o f 11,591 hec tares on 53-year leaseho ld r ight s commenc ing f rom

1992. The Company isa lso int o hydro power generat ion through i ts assoc ia te Hydro Power FreeLanka PLe.

Da~~of lncorporation 2nd June 2010

Regi~tratio~n NQ PV72S07

Re.gistered Address No. 481 , T. B.Jaya Mawa tha,

Colombo 10.

D"irectors Mr. G.A. Aloysius Mr. J.M.5. de Mel

Mr. l .C, Nanayakkara Mr. D.5.K. Amarasekara

Mr. N.M. Prakash Mr. G.J. Aloysius

Mr. W.A.P. Perera Mr. D.5. Panditha

ShaJehold.ws- >

OrdinaO!.Shares No. of Shares Percentage of Holding

Free Lanka Capital Holdings Ltd (FLCH) 250,000 50.00

Sierra Cables PLC 250,000 50.00

Total 500,000 100.00

Da;te,o~ Inco~pc;nation 1Sth June 1992

lR"egj"~tr"Fion No' PB951

,Registered Address Level 3,Prince Alf red Tower,

No. 10,Al fred House Garden s,Colom bo 03.

Directors Mr. K.Aloysius (Chairman) Mr. G.A.Aloysius

Mr. G.J. Aloysius Mr. J.M.5. de Mel

Mr. GD. Seaton Mr. I.e. Nanayakkara

Mr.J.H.J.Jayamaha (Government Nominated Director)

8h;<!reholders

Ordinar't_Shares No. of Shares Percen taqe of Holding

Free Lanka Management Co. (Pvt) Ltd 14,046,153 58.90

Secretary to the Treasury, Government of SriLanka 7,816,790 32.78

Employees of the Company 1,983,211 8.32

Total 23,846,154 100.00

);> Free Lanka Management Co. (Pv t) L td

F ree Lank a Managemen t Co . (Pvt) L td hol ds a c on tr oll in g i nte re st o f Pusse ll awa Pl an ta ti on s L td and a

substanti al s take in Mel fort Green Teas (Pvt ) L td . F ree Lanka Management Company isa l so the Managing

Agent o f Pusse llawa Pl an ta ti on s and is ent itl ed to r ece ive a management fee o f 20% o f earni ngs be fo re

charg ing depreciat ion, i nt eres t, ga inon fa i rva Iueof t imber s tock and appl i cab le t axes .

);> Mel fort Green Teas (Pvt) Ltd

The main bus iness act iv it y o f Mel fo rt Green Teas is t he manufac ture of Green Tea (Chinese var ie ty ) f or both

lo ca l and f or ei gn mar ke ts. Af te r i nco rpor at ion i n Apr il 2 003, they obt ained BO I app rova l on t he 18t h o f

September 2003.

Date of Incorporation 23rd January 1992

Re.gist~at'ion No PV4027

Re"gistered Address Level 3,Prince Alf red Tower,


lDitectors Mr. K. Aloysius (Chairman) Mr. G A Aloysius

Mr. J.M.5. de Mel Mr. G.J. Aloysius

Mr. O.5.K. Amarasekara Mr. GD. Seaton

Mr. c.i Chaytor Mr. A.J.Chaytor

Mr. H. Ramasamy

Sha"~eholde;rs . ~ ,Ordinact. Shares No. of Shares Percentage of Holding


Ashcote Ventures Ltd 4,500,000 45.00

Total 10,000,000 100.00

Date of Ineorporation 07th April 2003~ .

'R~9'istration Np, PV8588

Regi$terea Address Level 3,Prince Alf red Tower,

No. 10,Al fred House Gardens, Colom bo 03.

Directots Mr. K. Aloysius ( Chairman) Mr. G.A. A loysius

Mr. HD.A.D. Perera Mr. L.TD. Peiris

Mrs. R.V.Perera

'S haJ:eho lders

Ordinar't_ Shares No. of Shares Percentage of Holding

Free Lanka Management Co. (Pvtl Ltd 650,000 46.43

Mr. H DAD Perera 650,000 46.43

Mr. LTD Peiris 100,000 7.14

Total 1,400,000 100.00

19 20



F r ee L a nk a C a p, ro Ia l dl n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap i/ al H al di ng s L Id -IMol Pu b l i c O i f 2 1

Free Lanka Power Holdings (Pv t) l td );> F ree Lanka Powe r' (Pvt) L td

F ree Lanka Powe r Ho ld ings hol ds a st ake o f 34% i n Hyd ro Powe r Free Lanka PLC (HPFL ), wh ic h r ecentl y

concluded a very success fu llPO. HPFLopera tes two exist ing hydro power pro ject s, and have a lso inves ted in

t hree ful ly owned hydro power companies for t he development o f f our more MHPs in the future.

F ree Lanka Power 1 i sa ful ly owned subsidiary o f Hydro Power Free Lanka PLCand has obtained LOis to

const ruct two MHPs (Halgran Oya phase I& Halgran Oya phase I I) i n Ragala area, wi th a total generat ion

capac it y o f 3 .6 MW. Both p lant s are expec ted to commence the ir commerc ia l opera ti ons in Apr il 2012.

D,at!,!of lncorporatlen 19th November 2009

Registta;tion N9 PV70021

Registered I.\:ddress Level 3,Prince Alf red Tower,

No. 10, Alf red House Gardens, Colombo 03.

Directors Mr. K. Aloysius Mr. G.A. Aloysius

Mr. G.J. Aloysius Mr. J.M.s. de PBMel

Mr. U .K. Devasurendra Mr. D .5.K. A marasekara

Sha rehclde rs,-

O r d i na r x . Sh a r e s No . o f Sh a re s P e rcen ta ge o f H old in g


Total 100,000,000 100.00

Date of Incorp€ua,tion 13th August 2009

Regis trat ion No PV6B774

Reglsteredi Addre'ss Level 3,Prince Alf red Tower,

No. 10,A l fred House Gardens , Colombo 03.

Direc;to(,s Mr. K. Aloysius Mr. G.A. Aloysius

Mr. G.J. Aloysius Mr. J.M.s. de Mel

Mr. U.K. Devasurendra Mr. O.S.K. Amarasekara

Sh a reholders- . _ . .-

O r d i na r 't _ Sh a r e s No . o f Sha re s P e rc en tag e o f H old in g

Hydro Power Free Lanka PLC 100,000,000 100.00

Total 100,000,000 100.00

);> Hydro Power Free Lanka PLC .);> Hydro Power Free Lanka 2 (Pv t) L td

Hydro Power Free Lanka PLCwas formerl y owned by Pusse ll awa P lantat ions Ltd and Free Lanka Power

Holdings (Pv t) L td in equal proport ions of 50% each. A ft er t he L is ti ng on the Main Board of t he CSE,each

now holds only a34% s take and the balance isowned by the pub li c. Thi s Company present ly opera tes two

MHPs at Sanquhar and Delta Estates s ituated in Pussellawa Plantat ions with 1.6 MW capacity each, total ing

to 3 .2 MW, and is i n the p ro cess of addi ng four mo re MHPs wi th anaggregate o f 5 .37 MW o f powe r to the

nat iona l gri d byApri l 2012.

Hydro Power FreeLanka 2 isa ful ly owned subsidiary o f Hydro Power FreeLanka PL( , and present ly i s in t he

process of const ruct ing a MHP (Thebuwana) on a land located at Pusse ll awa P lantat ions in Kuruw it a area.

The expected capac it y o f t he MHP woul d be0 .83 MW and i s expected t o c on tr ib ut e to the na tio na l g ri d by

November 2011. The SPPAfor this MHP was signed with the CEBrecent ly .

Date.:of In.co~·poration 24th Apr il 2000

Rl:!gist~ffion No PV7385 PB

Fte.g~stered Add'ress Level 3,Prince Alf red Tower,


Di~ectors Mrs. R.L. Nanayakkara (Chairperson) Mr. K.Aloysius

Mr. G.A. Aloysius Mr. G. L Aloysius

Mr. LM.S. de Mel Mr.U.K.Oevasurendra

Mr. D.5.K. Amarasekara Mr. N.M. Prakash

Mr. R.M.5. Fernando Mr. A.U. Weerasinghe

Shareho ldersc c --

O r d i na [ 'i _ Sh a r e s No . o f Sh a re s P e rcen ta ge o f R aid in g

Free Lanka Power Holdings (Pvt) Ltd 37,044,056 34.00

Pussellawa Plantations Ltd 37,044,056 34.00

Public Holding 35,000,000 32.00

Total 74,088,112 , 00.00

,t;?ate'of Incorpor<;!~iq,1j 19th November 2009

:Re:gjs~rat;ton No PV70022

'Re~i!;tered Address, Level 3,Prince Alf red Tower,

No. 10,Al fred House Gardens, Co10mbo 03.

'DirectG,!'!> Mr. K. Aloysius Mr. G.A. Aloysius

Mr. G.J. Aloysius Mr. J.M.S. de Mel

Mr.U.K.Oevasurendra Mr. O.5.K. Amarasekara

Shareholders

O r d in a r y . S h a r es No . o f Sha re s P e rc en tag e o f H old in g


Total 100,000,000 100.00

);> Hydro Power Free Lanka 3 (Pv t) L td

Hydro Power FreeLanka 3was incorpora ted asafu I l yown edsubsid iaryo f Hydro Power FreeLanka PLCand

present ly in t he process of const ruct ing a MHP (Stel lenberg) w it h a capac it y o f 0 .94 MW in Garnpola area,

which i sexpec ted to commence commerc ia l opera ti ons f rom November 2011 onwards . The SPPAfor t hi s

MHP was signed with the CEBrecently.

21 22



F r ee L a nk a C a p it o ! H o ld i ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi ta l H o ld in gs L Id -IMol Pu b l i c O i f 2 1

Qat~ of Incprpmat!pn 19th November 2009

Re,gistration No PV70024

Registe.red Address Level 3,Prince Alf red Tower,


Dir.ectors Mr. K. Aloysius Mr. GA Aloysius


Mr. U .K. Devasurendra Mr. D 5.K. Amarasekara

Sharebolcle rs

O r d i na r y_Sh a r e s No . of Sha re s P e rce n tage of Ho l d i n g


Total 100,000,000 100.00

Date of lncorporatien 19th November 2009

,Registration No PV 70025

ReglSte~ed Address Level 3,Prince Alf red Tower,

No. 10,Al fred House Gardens, Colom bo 03.

Direetor.s Mr. K. Aloysius Mr. G.A. Aloysius


Mr. U.K. Devasurendra Mr. D5.K. Amarasekara

Shar ehol'ders

O r d in a r y. S h a re s No . of Sha re s P e rcen tage of Ho l d i n g


Total 100,000,000 100.00

Free Lanka Power 2 (Pv t) Ltd Free Lanka Capit al P ropert ies (Pv t) L td

Thi s Company was i nco rpor ated as a f ull y owned s ubsi di ar y o f FLCH,w ith the i ntenti on o f deve loping two

MHPs to ta li ng to 3MW inRakwana area.

This Company was incorpora ted for t he purpose of bui ld ing and opera ti ng acommercial bui ld ing complex in

Borel la w it h 80,000 square feet o f rentable space .

.pijt!! of Incorpo~raj:ion 19th November 2009

Registration No PV 70023

R~gistered Add'ress Level 3, Prince Alfred Tower,

No. to, Alf red House Gardens, Colombo 03.

D{rectors Mr. K. Aloysius Mr. GA Aloysius

Mr.G.L Aloysius Mr. LM.5. de Mel

Mr. U .K. Devasurendra Mr. D .5K Amarasekara

Shareholders

O r d i naC f _ Sh a r e s No . of Sh a r e s Pe r c en t age of Ho l d i n g


Total 100,000,000 100.00

'Da~e o f Inco'rporatio'n, 6th December 2010

Reg,lstrahon No' PV75864

Registered Address No. 481, T B. Jaya M awatha,

Colombo 10

Direct6rs Mr. J. M. S.de Mel Mr. G. A. Aloysius

Mr. N. M. Prakash Mr. D. S. K. Amarasekera

Mr. P. R. Saldin

5half!hl;)lders

O r d in a r y' S h a re s No . of Sha re s P e rcen rage of Ho l d i n g


Total 100,000,000 100.00

> - Free Lanka Power 3 (Pv t) Ltd

A 100% owned subsidiary o f FLCHwas formed primari ly t o manage f ive MHPs at Enselwatt e, Bever ley and

Aninkanda Estates belonging to Maturata P lantat ions in Deniyaya, where LOis have a lready been obtained

from CEBfor 3 of the projects.

Enselwatte Phase I

Enselwatte Phase I I

Enselwatte TeaFactory

Beverley

Aninkanda

0.50 MW (LOI obtained)



0 .75 MW (LOI to be obtained in February 2011)

2 .00 MW (LOI to be obtained in February 2011)

23 24




7.6 T HE D EG RE E O F D EP EN DE NC E O N K EY C U S TO M ER S I SUPPL IERS Companies inthe Leisure Sector

) - D ep en de nc e o n K ey C u s to m er s

AsFLCHisa holding company, their income wil l hinge on the performance of i ts group companies. Therefore

depending on the group companies ' bus inesses, the degree of dependence on the ir key customers and

suppliers will bevaried.

As t he ent ire tea product ion and major it y o f the rubber product ion are sold through auctions, the

piantat ion sector companiesof the Group arenot dependant onanysl ngIebuyer.Thepricesand quantities

aredetermined based oncompet it ive bids receivedat the auctions for dif ferent grades of tea and rubber.

The performance of the companies in the leisuresectorwould be primari ly associated with the att raction

of tourists to the country, mainly the high-spending-up-market t ravelers,which essent ially depends on a

number of externa l fac tors such as the g loba l economic and f inancial condi ti ons, the pol it ical and

economic stabiIity, the absenceof terrorism and civiIunrest,availability of infrastructu refacilitiessuch asa

transportati on and roadnetwork, existence of unpoIluted naturaI'green'habitat etc inthe domestic arena.

Apart from this, domestic economic factors such asthe disposable income levelsof local holiday revelers,

especially of the high net-worth-up-market segment would also havean impact to a lesserdegree on the

performance of companies inthis sector.

Companies in the Plantation Sector


) - D e pe n de n ce o n K e y S up p li er s

As both the plantation companies inthe Group - Maturata and Pussel lawa,cul tivate only asmall revenue

extent of coconut, the ent ire coconut harvest is sold via auct ions held at estate levels.The estate level

auct ions comprise of small groups of buyers, where quant it ies and prices are determined through the

competitive bidding process.

Onthe supply side, part icipants of the leisure sector are dependent on a number of sources such asthe

availability of man-power, specially suitable hospitality trained staff,support functions such asfresh fruits

and vegetable providers, travel agents andtour operators, laundry and cleaning services,security services

etc .The lei sure sector companies of the Group wil l not be enter ing into any hotel management or

operating agreements with anyparties.

With regard to t imber plantat ions in the Group, there's no signi ficant exposure to a part icular buyer as

timber issupplied to a scattered segment of buyersacrossthe country.Companies inthe RealEstate Sector

) - D e pe n de n ce o n K ey S u p p li er s


Inorder to meet the growing demand for quali ty tea, the tea plantations purchase fresh tea leavesfromsmall p ri va te tea suppl ie rs in the area. Therefore due to the r is ing demand f rom other p lantat ion

companies, a frequent supply shortage for quality bought leaf arises.

Promoters of realestateprojects pertaining to commercial properties would bedependent on the business

community astheir keycustomer segment. Levelsofoccupation and the pricesthat canbe charged would

bedetermined byseveraIfactorssu e has availabilityof commerciaIspacein the surround ing areas,physicaI

infrastructure faci li ties such asparking space and visibil ity to the main roads and other factors such as

proximity to banks and populated towns, t raf fic movement etc.

With regard to other suppl ies such asferti lizer, seeds and seedl ings, packaging material etc, the group

companies are not dependent on any parti cu lar suppl ie r but a range of suppl ie rs and the mater ia l i s

selected basedon quality standards and price.

) - D e pe n de n ce o n K ey S u pp li er s

Companies in the Hydro Power Sector

Thehydro power sector companiesareentirely dependent on CEBastheir solecustomerand further detaiIs

arediscussed in Section 7.7.2of the Prospectus.

Ini tial ly, due to the proli ferat ion of apartments and commercial complexes, especially in Colombo and

suburbs, promoters of rea les ta te pro ject s would be dependant to a large extent on the ava ilab il it y o f

sui table land for development. During the construct ion phases of the real estate projects, companies

woul d be heavi ly dependent on suppl y sou rces such as a rchit ec ts , con trac to rs and suppli er s o f

construction rawmaterialssuch ascement, sand,steel,wood etc.Thereafterd uringthe operating phasesof

the projects, the companies would be dependent on severalphysical infrastructure facilities and services

such aselectricity and water supply, garbage disposal arrangements, sewerage and drainage systems,

maintenance services etc.

) - D e pe n de n ce on Key Cus t ome r s

) - D ep en de nc e o n K ey S up pli er s

The power sector companies have not and wil l not be enter ing into any operating or maintenance

agreements with any suppl ier. Most of the equipment used inhydro power projects aremanufactured by

suppl ie rs of h igh qua li ty f rom Europe and count ri es in the Asian reg ion that are selec ted based on

quotations received andevaluated speciallyon quality, warranty and price prior to purchasing. Thetransfer

of know-how will be realized with training abroad andvisits from the manufacturers' representatives. Apart

f rom this most of the spare partsof hydro power equipment and machinery areavai lable local ly and the

technology usedin small hydro projects arewell proven world over.

25 26



f r ee L a nk a C a pi /a J H o Jd in g s L I d -IMo! Pub l ic o n e . f re e L an ka C ap it o! H oJ dl ng s L Id - !IliliQ! Pu /) !J cOf fe r

7 .7 F UT UR E S T RA TE GI ES , R IS K S A S S O C IA TE D W IT H F UT UR E S T RA TE GIE S , A S S UM P TI O NS O N W H IC H

T HE Y A RE B AS E D & R IS K M IT IG AN TS (I F A N Y) A DO P TE D B YT HE C O M PA NY

7 .7 .1 F UT UR E S T RA TE G IE S

1. Further expansion into the rubber production segment ofplantations

D ue to t he im me ns e p ot en tia l o f ru bb er p ro du ctio n s eg me nt o f p la nta tio n c om pa nie s, F LC H i nt en ds to

e xp an d t he g ro up 's r ub b er p ro du ct io n f ur th er . P re se nt ly f ro m t he t ot al l an d e xt en t o f 1 1 ,5 91 h e ct ar es o f

P us se lla wa P la nta tio ns a nd 1 1, S7 7 h ec ta re s o f M atu ra ta P la nta tio ns o nly a re ve nu e e xt en t o f 2 ,8 65

h ec ta re s a nd 4 17 h ec ta re s re sp ec tiv ely h av e b ee n a llo ca te d f or ru bb er b y th e p la nt atio ns . H en ce th e

c om pa ny w ill c on tin ue to fo cu s o n t he a cc ele ra te d t re e p la ntin g p ro gra m v en tu re d in to fiv e f ew y ea rsa go , w he re a s u m o f R s .l b illio n w as in ve ste d in n ew p la ntin g a nd re -p la nt in g o f r u bb er a nd u tiliz in g a ll

s ui ta bl e c ul ti va bl e a re as f or r ub be r p la nt in g e tc i n P u s se ll aw a a nd M at ur at a p la n ta ti on s.

2. Further expansion into the low-grown and high-grown segments of the tea plantat ions

D ue to th e N S As b ei n g h ig h er in t he lo w g ro wn s eg m e n t o f t h e p i en ta tio ns , F LC H p ia n s t o e xp a n d m ore

in to t his a r ea t hr ou g h n e w p ia n t a ti on a nd r e- pl a n ta ti o n. F ro m t he t ot a I r ev en u e e x te n t o f 4 , 8 3 2 h ec ta r es

o f t ea in M at ura ta P la nta tio ns o nly 1 ,3 83 h ec ta re s h av e b ee n a llo ca te d t o th e lo w g ro wn te a, w hile

P us se ll aw a P ia n ta ti on s h av e a ll oc at ed 3 71 h ec ta r es f ro m t he t ot al r ev en u e e xt en t o f 2 ,6 36 h ec ta r es f or

lo w g ro wn t ea . T he re fo re t he C om pa ny h as h ug e p ote ntia l to e xp an d in th is a re a.

A pa rt fro m th is , th e C om pa ny p la ns to in cre as e fu rth er th e b ou gh t le af in ta ke in a ll lo w g ro wn te a

fa cto rie s b y 2 0% a nd th er eb y e nh an ce t he f ac to ry c ap ac it ie s o f l o w g ro wn a re as t o im pr ov e t he N S As i n

t he s ho rt r u n . W it h t he b en ef it o f i mp ro ve d N S A s, M a tu ra ta i s e xp ec ti n g t o e n h a n c e t h e f ac to ry c a p ac it y

b y 1 0% in th e m ed iu m te rm .

A t p re se nt , h ig h g ro wn fa cto rie s o f M atu ra ta a do pt s t he R at ov an e m an uf ac tu rin g m eth od , w he re o nly

5 to 6 v arie tie s o f te a c ou ld b e p ro du ce d. H ow ev er in o rd er to im pro ve th e N SA s o f th e h ig h-g ro wn

se gm en t fu rth er, M atu ra ta w ou ld b e u pg ra din g th e m an ufa ctu rin g m eth od o f th ese fa cto rie s to

L ea fy -t yp e m a n u fa ct u r i ng , w hi c h p ro d u ce s 1 0 t o 1 5 g r ad es o f t e a .

3. Fur ther expansion in to the mini-hydro power sector

T he C om pa ny p la ns to e xp lo re f urt he r th e e xis tin g h yd ro p ot en tia l b y d ev elo pin g s ev en n ew M HP s in

t he n e ar f u tu r e.

NameofMHP Capac ity Construc tion - E stim ate d C om me nc em en t A pp ro va ls

Commencement Cost (*) o f P ow er

& Period (Rs.) Generat ion

Rakwana I 1.0MW Nov. 2011 150Mn May2013 LO I - M a rc h 2 0 11

(Rakwana District) (18 months) CEA- Aug . 2011

S EA - S e p t. 2 0 1 1PUCS L - S e p t 2 0 1 1

CEB(SPPA)O c t . 2011

Rakwana I I 2.0MW Nov.2011 300Mn May2013 LO I - M a rc h 2 0 11

(Rakwana District) (18 months) CEA- Aug . 2011

S EA - S e p t. 2 0 1 1

PUCS L - S e p t. 2 0 1 1

CEB(SPPA)O c t . 2011

27

NameofMHP Capacity C o ns tr uc ti on - E st im at ed C om me nc em en t A pp ro va ls

Commencement Cost (*) o f P owe r

& Pe r iod (Rs.) Generat ion

Ensalwatte I O .5MW May 2011 100Mn O ct2012 LO I - O b t ai ne d

(Deniyaya D istr ic t) (18 months) CEA- April 2011

S EA - M a rc h 2 0 11

PUC S L- M a rc h 2 0 1 1

CE8(SPPA)-Apr i l 2011

Ensalwatte II 1.0MW May 2011 150Mn O c12012 LO I - O b t ai ne d

(Deniyaya D istr ic t) (18 months) CEA- April 2011

S EA - M a rc h 2 0 11


CEB(SPPA)-Apr i l 2011

Ensalwatte Tea 0.2MW May 2011 75Mn O ct2012 LO I - O b t ai ne d

Factory (18 months) CEA- April 2011

(Deniyaya D istr ic t) S EA - March 2011


CEB(SPPA)-Apr i l 2011

Aninkanda 2.0MW Nov. 201 1 300Mn May2013 LO I - M a rc h 2 0 11

(Deniyaya D istr ic t) (18 months) CEA- Aug. 2011

S EA - S e p t. 2 0 1 1

PUC S L- S e p t. 2 0 1 1

C EB( S PPA ) O c t . 2 0 1 1

Beverly 0 .75 MW Nov.2011 125 Mn May2013 LO I - M a rc h 2 0 11

(Deniyaya D istr ic t) (18 months) CEA- Aug. 2011S EA - S e p t. 2 0 1 1

PUC S L- S e p t. 2 0 1 1

C E 8 (S PPA ) O c t . 2 0 1 1

(*) T h e e s t i ma t e d c o s ts of t he i nv e st me n ts h a ve b ee n a rr iv e d a t b as e d o n p re va i li ng m a rk e t p ri ce s o f r a w m a te ri al s, p u rc ha s e p ri ce s of

h y dr o p o we r e q ui pm e nt a n d m a ch in e ry , c o ns tr uc ti on c o st e s t im a te s a n d e x p er ie n ce g a in e d f ro m d e ve lo p in g p ro je c ts of s im i la r na t u r e

i n t h e p a s t .

A s t h e g e ne ra t io n c a pa c it ie s o f t h e p ia n n e d p ro je c ts a re l es s t ha n 1 0MW ea ch , t h e re w il l b e S PPA ss ig n ed w it h C EB

f o r a l l o f t h e M H P s. A ll S P PA ss ig n ed b e tw e en 2 5 th N o vem b er 2 0 10 a n d 3 1 st D e cem b er 2 0 11 w o u ld b e c o s t- ba s ed

and t ec hno l ogy spec if ic and deve lope rs have t he op t ion o f s e lec t ing a t h r ee -t i er ed t a ri f f o r a f l a t t a r i ff s t ruc t ur e . T he

t a ri ff s wou ld c on ti nue t o be s ta n da rd i ze d a n d n o n- ne g ot ia b le a n d t h e n ew SPPAt e rm s e x te n d u p t o a p e ri od o f 2 0

y e ar s a n d c a n b e e x te n de d t h er ea f te r b y m u tu a l c o ns e nt . A c co rd in g ly , a ll o f t h e a b o ve M HP s d e ve lo p ed b y t he

G r ou p w o u I d be o n a f l a t t a ri ff s tr uc tu r e o f R s . 1 3. 0 4p e r u n it o f e l e ct ri ci ty g e ne r at ed f or t h e e n t ir e 2 0 y e a r p e r io d .

4. Further expansion into commercial forest ry development on the estates

W it h r eg a r d t o t h e c u I ti va tio n o f t i m b e r, t h e g r ou p a I re ad y f ol lo ws a s t ra te gy o f " a t r ee f or a t re e" c on ce p t,

w he re a t re e is p la nte d fo r e ac h tr ee fe lle d. U nd er th is e xp an sio n p ro gr am , 1 .5 m illio n t re e p la nt s h av e

a lr ea dy b ee n c ultiv ate d c olle ctiv ely in b ot h P us se lle wa a nd M atu ra ta p la nta tio ns d urin g t he la st t wo

y ea rs , s pa nn in g a cr os s 4 3 e sta te s in lo w, m id a nd h ig h g ro wn re gio ns . E uc aly tu s s pp . a h ig hly s ou gh t

a ft er t im be r v ar ie ty b y th e c on st ru ctio n s ec to r h as b ee n p la nt ed in t he h ig h a nd m id g ro wn s eg me nt s.

M ah og an y, T ea k a nd R ub be r, u se d e xte ns ive ly b y th e fu rn itu re in du stry h as b ee n p la nte d in th e

lo w- gro wn s eg me nts . I n f ut ure t oo th e c om pa ny w ou ld c on tin ue to c ultiv at e t im be r in u nu tiliz ed la nd

a re as o f t he p la nt at io n s u si ng a m ix ed v ar ie ty o f t re es s o a s t o r ed uc e e xp os ur e t o a s i ng le v ar ie ty .

28




5 . D e ve lo p me n t o f n o n -c or e b us in e ss es to m a x im i ze t he r e so u rc e u ti li za ti on a n d to e a s e t h e o v e r - d e p e n d en c e

o n c o re b u si n es s

The Company, through i ts subsidiary Tea Leaf Resort, would be venturing into the leisure sector by

developing two boutique style hotels of 3-star quali ty standards in Kandy and Paddukka areas,which

offer accommodation to atotal of 92rooms.Alsosteps arebeingta kento convert unutiIizedb ungalows

in Nuwara Eliyaand Deniyaya areasinto holiday homes in the future.

The company would also be diversi fying into the construction, real estate and commercial property

development sectorsin the future and plansare already underway to develop acommercial complex in

Borella with 80,000sq. ft of rentable space.

7.7.2 RISKSASSOCIATEDWITH FUTURESTRATEGIES,ASSUMPTIONSONWHICHTHEYAREBASED& RISK

MITIGANTS(IF ANY)ADOPTEDBYTHECOMPANY

Risksassociated with Rubber production

The company's earnings have a signi ficant exposure to rubber prices in the global arena, which has

driven the group's earnings on account of more than 100%increment inpricesover lastyear.However

due to the cont inued short supply of rubber in the internat ional markets, the surging crude oil prices

andthe rislnqdemand from theautomobile industries of international power housessuchasChinaand

India, the rubber pricesareexpected to remain high for the next threeto four years.

The domest ic rubber industry haswitnessed some volat il ity in the past due to wage hikes and labour

unrest. However compared to thetea industry, the rubber industry islesslabour intensive and thus has

the resi lience to post higher prof it margins. After March this year, the local rubber product ion lagged

due to unfavourable weather condi tions and loss of man days. Therefore the risk remains of lower

product ion volumes due to unseasonal weather pat terns, f loods etc. As a mit igat ion measure, the

Group's plantations have developed rain - guarded fields, which hasassistedin harvesting the crop even

during the rainy season.

The recent budget proposals indicate an increasein CESSon export of rawrubber from Rs.4/-to Rs.8/-

per kg,which would affect the earnings potential of allplantation companies.

Risksassociated with Teaproduction

A major port ion of the company's revenue isderived from tea salesand hence i ts revenue isheavily

dependent on thetea pricesin the global market Currently SriLankacommands the highest pricesfor

i ts teas in the world. However due to increasein product ion volumes both local ly and internat ionally,

the tea industry ispresent ly faced with the threat of excessive supply, with resul tant decelerated tea

prices,which in effect would narrow the NSAsrecorded by the local plantation sectorcompanies.

The increasing COPisacommon problem faced bythe tea industry inSriLanka.On averagethe COPof

the sector i sUSS2.33 per kg, which isamong the h ighest in the wor ld , which has a lso affec ted the

country's competi tive posit ion in the global arena.The primary determinants of the tea sector COP

couIdbe sighted aslabour prod uctivity, where wage hikesevery two yearswith the renewaIof two-year

col lect ive agreements between the t rade unions and plantat ion companies have worsened the

s ituation . Present ly wages make up approximate ly 60% of the COP in Sri Lanka, whi le o ther tea

producing nations such asIndia and Kenyarecords only 40%- 50%.Also the local energy costsaccount

for almost 4%of the COP.

29

Continuous reduction in labour force due to migration every year hasaffected the availability of labour,

which directly affects productivity. Theexistence of tea-smallholders in close proximity to estates, who

offer work to estateworkers during cropping seasonetc hasalso contributed to this situation.

The recent budget proposal increasing the CESSon export of raw bulk tea from Rs.4/~o Rs.10/- per kg,

a imed at increas ing value add it ion to tea, would a lso adverse ly a ffec t the earnings of industry

part icipants asi t 's l ikely to act asadeterrent to potent ial foreign bulk tea buyersat the auctions, which

could resul t in declining prices at least in the short-run. Contrast ingly, the cont inued government

concessions inthe form of fert il izer subsidies provides a degree of relief for anindustry suf fering from

high cost of product ion, whi le proposed subsidies extended to small tea growers (Rs.SO,OOO/-er

hectare) to encourage replanting and new planting drivesthe sector forward.

The recent budget proposal also indicates that a six months not ice period would be granted for the

acquisition of unutilized land of teaestates by the Government. Theadverse impact of this proposition

would be addressed to some extent by the Company's future plans of increasing the t imber plant ing

and rubber cul tivation in unuti lized cul tivatable areas.Furthermore, the Company is also exploring

possibilit ies of cultivating oil palms in unutilized areasof the estatesin the future.

Similar to other agricultural crops,the teaindustry too isvulnerable to adverseweather conditions such

asdroughts, heavy rainsand extreme cold spells, which render low yielding output.

Changes in g loba l demand pat terns such asthe shi ft i n pre ference of the European markets to

vaIus-added formsof teasuch asteabagsfrom thetradi tionaI bulk tea focused bySriLankawou Idalso

threaten the country's compet it ive posit ion in the future. Going forward tapping the equity markets

would bea v iable opt ion to many p lantat ion companies in Sri Lanka, in order to venture into these

areas.

Risksassociated with Hydro-power

The tarif f ratesof small power producers havechanged from the avoided cost principle to a more cost

reflective one. However, the avoided cost formula isre-set every year based on the thermal generation

costs of the CEBand with the start of coal-based power generat ion, the CEB'savoided costs' could

reduce, posing a riskof reduced tarif fs to the small power producer inthe short-run ascoal prices are

expected to riseover the long-term. However, asthe MHPsdeveloped bythe Group would beon af lat

tarif f st ructure the riskof reduced tari ffs would not beappl icable inthis instance.

Basedon the f luctuat ions of the exchange rateand inf lat ion ratesthe tari ffs received bythe Company

would vary in the future. The escalable component of the three-t iered tari ff opt ion contained therein

would beaffected bythe LKR/USDrateof change forthe f ive preceding yearsand the averagelevelsof

inf lation. Asthere isan inverserelat ionship between the tari ff rate and these two variables, the risks

associatedwouId arisefrom Rupeeappreciation againstthe Dallarand lowering of inflation levels,both

of which would havea negat ing ef fect of lowering the tari ffs received bythe MHP.However asal l the

future MHPsdeveloped by FLCHsubsidiaries would beon theflat tariff structure, the riskof uncertainty

of the future revenueswould not exist inthis regardfor the ent ity.

Fluctuations in weather patterns, natural disasters etc would affect power generation and plant factor

ut il izat ion levelsas the MHPsare dependent on the levelsof water f low. Extreme weather condi tions

such as prolonged droughts and sudden unexpected f loods in catchment areas are detrimental to

power generation.

30




Thethreat of damages caused by natural disasters such asearthquakes, thunder storms and lightning

will be mitigated to some extent by comprehensive insurance coversobtained from leading insurers in

the country.

Risksassociated with non-core business

Pol it ical and economic stabil ity, changes in government pol icy etc affects the viabi li ty of the sector.

However,present ly mini-hydro power isthe cheapest sourceof power to the nat ion compared to other

renewable sources,coal power, thermal power etc.The price of one unit of electricity generated by

diesel, coal and hydro power isRs.2S/-,Rs.17.S1and Rs.S/-respectively. Theannual savingfrom the non

useof fuel for power generat ion due to small hydro isestimated to be Rs.7bi ll ion for ayearand with

agreements s igned with the CEBfor another 113 MW, thi s i sexpected to more than double in the

coming years.Also with the reawakening of the northern and easternprovinces, electrification needsof

agrowing populat ion, the present economic revival , the growing concerns for global warming etci t 's

most likelythat the government would encourage the sector with favourable policies.

Therapid growth of the post-war construction industry in SriLankacould lead to increased pricesof raw

materials such ascement, sand and steel . This could lead to unexpected cost overruns of planned

construction anddevelopment projects, whichwould lead to delayed execution of future strategiesand

negat ive impacts to the bottom-line of the company.

As i l lustrated below, there areseveral regulatory approvals required when developing projects in the

hotel and real estate sectors and the Company's future strategies in respect of their leisure and real

estateobjectives, hinges on obtaining allrequisite approvals from the relevant authorities.

Requisi te approvals of the two leisure sector projects

Unexpected cost overruns due to increasesin rawmaterial prices forconstruction, purchase prices of

hydro power machineryetc,wouId resul t in increasing the execut ion risksof the project interms of t ime

target, budget andexpected efficiency levels.

Approving Authority Status

, BoardOf Investment Pending

2 Na tiona lBuil dingResearchO rgan izat ion Ob ta ined

3 CentralEnvironmentalAuthority Pending

4 ProvincialCouncil ByMarch2011

5 SriLankaTouristBoard Pending

6 UrbanDevelopmentAuthority Pending

7 Ministry of PlantationIndustries ByMarch2011

Similar to other industry part icipants, the revenues of all MHPsdeveloped by the Company would be

entireiy dependent 0ntheir solecustomer -the CEB,Therefore,the performanceof thissector hingeson

the tariffs determined bythe PUCL,the payment ability of the state utility, thesubstation capacities and

minimum generation requirements of the CEBetc. However asthe minimum generation requirement

exist ing in t ier 2 for the three-t iered tari ff scheme would not be applicable for MHPson the f lat tarif f

scheme, the Company's revenue would not be affected to this extent. Also,the SPPAsor the upcoming

projects would besigned for 20 yearsand areextendable thereafter by mutual consent. However, the

risk of CEBexercising their right of refusalto purchase anyelectrical energy generated after the expiry

of this term persistsfor all exist ing MHPsinthe sector,Similarly the riskof not obtaining approval f rom

any o f t he rel evan t aut ho ri ti es ment ioned i n Sec ti on 7 .7 .1 o f t he P rospec tus, in cl ud ing t he

non-execution of SPPAwith the CEB,persists for allMHPsin the sector.

Requisi te approvals of the real estate project

Risksassociated with commercial Forestry development

Ap<provingAutti0rJty' Staft:is

I1 ColomboMunicipalCouncil- preliminaryclearance ByFeb.2 01 1

2 ColomboMunicipalCouncil - Drainageclearance, ByJune2011

surveyorplan& building planapprovals

3 FireBrigade ByJune2011

4 Ministry of Defense If required

5 CivilAviation If requiredChanges in regulat ion by Environmental Authori ties Onthe management of forestry resources have

proven to bea hindrance to this areaof focus. Foran instance, even though thefel ling of t rees isdone

with government approva l, t he exist ing temporary restr ic ti on on t imber fel li ng above 5,000 feet

elevat ion levelswould pose a problem, mainly for Maturata Planation, asmore than 56% of its timber

stock is above the 5,000 elevation levels. Comparatively, Pussellewa Plantation will be affected only

marginally asonly a negligible component of the stockfal ls above the restricted area.The plantat ion

industry isdueto makerepresentations at the next Golden Shareholder's meeting inorder to seek relief

f rom this exist ing temporary restrict ion imposed bythe Ministry of Plantat ions and Industries, which is

currently under discussion.

7.8 TA XA TIO N

Asperthe Inland RevenueAct No.10 of 2006 and itsamendments thereafter, the Company's revenue sources

comprising of investment income, dividend income and capitaI gainsincome areaIIexempted from taxatio n.

7 .9 T AK E-O VE R O FF ER SThe prevalent high demand fort imber hasresul ted inat t ract ive t imber pricesfor the suppl iers with no

dif f icul ty in disposinq of the ent ire t imber harvest . However, i f the t imber prices cont inue to rise, the

threat of lower cost t imber subst itutes suchasaluminum etccould reducet imber pricesin the future.

There have been no take-over offers bythird parties in respect of FLCH'ssharesduring the past two years.Also

FLCHhas not made any takeover of fers in respect of sharesof athird party.

Unlikeother crops,weather patterns have the least influence Ontimber plants. However, prolonged dry

spe ll s m ight cause casua lt ies to the p lants, espec ia ll y dur ing the ear ly s tages of p lant ing. A lso

un-favourable weather patterns might lead to fungal and various types of other diseases,which might

ultimately hamper the harvest of timber.

31 32




7.10 MANAGEMENT AGREEMENTS 8. DIRECTORS

The details of the Group's two material management agreements with i ts plantation sector subsidiaries are

outlined below. Exceptfor these,there were noother management agreements presently inforce or currently

being considered including particulars of anyconsideration passing to or from the Entity.

8.1 DETAILS OFTHE BOARD OF DIRECTORS

}- Maturata Plantations Ltdhasentered into amanagement agreement with FreeLankaPlantat ions Co.(Pvt)

Ltd, where FreeLankaPiantations Co.hasbeen appoi nted astheir managing agent for aperiod of five years

upto 30th September 2013.During this period FreeLankaPlantations Co.will beentitled to a management

fee of 20% of earnings before charg ing depreciat ion, interest, gain on fai r value of t imber s tock and

applicable taxes.

Full Name I A g el Residential Experience Other Directorships Held

Address

Mr. K attar Aloysius Former C hairman o f C eylon CHAIRMAN:Chairman Oxygen PLC · FreeLankaTrading Co.Ltd.

· PussellawaPlantations Ltd.

Age-aO · Maturata Plantations Ltd.

· FreeLankaPlantations Co.(Pvt) Ltd.Residential Address- · FreeLanka Management Co.(Pvt)Ltd.No.2, 6th Lane,Colombo 03. · Melfort GreenTeas(Pvt)Ltd.

· Hydro Power FreeLanka2 (Pvt) Ltd.


DEPUTYCHAIRMAN:

· Hydro Power FreeLankaPLC.

DIRECTOR:

· CeylonAgro Industries Ltd.

· FreeLanka Power Holdings (Pvt) Ltd.

· FreeLanka Power 1(Pvt)Ltd.

· FreeLanka Power 2 (Pvt)Ltd.


·FreeLanka Capital (Pvt) Ltd.

Mr. G odfrey Anton Aloysius Holder of a Bachelor's DEPUTYCHAIRMAN:Manag ing Direc to r / Chief Degree i n F inance f rom · PussellawaPlantations Ltd.EXecutive Officer North Eastern University, · FreeLanka Management Co.(Pvt)Ltd.

Boston, Massachusetts.

Age- 38 JOINTMANAGING DIRECTOR:

MBA from Brunei · FreeLankaPlantations Co.(Pvt) Ltd.Residential Address- University, West London. · Melfort GreenTeas(Pvt)Ltd.

No.2, 6th Lane,Colombo 03.

MANAGING DIRECTOR CEO:

· Hydro Power FreeLankaPLC.

DIRECTOR:

· Maturata Plantations Ltd.

· Ceylon EstateTeas(Pvt) Ltd.

·FreeLankaTrading Co.(Pvt) Ltd.



· FreeLanka Power 1(Pvt)Ltd.



· FreeLanka Power Holdings (Pvt) Ltd.

· TheTeaLeaf ResortHolding (Pvt)Ltd.

· FreeLankaCapital Properties (Pvt) Ltd

· FreeLanka Capital (Pvt) Ltd.

}- PussellawaPlantations Ltd hasentered into a management agreement with FreeLankaManagement Co.

(Pvt)Ltd, where FreeLankaManagement Co.hasbeenappointed astheir managing agent for a period of

f ive yearsup to 31st December2012. During thisperiod FreeLankaManagement Co.wiI Ibe ent it led to a

management fee of 20% of earnings before charging depreciat ion, interest gain on fair value of t imber

stock and applicable taxes.

7.11 LITIGATION, DISPUTES AND CONTINGENT LIABILITIES

Thereare no material legal ,arbit rat ion or mediat ion proceedings, which may haveor havehad in the recent

past ,af fected thef inancial posit ion or prof itabil ity of the Company. Asatdatethere are no penalties imposed

by anyregulatory andl or stateauthorities.

The Company had no material cont ingent l iabi li ties asat balance sheet date that would affect current and

future profits.

7.12 MATERIAL CONTRACTS

The Company has not entered into any mater ia l contrac ts other than those contrac ts entered into in the

ordinary courseof business.

7.13 TRANSACTIONS RELATEDTO PROPERTY

There areno transact ions relat ing to the property that took place within thetwo preceding yearsin which any

vendor of the property to the company or anyperson who isorwasat the t imeof the transact ion, apromoter

ora director or proposed director of theCompany had any interest , direct or indirect .

7.14 DETAILS OF COMMISSIONS & BENEFITSPAlD

Nocommission hasbeenpaid inthe two yearspreceding theOffering for subscribing or agreeing to subscribe

or procuring or agreeing to procure subscriptions for anysharesor debentures of the Company.

No benef it has been paid or g iven within the two years preceding the Offer ing and there are no benef it

intended to bepaidor given to any promoter.

33 34




0

Fu ll Name / Agel Residential Experience Other Directorships Held

Address

Mr .Geo ffr ey Joseph Al oysi us Ho ld s a BSe . i n Busi ness DIRECTOR:

Execut i v e D i r ec to r Administration (USA). · Pussellawa Plantations Ltd.

· Free Lanka Management Co. (Pvt) Ltd.

Age-52 · Free Lanka Plantat ions Co. (Pvt) Ltd.

· Hydro Power Free Lanka PLC

Residential Address- · Hydro Power Free Lanka 2 (Pvt) Ltd.

No.7, Queens Avenue, · Hydro Power Free Lanka 3 (Pvt) Ltd.

Colombo 3 · Free Lanka Power Holdings (Pvt) Ltd.

· Free Lanka Power 1 (Pvt) Ltd.



· Tea Leaf Resort Holding (Pvt) Ltd.

Mr. lshara Chinthaka Diploma in Business CHAIRMAN:

Nanayakkara Accounting & Finance - · Confi fi Hotel Holdings PLC.

Execut i v e D i r ec to r Dandenong College, · Riverina Hotel PLC.

Victoria · Eden Hotel PLC.

Age - 3 B · Tropical Villas (Pvt) Ltd.

Residential Address- DEPUTY CHAIRMAN:

302/1, Nawala Road · Lanka ORIX Leasing Co.PLC.

Rajagiriya · Lanka ORIX Finance Co. Ltd.

· Commerc ial Leasing Co. Ltd.

DIRECTOR:

· PRASAC Micro Finance Institute

· Pussellawa Plantations Ltd.

· Maturata Plantat ions Ltd.

· Ishara Traders (Pvt) Ltd

· Taprobane Fund Management Ltd.

· Taprobane Holdings Ltd.

· Brown & Company PLC .

· Gal Oya Plantat ions (Pvt) Ltd.

· Gal Oya Holdings (Pvt) Ltd.

· Diriya Investments (Pvt) Ltd.

· Seylan Bank PLC.

· Sierra Construct ions Ltd

· Agstar Ferti lizers (Pvt) Ltd

· The Tea Leaf Resort Holding (Pvt) Ltd

· LOLCMicro Credit Ltd.

· Agris il Holdings Ltd.

35

Ful l Name / Agel Res idential Exper ience

Address

Mr. Aji th Lasantha

Devasu rendra

Execu ti v e D i re c tor

Age-49

Residential Address-

No. 17, 5pathodea Avenue,

Colombo 5.

Mr. Jayasiri Manik Sumithra

deMel

Execut i v e D i re c to r

Age-68


51/4, Soysa Road, Panad ura.

Former Group CEO of F irst

Capital Group.

Other Directorships Held

CHAIRMAN:

• Gal O ya Holdings (Pvt) Ltd.

• Royal Fernwood Porcelain Ltd.

First President of Sri Lanka

Money Brokers Association. DEPUTY CHAIRMAN:

• Brown & Company PLC.

Heac ted as a consultant to

Price Waterhouse Coopers, DIRECTOR:

Bombay, I nd ia on a USAID

project.

Master of Business·

Adminis trat ion (MBA) from

the Pos t Graduate Ins ti tu te DIRECTOR:

of Management (PIM) of

the University of Sri

Jayawa rdenapu ra.

First President of the Sri

Lanka Primary Dealers

Associ ation.

At p re sent a Comm it tee

member of National

Council for Economic

Development (NCED).

Fellow

Chartered

member

Institute

Management Accountants,

U K

Funct ioned as the F inance

D irec tor o f S ri Lanka S ta te

P lantat ions Corpora ti on

and Janatha Estates

Development Board prior

to privatization of State

owned Estates in 1992.

36

MANAGING DIRECTOR / CEO:

• Taprobane Holdings Ltd.

• Taprobane Fund Management Ltd.

· AssociatedBattery Manufacturers (Cey)Ltd.

· Standard Finance (Pvt) Ltd.

· Engineering Services (Pvt) Ltd.

· Mason Mixtures Ltd.

· Muthugala Estates (Pvt) Ltd.

· Gal Oya Plantat ions (Pvt) Ltd.

· Diriya Investments (Pvt) Ltd.

· Browns Investments (Pvt) Ltd.

· Eden Hotel Lanka Ltd.

· Riverina Hotels PLC.

· Confi fi Hotels Holdings PLC.

· TropicalVilias (Pvt) Ltd.

· Seylan Bank PLC.

· Maturata Plantat ions Ltd.

· Sierra Constructions Ltd.

o f MANAGING DIRECTOR:

of • Maturata Plantat ions Ltd.

Free Lanka Management Co. (Pvt) Ltd

JOINT MANAGING DIRECTOR:

Free Lanka Plantat ions Co. (Pvt) Ltd.

· Pussellawa Plantations Ltd.

· Hydro Power Free Lanka PLC.

· Free Lanka Power 1(Pvt) Ltd.

· Free Lanka Power 2 (Pvt) l td.


· Hydro Power Free Lanka 2 (Pvt) Ltd.

· Hydro Power Free Lanka 3 (Pvt) Ltd.

· Free Lanka Power Holdings (Pvt) Ltd.

· The Tea LeafResort Holding (Pvt) Ltd.

· Orion Fund Management Co. (Pvt) Ltd.

· Free Lanka Capital Properties (Pvt) Ltd

· Free Lanka Capital (Pvt) Ltd




Other Directorships Heldu ll Name / Agel Res idential Exper ience

Address

Mr. Don Soshan Kamantha

Amarasekera

Non-Executive Director

Age-40


No.12, Rotunda Gardens,Colombo 03

Member of Institute of DIRECTOR:

Chart ered Accountants o f · Free Lanka Power Holdings (Pvt) Ltd.

Sri Lanka. · Free Lanka Power 1(Pvt) Ltd.


Attorney-at-Law of the · Free Lanka Power 3 (Pvt) Ltd.

Supreme Court of Sri · Hydro Power Free Lanka PLC.

Lanka. · Hydro Power Free Lanka 2 (Pvt) Ltd.

· Hydro Power Free Lanka 3 (Pvt) Ltd.Holder of a Bachelor's · FreeLanka Management Co. (Pvt) Ltd.

Degree in Business · Free Lanka Plantat ions Co. (Pvt) Ltd.

Admini stratton from the · The Tea LeafResort Holding (Pvt) Ltd.

University of Sri · Free Lanka Capital Properties (Pvt) Ltd

Jayewa rdenepura. · Browns Investments (Pvt) Ltd

An eminent Tax Consultant NON EXECUTIVE DIRECTORS:

and the Senior Tax and· Lanka Milk Foods (CWE) PLC

Legal Partner of· Madulsima Plantations PLC

Ama raseka ra &Company, a •

leading tax consultancy •

firm in the country. •

Kelani Tyres PLC

Colombo Land Exchange Ltd.

Confi fi Hotel Holdings PLC

Riverina Hotel PLC

Eden Hotel Lanka PLC

Ins ide the Jungle (Pvt) Ltd.Tropical Villas (Pvt) Ltd

Balangoda Plantat ion PLC

Sierra Cables PLC

Sierra Holdings Ltd

Sierra Water Works (Pvt) Ltd

Sierra Road Engineering (Pvt) Ltd

Sierra Telecommunications (Pvt) Ltd

Sierra Electrical Engineering (Pvt) Ltd

Sierra Civ il Engineering (Pvt) Ltd

Sierra Pil ing (Pvt) Ltd

• Finco Holdings Ltd

Agstar Ferti lizer (Pvt) Ltd

Sunsun Boutique Hotels Ltd

37

Address

Ful l Name / Agel Res idential Exper ience Other Directorships Held

Mr. Nadarajah Murali Prakash Holder of an MBA from

Non-Executive Director University of Souther n

Queensland.

Age·47


N O .7 B ,

Barnes Place Residencies,Barnes Place,

Colombo 7.

Certified Professional·

Chartered Marketer.(Asia •

Pacific)

Certified Management

Accountant (Aust.)

Holds an Executive

Diploma in Business

Administration fr om the

University of Colombo

Alumni of National

University of Singapore & •

Asia n Institute of l v

Management, Manila. •

Fellow of Certi fied DIRECTOR:

Profess iona l Managers SriLanka.

Served asthe Sales Director

for Singer (Sri Lanka) PLC.

A lso served as the Deputy

Credit Director and

managerial positions

relating to marketing at

Singer.

Served in the Boards of

Singer (Sri Lanka) Ltd,

Si nger Fi nance Lanka L td

and Singer Industries

(Ceylon) Ltd.

38

MANAGING DIRECTOR ICEO:

• Brown & Company PLC

• Standard Finance (Pvt) Ltd.

Engineering Services (Pvt) Ltd.

Browns Group Motels Ltd.

C.FT Engineering

Browns Group Industries (Pvt) Ltd.

Browns Tours (Pvt) Ltd.B.G.Air Services (Pvt) Ltd.

Th e HattonTransport & AgencyCo (Pvt) Ltd.

Walker & Greig (Pvt) Ltd.

Masons Mixture Ltd.

I .G . Browns Rubber Industries (Pvt) Ltd.

Browns Radiators ( Pvt) Ltd.

( Fo rm e rl y K n ow n a s B r o w ns D im o

I nd u st ri al P r od u ct s ( Pvr) Ltd. )

Sifang Lanka ( Pvt) Ltd.

Sifang Lanka Trading ( Pvt) Ltd.

Snowcem Products Lanka ( Pvt) Ltd.

Browns Investments ( Pvt) Ltd.

Associated Battery ManufacturesCeylon Ltd.

Klevenberg (Pvt) Ltd.

The Tea Leaf Resort Holding (Pvt) Ltd.

Hydro Power Free Lanka PLC

Free Lanka Capital Properties (Pvt) Ltd.

Gal Oya Holdings (Pv t) L td .

Browns Bat tery ( Pvt) Ltd.




Ful l Name/ Agel Resident ial Experience

Address

Other Directorships Held

Mr. Prawira Rimae Saldin


Age~53


No.4,Samagi Mawatha,

Borupana Road

Ratmalana.

Char te red Account an ts o f •

Fell ow o f t he I ns ti tu te o f DIRECTOR :

SriLanka

Fell ow o f t he Char te red

Institute of Management

Accountants UK

Ce rt if ie d Managemen tAccountant Australia

Alumni of the Asia Institute

of Management ~Manila.

Served as the Group

Director, Chemical

Industries (Colombo) Ltd,

Finance Director Shell Gas

Lanka Ltd and Shell

Terminal LankaLtd,

Country Controller, Shell

Businessesin SriLanka.

and served onthe Board of

Di re ct ors o f a number o f

listed and unlisted

companies.

Mr . Dahamkith Chandramani Graduate of the University

Wima lasena of Ceylon

Independent


Age~73

Residential Address ~

22/11, Subadra Mawatha,

Madiwela, Kotte.

Served as Chairman at

Ceylon Petroleum

Corporation, Lanka

Tankers, Colombo Gas &

Water Co. and Lanka

Marine Services.

Directorships held at

Pussellawa Plantations Ltd,

Maturata Plantations Ltd,

Free Lanka Management

Co.(Pvt)Ltd and FreeLanka

Plantations Co.(Pvt) Ltd

39

BrownsInvestments (Pvt)Ltd.

RoyalFernwood Porcelain (Pvt) Ltd.

GalOyaHoldings (Pvt) Ltd.

Samudra BeachResorts(Pvt) Ltd.

FreeLankaCapitalProperties(Pvt)Ltd.

DIRECTOR:

• ChevronLubr ican tsLankaPLC

Address

Ful l Name/ Agel Residential Experience Other Directorships Held

Mr.Asela Indrajith Fernando

Independent


Age ~48

Residential Address ~

No. 102 11 0, Kitulwatte Road,Colombo 8

President -

Confederation of SAARC

Apex Bodiesof SriLanka

- (asatdate)

ICA Sri Lanka

(2004-2005)

South Asian Federation

of Accountants (SAFA)-

2007

Advicer I Chairman -

SAFA committee on

improving Transparency,

Accountability and

Governance (CITAG)

Exoff icio member ~

Securit les and Exchage

Commission of SriLanka

PostGratuate Institute ofManagement of the

University of Sri

Jayawardenepura (PIM)

The Nat ional Inst itute of

Business Management

(NIBM)

Served as the Group

Financial Officer and

Director of subsidiaries at

Forbes & WalkerLtd.

T ra ined and worked as a

Manager at KPMG FordRhodesThornton & Co.

40

MANAGINGDIRECTOR CEO

• Bar tl ee tT ranscapit al L td

DIRECTOR:

Bartleet FinanceLtd

Strategic ResearchLtd

Stromme MicrofinanceAsia

(Guarantee)Ltd



41


8.2 DIRECTORS'STATEMENT TheCompany understands, supports and hasapplied the coreconcepts that underlie enterprise governance

and ensures that itsstandards remain in compliance with allapplicable legal and regulatory requirements.

Nodirector ora person nominated to become adirector isorwasinvolved inthe fol lowing events-

8.7.1 REMUNERATIONCOMMITIEE(i) A pet it ion under any bankruptcy lawsf i led against suchperson or any partnership inwhich hewasa

partner or any corporat ion of which hewasanexecutive off icer.

(ii) A convi ct ion for f raud, misapprop riat ion or breach of t rust 0ranyother similar offence , which the

Exchange considers a disqualification.

The Remuneration Committee, which was set up on the 10th December 2010, consists of two independent

and non-executi ve d irec tors . Mr. A .I . Fernando, a wel l known profess iona l i n the count ry heads the

Remuneration Committee to ensure that the remuneration arrangements support the strategic aims of the

Company.

8.3 DIRECTORS' SHAREHOLDI NGThecomposition of the Remuneration Committee isasfollows,

Asat date of Prospectus, the directors do not have anydirect or indirect shareholdings (inrespect of allclassesof shares)inthe Company other than what isdisclosed inSection 7.4of the Prospectus. Mr.A.I.Fernando - Chairman (Independent, Non- Executive Director)

Mr. D.C.Wimalasena - (Independent, Non- Executive Director)

8 .4 SALES AND PURCHASES OFSHARES MADE BYTHE DIRECTORS

Apart from the purchasesof sharesby the directors asdisclosed below,there were noother salesor purchases

of sharesby the directors during the yearimmediately preceding the date of issueof this Prospectus.

The Committee isresponsible for set t ing up the remunerat ion pol icy and making recommendat ions to the

Boardon;

Remuneration framework

Name No.of Shares Share Price %ofHolding Date

Mr. I sha raChin thaka Nanayakka ra 10, 638, 298 Rs. 4. 70 1 . 0 0 0 1 0 30th December'10

Mr. Ajith Lasantha Devasurendra 10,638,298 RsA.70 1.00% 30th D ecember '10

Mr.Nadarajah Murali Prakash 1,000,000 RsA.70 0.09% 30th December'1°

Theremuneration payable to the ExecutiveDirectors, CEO/Managing Director and SeniorManagement

Senior Management performance evaluation

Performance based remuneration plans including performance incentives

8.5 AGGREGATE EMOLUMENTS INCLUDING BONUS AND lO R PROFIT SHARING PAYMENTSRemuneration policy amendments

There were no emoluments including bonus and/or prof it sharing payments made to the directors by FLCH

during financial year ended 31stMarch 2010,asthey were remunerated byother companies inthe FreeLanka

Group.

Asstated inSection 8.5,the Company hasnot paid remuneration to their Executive0r Non-Executive directors

inthe past.

8.7.2 AUDITCOMMITIEE

Further this pract ice wil l becontinued inthe future and accordingly there wil l beno emoluments including

bonus and/or profit sharing payments payable to the directors by FLCHfor the current financial year. The Audi t Commit tee which was set up on the 10th December 2010, compri sesof two independent and

non-executive directors. Mr.A.I. Fernando hasbeen appointed asthe Chairman of the Audit Committee.

8 .6 DIRECTORS INTEREST IN ASSETS AND CONTRACTS

Thecomposition of the Audit Committee isasfollows,

Directors hold no interest inany assetsacquired, disposed or leasedby the ent ity during the past two years

preceding the issue;and or proposed to beacquired, disposed or leasedduring the two yearssucceeding the

issue.

Mr.A.1.Fernando - Chairman (Independent, Non- Executive Director)

Mr.D.C.Wimalasena - (independent, Non- Executive Director)

Further there are nocontracts orarrangements inforce asatthe date of the application inwhich adirector of

the Entity ismaterially interested, in relation to the businessof the Entity.The Managing Director and the Headof Finance attend meetings of the Audit Committee by invitation. The

Committee isresponsible for:

8.7 CORPORATE GOVERNANCE PRACTlCES

TheBoardof Directors of the Company isresponsible to adopt the best corporate governa ncepractices of the

Company and itscontrolled entities. They provide the strategic direction, leadership and quidance aswell as

supervision, in order to ensurethe responsibiIity & accountabiIity towa rdsthe best interest of itsshareholders

and other stakeholders of the society.

Overseeing of the preparation, presentation andadequacy of disclosures inthe financial statements of

a listed entity, inaccordance with the SriLanka Accounting Standards.

Overseeing of the Entity'scompliance with financial reporting requirements, information requirements

of the Companies Act and other relevant financial reporting related to regulations and requirements.

TheBoardof Directors of FLCHconsistsof 11Directors including the Chairman and Deputy Chairman. In line

with the regulatory requirements of the CSEList ing Rules, the Company has appointed f ive non-executive

directors including two independent non-execut ive directors to the Board of FLCHin order to facil itate

independent judgment in Board discussionsand decisions.

Oversee ing the processes to ensure that the Ent it y' s interna l control s and r isk management are

adequate to meet the requirements of the SriLankaAuditing Standards.

Recommending to the Boardthe appointment, re-appointment and removal of internal and external

aud itors, approving the remunerat ion and terms of engagement o f the externa l aud itors and

assessment of the independence and performance of the Entity's external auditors.

42



43


Mr. Godfrey A. Aloysius

( R e f e r Sec t i o n 8. 1of t h e P r o s pec t u s ) .

j

Name I O€s'ignation Qual ificat ion s Workitag ·uxperience

Mr. M.V.S. Plevian · Bachelor of Commerce . 16years exper ience asan

S e n i o r A c c o u n ta n t · Passed f na Iist of t h e Accountant in the plantation

Chartered Institute of sector.

Management Accountant U K

• Th e Inst i tute of Cha rtered

Accountants of Sri Lanka

(Licentiate level)

· Member of Austral ian

Computer Society

9. K EY M AN AG EM EN T P ER SO NN EL

9.1 M AN AG I NG 01 RE CT OR I CE O

The Chief Executive Off icer I Managing Director of the Company is not or was not involved in any of the

following:

A peti tio n under any bank rupt cy laws fi le d aga ins t such per son o r any par tner sh ip i nw hi ch hewas a

par tner or any corpora ti on of which hewas anexecut ive off icer ;

9.3 E M O LU M EN TS O F T HE S E NIO R M A NA GE M EN T

Convict i on for f ra ud, misapp ropri atio nor breac h of t rust 0r any o t her simi la r o ffe nce, which the CSE

considers a disqualification.

During the last financial year, there were no emoluments induding any bonus and I or pro fi t sharing

payments made to the Chief Executive Officer and the senior management team, as they were all

remunerated by other companies in t he Free Lanka Group. However , t he sen ior management was ent it led

for an aggregate a ll owance of Rs.400,000 for t he las t f i nanc ia l year.

~~me I Oesigl';lati$:m t\l,ualifkatio.ps Wor~ing Expe.rie.n-ce<

Mr. Godfrey A. Aloys ius

Ma n a g i ng D i re c t o r/ C E O (Refer Sec ti o n 8.1 of t he Prospec t us)

Mr. U.P.C Fernando · Fel low Member of t he · 8 years in t he f ie ld o f aud it ing

C h i e f F i n a n ci a l O f fi c e r Institute of Chartered · 2 years overseas in the travel

Accountants of Sri L anka sector as the Chief Accountant

IGroup Internal Auditor

· 14 years in the Plantat ion

Sector

Mr. S. Muthurajah · Diploma in Marketing · 15 years experience in the

I n v es t m e n t A n a l y st · MBA fields of finance, investments,

capital market operations,

manufacturing and corporate

re-structu ring.

Ms. A.D. Outschorn · Member of t he Chart ered · Possesses over 16 years

G e ne r al M a n a ge r - F in a n ce Institute of Management experience in the field of

Accountants (UK) finance.

· D ip loma in Marketi ng f rom

the Chart ered Ins ti tu te of

Marketing

· MBA from the Postgraduate

Institute of Management,

Univers ity of Sri

Jayawardenepura.

Fur ther th is p ra ct ic e wi ll b e conti nued i n the cu rr en t fi nanc ia l y ea r, and ther e wil l be no emol uments

i ndud i ng any bon us and lor pro fi t shar ing payments payab le to t he Chief Executi ve Off icer and the sen ior

management team. An estimated aggregate allowance of Rs.1,440,0001- will be paid to the senior

management t eam in the cur rent f inancial year.

9.2 SEN I OR MANAGEMENT

9 .4 T RA NS AC TIO N S W IT H K EY M AN AG EM EN T P ER S O NN EL

The Company has not ransact ions w it h key management personnel and other t han the a ll owances s ta ted inSection 9.3 above, incurs no other expendi tu re per ta in ing to the ir key management personnel .

9.5 H UM AN C AP IT AL O F TH E G RO U P

FLCH Note 1

No. of Employe~~

Power sector companies 22

Note 2;tur;ala Plantations Lt d 11,772

Pussellawa P lantat ions Ltc { 11,016 Note 2

r Note 3

22,810

Note 1: A s F L C H i s a h ol di ng c om p an y, b us in e ss a ct iv iti es a re b ei ng h an d le d b y s e l ec te d s ta ff m e m be rs f ro m t he F re e

L a n ka G ro u p . T h e e m p l o ye e s of th e e n t it y a re n ot e n ga g ed i n a n y l ab ou r u n io n a ct iv it ie s a n d f ro m t he o u ts et t he

C o m pa ny h as n o t h ad a n y l a bo u r r el at ed d is pu te s w ith t he ir s ta ff. A ls o t he C o m pa n y h as n o l ab ou r u n io n s a n d

t he r ef or e t he re a r e n o s ig n if ic a n t a g re e m e nt s e n te r ed i nt o b e tw e e n t he C o m p a ny a n d a n y l a bo u r u n io n s.

Note 2: Th e two p la nta tio n c om p an ie s in th e g ro up , M atu ra ta a nd P us se J/a wa p la nta tio ns e ac h h av e two ma i n

c o ll ec ti ve a g re e m e nt s w i th e s ta te s ta ff a n d e s ta t e w o r ke rs u n io n s, w h e re t he E m p lo y e r' s F e d er a ti on of Cey l on

r e pr e se n ts t he e m p lo y e rs of re gio na l p la nta tio n c om p an ie s, a nd a ll n eg ot ia tio ns w ith la bo ur u nio ns a re

c o ll ec ti ve l y h a nd le d b y t he m .

Note 3: A ll t he P o we r s e c to r c om p an ie s i n t he g ro u p a re o v er se e n b y a c om m o n s et o f e m pl oy ee s a n d t he s e c o m pa n ie s

d o n o t h av e a ny l ab ou r u ni on s o r r e la te d a ct iv it ie s, a n d h av e no s ign i f ican t a g re e m e nt s e n t e re d i nt o w i th l a bo u r

u[ . ! ions .

44



F r ee L a nk a C a p, ro Ia l dl n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap it al H al di ng s L Id -IMol Pu b l i c O i f 2 1

10. STATED CAP ITAL SHAREHOLDING STRUCTURE AFTER THE IPO

S ince the inception , t he movement in t he share cap it al s truc ture of t he Company isout li ned below ;

5liia.[eh9Iders Numper of Ordina,ry ' Shares % of holdi tl9

Free Lanka Capital (Pvt) Ltd 747,600,00(1 I' 54.65%-Browns Investments (Pvt) Ltd 43,978,2)1 .3.2194i

Perpetual Holdings Ltd 43,953,090 3.21%

Others 232,468,693 16.99%

Public Holding 300,000,000 21.93%,

Total 1.368,000.000 100%

1 0.1 C A PI TA L S T RU C TU R E

The S ta ted Capit al o f t he Company asat t he date of P rospec tus was Rupees One B il li on and S ix ty E ight M il li on

(Rs.1 068,000 .0001- ) compris ing of One Bil lion and Sixty Eight Mil lion (1,068.000,000) Ordinary Vot ing shares.

Consideration per Tetal ~o. of

Dateof'Allotment Share No, of Shares issued Shares

(Rs.) Outstanding

27th March 2009 10.00 90,000,000 90,000,000

Asat 31st March 2009 90,000,000

01 st September 2009 10.00 1,800,000 91,800,000

05th March 201O 10.00 15,000,000 106,800,000

As at 31st March 2010 106.800,000

Subdivision of Shares

15th October 201O One existing Ordinary Share to ten shares 1,068,000,000

Asat t he date of Prospectus 1,068,000,000

1 0. 3 P AR T IC U LA R S O F D E BT A ND L O AN C AP IT AL

10.3.1 DEBT AND LOAN CAPITAL OFTHE COMPANY

Asat date of Prospectus,

There were no loan cap it al out st anding, o ther bor rowings, t erm loans or indebtedness in t he nature

o f bor rowings, in cl ud ing bank ove rd ra ft s o r l iab il iti es ( other than o f norma l tr ad ing nat ur e) under

acceptance credit.

There were no leasing, lease purchase or hire purchase commitments.

Other t han the said Ord inary vot ing shares, t here was no other c lass of shares i ssued by the Company . Fur ther

t here were no shares redeemed, re-purchased immedia te ly preceding two years of t he date of t he Prospec tus

in t erms of Sec ti ons 63, 64,66,67,68,69,93 and 100 of t he Companies Act and there was no reduc ti on of s t at ed

cap it al i n t erm sof Sec ti on 59of t he CompaniesAct .

There were no guarantees or other material contingent l iabi li ties .

There were no mor tgages or charges on the asset s of t he Company as the Company has no propert y,plant & equ ipment p ledged assecur it y f or any l iabi li ti es and there fore has no amount o f res tr ic ti ons

on t it le o f any propert y. p lant or equ ipment .

, 0.3.2 DEBT AND LOAN CAPITAL OFTHE GROUP ASAT 31ST MARCH 2010

Also there are no restric tions applicable in respect of non-res ident shareholdings.

Loan cap it al out st anding, o ther bor rowings, t erm loans or indebtedness in t he nature of bor rowings,

i nc luding bank overdra ft s or l iabi li ti es (other t han of normal t rading nature) under acceptance c redi t

i sd is closed in Note No.s21(b) , 25and 26of t he Audit ed F inancial S ta tements f or t he year ended 31st

March 2010.1 0.2 S H AR E HO L DI NG S T RU C TU R E O F T H E E NT IT Y A S A T D A T E O F P R O S PE CT U S

SHAREHO LDINGSTRUCTURE BEFORE THEIPOThe Group l ia bil iti es wi th r egard t o leasi ng , le ase pur chase or h ir e pur chase comm itments a re

d is closed in Note Nos . 25and 28of t he Audit ed F inancial S ta tements f or t he year ended 31st March

2010. Fur ther detai ls o f t he "net l iabi li ty t o Lessor - JEDBI SLSPCEstates" and "other finance leases" are

tabulated below, fol lowed by further information pertaining to "PHDT lease rental receivables ':Sha'relib I de~s Number of O~dlnarey Shares % of Raiding

'Free Lanka Capital (Pvt) Ltd 7417,600,000 7O%.

Browns Investments (Pvt) Ltd 43,978,217 4.12%

Perpetual Holdinqs Ltd 43,953,090 4.12%

Ot~ers 232,468,69~ ,~1,76%

Total 1,068,000,000 100%

( R e fe r S h a r e ho l d er i n fo r m a ti o n i n S e c ti o n 7.4 o f t he P r o sp e c tu s .)

45 46



( R s . 0 0 0 )


Net Liabi li ty to LessorofOther Finance Leases

JEDB /SLSPC Estates

31.12.2010 31.03.2010 31.03.2009 31.12.2010 31.03.2010 31.03.2009

Payable within one year

Amount payable within 16,744 16,744 16,744 25,144 29,853 22,355

one year

Less:Finance charges (12,409) (12,577) (12,707) (7,261) (10,302) (7,110)

allocated to future years

4,335 4,167 4,037 17,883 79,551 15,245

Payable within 2 to 5years

Amount payable within 2 66,976 66,976 66,976 29,736 36,684 33,327

to 5years

Less:Finance charges (50,161) (48,570) (50,502) (5,316) (7,605) (6,459)


16,815 18,406 16,474 24,420 29,079 26,868

Payable after 5 year

Amount payable after 5 503,598 505,892 522,598 - 1,311 994

years

Less:Finance charges (214,506) (215,076) (226,159) - (104) (59)


Total 289,092 290,816 296,439 I' - I' 1,207 I' 935

310,242 313,389 316,950 42,303 49,837 43,048

Mortgages or charges on the assetsof the Group, property, plant & equipment pledged assecurity for

IiabiIitiesand restrictions ontitle of property, piant0requipment of the Groupare disclosed inNoteNo.36

of the Audited f inancial Statement for the yearended 31stMarch 2010.

1 0. 4 D IV ID EN D P O LtC Y

The d iv idend pol ic y o f t he Company wou ld be t o decla re a t leas t 20% o f i ts a ft er t ax p ro fit s sub je ct t o

availabil ity of funds and incompliance with the statutory solvency requirements aslaid out inSections56,57

& 60of the Companies Act. Accordingly the dividends declared (ifany) for the 2 yearsimmediately preceding

the issueof Prospectusis setout below.

Year Qivide lilds 0e<.:la red 'N:et D iv ig en ds P er S h ar eI . I -n

(8s.) (Rs.)

2008/2009 - -

2009/2010 1,200,000 0.01

Further an Inter im div idend of Rs.0 .01 per share was dec lared dur ing the s ix months per iod ended 30th

September 2010.(ReferNote No.7 of the Interim FinancialStatements)

1 0. 5 O U TS T AN DI NG C O NV ER TI BL E D EB T

Premisesat St. Andrew's Drive in Nuwara Eliya owned by Maturata Plantations Ltd have been leasedout toPHDTfor a period of 20years commencing from August 2005, at a total lease rental of Rs.10,734,696/-.The

Group has recognized the leaserental receivable asa deferred income and amort ized over 20yearsasgiven

below.

Asat the date of the Prospectus,the Company hasno outstanding convertible debt securities.

1 0. 6 S H AR ES S U B S CR IB ED O R S O L D P RIV AT EL Y

(Rs.OOO)

31.12.20ro 3'1.03'.2010 31.0,3.20f)9

Not later than one year 537 537 537

Later than one yearand not laterthan f ive years 2,147 2,147 2,147

Laterthan fiveyear!). 5,15~ 5,558 t,oM

Total 7,839 8,242 8,779

The Company hasno shares/ other classof sharessubscribed or sold privately, inconjunction with the public

issueof shares.

1 0. 7 S T AT UT O RY R ES T RIC TIO N S O N T HE F RE E TR AN S FE RA BIL IT Y O F S H AR ES

Thecontingent l iabi li ties applicable to the group aredisclosed in Note No. 33.2of the Audited Financial

Statements,where the deben turesissued on 19th June 1997 to the vaIueof Rs. l50mill ion by Maturata

Plantations Ltd were converted to ordinary shareson 22nd June 2002,aswas done in the caseof regional

plantations companies that were purchased at parvalue.The contingent liability hasarisenas the basisof

this debenture conversion to ordinary shareswascontested bythe Golden Shareholder inthe year 2008.Thedetails of the conversion areasfollows:

TheCompany hasno statutory restrictions on freetransferability of itsissued shares

(I) Basisof Conversion - 4.575,000,732Ordinary Sharesat parvalue of RS.1/- each per Debenture of par

value of Rs.10/- each.

( II )Number of Sharesresu lt ing f rom the above convers ion - 15,000,000 Ord inary Shares. ( I. e. 21%

incrementaIshareholding to theGroupfrom 51%to 72%)

(1I1)Possiblempact on Group shareholding of Maturata Plantations Ltd from the above contingent liability

i s that the number of shares resul ti ng f rom the convers ion would bereduced f rom 15,000,000 to

3,278,688Ordinary Shares.(I.e.incremental share holding to the Group would be reduced from 72%to

57.90%)

47 48




11. OPERATIONAL & FINANCIAL OVERVIEW OF THE GROUP 11. 2 Pl an ta ti on s Secto r

1 1.1 D IV ER S IF IC AT IO N O F TH E G RO U P

P lantat ion sec tor, t he key sec tor o f opera ti ons of FLCHcontr ibutes to more than 96% of t he group 's revenue.

Thegroupawns 43es ta tes under t he purview of Maturata and Pusse ll ewa P ianta t i ons ,where the rna inca ntr i-

but ion s tems f rom tea and rubber p iantat ions . (Refer segmenta I i n form ation d is c lased in the 31st Decem ber

2010 Interim Financial Statements of FLCH.)

F ree Lanka Capit al Ho ld ings

Limited

+ + + +Real Estate &

Plantations Power LeisureCommercial

Property

Development

i=reetanka [ F.reeLanka I TI)e Tea teef FlreeLanka- Plantations Co. - Power Holdings - Resort Holding ~ Capital Properties

(Pvt) Ltd. (Pvt) Ltd. (Pvt) Ltd. (Pvt) Ltd.

Free Lanka Free Lanka

_ _ _ . fRain Forest- Management - Power 2 Eco Lodge

Co. (Pvt) Ltd. (Pvt) Ltd. ~ (Pvt) Ltd.

Maturata Free Lanka- Plantations - Power 3

Ltd. (Pvt) Ltd.

Pussellawa Hydro Power- Plantations - Free Lanka

Ltd. PLC

Melfort Green Free Lanka

-Teas

-Power 1

(Pvt) Ltd (Pvt) Ltd

Hydro Power- Free Lanka 2

Ltd

Hydro Power- Free lanka 3

Ltd

.~

49 J-

Revenue for the 9 m onths period Reven ue for the 9 m onths period

ended 31st Dec. 2010 ended 31st Dec. 2009

Tea (Rs.'OOO) 3,454,221 2,918,167

Rubber (Rs:OOO) 1,132,483 625,607

Other (Rs.'OOO) 148,922 33,594

Total Revenue 4,735,626 3,577,368

Maturata Plantations Ltd, w ith a tota I extent o f 11,$77hecta res , i sone of t he p ioneer p iantat ions in S ri Lanka

and contr ibuted Rs.1.9 b il li on , i .e . a lmost 40% towards the Group 's p lantat ion sec tor revenues for t he year

ended 31st March 2010. Matu rata i spr imar i Iy i nvol ved in t he cuIt ivat ion, manufac tu reand sale of b lack tea,

rubber lat ex and coconut and there are 19estates under t he ir purview . According ly t ea, rubber and coconut

can be recognized as the ir main c rops , wh il e t imber grown for commerc ia l purposes a lso makes a s igni fi cant

contr ib uti on . Al though t ea p roducti on accoun ts f or t he substant ia l p ropo rti on o f Ma tur at a Pl an ta ti on 's

revenue, rubber account s f or a larger proport ion of t he gross pro fi ts .

Forthe year ended 31stDecember 2010

Tea Rubber Coconut

Revenue Extent (hectares) 4,823 417 127

Production ('000) 6,293 Kg 496 Kg 241 nuts

Yield (per hectare) 1,040 kg 1,188 kg 1,890 nuts

Revenue (Rs:OOO) 2,168,390 174,047 $,669

Gross Profit (Rs.'OOO) 81,060 98,109 1,302

Contribution to Group's Plantation Sector Revenue (Rs.'OOO) Rs.1,896,269 40.04%

Contribution to Group's Plantation Sector GrossProfits (Rs.'OOO) Rs.145,742 18.10%

Due to topog raphicreasons,Maturata is largely exposed to tea com pared to other maincrops and nearly48%of the

land owned by Maturata is located in high grown elevations, which ismore sui table for tea cul tivation. Also 90% of

t he main-crop-cul ti va ted areas consist o f t ea p lantat ions , out o f which 72% is categor ized under h igh grown

elevations. Intotal, Maturata operates 12tea factories with indiv idual capacit ies ranging from 850,000 kgper annum

to 1,600,000 kg per annum.

Growing demand for rubber in t he wor ld market has s timula ted Maturata P lantat ions to inc rease i ts exposure to

rubber sec tor. Total l and extent o f rubber s tood at 29% of t he main-crop cul ti va ted area. Rubber cul ti va ti ons are

concentrated to low grown elevations inAkuressa and Matara areas and Matu rataoperates 2 rubber factories each

with acapaci ty of 70,000 kg per annum.

Due t o t he uneconomi ca l na tu re o f i ts ope ra ti on s, the si gn if icanc e o f coconu t, a s the th ir d ma in cr op has

deteriorated substantial ly and only 127 hectares were allocated for coconut . All the coconut plots are In estates

located in Akuressa and Matara areas.

50



F r ee L a nk a C a p it o ! H a ld l ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H a ld in gs L Id -IMol Pub l ic o n e .

Fortheyear ended 31sf December 2010

Summarized Operational Performance of the existing MHPsin the Group

;{Mi~:w!r Del ta

(At 1. i f j'MWk~apac i ty ) ( 1 .2 MW C ap ac it y)u

'OutputPlant .Eactor

Out'putPlant Fat;tor

(MWJ (MW)

2006/07 3 ,471 25% 1,400 13%

2007/08 3 ,534 25% 3,220 31%

2008/09 3 ,589 26% 2,509 24%

2009/10 5 ,341 38% 4,259 41%

I n a d d it io n t o t h e t h re e m a in t ra d it io n a l c ro p s, M a tu r at a P la n ta t io n s h a s s i g ni fi ca n t e x p os u re t o t im b e r, w it h v a ri ou s

h a rv es ti ng p e ri od s f ro m m e di um t o l on g t er m. M a tu ra ta P la nt at io n s t o d at e h av e c ul ti va te d m o re t ha n 5 0 0, 00 0

t im b e r p la n ts , w i th E u c al yp t us , M a h o ga n y , T e a k a n d L u n um e d e ll a b e in g t h e m a in v a ri et ie s o f t i m b er p la n te d . F o rt h e

y e ar e n de d 3 1st D e c em b e r 2 0 1 0, t im b e r s a le s c o n tr ib u te d R s .1 5 .3m i ll io n t o t h e G r ou p 's r e ve n u e.

PussellawaPlantations Ltd, w it h a t ot al l an d e xt en t o f 1 1 ,5 9 1 h e ct ar es , c on tr ib u te d R s. 2. 9 b il li on o r a lm o st 6 0 %

t owa r ds t h e G r ou p 's p l an t at io n s e ct o r r e ve n u e f o r t h e y e a r e n d e d 3 1 s t M a r ch 2 0 1 0. P u s se ll a wa o p e ra t es 2 4 e s ta t es

w it h i ni ts p u r vi ew a n d c ul tiv a te s t he t h r ee t r ad i ti on a I m a i n c r op s o f t e a , r u b b er a n d c o c on u t, w it h m o re p ro m i ne nc e

g iv en t o t ea a n d r ub b er .

ifea Rubbe r Coconut

R e v en u e E x te n t ( h ec ta r es ) 2 ,636 2,865 69

P r od u ct io n ( '0 0 0 ) 6,351 3,173 1 9 8 n u ts

Y i el d ( p er h e c ta re ) 1 ,4 05 kg 1,106 kg 2,862 nu ts

R e v en u e ( R s: O O O ) 2 ,217 ,573 1,301,270 4 ,043

G r os s P r of it ( R s. 'O O O ) 146,502 655 ,813 2 ,096

Source:Hydro PowerFreeLankaPLC

C on tr ib u ti on t o G r o up ' s P l a n ta t io n S e c to r R e v en u e ( R s. 'O O O ) Rs.2,739,112 57.84%

C o n tr ib u ti on t o G r o up ' s P l a n ta t io n S e c to r G r os s P r o fi ts ( R s. 'O O O ) Rs.589,463 73.19%

RevenueRelated to Energy Production from the existing MHPsin the Group (Rs. '000)

9 months to 9 months to Year ended Year ended

3 1 st D e c. 2 0 10 31st Dec 2009 31S t March 201'0 31 sf Marcil 2009

S a n qu h ar M H P 41,724 (*) 51,474 57,008 32,906

D e lt a M H P 4 8 , 39 8 ( -) 41 ,005 45 ,4 25 22,803

t ' " J The lower cantr ibut ion in 2010 from Sanquhar M H P was due to t he p la nt b ein g shu ! d own f or a pe ri od due to

damages caused by lightning.

P u s se ll a wa h a s a l lo c a te d a n e x te n t o f 2 , 6 36 h e c ta r e s f or t e a c u I t iv a ti o n o r 4 7% o f t h e t o ta ll a n d w h e re m a i n c ro p s a r e

c ul ti va te d . F ro m t he 2 4 e st at es , 1 5 a r e t e a e st at es c om p ri si ng o f b o th l ow a n d h ig h g ro w n s eg m en ts . D u ri ng 2 0 10 ,

P u ss e ll aw a h a s p ro d uc e d 6 .4 m il li on k g o f t e a , w h e re 7 9% o f t he p ro d uc ti on w a s f r om h ig h g ro w n s eg m en t, w h il e

t he r em ain de r w as f ro m t he lo w g ro wn . T he a ve ra ge y ie ld p er h ec ta re o f h ig h g ro wn is 2 7 % g re at er th an t he lo w

g ro w n, m a i n Iy d u e t o f av ou r ab le e limatte c o n d i t io n s o f t h e h i g h g r ow a r ea s . P u s se ll a wa o p e ra t es 9 t e a f a c to r ie s w i th

i n d iv id u a I c a p a ci ti es r an g in g f ro m 5 0 0, 00 0 k g p e r a n n u m t o 1 ,5 0 0, 00 0 k g p e r a n n u m .

(**) Theincreased contribution from Delta MHPwas due to the plant operating at maximum installed capacity levels

Source:HydroPowerFreeLankaPLC

H PF L i s a ls o in th e p ro ce ss o f e xp an din g o pe ra tio ns w ith th e c on stru ctio n o f fo ur m ore M HP s w ith a to ta l

c a p ac it y o f 5 .3 7 M W , t h er eb y i n a g g re g at e c on tr i b u ti ng a t o ta l o f 8 . 5 7M W t o t he N a ti on a I G r id b y A p ri I 2 0 1 2 .

P u s se ll a wa b e n ef it s b y t h e p r od u c ti on o f C r e p e R u b be r , w h ic h h a s a g r ea t d em a n d i n t h e w o rl d m a r k et a n d t h er e fo r e

c omm an d s h i g h e r p r i ce s . P u s s el la w a h a s a l so i nc r ea s e d i ts p r es e n ce i n t h e r ub b e r s e ct o r b y f o l lo w i n g a n a c ce l er a te d

r e- pl an ti ng / n e w p la n ti ng p ro g ra m , w h ic h c om m en ce d 5 y e ar s a g o a n d w it hi n a p pr ox im a te ly a n ot he r t wo y ea rs ,

w o ul d b e a b le t o h a rv es t f ro m t he n e w p la n ta ti on s. D u ri ng 2 0 10 , r ub b er w a s c u lt iv at ed i n 1 4 e st at es s pr ea d o ve r

2 , 865 hec t a res .

A pa rt f ro m t he a bo ve , th e G ro up h as in co rp or at ed t wo m ore c om pa nie s - F re e L a nk a P ow er 2 a nd F re e L a n ka

P ow er 3 , fo r t h e e xp lic it p ur po se o f e x pa nd in g fu rt he r in to t he p ow er s ec to r b y d e ve lo pin g s ev en m ore M HP s i n

R ak wa na a nd D en iy ay a a re as a nd t he re by a dd in g o n a no th er 7 .4 5M W o f p ow er t o t he N atio na l G rid b y M ay

2 0 1 3 . F ur th e r d e ta i I s o f t he u p co m i ng M H P s a re d i s el os ed i n 5 e c ti on 7 .7 .1 t o t he P ro sp e ct us .

P u ss e ll aw a P la n ta ti on s i s a l so i nt o t he c ul ti va ti on o f c o mm e rc ia ll y v ia b le t im b er a n d h av e p la n te d m o re t ha n 1

m il li on t im b er p la n ts i n m a rg in a l t ea l an d s a n d o n s el ec te d r oa d si de s a n d b o un d ar ie s. D u ri ng t he y e ar e n de d 3 1s t

D e c em b e r 2 0 1 0 , P u s se ll a wa h a s r e a l iz e d R s .1 1 3 .7 m i ll i o n f rom t i m b e r h a rv e st i n g .

A cco rd in gly b y th e e nd o f y ea r 2 01 3, th e G ro up a ntic ip ate s to g en era te a to ta l o f 1 6.0 2M W o f h yd ro p ow er

t hr ou g h it s s u b si di ar ie s a n d s ub -s ub si di ar ie s i nv ol ve d i n t h e p o we r s e ct or .

1 1.3 H YD RO P OW ER S EC TO R

P re se n tl y t he G ro u p a lr ea d y h as p re se n ce i n t he m in i- hy dr o p o we r s ec to r t hr ou g h H y dr o P o we r F re e l an ka P L C

( HP F L) , w hi ch o p er at es t wo p o we r p la n ts - S a n qu h ar M H P a n d D e lt a M H P, l oc a te d i n P u ss el la w a P la n ta ti on s i n

G a mp o la , K a nd y D is tr ic t. E a ch M H P g e n er at es 1 .6 M W o f h yd r o p o we r, t ot a I i ng t o 3 .2 M W . Th e t ot a I c on tr i b u ti on t o

t he G ro up 's r ev en u e f ro m t he p ow e r s e ct or f or t he 9 m o nt hs p e ri od e n de d 3 1 sr D e c em b er 2 01 0 w a 5 2 . 12% o r R s . 10 0

mil l ion.

51 52




11.4 KEYPERFORMANCE INDICATORS 12. STATUTORYAND OTHER GENERAL INFORMATION

GroMP CQ~eany..

:mO.3 .1QI ' ,31.12. '10 J l,Q 3 .U ~ 3kQ3.09. 31.12.10 31;03 ,09I

Net Profit Ratio" 19.45% 6.21% - 88.29% 11.38% 98.58%

Return on Capital Employed" 8.34% 4.42% - 3.79% 1.83% 0.53%

Returnon Average Shareholders' Funds" 10.10% 3.58% - 4.02% 033% 0.53%

Return on Average Assets(ROA)" 8.11% 4.19% - 3.62% 1.95% 0.52%

Debt to EquityRatio 43.55% 46.23% 41.53% 15.02% 2.72% 1.30%

Debt to TotalassetsRatio 30.34% 31.61% 29.34% 13.06% 2.65% 1.28%

Equityasa %oflotal Assets 69.66% 68.39% 70.66% 86.94% 97.35% 98.72%

Interest cover' 9.58 3.00 - 44.80 1.26 -

EarningsPer Share(EPS) 0.37 0.87 24.72 0.04 0.04 0.05

Dividends PerShare(DPS) 0.001 0.01 - 0.001 0.01 -

NetassetsPerShare 4.41 33.69 34.72 1.04 10.06 10.05

Current Ratio 1.26 0.66 0.56 1.18 1.11 0.42

12.1 ARTICLES OFASSOCIATION

Ext ra cts of t he Ar ti cl es of A ssoci at ion o f FLCH a re se t out i n t he Annexu re B o f t hi s P rospec tu s. Ar ti cl es o f

Association of the Company will be available on the website of the CSE, www.cse.lk and FLCH website

www.freelankacapital.com

12.2 INSPECTION OF DOCUMENTS

The Art ic les of Assoc ia ti on , t he Audit ors' Repor t, Aud it ed F inancial S ta tements of FLCHfor t he two f inancial

years immedia te ly preceding the date of t hi s P rospec tus, i .e . FY 2008/09 and FY2009/10, Audited Financial

St atements o f Fr ee Lanka Powe r 2 (Pvt) L td and F ree Lanka Powe r 3 (Pvt) L td fo r t he FY2009 /10 and o ther

pro ject documents to which references are made in thi s P rospec tus, are ava il ab le f or i nspect ion by the pub li c

dur ing norma l wo rki ng hour s a t the Bus iness Of fi ce o f t he Company fr om the da te t he Prospect us i smade

avai lable to the publ ic unt i I c losu re of the Subscri ptio n List . (Refer Section 5.B of the Prospectus)

12.3 HOSTING OF PROSPECTUS AND APPLICATION FORM ONTH EWEB

. . There were no revenues or pro fi ts ar is ing out o fopera ti ons of t he group asat year ended 31st March 2009, as

the control over t he two revenue generat ing subsidiar ies Free Lanka Management Co. (Pv t) L td and Free

Lanka P lantat ion Co. (Pv t) L td were acqui red at year end, i .e . a t 31st March 2009.

The Prospec tus and Appli ca ti on Form are ava il ab le on the websi te o f t he CSE,www.cse.lk and FLCH website,

www.freelankacapital.com. f rom t he da te hereof , un til t he Subscr ip ti on L ist c lo ses o r up to f our teen (14 )

Market Days, whichever is later.

Please note that the re-audi ted f inancial s ta tements of Hydro Power Free Lanka PLC(HPFL)has not been

considered inconsolidation of31st March 2010 grou p financiaIstatements ofFLCH,as the revision took place

after the group financial statements were finalized. However the same has been considered for consolidation

inthe interim financial statements of FLCHfor the period ended 31st December 2010. (Refer Section 14.4 of

the Prospectus)

12.4 BROKERAGE

Brokerage at t he rate of zero dec imal seven percentum (0.7%) of t he Share Off er P ri ce w il l bepa id in respect o f

t he number of shares a ll ot ted/al located on Appli ca ti ons bearing the sea lo f any bank opera ti ng inS r iLanka or

a member / trad ing member of t he CSE.

12.5 COSTOFTHE ISSUE

The D irec tors est imate that t he total cos t o f t he Off er ing inc luding s truc turi ng and management f ees, f ees

payab le in respect o f servi ces rendered by lawyers , accountants , reg is trars, pri nt ing and marketi ng cos ts and

brokerage commiss ions w il l be approximate ly Rs .50 Mil li on (exclud ing taxes ). Such cos ts w il l be recovered

f rom the proceeds of t he i ssue.

12.6 UNDERWRITING

The Offer ing i snot underwr it ten. The Company sha ll seeka l is ti ng i rrespect ive of whether t he Off er ing i s f ul ly

subsc ribed or not f or t he reasons set out i n paragraph below , whi ls t acknowledging the fac t t ha t t he l is ti ng

woul d be g ranted onl y upon the Company sa ti sfy ing t he r equ ir ements under t he CSE L isti ng Ru les . The

O ff er in g i n c on fo rm it y to Secti on 45(1) o f the Compani es Act No .7 o f 2007, wil l n ot bec ondit ional upon any

min imum subsc ript ion being met . The proceeds rai sed by the Off er ing are to be uti li zed by the Company for

t he act iv it ies e labora ted under Sec ti on 5.2 - Objec ti ves of t he Off er ing. I n t he event o f an under subsc ript ion,

t he D irec tors o f t he Company are confident t ha t t he short fa ll can be f inanced through interna ll y generated

funds and borrowings.

53 54


http://www.cse.lk/

http://www.freelankacapital.com/

http://www.cse.lk/

http://www.freelankacapital.com./

http://www.freelankacapital.com./

http://www.cse.lk/


http://www.cse.lk/



13. STATUTORYDECLARATIONS 1 3. 2 S TATUTORY D EC LAR AT IO N B Y THE MA NAGER S TO TH E O F FE RI NG

1 3. 1 S TATUTORY D ECLAR AT IO N B YTH E D IR EC TOR S February 01,2011

February 01,2011 We,Taprobane Holdings limited, of No.10,Gothami Road,Colombo 08 being the Managers to the initial public

offering of FreeLankaCapitaI HoldingsLtd, hereby declareandconfirm to the best of our knowledge andbelief

the Prospectus const itutes full and true disclosure of all material factsabout FreeLankaCapital Holdings Ltd

and their Offering and that we are sat isf ied that where applicable prof i t forecasts have been stated by the

directors after due andcareful enquiry.

"This Prospectus has been seenand approved bythe directors of FreeLankaCapital Holdings Ltd and they

col lect ively and individually accept ful l responsibil ity for the accuracy of the information given and confi rm

that provisions of the CSEList ing Rulesand of the Companies Act No. 07of 2007and any amendments to i t

f rom t ime to t ime havebeen compl ied with and after making all reasonable enquiries and to the bestof their

knowledge and bel ie f, t here are no other fac ts the omiss ion of which would make any sta tement herein

misleading or inaccurate.Where representat ions regarding the future performance of the Ent ity have been

given inthe Prospectus,suchrepresentations havebeen made after due andcareful enquiryof the information

available to the ent ity and making assumpt ions that are considered to be reasonable at the present point in

t ime inthe best judgement of the directors."

The Common SealofTaprobane Holdings Limited aff ixed on this 01stday of February 2011at Colombo inthe

presenceof Mr.IsharaNanayakkara(Director) andthe Managers and Secretaries(Pvt)Ltd (Company Secretary).

"Alsoasper Sect ion 40(1)b of the Companies Act No.07 of 2007,the persons named inthe Prospectus,being

Directorsof the Company do herebydeclare that wehavereadthe provisions of this Act relat ing tothe issueof

the Prospectus and those provisions havebeen compl ied with to the bestof our knowledge and bel ief"

Sgd.

Managing Director

Sgd.

Company Secretary

Sgd. Mr. K att ar A loysius

Chairman1 3. 3 S TATUTORY D EC LAR AT IO N B Y THE C OMPAN Y

Sgd . Mr.God frey An ton A loysiu s

Managing Director / CEOFebruary 01,2011

Sgd . Mr.Geo ff re yJoseph A loys iu s

Director

"Anapplication hasbeenmade to theColombo StockExchangefor permission to deal inandfor al isting for all

securities ina partieularclassissuedby the Entity and those Securities of the samecI asswh ichare the subject

of this issue.Suchpermission will begranted when the sharesarelisted on the Colombo Stock Exchange.The

Colombo Stock Exchange assumes no responsibil ity for the correctness of any of the statements made or

opinions expressedor reports included in this Prospectus. listing on the Colombo StockExchangeis not to be

taken asanindication of the merits of the Ent ity orof the Securit iesissued"

Sgd. Mr. lshara Chinthaka Nanayakkara

Director

Sgd.

Director

Mr.Ajith Lasantha Devasurendra

Sgd.

Director

Mr.JayasiriManik Sumithra de Mel

The Common SealofFreeLanka Capital Holdings Ltd aff ixed on this 01stday of February 2011at Colombo in

the presenceof Mr.Godfrey Anton Aloysius (Managing Director/ CEO)andthe Company Secretary.

Sgd. Mr.DonSoshanKamantha Amarasekera

Director Sgd.

Managing Director/ CEO

Sgd.

Company Secretary

Sgd . Mr.NadarajahMurali P rakash

Director

Sgd . Mr. P rawiraR imoeSal di n

Director

Sgd. Mr.Dahamkith Chandramani Wimalasena

Director

Sgd . Mr. Ase la I nd ra ji th Fernando

Director

55 56

f r ee L a nk a C a pi /a J H o Jd in g s L I d -IMo! Publ ic O if21 fre e L anka C apito! HoJd lng s L Id - !I Q! Pu /) !J cOf fe r



14. AUDIT REPORTAND FINANCIAL STATEMENTSFORTHEYEAR ENDED 31STMARCH 2010

14.1 ACCOUNTANTSI8IREPORT FORINCLUSION INTHE PROSPECTUS IBDO

IBDO Fax£·mail

webstte

; .94-11·2421878·79-70

+94·11 ·2387002·0]

: +94-11-2336064

: b dop a r t ners@bdolk

; www.bdolk

BOO Partners

Cha rtered Accou nt.ants~Cha rrer HOLISe~6512, Sir Chittampalam A Gardiner Mawatha

Colombo 02Sri Lanka

2.3 Audit Reports

Tel

TheBoardof Directors

FreeLanka Capital Holdings ltd

No.168,

Negombo Road

Peliyagoda

TheAudit Reports issuedfor the financial yearsended 31st March 2009 and 31st March 2010,indicate that

unqualified audit opinions have been issuedfor the said financial years.

Attent ion isdrawn to thefol lowing note inthe Auditor's Report under Emphasisof Matter under cont ingentIiabilitiesin the consolidated f nanciaIstatements of the Campanyfor the yearended 31st March2010,

DearSirs,

ACCOUNTANTS'REPORTFORINCLUSIONI NTHE PROSPECTUSOF

FREELANKACAPITALHOLDINGSLIMITED

"Debenture issuedon 19th June 1997to the value of Rs.150.0Min hasbeen converted to ordinary shareson

22nd June2002asst ipulated inthe agreement. The basisandor rat io of conversion has beencontested by

the golden shareholder in the year 2008"

INTRODUCTION 2.4 Account ing Pol ic ies

Thisreport has beenprepared for the inclusion inthe Prospectus issuedin connect ion with the ini tial public offering

of 300,000,000Ordinary Sharesat the ShareOffer Priceof LKR5,00each(ReferSection 5.4of the Prospectus).

The account ing pol icies of theCompany arestated indetai l inthe audited f inancial statements of the

Company for the financial yearsended 31stMarch 2009 and 31stMarch 2010.

Wehaveexamined the f nanciaIstatements of the Freela nkaCapitaI Holdings ltd and report asfollows: Thefinancial statements have been prepared in accordance with Srilanka Accounting Standards andthere

were no material changes inthe account ing pol icies of the Company during this period.

1 , I NCORPORAT ION

2. 5 Dividends

TheCompany was incorpora ted inSr i lanka on22nd May 2008 as a l im ited l iabi li ty Company under the

Companies Act No.O?of 2007, ini tial ly with the object ive of invest ing in the Plantations and hydro power

sectors.

The Company paid dividends out of the Dividends received bythe Company forOrdinary Shareholders of

the Company inthe following financial years.

The Company's name was changed from Freelanka Plantation Holdings Co. (Pvt) Ltd to FreeLankaCapital

Holdings (Pvt)l td with effect f rom 30th August 2010 and subsequently the Company has obtained Board

approval byway of a Resolut ion dated 07th December 2010, on i ts application to the Registrarof Companies

to change its status to a public l imited I iabi I ity company under Section 11(1) of the CompaniesAct No. ? of

2007, Accordingly Freelanka CapitalHoldings (Pvt) Limited wil l bechanging i ts name to Freelanka Capital

Holdings Limited.

Year Dividends declared Dividends per Share

Net (Rs.) (Rs./Cts)

2008/2009 - -

2009/2010 1,200,000 0.01

2. F INANCIAL STATEMENTS

2.6 EventsOccurring After the Balance Sheet date

2.1 Two-year Summary of Financial Statements

Two-year summary of Income Statements, BalanceSheets,Statement of Changes in Equity and Cash Flow

Statements of Freelanka Capital Holdings limited for the financial yearsended 31stMarch 2009to 31stMarch

2010 based onthe audited f inanciaIstatements areset out inSect ion 14ofthe Prospectus.

Nosignificant event of the Company hastaken place after the Balance sheet date other than those disclosed

inthe Explanatory Note 6 to the Interim FinanciaIStatements (ReferSection 14.3of the Prospectus) and aIso

Note 32to the f nancialstatements forthe yearended 31st March, 201o .

Note: TheCompany acquired the controlling interest of Maturata Plantations Limited and PussellawaPlanta-t ions Limited on 31stMarch 2009.

Yoursfaithfully,

Ouraudit report on financial statements forthe yearended 31stMarch2010together with such financial state-

ments comprising the Balancesheet,Income Statement, Statement of Changes in Equityand CashFlowState-

ment along with the Account ingPol iciesandnotes thereon isset out inSection 14of the Prospectus.

l3bo ~'~~Irl~_

CHARTEREDACCOUNTANTS

Colombo.

09th December 2010

2.2 Audited F inancial S ta tements for the yearended 31st March 2010.

aoo Portn"" .• Sril"n~"" Po """r,hlP. I> a Inemoer o f a00 IM""" ,,"onatrm ted I a UK company urmted by gua rentee j and forms part of theI n l ema k ", .1 6 00 n et w o . ' 0 r lndcpendoo l member f " ' ' I S _

P"~ rners s~Raj ape l e se FCA IMBA Ms_ M S E Raymond FC. .A .

:5 G R ao h AU . T ~hao H Su~s n ghe ACA

Hs, R.atllnav-e-era AU

Ashane J,w. .Jevaseaera ACA MBA... H _M Sa me n SM a I i J ,C J I t .

CQns.u1tant~V. Snnadof! FCA

57 58

F re e L a nk a C o pi ta t H o ld in gs L td · ln rUo/P , lbilc Offe rr e e L a n ka C a p it a l H o ld i ll g s L i d· , 'M IO! Pu b l i c O f f e r

mailto:[email protected]

http://www.bdo.lk/

http://www.bdo.lk/




F inanc ial Ra t ios

Ea r nings Pe rSha r e (LKR)

Div idends Pe rSha r e ( lKR)

Ne t Asse tsPe rS ha r e ( lKR)

~ ~ ~ ~ ' ~ , , ) .Ch ie fF inance Of f i cer

0.87

o m

33.69

0.66

0.04

0 . Q 1

10.06

1.11

24 .72 0.05

1 4.2 T W O Y EA R S UM MA RY O F F IN AN C I AL S TA TE ME NT S FREELANKA CAP ITALHO lD INGS l TD

GROUPCASH F LOWSTATEMENTSREEL ANKA CAP ITALHOLD INGS l TD

SUMMARY OF F INANC IAL STATEMENTS

34.72

0.s6

10.05

0.42

: :1009/10 2008L09G r ou p . .. . .. Ccmpaav Group o

.Comoanv ee

RS. 'OOO Rs.'O O O Rs.'O O O Rs.'O O O

Ca sh F l ows f rom Op e ra t in g A c ti v it ie s

P r of it b e fo re t ax 341,061 4,040 2,224 ,419 4 ,791

Ad ju s tm e n ts f o r:

Pr o v is ion fo r Re t ir i ng G ra tu i ty 490,812

Depreciation on Property, P lant and Equipment 224,630

G a in o n Ch an g e i n F a i r Va lu e o f T Im b er S t o ck s (237,785)

Sha r eo f Pr o fi t o f Jo int Ven tu r e lAssoc ia te s (6,421)Cap i ta l G r ants Amo r ti sed (15,242)

Fina nee Costs 221,398 15 ,652

In ter e s t In come (88)

B a d De b ts W r it te n O f f (491)

Adjustments to PPE 6,898

Negat i ve Goodwil l . (2 ,224,488

G a in o n D i sp o sa l o f P r op e rt y , P l an t & Equipment (833)

O p er at in g P ro fi t B ef or e W o rk in g C a pi ta l C ha ng e 1,023,939 19,692 (69) 4,791

W o rk i ng Ca pi ta l Ch an g es

Increase/(Decreasej in Inventories (147,006)

( Incr ease ) / Decr ease inT r ade and Othe r Rece ivab le s (50,490) 2,235 (4,860)

( Incr ease } /Decr ease in Re la ted Pa r ty Rece ivab le s (46,633) (23,682) 117

Increase/(Decrease) in Trade and O ther Payables 106,195 (11,243)

In crease /(Decrease ) in Re la ted Pa r ty Payable s (17,716) 27,951 117 11,650

Cash Generated From/(Used In) O perations 868,289 14,953 48 11,698

In come Tax/ESC/SRl Pa id (7,142)

Re t ir i ng G ra tu i ty Pa id (52,666)

Interest Paid (223,738) (15,652)Net Cash Generated from/(Used In} O perating Activities 584,743 (699) 48 11,698

Ca sh F l o ws F r om I n ve s ti n g A c ti vi ti e s

Acqu is i t io n o f Subs idia ri e s (105 ,000) (160,000) (1,014,650 (911,650)

Purchase & Constr u c ti o n o f Pr ope r ty, P lant & Equipment (700,091)

Cap i ta l G r ants Rece ived 109,028

Interest Income Received 88

P r oc e ed s f rom Sa l e o f P r op e rt y , P l an t & Equipment 4,574

W r it t en 8 a ck Amo un t P a ya b le (4,064)

Div idend In come 29,142

Net Cash G enerated from/fUsed In) I nvesting Activities (666,323) (160,000) (1,014,650) (911,650)

Ca sh F lo ws F r om F i na n ci n g A c ti vi ti e s

Repaymen t o f F inance lease l i ab i li t y (80,888)

Receipts f rom Issue of O rdinarylPreference Shares 168,000 168,000 900,000 900,000

Term & O t h er l o an s Re pa id (681,5 34 ) (105,000)

Term & O ther Loans Received 734,000 105 ,000

Dividends Paid (25 ,919) (1,200)

Net C ash G enerated from/(Used In) F inancing Activities 113,659 166,800 900,000 900,000

Net I ncrease/(Decrease) in Cash and Cash Equivalents 32,079 6,101 (114,602) 48

Cash and Cash Equivalents a t Beginning of the P eriod (114 .602) 48 . .

C as h a n d C as h E q ui v a l en ts a t E n d o f t he P er io d (N ot e· A ) (82,523) 6,149 (114,602) 48

N ot e A

Ca sh i n Ha n d & Bank 55,954 6,149 17,720 48

Bankave r d ra f ts (138,477) (132,322)

(82.523) 6,149 (114,602) 48

SUMMARIZED !NCOM ESTATEMENTSAND BALANCESHEETS · YEARENDED 3 1 STMARCH

2009/10 2008/09

Grou~ Company 'Grbup Company

Rs:O O O Rs.'O O O Rs:O O O Rs.'O O O

A ) Summa ry o f Op e ra t io n s

Turnover 4,885,741 28,656 · 4,860

Gross Profit 329,646 28,656 · 4,860

Negat i ve Goodwil l . 2,224,488 ·

Gain o n Change in F air Value o f Timber IRubber S tocks 237,785 ·

Ne tP r o f it b e fo re F i na n ce Co st : 511,509 19,692 2,224,419 4 ,791

Pro fi t b e for e Taxa tion 341,061 4 ,040 2,224,419 4 ,791

Taxation (37,782) (779) · ·

P r of i t A t t ri b ut a bl e t o Eq ui ty Ho ld e rs 80,156 3,261 2,224,419 4 ,791

P r of i t A t t ri b ut a bl e t o M i no ri ty Ho ld e rs 223,123 · ·

B ) Summa ry o f F i na n ci a l P o si ti on

Capita Iand Rese rves

S tated Capita! 1,068,000 1,068,000 900,000 900,000

Revaluation S urplus 230,078

Retained Earnings 2,300,475 6,852 2,224,419 4 ,791

T otal E qu ity A ttribu ta ble to E quity H olde rs o f t he C om pan y 3,5 98 ,5 53 1,074 ,852 3,124,419 904 ,791

Mino ri ty In ter e s t 5,249,442 . 4,987,576 ·

To tal Equ ity 8,847,995 1,074,852 8,111,995 904 ,791

Asse ts and l i a bi l it i e s

Current Assets 899,033 32,456 619,356 4 ,908

Current liabilities 1,354 ,570 29,254 1,108,874 11.767

Ne t Cu r ren t Asse ts (455 ,537) 3,202 (489,518) (6,859)

Pr ope r ty, P lant and Equ ipmen t 6,258,470 5,113,743

T imb e r a nd Ru bb e r Stocks 5,769,166 5,642,140

In vestments in Subs idia ri e s 1,071,650 · 911,650

O t h er N o nCu r r en t A s se t s 11,777 105 ,479

Non Cu r ren t l i ab i li t ie s (2,735,881 ) (2,259,849)

Ne t Asse ts 8,847,995 1,074,852 8,111,995 904 ,791

T h e a b o ve summa ri ze d f in a nc i al i nf o rm a ti on h a ve b e en e x tr a ct ed f rom t h e a u di te d f in a nc i al s t at eme n ts . T h e Bo a rd o f D i re c to rs o f F r ee l an k a

Ca pi ta IHo l di ng s l td i s r e sp o ns i bl e f or t he p re p ar at i on a n d p r e s en ta t io n o f t h e s e f in a nc i al s t at eme n ts .

A p pr o ve d a n d s i g n ed f o r a n d o n b e ha lf o f t h e Bo ar d o f D i re c to rs o f F re e l a nk a Ca pi ta l Ho ld in g s l td .

Colombo0 9 th De cembp , r 2 0 10

59 60

Colombo0 9 th Oe cemb e r 2 0 10

F re e L a nk a C o pi ta t H o ld in gs L td - ln rUo/P , ibllc Offe rr ee L an ka C a pi ta l H o ld in gs L id - ,'MIIJI Pu b l i c O f f e r



61

FREELANKACAPITALHOLDINGSLTD

STATEMENTOFCHANGESINEQUITY GROUP

1 4. 3 A UD IT R EP O R T A ND F IN AN CIA L S T AT EM E NT S F O R T H E Y E A R E N D E D 3 1 S T M A RC H 2 01 0

IBDOTel : ·94·11·2421878·79·70

+94·11·2]87002·0]: .94-11-2336064

: [email protected]

: www.bdo.lk

600 Pao-tnersC ha rt er e d A cc ou n ta n ts~ Ch a r te r H ou se "6512, S ir C hl tt am pa lam AG a rd in er M aw at haCOlombo 02Sri LankaTAT£D REVAUJATIDN RETA INED TOTAL M INO RITY TO TAL

CAP ITA r SURP fUS EARNINGS IN'rIRES JS EQUIIY.

Rs.'ooO Rs.'ooO Rs.'O OO Rs.'O oo Rs.IOQO Rs . 'OOO

B a la nc e a s at O i st A p ri l 2 00 8 - -t s sue 0Ie w O rd i n a r y S h a re s 900.000 900,000 900,000

M i n or f ty I n te r es t o n A c qu i si t io n - 4,987,576 4,987,576

P rofit lor the period (First year o f Operation) 2,224419 2. 224,419 2,224,419

B a l a n e e a s at 31st March 2009 900,000 - 2,224,419 3,124,419 4,987,576 8,111,995

Balance a, a t 01st A pril 2009 900,000 2,224,419 3,124,419 4,987,576 8,111,995

t s su e of New O rd in ary S ha res 168,000 168,000 168,000

Pre terence Sh a re Div iden d s (2,901 (2,901 2,901 -

Profit for the Year 80,156 80,156 223,123 303,279

D i vi d en d s P a id (1,200 (1,200 (24,719 (25919

S u r pl u s o n Re v al u at i on 01 PP E 230,Q78 230,Q78 60,561 290,639

Balance as at 31st March 2(110 1,1)68,000 230,078 2 ,3 00 4 7 4 3,598,552 5,249,442 8,847,994

Fax

[·mail

Website

INDEPENDENT AUDITOR'SREPORT

TOTHE SHAREHOLDERSOF FREELANKAPLANTATIONHOLDINGS COMPANY(PVT) LIMITED

Report on the Financial Sta tements

Wehave audited the accompanying financial s ta tements ofFree Lanka Plantat ion Holdings Company (Pvt) l.td, and consolidated

f inanci al s ta tement s o f t he c ompany and i ts subsi di ar ie s a s a t 31st March '201 0 whi ch compr is e t he bal ance she et a s a t 31stMarch '20 10, a nd t he i nc ome s ta tement , s ta tement o fc hange s i ne qu i ty a nd c ash f low s ta tement for t he yea r t he n ended , a nd a

summary ofsigni ficant accounting pol ic ies and other explanatory Notes as set out on pages O S to 52.

S T AT E ME N T O F CHAN GES I N E Q U I TY - C O M P A NY

Management' s Respon sibil i ty for the Financia l Sta tements

Management i s r espons ib le for t he pre pa ra ti on and fai r p re se nt at ion of t hes e f inanci al s ta tement s i na cc ordanc e wit h S ri Lanka

Account ing Standards. This responsibil ity inc ludes: designing, implement ing and maintaining interna l control relevant to the

prepara tion and fai r presentat ion offinancial s ta tements tha t are free from materia l misstatement, whether due to fraud or error;

s el ec ti ng and app ly ing appropr ia te a cc ount ing pol ic ie s; a nd making a ccount ing e st imat es t ha t a re r ea sonabl e i n t he c ir cum-

stances.

STATED REVALUATION RETA INED TOTAL

C A P I T A L' 0

. E A l f f i l N G s ' : :URPLUS

1U.'000 Rs.'ooO Rs . 'OO( l 1U.'000

B a la nc e a s < I t 0 1s t A p ri l 2 00 8 - -l ss u e 0 1 N ew O r d i n ary Sh a r e s 9(10,(100 900,00(1

P r of it f or t h e p er io d ( Fi rs t y ea r o f o pe r an c n I 4,791 4,791

B a la nc e a s at 31st March 2 009 900,000 - 4,791 904,791

B a la nc e a s at ( li st A p ri l 2 (1 09 9(10,(100 4,791 904,791

I ss u e o f N ew O rd I ~ < I y 5 h a re s 168,000 168,000

P r of it f or t he Y ea r 3,261 3,261

Dividends P<lld (1200 (12(10

Balance as a t 3 1s t M ar ch 2 01 0 1,1)68,00(1 - 6,852 1,074,852

Scope ofAudit and Basis of Opinion

Our responsibil i ty i s to e xpre ss a nop in ion on t he se f inanci al s ta tement s bas ed on oura ud it . We cond uct ed oura ud it i naccorda nce

wit h S ri Lanka Audit ing S ta ndards . Those s ta ndards requi re t ha t we p la n and per fo rm t he aud it t o obt ai n rea sonabl e a ssurance

whether the financial s ta tements are free from materia l misstatement.

Anaudi t i nc lude s e xami ni ng , on a t es t bas is , e vi de nc e support ing t he amounts a nd d is cl osures i n t he f inanci al s ta tement s. An

audit a lso inc ludes assessing the accounting princ iples used and signi ficant est imates made by management, aswell asevalua ting

the overall financial statement presentation.

Colombo

0 91 h D e ce m be r 2 01 0 Wehave obt ai ne d a ll t he i nforma ti on and exp la na ti ons whi ch t o t he bes t o four knowl edge and bel ie f were nec es sa ry for t he

purpose s ofour a ud it We t he re fo re bel ie ve t ha t oura ud it p rovi de s a reasona ble basis for our opinion.

Opinion - Company

Inour opi ni on , so fa r a s a ppea rs f rom our e xami na ti on , t he Company mai nt ai ne d prope r a cc ount ing rec ords for t he yea r e nded

31 st March '201 0 and t he f inanci al s ta tement s g ive a t rue a nd fai rv i ew of t he Company 's s ta te o fa ff ai rs a s a t 31st March'201 0 and

i ts profi t and cash flows for the year then ended inaccordance with SriLanka Accounting Standards.

Opinion -Group

Inourop in ion, t he c onso li da te d f inanci al s ta tement s g ive a t rue a nd fa irv i ew of t he s ta te o fa f fa ir s a s a t 31st Ma rc h' 2010 and t he

pro fi t a nd c ash f lows for t he yea r t he n ended , i na cc ordanc e wit h S ri Lanka Accou n ti ng S ta ndards , o f t he c ompa nyand i ts subs id -

iaries dealt with thereby so fa ras concerns the shareholders ofthe Company.

Emphasis of matter

Without qual ifying our opinion we draw your a ttention to the Note 33.2.1.1 to the financial s ta tements regarding the contingent

liability.

Report on Other legal and Regulatory Requi rements

These financia l s ta tements a lso comply with the requ i rements ofSection 153(2)to 153(7) ofthe Companies Act No. 07of 2007.

1 3 k : ) ~~rb,t!'t5_CHARTEREDACCOUNTANTS

9th June, 2010

Colombo

SR/rn

BOO Partners c. S ri L an ka n P ar tn er sh ip , t s a membe r o f BOO mtemenonet

lmted, aUK"ompany limited by guarantee. andforms.pan ofthe

tntemencnat BOO JeVYOrKfindependent member Hrms.

eer ner s s R aJap2 k s e FL A ME =A_Ms._ MS E_Raoymond FCA_

$_ G_Fa n 1 h ACA_T1 s h n H_Sub as n gh e AU_

~ _ s . _ RaVIn awee - . . . . . ACA

Asha ne J_W_ J evaseke ra ACA, MBA_ H _ / IrA . . Sar na n S u a I ACA

Con SUa n l "1_ $ or a do ra FCA

62

Frrw I . ( l'n l i .a Capiw l Hol d i IlQs: :L t d l / l .' t , 'i l I ' u "l " O l f " .'


http://www.bdo.lk/

http://www.bdo.lk/




F RE E L AN KA P LA N TA TI O N H O L DI NG S C dM p AN Y {P V T) L IM IT ED

INCOME;STA 'FE 'MENT

F O R TH E Y EA R E N DE D 3~STMAR'CH 2010, .1

Revenue

C Q s t o f S a le s

G r q5 s P r of it

O t he r I nc o me

Neg at iv e G o o dw i ll

G a in o n C ba fl ge ~ i n F !l ir V a lu e . o fT im b er

and R,Ub~f S t0C~S

A dm i ni st ra ti ve E x pe n se s

:Pi 'nance'€osts

Pro f it . befo re Taxat ionI nc o me T a x E x p en se

Profit for the Year

Attr ibutable to:

Equ ity H ol a~ rs o f t he C om pa ny

Minori ty lnterest

B a si c E a rn iN g s p e r O r di na r y S h ar e ( R s. )

Di/ured€amings Pe r Ordinary Sha re (Rs.)

b . i vi aeoa peJ -O rd ina ry .· Share ( R s . )

F i g ur ~ s i n b r a c ke t s i n d i~ a ~ e .d e q u <: t io m

Notes

3.1

3.2

3.3

4

5

11 0).1 &

12

Page 1 F RE E L AN K A P lA N TA T IO N H O L Dli NG S "C 0MP A NY ( PV T ) L IM IT E D

BA LANCE SH EE T

AS "AI31 S T M A R CH 201 0

Notes

6

Group Company

Ftom 22ncl M ay F r . o l l ) 22nd ( ' v 1 a y

2008to 2008 to

2009/Z01,O 31,5t Ma(eh 2.009 20 09/20 10 3J s t M a reh 2009

(Rs:eOO) (ih. 'oOO) ( R s : O O O ). ~

( R s . t O O O )

4,885,741 28,656 4;800

(4,556,096)

329,646 28,656 4,860

163,256

2,224,488

237,785

730,687 2,2l:~,488 28,656 4,860

(219,178) (69) (8,964) (69)

(170,448) (15,652)

(389,626) (69) (24,616) .(6'9)

341,061 2,224,A19 4,040 ~4,791

(37.782) (779)

303,280 2,224,419 3,261 4,791

2.5.(a)

26

27

28

80,156 2,224,419 3,261 4,791

223,123

303,280 2,224,419 3,261 4;791

9 0.87 24.72 0,04 0.Q5

9 0.87 14'.12 0.04 (J.05

10 0.01 0.01

ASSETS

Non ·c ~ r re n t A s se t s

PJop,er_ty,.RIi?r1tl i l c l Equipme~~

l ll r nb e .r a n d R ~ b b er S t o cK s

l hvestmen ts i n S ' t l tl s k fi a r ies

Investrnents i n E ( ij u it y A c c o u nt e d I n v es t se s

Long- te rm fnves~ [1 i 1enU ;

n12

13

14

l5

Goodwil l

Cu t re ll ! A sse ls

Inventories

T r ad e a n d O t h er R e c ei va b le s

A l l)oun ts, Du t : From~Re la ted Partjes

iOGome."faxRecoverable

(ash and Casl<!Equiva1el'lts

16

17

.18

19

2" 0

21.{a)

Tota l A sse ts

EQUliTYANfl l lA~l l ITIE5

S ta \€ c~Kap i tal an~ IReser f ve~

Stat~a'Gavital

Rev .a lua t ion Surp l us

RE:ti l ' ined'Earnings

To ta l t qu i ly ' a tt r ib ~ t aB I ~ t o ! i . q uity Holders of the

Company

Minorl i ty" Interests

To ta r Equ it y

Non-current LiabilitiesI r it e res t Sear iIi9 Bo rrElwi n ; g s

Reschedu l ed Deben t l! J res

R'efi rement !g'enefi t ,O l i l li~ations

Deferrefl . lncome

Tota l ! i on-cu r ren~ L i a~ il i ti es

Gu rre·I'lt:i1 b i it'ie,

Trade a n d O t h er P a y al J le s

Am0UD t s D u eTo R e la t ed R a rt ie , s

Inwn;;e Tax ' I ? ayabl e

~no r r Term Bo r r owings

~ ~ c A$ d u le d I ;l ~ ~ en t ur e $

Current ~ortiO'rlof I n ter e s t Bea rimg 60 r, r o ~ in g s

Sank Overd ra~ ts .

t 0 ta l Cur ren t l i ab i l it i es

to ta l L !, 'ib illtie s '

To ta l Eq i Ji t (" and L i ab il i ti es

2 2

23

24

78

29

3[)

31'

26

2 .5 .Jb)

2.1.(0)

Conlin~ensie~and Commi tnwmsN e tA n e ts p e rO r d in o ry £ h or e I R s .)

3 3a nd 3 4

Grdup

A s A t

31.03.2010

A s A t

3'1.03.2009

( R s : O O O ) (8.5:000)

6,258,471

5,769,166

5,113,741

5,6 .42 ;14"0

11,261 15,769

a9TrO12,038,896

~ 516ro,861 ,366~.~·~r-~ _ .-~

3.1},024

260,437

21,289

2{884

55,954 l7,720-~~89~9~,0;':;3~3~ __ ~'61{?354

464,030

369,979

9,070

12 ,936 ,447 1 1,41 !0,7 f2,0

1.068,000

2.30,079

2,300,475

90@,000

2.,:224,419

3,598,554 3,124,419

5,249,442 4'<}87S76

8,647,996 8,111,995

1,007,460

, 1,5 00

1,179,389

547,532

I,058,~ 10

7,5.00

740,82'8

453,411

' i259:s492,73S,881

699,260

12,669

34,60:4

55,000

3,000

411,560

138,477

620,663

3;2'14

7,~563

60,325

284,189

132,322

1,354,570

'4,090,451

12,938.447 11A80,720

33.69 34.72

I i 9 u re j i n b , o c k e t s i nd i ca te o e d UCl i on llTh S i g n i f i c a ~ t A C [ Q u n t i n g P o l i , i e , a ~ d N o te s a n ne x e d f o rm a~ i n t e g r a l p _ i l r i o f t h e s e f i n an c i a l S t a te m e n t l ,

Th e f i r .a n [ r S ta t e m e nts a r e R r e p a L e d a n c p re se n tE d in [0 r:1 P I i a n e e Vi it h \ r ,e r eG u 'r e~ e m , o f t h ' e C c r r , p a n ; e 5, A < l tN o .7 o f 2 0 0 7 .• ) j

. , " I .

i J , I P H e m a n d o

(t i ief FinanceOff ieer

T h e S i gn if ic a nt A c c ou n ti ng P o li ci e' S ~a n lf No te 5 a n ne x ed f or m a n i n t eg ra l p a rt o ft he 5 e F in a nc ia l S t at f? m e nt 5.

Colombo

9tn June, 201'0

T i l e B u a r d of ' D l r e c t o r l 0 il responsible f O ' r l b e p J e r a r J t i o n , a n t! p r e s e n t a t i o n of t n e s e I~inan[ia l t ~ t e l T ' . . e n t l .

S i ~ f o r a~ d o n e ha ll o f tr ,e S oa r~

63 64

Pgge2

A s A t

31.03.2010

A s A t

31.03'.2009

( R s : O O O ) ( R s :O O O )

1,071,650 911,650

_ _;.1!..::.,O_:_71.:.!,6=.:5:.;::Cl:;.,'_ _;9.Jl&~Q

2,625 4,86)0

23,681

6,150 48

32,456 4,908

11~04,106 916S58

1,068,000 900,00b~

6,852 4',791

1,074,852 904';,791

1;.oHi652 90'i,l,791

12,057

16,418

779

11,650

117

29,254 11,767

29,2S4 11,767

11,104,106 91-6,558

10 . 06 J;0.05

F r rw I . (j ', , ~a C a p iw l H o ld i nQ s :: L td , '! ) .' ;. " l , " uh l " O , 'f e .'



F R EE L A NK A P lA N TA T IO N H O L D li NG S " C0M PA N Y ( PV T ) L IM IT E D

C A S H F LOW S T A TE M EN T

FiGRTH E YE ~ R ENDED 3 · ,. S TMAR tH 2010

Cas ,h I&Cash Equ iv a le n ts a t End o f th e rYea r

Cash ' i nHand .& Sank s

S a n R O v ~ r a r a rt s

F R EE L A NK A P L AN T AT IO N H O L DI NG S C dMp A NY {P V T) L IM IT E D

STA i, EMENT OF CHAN€i ES IN EQUITY

F O R TH E Y E AR E N DE D 3~STMAR'CH 2010• I

Page_ ]

Stated (ae:ital aetai i1ed Minori ty. Tot~J

Group Total In terests Egu_Lty

(Rs:000,) ( R s . ' O O O ) { R s . ' O OO )

: Issue of New O rdinary S hares 900,000 90O ,000 900;000

Minori t y In te res t 00 Ac.guisitiQn f\,987,pZ6, 4,987,576

Profit for the Period 2,224;419 2,224,419 2,224 ,419

B a la n ce a s a t 31 s t M a r ch 2 (! )O 9 900,000 2,224,419

Is s u e o f O r d i na r y S h a re s 168 ,000 168,000 168;000

Prefer~n<;,eShare Dividend.~ (2,~.o1) (2:,901) 2,901

P rof it f o r t h e Year 80,150 80,156 252},1'23 3Q3'f8:0

Divideri"~ s for the Year (1 ,200) (1 1, 20 '0 ) (2 4, 71 9) (25.919)

S u rpl u s o n Rev aluation of Property , 230,078 23'0,078 60 ,551 290,639

P lan t and Equ i 'pment

Ba / a n ce : t! s a t ~ J s t ~ (1 r ch 2 01 0 1,068,000 8,847 ,995

Ga~bf lows Fror f l. {! )p_erat ir ig Act iv' it ies

P r o f l ! before Taxatlon

A d j us t me n ts f o r:

Provi s io l 1. f o r Re r ir emep ! Be l1 . ef i t Ob l ig a ti o ns .Gra t u i ty ,Depreciation/Amortization

Ga in o n Ch an g e. in F a ir V a hl e o f T im h er a n d Ru b b er S t o, ks

Sha reo f P ro fi t f r om Jo in t Ven tu re sl Kss oci a te s

Ca,pi talGra~IS Amoliized

Finance CQst5

Interest lncorne

BadDeb t s Wr i tt e n Off

Am6ont:Written O ff from·immature"Plantations

Negat ive Goodwi l l

. Gain on Disposal'o fProRert~"P,lant & Eq:l:jipment

O p e ra t i! lg P r o fi t 6 e fo r e W a r k i! l9 C a p it a l C h a ng e s

W o r k in g C a p it ;1 C h a ng e s

(Increase)IDecre< lse ' in Inver!tmies

( I nc rea s e )" Dec reas e i n T rade and Othe r Recei v ab l es ,

Uncroea.5.e)!Decreasen Amount~ Due F r o m Relat .~dPart ies

1 mc r e a s e ! ' l q e c r e a se ) i ~T r?Qe an ~ q!h e r Payab l es

Increase/(Decrease) in Amout: lts lDueTOIRelated 'Rart ies

( osh Gen } , :r o t edF r o lJ l l ( !) s ed J I l ) O pe r a tians

l l i IcomeeTax iESClSRL Pai t iRe t ir i rl g Gra tu i ty Pa id

l nterest ~aid'

N e t C a s hGe n e r at e d F r om / fU s e d I n )' O p e ra t in g A d iV i ti e s

C a s h F l o w s F r om I n ve s ti n g A c ti v it ie s

Acqlllisilion of S u!)sid iafjl Note 13.2

PufGhas e & J f r o n SI I u c t io n of P I @ p e f t y . F!ianf 1& r;q w i p m ene

Cap it a l Gf ant s Recei v ed

I n te re st I nEome Rece[ v ec l

P ro c§€ds f r ~ S~le o f P i ope r ty , P l a nt & Equipment

Amount s Payab l e Wr i tt e n B a c k

Q i ¥ i d ~ e f \ d lncome., I

N e t C o s hGe n e r at e d F r om / (U s e d I n ) I n ve S ti n g A c ti v it ie s

C asMC Iows Fr om F inonc ing Ac t iv i t ie s

Repa llmen t 6 fF if i la o c e Lease ~ i abi li t ie s

R e c e r p t f~9m Issueof ,Orc ! i r fary/PreJeLence 'S!1ares

Term & Other Loans 'Rep' i i id

T t = rm&cQthe r Loans Recei v er !

Re pay me nt o f S ho~ i T e ~ fi l L o a n s . ( ' N e t of ~ke ipt s )

Qi vi d ends Pa id

Net C056 f lows . 'Gene r a ted F r om / fU sed - Jn) F inonc ing AC t ivi t i es

Net Ir lc rease/(DeCfei lse) in Cash & Cilsh'Eqllivaients

Gash& C a s h Equivalents at beg. inning of t h e Yea r

Cas l )& (ash.Equivalents at E M i l of t h e Yea r

S ta ted Cap ' fta i Retained nital

Ordinary Prefereitce Eguity

Company : (R s: OO O ') ( Rs :O O O ) (Rs ;OOO)

I ss u eo fN ew O rd in a ry S ha res 900.000 900,000

Profit for die Period 4 ,7,91 4,791

Ba lanc£ , { l s af 3~1stcMarc;h2009 900,000 4 ,791 904,791

Issue o f Shares 168 ,000 168 ,000

Porof' i tGr the 'Year 3,261 3,261

Diviflends for the Year (1,200) (1 ,20.0)

Ba l a nl l e a s at 3 J s i M ' a r~ h2 01 0 1,008.000 6 ; $ : 5 2 1,074,8'12

Fi1Juresn bracket s ind imtc e deduc tion»

Gro'-1P

2009/2010

F mm > 22 nd M ay. ~ i0 08 .to

3 i . s . t Match 2 0 0 9( R s : O O O J ( R s . ' O O O )

341,061

490,B12223,223

(237,785)

(34,319)

(14,906)

170,448

(44)

491

622

(833)

(2,224,488)A

(69)3B,770

(147,006)

( 50A90 )

(46,633)

151 ,517

(lB.91~

827,242

(18,333)(52,666)

(223,738)

·48

532,505

(105,000)

(649,212)

109,028

44

4,218

(4,064)

29,142

(1.0) :4 ,650)

(615,844) (1,014,650) (160,000),

900,000 168,000

(105,000)

105,000

J R § S l g , Q __ 228 ,000

(114,602) 6,101

48

(114,602) 6,149

(92,433)

168,000

(504,107)

574,000

(5,323)

(24,719)

32,079

(114,602)

55,954

(138,477)

17,720(132,322)

(82 ,523) (114,602)

Colembo

9th June, 2010

Figures inbmcket s ind ica t e deduaion«

T c / r ~ £ iG' n ~c on t Ac coun ti n g P o li ci e s a n d No te 5 a n n ex e d f orm an i n te g ra / p ar t of these FinanrriaI5rate'ments.

N ote A (82,523)~~~~~~~~~~

65 66

Pgge4

Company

2009/2010

r rQm 2 2 nd M;~y

2 , O o ' 8 : t o

31 st Ma[Cl.A 2009

( R s . ' O OO ) C R s . ' O OO )

4,040

15,652

19.692 4,791

2,235 (4,860)

(23,682) 117

(11.243)

26 , . 7 5 . ) 11,650

13.753 1'1;6~8

(15,652)

48 (1,899) 11,698

(160,000) (911,6tlO)

(911 ,650)

900,000,

~ o . o o o

48

48

N ote A

6,149 48

6,149 48

Frrw I.(l,,~a a p iw l H o ld i nQ s :: L td , '! ) .' ;. " l , " uh l " O , 'f e .'



P a g e _ 5F RE E L AN KA P LA N TA TI O N H O L DI NG S C dM p AN Y {P V T) L IM IT ED

S I GN I F INANT ACCOWNTI NG P 0 L1G ]E S AND NOTE S - TO TH E F INANCI AL S TA TEMENTS

F RE E L AN K A P lA N TA T IO N H O L Dli NG S "C 0MP A NY ( PV T ) L IM IT E D

S IG N IF IN AI \l T A C CO U N TI N G P O L i GIE S : AN D N bT ~ S T O T HE F IN A Nt lA L S T AJ EM E NT S

P g g e 6

1.1 l i>omic ile and leg,al Form of ,Be'PQr,t ing Ent ity

These two standards toqether proviae cornprehenstve guklance oniderrti ficatfon, c lass if icat ion, measurement

and pres"er'lf 'alion of fi n a n c l a J i r tstnrments ( ind u'ding Derivat ives) into ffi mfn c i ' a I assets, f in an ci a I Iia l : ) i I i t ies and

~qui~y instruments.

1 Corporate Information

Fr,ee lank:a Plantation~Moldings''Cdmpany (Pilt) l im it ed i sa l imi ted l iabi li ty company ln€drpora~ed on,22nd May

ZOOS and domic iled in Sri lanka.

In ort:Jer to comply with t he requi rement s of t hese standards, th e c ompany is i n t he p ro cess o f se tti n~ up an

implementat ion p lan and assessing the eff ec t o f adopt ion of a foresa id two s tandards . Due to the complex

natu reof the effect of these standa r ds the impact o f adop ti o n i s not estirna bl e as at the date o f pu101cat ion of

these financial statements;he regi.stereGioffice of the .CoIl'lP'any is Ibcat~d!,at level 3, Prince Alf red Tower, No.10,Al fre,d House Gardens,

Colombo 03.

The Consol idation Financial statements o f the company f or t he yea.r ended 31st Ma r ch 2010 ineludes the

company an€! i ts subsidiaries ( 'to~gether referred to asthe "Group") and the Group's interest in associates,

b) S.riLanka Accollrting S tandard 39 - Share Based Payments (SlAS 39).

i ;P re p 'r iJ kipa l act iv it ies of t he Company w e r e inves 'tments in Plantat ions Co'mpanies namely M'aturata

Plantations LEd.,< ! , f ; 1 d P(Jsse,l~waPiantatioils It!;l., thmug h the rm~nagem ent COIM pa.nieS'of jpi'ee'tan ka Plantation

Co (Ryt) l td' and Free lanka l '\ !lanagement Company (Pvt) l td., .

SLAS 39 - Snare based payment s, e ff ecti ve f or per tods begi nn ing on o r a ft er 1 st Janua ry 2010 wi ll b e f ir st

adopted-in-the year eMdi' ng 31 March 2011. t hi s s tandard requires ali i expense to B e re.cogniil:ed where the

company buys goods or servr t es in @xcnar!gefor shares or rights Q'i ler shares (equity- se!t:led Trans~actior,ist or

in ~xcha.ngfii forother assets equjvalent invalue to a given number @fshare.sor rights over shares (eash- settled

transactiens ).F['Hequi!y-gettl~(j share-based.p~¥ment transactions, the company is requi red to app!y S 'lAS 39

to §rant s of sha~es, share opt ions or ( il ther e~u it y ins truments t hat were granted aft er 1 January 2@10.

1 .2 f lr ipdpal .e ,c ti vi ti es and Natqre of Ope~" ,~ ion~

During the year, the company has invested in Hydro Power Managemen't Companies n'amely Free lanka P0wer

3 (Pvt) l .td, and Free lanka Power Ho: ldings (Pvt) Ltd., .

r he company i s In , the pr oc es s o f e va luati 'ng the impact a f th is st andard, and t he impact o f the s ame i s not

current ly est imable as at theaate of t he pub li ca ti on of thesefinenciel statements,

1..3 Parent Ente,r.prise2.2

General Account ing Pol,jcies

The Comppny isajojnt venture-which isa jQint !y conrrol led efl ti ty by Browns Plat"1tat i91l Inve~tment~ (P.vt )l td.,

and Perpetual Holdings Co. Ltd.,

2.2.1 "1Basfsof Preparation ofFinan'dal Statements

The f linan.ciai Statements of Free LanKa.Plantation Roldings Company (Pvt) l td., for the year e'ntled: 31st March

2010 was autho r ized for i ssue on 9th .Iune 2'01"0 ill accordance w it h a resol ution o f t he boa rd Q f di rectors,

These.Finaneial Statements r:>r-esentediA Sri Lqnkajn Bupees h;qve been prepared on the. His torical, Cost Bqs j s

except for Proguce stocks which are stated at Net Realiza~le Value and .certain Property, Plant and Equipment

vy~'ich are stated at revalued amounts, in accordance with Generaj ly Accepted Account ing Principles and the

Accounting Standards la id down by the Institute of Chartered Accountants of Sri Lanka.

l ; . o !1 Date of.Authoriz2I ,t ioA for Issue

2 Su m ma ry o f Signifi~.?Il'ilt Ac.cou ntin!iJ fol ides

T ine a!: co~rnt ing po: li ci es set out below have been app li ed conslst entl y t o a ll pe: riO.ds presented in t hese

F inancial S t: at emef "! ts . The aG.c~unting : pol ic ies of t he Company have been consist entl y ·appl ie~ by Group

entities where appli<;able and deviations, if any, heve.been cdi5c1.osedaq;;ordingJy.

lh~ . .inanci:aIStat~ments of company and thos~ consolidates with ~l: lchare"p~epar.e(j in accordance with the

Sri Lanka Account ing S tandards laid down by the Ins ti tu te ofChar tered Accountants o f S ri l anka ant i a lso in

compl ia nce wi th the r eqoir er 'n en ts of the Compar ri es , A.ct N o.07 of 2007 imd t he re fo re p re sent fa ir ly t he

f in~ncial pos it ion, f inancial perfarmcmG,e and cash f low of t ile company.

However, ~hefollowing star;}d,ardsna'le l3eel'1iss0e(1j tly t¥le Institute of.Oharter.ed: Al2co~J;nti:intsof Sri Eimka bu tnot yet effective. 2.2.3 Critical Acco unti1\19Jwdgments, Esti.mates and AssHrY!Qtio:ns

2.1 E ff ec t o f S ri Lanka Account ing S tandards ' Is sued but not yet£f fe€t ive. fhe; p repa ra tio n o f f in anci al s ta tement s r equi red management to make j udgments, e stima f' es' a 'n d

assumpt lo ri s t ha t a ff ec t t he app li ca ti on of account ing' pol ic ies and the repor ted amount or asset s, l iabi li ti es ,

in·come·and expenses.s~ iL<:!nkaAccounting Standard 4 :4 Finand~llnstrumel li ls i Presen. tation (S"LAS44) and Sri lanka Account in,9

Standard 4'5<Finanela II nstturnents: Recagn ition & Measu rernent '(SlAS 45).

a)

Sl'..~S !1 - and 45 qec0me effective fpr financial year;s.beginnin!!J om or a ft er 1st January 2011. According ly , t he

Financial Statements for the ye~rendiJ ilg 31 M~rch 2011 wil l adopt ~LAS44 aneJ:~S,for the f irst t ime . .

Est imates and underly ing assumpt ions are rev iewed on anof i lgoing basis . Revis ion to account ing est imates are

recHgl' 1i zed in t he per iod inwh ich the est imate i s rev ised and ina ny futu reperiod aff ec ted.- ~ I - _ -

67 68

Frrw I.(l,,~aCapiwl Ho l di n Q s: : Lt d , ' !) . '; " ,l , " uh l " O , ' fe . '

mailto:@fshare.sor

mailto:@fshare.sor



Page 7F RE E L AN KA P LA N TA TI O N H O L DI NG S C dM p AN Y {P V T) L IM IT ED




Pgge8

The company makes assumpt ions concerninq the future. The resul ting account ing est imates wil l, bydef init ion,

seldom equal the related ac.tual results. The esnrnates and as su rnpt lons t ha t have a s ig l' li ii cant r is ko f causing a

material' adjustment to the carry in9 amounfof assets and l iabl ll tles within the mext f inancial year are discussed

below,

2.2.4 Going Concern

2,2.3.1 Judgments

The Directors have made a n a ssessrnent of t he Company's .ability to centi nue as a-goi ng coneern and they

certi fies tha:t_the company has a~ge~uate rcesO,t lTCeSo Gontim.l!i!.,..its oR8rcations in the for!"s~ea.ble future,

THerefore, these f inancial s tatements are prepared on going, concern basis ... ~ ~ • • 'I

In the: proCE~.SSf qf: lply ihg thee Company's gccQunt·ing fi>oJj_€i.~s,m' qn{ lge~ent has made t he followinqjudgments, apart f rom those involving Est imat ions , wh ich has t he : mos t s igni fi cant e ff ~c t on, t h~ amounts

recognize£! in the Financial Statements,

2.2.5 Materiality and Aggregation

Eacb material d~.ss of s imilar i t~ms is pre'sentecl separ:aJeJy in the Finarlc ial Statements. ltems of dissimilar

natu reor function are presented S8rNTa! :eIy u nless. they are im materia I.

a) ' Inventor:Y,Valuation

2..2.6 Basts of OUl)sofidation

Unsold Produce S tock asat t he balance sheet has been valued date at t he ir actua l or est imated rea li zM ii le

values, net-of direct selling expenses based o n most reeent seHing prices avaHable sobsequent t o t he year end. Tr"e~consoJidated' financialstatements inc:iu(je the f,l'nanci~1stat,ements of the company, its 5ubsiOiarje,s alKI

other com pan ies...,overwhich.it has control.

2.2.3.2 Estin;aate.sand Assumptions

a ) Useful Lives and Residual'Value5 appropriate for Prope~ty, I?lant'anl: ! Equipment

The g~oul?' s f i nanc ia l s ta tements compr ise of t he f inancial s ta tements of t he company 'Hld the group which

have been prepared incomolt ence w it h t l ' i e group's accounting poltdes,

I h~ company tes ts annua ll y whether , t he usefu l l if e and r :esidI Ja l va lue est imates were appropr ia te and in

aC(Qrdance with i ts accQu[' tt in~> pol icy. Useful l ives and.res idual values of pr~erty , plant ane equipment have

been determined by ProfessionalValu.ers,

a ) Acquisition~ <j ;r i t i - Divestments

Impairment toss on T~ade Receivables

Acquisi ti ons of subsidiar ies areaccounted

fo r us ing t he pur chase met hod o f a ccoun tin g. The resu lts o f

subsidiaries, joint ventures and assol iates acquired or incorporated dur ing the year have been included from

the date of acquisi tio' ri . or incorporation whi le resul ts of subsi 'diades, joint ventures and associates disposed

have been included up to the dale of disposal.TAe co rnpany r ev iews it s oe8 to 'r s to assess impai rment on a requl ar basi s. I n de te rmimi ng whether anirrtlOairment loss "should be ~ecoi:dE!din trfe income staterrrsnt, the company makes judgmet;)t~ as to whether

there isany ebservable data i n9 icat ing that t here i sa measursble dec rease ' in est tmated cash f lows f rom a

portfolio 'O f debte rs.

b) S I L l bsid iaries

Mahagement usesesti mates based 0n hrstorica 11055experience of assets.The assum ptionsused for esti'mating

thEtamount and t iming of cash f lows ate rev iewed teg,ularly to reduce any q'i ffefenc~s between lossest imates

and actuallo:s~s e~perience.

Subsi dia ri es those a re ent er pr ise s cont ro lle d by the Company. Cont ro l e xi sts when t he Company has t he

powe r, d ir ectl y o r i nd ir ectl y, t o gove rn the f in anci al ana ope ra ti ng poll de s o f an ente rp ri se so as t o obt ai n

benef its f rom its act iv it ies. The f inancial s tatements of·subsidiaries are. tneluded in the consolidated: f inancial

statements from the date thal the contr ol commences until the dar e t) :rat the control ceases. ~ Ii~t of

Subsidiaries is~iv?e[1below.

c) gefined 'Benefit P.lalils- GratuityFree Lanka Plantat ion G6mfJany (Pvt) Ltd . ,

f ree Lanka M'anagement Compahy (Pvt) t .td. ,

Free l .artka Power Holdings (Pvtj Ltd.,E~eeLanka Pow~,r,3,(Pvt) Ltd"

Th€ cos t o f def ined benef it p lan i sdetermined using actuarial valuati ons. The actuarial valuati on involves

makitilg assumptions about discount rates, e~GeGt~~ rates of rettlN1)on assets, future salary increases, mortalityrates-and future pension ihc;rea5€s.

Que to the long, term nature of these pians,s l !1:h est imates aresu bject to s igni i icanituncet ta inty. Further deta l is

are'cliscio.se£! in Note 27 to the Financial Statements.

fhe' interest of t~'e 0uts ide shareholders of the GfOUP~sdisc iosed se~arately Ur.1 aepthe h'eadi'~g. of" Minority

Interest"

rhe assurnpt ion sand meth odolQgy used by the cornpa ny i jj rceconsistent with SLAS16.The pension costs ant i

balance sheet i tems are dependent on the 'assl lmpNom' made for f ut ure exper ience. SLAS 16sets out how

these assumpt ion-s should be set .These assumpt ions are showr t in 'Note 2.4.2.1.a} to the fina rtt'iaI statements.

c)

Th-e ,Ii nancia I ,s tatements of the,subsid iaries with a.l t~rnate y:~ar ~nds are.prepa red for the period/yea r ended

31s t March 2010 using accou nti ngpo l i ci es which are consist ent w it h t hat o f Parent C 0mpany.

69 70

Frrw I.(l,,~a ap iw l HoldinQs::Ltd ,'!).';."l,"uhl" O , ' i e . '



Page 9F RE E L AN KA P LA N TA TI O N H O L DI NG S C dM p AN Y {P V T) L IM IT ED




P a g e > 1 0

d},. I

~qu.Jty Accouhted Investees - Associates f) 'fr,ansactions E'limimatetl on Consolidation

Ass<Dciatesare t hose inves tments over which the group has s igni fi cant i nf luence and holds 20%40509-'0 of the

equity and which are neither ~[Jhs idjaries nor joint ventures of the §tl0. lUp.

I nt ra-group balances ana t ransar ti ons and < ; i n y unrea li zed gains ar. is ing f rom [nt ra-qroup t ransac ti ons, ar-e

elirninated in preparing the co'nsuiidated financial statements.

Assoc ia te company of f he group which ha s been accounted for under tfie equ it y me thod o f a ccoun ti ng is

Melfort-Green Teas (Pvt) Ltd.,

Unreal'iz¢d ga:ins arisjng from trams!,!ctions withassOlZi~te.s·,are. elimioated. to the:extent of the Groul?'::;int~rest

i n t he enterpr ise. ~0a inst t he inves tment in t he associate. Unrealized losses are eliminated in the.same w~y as

unrealized gains.

The irivesJmerJt§ in associates i(lj"e,,"@arcriedn tbe balance sj:1_e_ett cost J 'l l.uspost acquisi tieri cbalig~s II) the

qroup's share of net assets of the associates,2.2.7 'ForeigJI Ctlnenc:y lr,ans8ctions

G'oodwifr relat ing to an associate is included inthe carry ing amount of the investment.Transe ctions i n f oreig n cu r r enc ies i r re t r a n s l e ted i nt o S ri t anRaRu pees ("Hu pees") at the foreig n exel1ange rate

ruling at the date of-the'transatfiont

A€t~J app,liGatiQI"l of t he eqi :J if y method, . the group deterA; li nes whether it is n:eC'essar,yto re~ognize.:aay

additionel impai rment lossw it h respect t o t he group ' s net investment in the associate.

Monetary asset s and l ia tl il it i~s denominated in f oreign cur renc ies at the Balanco,eSheet da~e are w;inslated to

rupees at t he foreign exchange rate rul ing at t hat date, Foreign exthange differences arising on trans lations are

recognized in the Income Statement .T ine income s ta tement ref lect s tHe share of t he resul ts o f operations of t h~ assoc ia te . Where there has been a

chan'ije recognizee directly ifilthe·equityof'ilie as socra t e, the group recogni 'zes i ts share 0fany char tqes 'i'fl the

statement of shanqes in equity,

2.2.8 l iiunct ioaal and Presentat ioh Currency

The"Financial St<;jtellnenH are presented in Sr.iLaMkan Rupe_es,which is the Cooopar:W'sfunctlonal currency.

Wren t he gWH~S sh a~e_of losses; i n an associate -~quaIsor exeeeds the in:te£~st in tl:!e u!1~er-ta~ln,9,th e 9rcDUp

does not recognize future losses unless it has incurred oblig~tions or made payments on behalf of the entity. Financial information presented in Sri Lankan ~\'Jpees M a s been reunded t o t he nearest thousand unle ss

The group ceases ' to use the equity method of a~counting J.9~licies'of associate comp~nies confo'rfl'led to those indicated otherwise.-x ;

used for s imi lar t ra nsact i ons of the group.2.3 Assets and Bases of~TheirValuation

e) GcgdwillAssets classified as current assets on the balance s he et a re c as h and bank ba lances and t hos e wh ic h a re :

expec ted to \be rea l i zed in cash dur i .~g the norma Ioperat l ng ey e Ie 0r .w it li i n one ye.ar f rom the bala nce sHee~

date, whichever isshorter.,Goodwi ll acqui red l in a bus iness combinati on i s in it ia ll y measured at cos t bei fl § t he excess of t he cos t o f t he

bus iness combinati on over ' the group 's int eres t i n t he net f ai r value of t he ident if iable asset s, l iabi li ti es and

GontingeR! (iabilit ies, Following the in' it i'al rec i: igni ti 'on, goodwil l ismeasured at cost.less any aceranulated

impairment losses, G.GodwUI is rev iewed for tmpatrmet tt . annually or mote f reql 'l en tl y i f events or changes in

c ircumstances indicate that the cqr ry ing value may be impajres . .

2.3.1 ,Freehold Property, Pla]nt and Equipment

a) Cost

For t he purpose of impai rment t es ti ng , goodw il l acqui red in a bus iness combinati on i s, f rom the acquisi ti on

date. a ll ocated to groups of " ish-genera ti ng . uni ts t fi at are expec ted t'o benef it f rom the syner .g ies of t he

som binatio n,

I tems of Property, PJ~nt and Equipment are stated at cost or . fair val l! l~ less9~clj rrH, lIated depreciat ion and any

accumulated impa.Jrment irrvalue . .

Impairment i~.dete:~min~d by assessing, the re.€oy:er,,~le amount of the cash-geneJ.aNng unit to which the

g000wiJ l relates. Wlnere the recovera ble amou nt of the cash generat i ng uni t i s l ess tna n the ' carryi ng amo unt,

an impai rment loss i s f ecognized: -The im8ai rment loss i sa ll ocated f irst t o redu~e the car ry ing amount o f any

gooElwi li a ll ocated to the unhand then to the other asset s pro-rat a t o t he car ry ing amount o f each asset ind ie

unit.

The cost of Property, Plant qnt! Equi! ! Iment is the cost oratq Ujs it iO)l or construct ion together with'aTIY expenseslncurred ' imbrt ingi :ng the asset to i ts workiq, 'i ,I condision fOEits intended use.

Where an item of Property, P.; lanraod Eqdipri lent comprises major compor: fer. lts ha~ing dif ferent useful l ives,

they are accounted for asseparate i tems of Property, Plant and Eqrlipment.

Cost and Valuation

Where goodw il l f orms P iJ Ir t of a cash-qenera tl nq uni t and par t o f t he opera ti on w it hin t hat uni t i sd isposed of,

t he goodwi ll assoc ia ted w it h t he opera ti on d isposed of i s included in t il e I ta rryin~ 9mount o f t he-opera ti on

when determining the gain or losson d isposa l o f t he opera ti on .

A ll i tems of prqpert y, p lant and equ ipment ar~ ini ti al ly recorded .~t cost. Where i tems-nf property. pl.aAt and

e!i juipment are subseq uently revaIued, the ent i re,c iassof such assets isreva Iued.

71 72

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P a g e > 1 2

WHen an asse t is r eva l" ued any i ncr ease i n t he ca rr yi ng amount i s ( [( ed ite d d ir ectl y t o a revaluattonsurplus

unless i t reverses a pre\~iOus revaluation decreaserelat inq to the same asset which was prev'iows:ly~re(ltigni;!ed

as an expense. I n t hese c ircums tences the inc rease is recoqn ized as in. c: or t; le t o t he extent o f t he , p :rev ious

wri,'1:en down value, When asset's <::5Hryingamount ·!sdecreased asa rcesul' tofa [~valt;Jation, th~den~!l;se' is

recognized as an expense unless it reverses-a p revi ous i ncr ement r ela tin g t o that a sse t, i n wh icH c as e i t is

charged aga inst any relat ed revaluati on surplus , t o t he extent t ha t t he dec rease does not exceed the amount

held in t he revaluation surplus ih respect of that same asset . Any ba' iance remaining in the revaluation surplus

in respset o f an asset i s transfer red d irec tl y t o accumulated pro fi t o r l osson ret irement or d isposa l o f t he asset .

d) Amo~tization

The leaseho ld r ight s o f assets t a, ken over f rom JEDP/SlSPC are amort ized in equal amounts aver t he lower of

lease ~eriod and economic useful l ife.

Depreclatlon rates used for the purpose are asfol lows.

Class of AS5:t; t No. of Kears Rate

Class of Asset No . of Years Rate

BareLand 53 years 1:89%

Mature Plantations ~Q years 3:3.0%

Bu;ildings 2S y~.~rs 4%

f'iI1a.chil"'lery 15 years 6.67%

Water. and Sanitation 20 years 5%

Other Vested Asse,ts 30 years 3.33%

e) 9u'bseqllel1f Expenditure

f) IDepredation

Depree iat l'on ischarged on a strai ght I Ine basis over the est imated usefu I I ives of such asset sbased on the cos t

or valuation 0 .f aUp'roper1:y , plant and 'equipment other than fPceeho"ii:lland. Assets are Elepre<iiated~over the

shorter of tHe lease term' and their useful l ives.

Buiidings

WateJ Sani'tation

Piant and Machi ner.y

Office EqtJipment

Furniture and Fittings

Motor Vehicles

Roads Bridges

40 years

20 years

131/3 years

CIS y~ars

10 years

05 years

'50 years

2:5%

5%'

7,5%

12.5%

10%

: 2 f J %

2 %

Expen@iture incurred to replace <' l ~·Gr'npbr.lem of an item of:Prope~ty, Ptant amt,Eejuipment t~'at isaceounted

for separately, inc luding major inspect ion and overhaul el;<penditure, iscapi talized.

Other subsequent expenditure iscapi talized only wham it increases the future economic, benefits embodied in

the item of PropeHo/, ¥Hantand Eql;li;pment.

All other expenditure isrecognized tn the Income Statement asan expense asincurred.

Imt%Ov~fi fI¢F1t~to leasebold bui lc !ings arid hui ldings constructed on leasehold lal 'ls are amrJrti ,?:~.dover the

lower of t he i reconomi cusefu I I i f eand une. xp i red period of lease.

f)

No:ot \'fears Rate

An item of-property, plant and equ ipment i sdE lrewgnized upon d isposa l orwhen no-future economic benefits

are expec ted f rom i ts use or a isp0sa l. 1Xny gain or lessar is ing on i :: le recogn it lon of t he asset cal cu la ted as the

dif ferefl~e between the net disposal pro.reeds and the carrying amoU.f1t.Gains or losses·on tlere.cogn'itie.ln are

remgn iz~d In profi t 0r lossand 9aif lsare not c lass if ied asrev.e,nue.

Mature· Plantations ~Re~pJantjng andNew Pfa.nting)

Tea,

Rubber

Coconut

331/3 years

20 years

~O years

3%

5%·

z%

2.3.:2 Per.manent' land Development Costs

Permanent land development cos ts are those costs in~lurred rnakinq maj~)('inf rast rqctwrre .development and

bui lding new access roads on leasehold lands.

D~!SIltecation:of anasset beQilns when it is ava ila ble.fo r use and ceases at the ea.rIier of the dat~,that t he es se t isc lass if ied ashe~~for sale and the ~~t~ t~a!the asset isd.arecggnized.

lh ese costs ha~e been capita Iized'and arnortized over the rernai ning lease perioa:.

Elepre.c. iatiof l methods, useful l ives and res idual values are assesseo in the reportinq date. Mil'ture'Jplantati.ans

are depreciat ed over t he ir usefu l l iv es or unexp ired lease per i0d, wh ichever i s less.

2.3.3 Immature and Mature Plantat ions

Nodepres ta ti on i sprovi qed for i I T : ! rnatu repi antatlons and: f reehol d land.

The total €Ost of land preparatioa, rehabil itat ion, new plant ing, replant inq, crop diver's ifkafion, inter-pl'anting

and fertilizjrg et(,., il 'lE.Urf~,8bE!twe~!'1 the.time of plaliltirfg anE lharvest ing (When the p lanted are il iH· ta ins

matmity) aredassified as immature plantat ions. Th.gse immature plantations are 'shown at direct costs plus

attributable overheads, including interest attributable to loncQ-'term loans usee for f inancing immature

p'lanta,tio A s.

73 14

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P a g e > 1 4

Atfri butable- overheads incurred 0n the p iaAta tion are apporti oned based on the l abour days spent on

respective H~plariltingand !'lewplanting and capitallzed-orrthe immature area's:The remaining non attributable

overhead isexpensed inthe account ing peried inwhich i t isincurred.

a) Goodwill

'Thee~p.endit~re incurred on perennial crop (Tee/Rubber/Coconut) fields, whicr oorne into bea,rin~dur.iogthe

year,has been transferred to mature plantations and deprecieted over their useful life period.

Goodwil l is reviewed for impajrment, annually at more frequent ly i f events or cha'r; ]gesin circumstances

indieate that the tarrying value maybe impaired,

Theland development costs incurred in the form of infilling have'been capitalized to the relevant mature field

where inf ll ling resul ts in an increasein the economic l ife'~. f the relevant f ield beyond its previously assessed

standard of performance, in accordance with SriLanka Accounting Standard KIa,32 and depreciated over the

useful life at ratesa~plic·ableto mature plantation.

Impaired isdetermined: for qoodwil l by assE1ssirlghe recoverable amount of the cash generat ing uni t {or

group of·cash genevat ir r~ uni ts ) to which the goodwil l relates . Where1the recoverab le amount o f cashgenerp,ting Un,ly(CDrrcoupof cashgenerp,ting un,lystislessthan the carryin~ ameunt of €ash'gen~Gatingiii!;! i t (or

group of cash generat it ; 'lg uni ts) to which ·goodwil l has been allocated. an impairment loss is' recoghized.

Impairment lossesrelating to'9"oodWillcann;t be reversed infuture periods,

h) !ntangible As~et~

Infill ing cost that arenot capitalized hav~ been charged to,the income statement in the ye~r,'inwhich t~ey are

incurred.

Intangible assetswith indef ini te usefuI l ives are tested for impairment annuaI ly asof31st March 2010 either

indiviol:lCillyor at the ea~hgenehting u,l'1ite\,/.easappropriate,

However, at pres-entthewmpany does notrecord anyimtaflgible ass-etsasat the balance sheet da~e.

2.J.5 1m pairment of Assets

2.3.6 l.;easedProperty, :lf1lantand!Equipment

TMegroup assessesat each reporting'li 'late whether there isan indtcation that a'f(lassetm'aybeimpaine~, Ifar)'y

such indication exists,or when anl1l~.I'almpairment testir'lSlfOTaliia~5et isreJ'luir~d,1hegroup m<;lkesar:Je5!impt~

of the asset'srecoverable amount. An asset'srecoverable amount isthe,filigMerof anasset'sor cashqeneratinq

unit's fair vait;lelesscosts to sell and its.value in usean~Glsdetermirredtfor an individual asset,unlessthe asset

does not generate cashinflows that are largely independent of t riosefrom other assetsor groupsof-as s et s .

a ) Hnanee Leases- Wtl lerethe Company isthe lessee

Property, plant and equipment obtained under the f ihance lease,which effeet !v.elyt ransfer to the company

substantiallyth eentire riskand rewards incidenta Ito,ewnersh ipof the leasedasset'S,aretreated asi f theyhave

been purchased outriqht and arecapitalized 9,t their cash price.

wtwr~ the £arrying all'l9unt of an asset·exG.t:edsts recoverable amount, the as:~e,t:isOnsidere,difl1lpairedandis wri tten down to i ts recoverable amount, In a~~e_s_siAga lue in use, the est imated future cash f lows are

discounted to their present value.usinga pre-tax discount ratethat refle~ctscurr~nt masketassessmentsof the

t ime value of money and the risksspeci ficto theasset

Assets held under f inance lease are amort ized over the shorter of the lease per iod or t lt e usefu l l ives,of

equivalent ovvn~dassets,unless ownersh ip-ts not tr:a:nis;f~rr~dtthe end of the tease"pf:l~tod.

Irnpalrrnent lossesaJe.reco"g'nzed iIi thei ncome statement exeeptfer irnpairrnent lossesiMrespectof Property,

Plant and J:quipment which arcerecognized aga!f lst the revaluat ion reserve ~othe extent that i t reverses a

previous H;:v,:al,uatipnurpLus.

fne· corresponding principal/capital elements.payable to the lessorare shown asa l iaBi li tY/Qbl igat ion. The

le·asereFitaisaretreated a's·consisting:®fcapital and interest elements.The Eapifal element in the rental that-Is

appliedtp reduce tb e 0utst"andiJJ9obiigatiop and interest element iscb e rgadpga,inst Prefit, iI ' l l "glropo(tio!;'lto

the redlocingcapital el'ement outsta.rrding.

,Anassessmentis made at each repmtmg date asto whether there isanyindicatiun tflat'previ&usly recogn·ized

impairment lossesmay no longer eXistor mayhavedecreased. Prevjou~ly recognizetl lrnpalrrnent lossesother

than in respect of g:oo€lwill,are rezersed Or'illyf there hasbeen an increasein the recov~r:ablf iamount of theasset. Such increase is recognized to th~ extent of the carrying amount ~ad mo impairment losses.been

recognized previously.

Tii:e.fnancechargesallocated to future j:ler'iodsar.eseparately disclosed inthe notes.

THecosr of impr-0vemmntsto or on leased pt'.ogertyis capitalized, d t s elos ed as improvements t? leasehold

p rope rt y and dep reci at ed ove r t he unexp ired per iod o f t he l ease o r t he est ima ted use fu l li ve s o f t heimprovemel'1t:s,whichever isshorter.

b l O~erating lea~esThefollowing criteria arealsoapplied in assessinqimpairment of specific assets.

Leaseswhere the lessoreffectively retains substantially allthe risksand benefits of ownership over the leased

terrcnare GiassifieQas operatirilg leases.

Leasepaymeflts,(e-~cIdin§ cost of s~rvi~esuchas if)~Panceand maintenanee)paid undsrop::rati ng leasesare

recognized asanexpense indie-income statement.

75 76

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P a g e > J 6

c) leasehold Rigl1tsto Bare land ofJEDB/SLSPG Estate Assets and Immovg.ble (JEDB/S6SPC) Estates Assets on

F'lnance lease In~al 'lgible assets with f inite l ives are 'am0Ftized over di)e useful economic l ife and assessed, for Impairment

whenever t here i san indtcat ion that t he int angible asset may be t rnpa lred, The ambrt izat ion per iod and the

amortization metl:i tl ra fO T an intangible asset with a f ini, te useful life. are rev iewed at least a t each f inancial

ye.ar-end.

~eas ehold Big~~s to. Bare land of JEQS/SLSPC Estate Assets a nG! Imm ova,ble (J EDB/SLSPCl. Estates As,~etson

F inance lease obtained on a long term ba, si s, are s ta ted at t he recorded carrying values as at the effective date

o f Sr i Lank aA ccoun ti n g St anda rd No .19 - Leases, i n l in e wi th Ru Ii n9 of t he Urgen t ls sues ta sk Fo rce . o f th e

Ins:titute of Charter-eEl Accour i tants af Sr ' i Lanka. Such carrying amounts are amort ized oveYdile remaining

b.ease term 0 r l'.lseful life of Stl~~ ·a~$et whi GReVeris sbQLtE;r.

l nt ar rq lb le asset s w it h indef in it e usefu l l iv es are tes ted for impai rment annua ll y-ei ther ind iv idua ll y or a t t he

cash-generating unit level,

Prepaid lease rentals paid to acqatre land use rigA'1Sare amort ized' over the lease term in accordance with the

pattern of benefits provided. '..2 .3.10 lfim ber a t1 i t l R(l bber 1ito'cks

Leaseho ld propert ies are tested for imp.airment annually and a re wr it te n down where appl icable . T he. , ,...:. r .-.

impairment loss~ifany, 1' 5 recog,nized in th e iA'tiome statement.

The aecountinq policies adopted f orTimber and RUBber an p lantat ions which i sa consumable Dialogical asset,

i s s ta ted at f ai r value lesses timated point -o f-se le-ces ts . f he pol ic y f or revaluati on i sadopted based on t he

intern atlorra I Accou ntiI 'Ig St a nclalld 41 - AgricuItu re. as"tnere is no Sri Lanka ~ccou nti Fig Standard on T ir1 n ber

and Rubbet. Po l nt - o f- s e le s - co st s i n c la d e allthe cos t s that wou l d be necessary to sell t.he assets, iric'ludihg costs

nesessary to get the assets to market ,2cJ;7 Investment I?rope~ty

P ropert ies held to earn ren,t al i ncome, and propert ies. held f or cap it al appreciat ion have been c lass if ied as

in~estment property. Investment properties are ini tial ly rec,ognized at cost.THe eornpany has erlgaged an Independent Ghartered Valuation Surveyor Mr.K.T.D.Tissera in determining the

. ~, " ~fai r value ofTimberand Rubber Stocks. The valuer- has valued tAe Timber and Rubber Stocks per t ree valuation

basis by using available log and tr~e prices in c ity cenltefs less point-of-sale-costs, The Company measured the

TimBer and RClJ)"serStetks at fait·l:t:a,1e less estimate-a-poitilt-of-sa,l'e'-G;Qsts as at each b a la n c e s h e et date.Subsequen t to ini tial rec 'Ggnit iorn, the i t")ve.stm~nt propert ies axe st.~~ed at fair values , W I t i C R l (;~fl~ct market

condi ti ons a.t t he balance sheet date, Gains or losses ari siDg f rom changes in f ai r value are inc luded in the

incorne s ta tement in t he yea r in wh iclil they arise.' .

2.3.11 Investments

Inv~tment prQ!)lert ie,s are d!"reEp§niz~d when djsposed, or R~rmaFi 'lently wi~~drawQ hom t : , ! s . e Qe,caus~ no

future economic benef it s are expec ted. Any 9ains or losses on ret irement or d ispess l are re"co<j li li zed in t he

in~come statement in the ye"'arof retirement ordlsposal.

2.3.11.1 long T~:"rmnvestmants

Trans fers are made to inves tment propert y, when there i sa change in use, . eyi ·denced by €Rding of . owner

occupat io n,com mencernent ofa n operati ng lease to another part)( or end ing of c~Ji!st ruct ion or development .

Trca1sf ius are madefrorrr investment property, when there~ 5 <a change in use,evidenced bycerr rmencemera of

owner-occupat ion or eomrnencernent of development with a,vi'ew to S < \ : I 6 . .

I n t he parent company 's f inancial s ta tements, t he inves tments in unquoted substdlar tes and cjssQciates are

carrie~ at cost, Th e ca rr yi ng amoun ts o f lo ng t erm in vestments a re r educed to recoqnize a dec li ne which i s

constderedother t ha n tempera ry, i n t he vaIueof inves trnent s, determ ined 0nan individua I investrnent l:I~si~.

Where group compamies occuJ !)¥ fu s igni fi cant por ti on of t he inves tment propert y, o f a su~bs l€ li ary, such

inves tment propert ies are t reated asPr0pert )l , P lant and Equipment in t he consolidated financial statements,

and accou nted for asper S ri Lanka~cco u nti'ng. Standard 1'8- Property, Nabt and Equiprnent ,

In the colmpany's finan"tfal statements, inves tmen t s in sub s ld ler les , Joint ventures .and associate companies

have peen accounted for a t cos t, net of an y impairment losses which are charged to the income statement.

lncorne f rom th"~seinvestments isrecogniZed only to; the extent of div idends receiY,ed,

2.3.8 Capital Work-I rHi lrog ress

Provi si on fo r d imi nu ti on i n v al ue i smade when i n t he opi ni on o f the Di re ct or s t ha t ther e has been a decline

other t h9r 1 tem pora ry 1 n the va I ue of t he investm€rit.

Capital Work-In-pro.gr'ess istransferrea t:0 t~ercespe,€tliv.e,assetaccounts, at the time of the first·:utilization or at

th€i!time.the asset i:5comrnissiorred,

~.3.11.2Im(l~$tme-nts :in Subsi"diareies.

Investments in subsidiaries are carriedat cost. ...

2.3.9 I~tangible Assets2.3.11.31 nvestme nts in Associates

An intangJble asset is l ! i' li tial ly~e(o<jnize'd at cost, i f i t ispr~obaIDI !?:that future-economic benef it w il l f1ovWto the

enterpr ise, and the cos t o f t he-asset can be measured rel iabl y. Fol lowing the ini ti al recoqni ti on , i nt angible

assers are carried at cost Iessany aceum ulated arnort lzat lon and any accum ulated im pairment 'losses.,

Investments 'in~Associates a~~ accounted tor usinq the equ it y Method of Acc tl l' .l nt ing (equi ty < iecounted

inv~estee5)and are initially f~cogni?ed at cost.

77 78

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P a g e > 1 8

Inventories ether t han produce s t6 ;c ks are valued at- the lower of cosnand estimated n - e t realizable value, after

makjng citJe <I!l:owa,rlCe5fQr obsolete ailE! slow mq:Vi[19 items. I'\l~t reali?·able value is the p~.iceat which

inv~nrories can be sold in t he ord inary course of bus iness aft er allowinq for cost of realization and/or cost of Tne cash flow statements ar~ prepared using "Indirect Method' :

conversion frorrrtheir exi-sting state to~saleable condition.

Interest paid isc lassi fied asoperatinq cash f lows. Government grants received, whicln are related to purchase

a'm;lwnstrucNon of Property, Plant and Equipment qre clas'sifie6 as1investing cash Hows. Dividend and interest

i ncome are c lass if ied ascash f lews f rom inves ti ng acrlvitles. 'Divideflds paid are Class if ied asf inancing cash

flows.

2.3.12 Inventories

2.4 Liabilit ies and Provisions

the cost incurred isbrin9ing lnven tof fes to ' itspresent locat ion and c:ont li ti "Qn isaccounted using the follow,il'lg

cost forctnl;lla:. 2.4..1 lJabiI ities.

Type O f Invent0ry Metftldd ofNall,.lation,

lnp_ut Materia;ls At Average Cost .usirm·Weigf'lted Aver.age Cost Fermula.

Growing:.Crop _ At the cost of ~i(cect materials, direct labour and appropriate proport ion 0f directly

Nurseries attributable overrheads less p rovision fen over qrown plants.

Produce Stocks Produce Stocks manufactured up to the Balance Sheet date and sold s ince ' then, u1nti l

t he t im e - o f preparation of the Fin"nidal S ta t emer e t s a r e valued at s ince realized p'i ;ice.

Tb~ Bal'i:mce Produce StQ~k.sare valued ~t est l tnated selling pr i ces . The pri¢~s are net

~f al,1att ri butebl eexpenses rcela ti ng to the p,w bIie auctie n.

Spa[€s and At the AGtual Cast

Consumab les

Liabi I iti es d;;t~sifi~d ascu rr~nt ligbi Iitio:.son the hal arc€: sh! !et are' those, wh ich f a II due for paym~nt on dema nd

o r wit hin one year f rom t he bal ance s heet dat e. Non- cu rr en t l ia bi li tie s a re those bal anc es t lia t fa ll d ue fo r

p"ayrnent after OMeyear f rom the.balance sheet date.

All known l iabi li ties have been accounted for in preparing the-f inancial s tatements.

2.4.2 Provisions

2.4.H Empl'oye_e Bene·fi"ts

al Bafined Benefit PIClLl'lsGratuity

Traae a i l a other, receivables ar<estated at the amourits they are est imated to be real ized, net o f provisrerrs for

bad a.nd doubtful receivables.

A defi ned benefit plan is a pos t employrnent benef i t pia n other tha n a def i ned contri buti on p ia 1 ' 1 : The liabi Iity

recognized in the balance sheet date. Benef its fal ling aGe m®~ethan 12 months aft :er the balance sheet date

are disceimted t o p re sent v al ue . The, defined benefit dbl iga tio n i s ealculated annual ly b y indeperideat

a(h!l<j~ies using Projected Unit Cr!'!drtMeth'oG! (PUC) as recomm.ended by S lAS - 1ff, Emplo¥ees benef its. The

present vat!oJ€"of t i l E ; defined benefit ob! !gat ion i s determined by \ iJ scol Jl 'l ti ng the est imated future cash

out flows. The gx:alui ty l iabUity was based on the actuarial valuation carr!ed outi

2.3.13 Trade & Other Receiv~tbles

A provision for dout3tfu Idebts ismad~ when the col lect ion of t he fu I I amou nt i sno longer. probable Bad debts

ar-ewrit ten off when identified,

Other receivables and dues f rom rel il ted panties are recognized at cos t l essprov is ibn for bad ane l doubt fu l

receive bles.

The actuarlal qains ana lo ss es are charged o r c fedi t~ d to i ncome sta tement in the pe ri od i n which tl1'ey arise.

The assumpt tsas based! on whLch tHe resUl ts o f t he actuarial valuati on was determlAed, are g iven below,

Howeve r, ac eo rd l ne toJme' Pa~li llent of Gratuit ies, j\ct No.12 of 19.83. the l iatDil ity fOltM gratuity paymeot to-an

employee ari ses only on the cornp le ti on of 5 years of c~ntin\.le~ service with tine (Of'lT)'Pany.

2.3.14 Cash and Cash Equivalef)ts

Cash and cash equi va lents a re ii le fimed as cash i n hand , demand deposi ts and shor t te rm Highl y l iq ui d

investrnents f 'ead.! ly comvertil\'ll e to-known arnousts of <::ashand Sl,J bject to i115i9nifica nt risk·of cha'ng eS"~ i !1a Iue.

a. Average Rate of lnterest

b. Aver;ge Rate of Sif lary Inc~ease

- wo""ke'r

- Staff

c. Aver?ge.R~tirement Age

-Wotker

_Staff

.d. 8ai ly Wa~e Rate

-Teao

- Rub~er

_12% H~erannum)

- 1 S O l o (Every two ye';;i.rs)

- 7 . 5 °{ o (Every two years)

For t he p urpose of cash f low statement , c~sh ~ cash equivalent consists of cash in h~Ad and depos it s in banks

net o f outsta nding banll{overd rafts that are repayable pn dema nda no forma n integtal part o f the Grou p'scash

manaqement,

- 60 Years

- 60 Years

lnvestmerrt with short term mattHit ies i .e. three months or less-from the-date O' f acquisi tions isalso treated as

cash equivalents.

- Rs.200/=

- Rs.200/::;;.

e. Th 12 com pany wi j.j conti nue in. !business asa goi ng concern

79 80

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P a g - e J 9F RE E L AN KA PLA NT AT IO N H OLD ING S C dM pAN Y {P VT ) LIM IT ED

S IG NI F IN AN T A CC O W N TIN G P 0L 1G ]E S A ND N O TE S- TO T HE F IN AN CIA L S T AT EM EN TS

F RE E L AN KA P lA NT AT IO N H O LD liN GS "C 0M PA NY (P VT ) L IM IT ED

S IG NIF IN AI\lT A CC O UN TI N G P O LiG IE S: A ND N bT ~S T O T HE F I NA NtlA L S TA JE ME NT S

P a g e . 2 0

Interest paid isclassified asoperatin~ cash f lows. Government-grants received. which are related to purchase

and construct ion or Property, Piaot a~d Eq uipment a rec lass if ied asinvest l ng cashf lows. Div idend and interest

ineome are c lass.i fi€!d as cash f lews f 'fom investinq.act iv it ies . .Dividends paid~dre c lass if ied asf inancing casm

flows.

However accordi ng to the payment o f Gratu it ies Act [email protected] 1 ,983. the l iab i I it y f or payment t o afl em pleyee

arises only after the complet ion of 5years continued services.

The liaqility is nQt~x;ternall·tfunded.

b) Defined Contribt1t,i'on PJarts.- EP.F, STF'al i ld ESPS

Tne cash f low statements are prepared l:!sif:1.9Indirect Method"Employees are eligible for EmjJloyees' Provident Fund'Contributions and Employees 'Trust Fund Contribut ions

in lJ~ewith respect ive statutes and reg.ulatians. The-cempany contributes 1i% and 3% of conso li da ted salary

o f such employees to the relevant P rovident Fund and to the EmployeesTrus t ,Fund respect ivel y .2.4 Liabifith~s ah d Provisions

.2.4.1 ·lia biIities

Liabi li ties c lass if ied ascurrent l iabi li ties on the balance sheet are those, which fal l due for payment on demand

or w itRin one year f r. om the balan 'ce sheet date. Non-cur rent l iabi li ti es are those 'bal rances that f al l due for

payment a ft er one year f rom the balance sheet date.

Employees Provident F~nd & Emp,loyees Trust FW'1dare recognized asan 'e~ge)lse in the inceme-staternent as

ineurred.

All known l iabi li t. i~s have aeen ojlGwunted for in pre;paring. the financial statements.

lucerne tax OJ;]profi t or loss f { ir t he year -eernpr t s es current ant ! deferred ta:x ah d i s recognized in t he Ineame

Stgtement.

2.4.2 Provisions a). Current TaxExpanse

V1.2.1 .Empl.oyee Benefits Curr; en t t ax i s t he expec ted. t ax payab le en the t~xQ.ble i l' l~ol l" \e f or t he year, using ' t ax rates €f1a( ;t ed at t he

Baiaj lce Sheet date and any adjus tments t o t ax payab le in respect o f previous years .

a) Defineq Benefit Plans - G ratuityb) Deferred Tax

A def in ed benef it p ian i sa pos t employm ent benef it p lan other t han a def ined contr i but io n p ian. The IiabiIity

recognized in the balance sheet date. Benef its fal ling, ~ue mdre than 12 mol 'lUis after the oalan(e"sheet date

are -d ls coun t ed to pr es en t va'l'ue. The defined: benef i t obl igat ion i s cakula t ed annually by i:I~depet;ldent

actuaries usLng Projected Ul)it Credi t I 'v letrt~d {I?UC) asrecommended by:SLAS - 16, Ibmploy.eesc be-nefits. Tb e

pngsent value, o f t he . def ine€! benef it obl .i ga ti on i sdetert nined QYdi~C0tlnt in9, t he est imeted future cash

out fl ows. The gra tu it y l iabi li ty was based on the actuarial valuation carried out .

Defer red tax 'l ti on ! is t he tax att ri bu table t o t he temporary d if fe r~nces that arise when taxation authorities

reooqriize and measure asset s anc lr l i ab il it ies w it h rules that d if fe r f rom those of the consolidated f inancial

sta:t~ments.

Defer red tax i s ~ f6"' ided usi l' lg t he l iabi li ty method on tem~por<ary·dif fe'ren-ces at the balance sheet date

between th e tax bases'cf assets and I 'iabil it ies and their carrying, amounts for f inancial reporting pu·rposes.

Th e actuaria I gainsand Jesses are charged or c redi ted to income s ta tement in the: per iod in whi ch they ar ise.

Th e assumptions based on whrch t he resul ts o f the actuarial valuati on was determined, are g iven below .

i=lolI"'!'.,~ver,ccordinq to the 8ay,ment of Gratuit ie,s Act Ne.12 of 1983, the l iabi ,l ity fer l ine gratuity pa¥m.~nt to an

employee arises only am the completion of 5 years-of continued service with the Compan y ,

Deferred tax assets are recognized for a . 1 I deductible temporary dif ferences. carry-forward of unt lse€l tax credi ts

and unused ta x lo sses, to t he ext ent that it is pmbab le t ha t ta xabl e p ro fi t wi ll b e avatlable aga inst which the

deductibletemporary dif ferences, and the carry .-forward of unused t ax c redi ts and unused tax losses eaA be:.

utlli'zed.

a . Average R .ateof lnterest

b. , Average-Rate of Salary Incre'g~se

- Work:~r

- Staff

c. Average Retirememt A9~

- Worker

.::Staff

d . 0a, il yWage Rate

-Tea

- Rubber

- 12%"(Per annum) The 'car ry ipg amount o f defer reg tax asset s i s reviewer ! a t each balance sheet date and reduced to the extent

tha~t i t isno longer probable that suf ficient taxable p~©fi t. ;w il l be avetlable'to allow all or pah of the defer r ecs t a«

asset to be uti lized.15% ~E l Ie : rytwo years)

- 7.5% (Every two years)

- 60 Years

- 60 Years

Unreco§nized deferred tax assets ate r eas s es s ed .a. t~ach balance sheet date arid are recognized to the extent

t hat i t h as become probable that future taxable.profit w il l a ll ow the defer red tax asset t o berecovered.

- Rs_200/ := ,

-l i \s .200/=

Deferred tax a~sets and , Ii 'qbi li ties are measured at tax rates that areexpected to app ly to t he year v J h e . n the

asset is realized or liability is settled, bas.ed on the tax rates and tax laws that have been enacted or

substantivelyenacted asat the balance sheet date.

e . The company w il l conti nue in bus iness asago in9 concern

81 82

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Pag~:llF RE E L AN KA P LA N TA TI O N H O L DI NG S C dM p AN Y {P V T) L IM IT ED




Page p

Deferred'tax assetsand deferred tax lia'~ilities areoffset,if ale§lallyenfor€eable right existsto setoff current tax

assetsagainst current tax liabilities andwhen the deferred taxes relateto the sametaxable entity andtliiesame

taxation authority,

a) Revenue from Saleof (J'oods

Revenlje from the'saleof good!>is recognized inthe-income statement when the sigrii-Mant risksarid rewards

of oWI'I~rshiphave.been transferredro the byyer,

Deferred t9x relating to items recognized directly in equity isrecoqnized in equity,

bl Revenue from Services Rende~edI

2.4,4 (5rants~';mdSubsidies.

Gra.nto$elateClto property, Plant and Equipment areinitially deferred.and allocated to income sMtement on a

systemat ic basis over the useful l ife of the (elated Property, Plant and Equipment as follows..Assets ar,e

amortized ov~r the sh or!er of the . I~aseerm and thalr usefuI I ives,

Revenue from se,rvieesrendered! is recognized in the income statement i r. l, -pro~ort fon 1'0' t he s tage o f

completien of the transacti6n. at the Bali;1,nceheet dij.te.The sfage ofcoropletrsn isassessedbyreference to

surveysof wor~ performed,

c1 I:Hvidend lncome

Classof Asset No,ofYears Rate

Building 40 y;ea'ts 2.5%

Plantal1dMac~iflery 131/3 years 7.5%

EtJu[prment 08 years 12,5%

Road SO years 2%

Vehicles 05 years 20%

Div idend income is reooqnized in the ' income sta tement , when the Group 's dght to receive payment 'is

established.

d) lnterest Income

lnterest income isfecogni.~edin the income statement asit accrues"

Grants related to assets,incluq,ing nen-rnanera ry gr a n t s at fair vaIue, aredeferor,edn theba l<in@~heet:C1r;1d

credited to the income statement overthe useful l ifeof the reletedasset ;

e) Gai'i151{I.!cosse$)orach;,'inge in FairValuatlon ofTimber and R!Jbber Stocks

Grantsrelated to income are recoqnized inthe income statement inthe period iswhich they are receivable,

Gainsl{Loss~s)ari:singon the change. in the fair valuation ofTimber and Rubber Stocksaredealt with inthe

Income Statement in the year in which they occur in l ine w ith Int ,e rna. tiQnaAccounting Standard41 -

Agriculto~e,

2.4.5 ilirade ahd.Other Payables

f) Gai!1soq Il::osses'orlthe disposal' of Pr9pe'rtYi Plant and IEquipment

Tradecre.dit0(~Snd other pay~bl~~Me.statedat t,Aeirbook values,

2 .5 InaomeStatemenn

Gains or Lossesof revenue nature on the disposal of Rmperty, Plant and Equipment and other Non-current

assets,including investments ~11dOy the Group '~ave been ~ccounted ' for in die Income Statement, af ter

deduct ing from the net salesproceeds on disposal, the carryihg amount of suchAssetsand related Property,

Plant and Equipment-amount remaining irnthe Revaluation Reserverelating to that assetisdire~tly-transfeH~d

to Reta'ined~;arnings.

2, 5.1 Revenae

The net Group turnover excludes turnover taxes, and trade discounts, The gross turnover represents the

invoi~edvaIueorgoods: and.servicesetocustomers outside the G0 1 4 P . g } Other Income

2.5,1,1 Rev.e,nue.Recognition Other incor.l'leilsrecognIzed on accrualbasis,

Revenue isrecognized to the extent that i t isprobable that the economic benef its wil l f low to the group, "and, "

the revenue andassociated costs incuned ar to-be ineurred ca0 be reiiably measured, RevenlLlesrneasure~,at

the fair value of the consideration received or receivable, net of t rade discounts and value added taxes, net of

saleswithin t:I'IeGroup,

2.5.2 Expenditure Recognition

a)Expensesare recognized in the income statement on the basis of a direct association between the cost

inc:urred a ' l ' l , a the earning of spe€ific'items of inGome,

The follo!",ing specific criteri'l0have.been used to recognjze revenue, All the expenditure incurred il"! the running of the business and in maintaining- the property, plant and

~\iluipment ina ,stateof efficiency have ~\3encharged to in~ome isarriving <1 1 the profi t forthe period.

83

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85





Page.24

For tHe purpose o f p te senta tio n o f t he i nc ome st at ement the d ir ecto rs a re o f the opinion th at f unct ion o f

expenses method presents fairly the ele"ri1ents €I f the company 's performance and hence such presentat ion

!'liiethod is adopted,

2.7 E)i scontint ii ng Operati ons

Repa irsand renf! 'wa I sarecharged to the income s ta te ment in t he y !=ar in whi ch 'the expend itu r~ is incurred.

A discont i nuin@operation isa dea r)y d istingtJ ishable component of; t f e J eGroup's btlsiness that isaba ndoned or

terminated pursuant to a 'single Rlar, and which F~J'>r~gentsa separate-rnajcr line of in:d1;!s~ryor geog~apl9ic-al

asea of operations.

b) ·lheJiminary and pre-operatlcnal.expendltu roe

2.8 Off BalanGe Sheet ant i, Income Statement I tems

grelimiriar)i-an€'!ip)"(€'-operationa'i. expertditure is-:recognio:ed In the lncorne Statemetrt ,2.8':1 Events after the Ba!ance She.et Q'ate

c) B.orrowir;Jg CostsAll material post Balance 6'heet events have been considered where appropriate, either adjustWleflts have been, .

made or adequately disclosed in the Financial Statements.

Borrowing '!"Qststhat ate clrrectly attributable to acquisiti0f1, constrUcti(5n or ptoduCtion of a qua'lifying asset,

which takes a substantial period of·t, lme to g.et ready for i ts intended use or sale,are.€apitalized as a pa rt of t 'He

asset.

2':8.2 Capita I Cooti ngencies, a n t i Ullre:C0gn iied Contractual Com Ililitm'e'nts

Borrowing cos ts t hat are r ro t cap it al ized are recognized asexpense in the per iod inwhich they are incur red and

chargeo to the Income Statement .

CantingeJ](l~s are possible assets or obliqatiorts that ari se f rom pas t ev~nt s and would bezonfi rrned onl ,y by

the occ.urrence or non-occurrence. of uncertain future events, which are beyond the company 's control .

TIlle amounts of borrowing: costs wli lich are 1?l igible for capital izat ion are detenn)ned in accordance With the

Allow€9' ~'Itemative Treatment in Sri ,~ a ' r : 1 k a : AccOi:.JntingS taadard 10 - "Bor;royvit:]9'eGgs ' :

Conti nqenc ie s and capi tal commi tmen t of t he company have been d isc lo sed i n ' No te s 33 and 34 t o t he

Firrancia I Stat~rj1eOfS'r!3~p,ectively.

2.9 Comparative Inferm;;ltion'

Borrowing cost incurred in r:es'fJectof splec if ic loans that are.utmz~d for f ield devE! lppm.ent act iv it ies have be~n

capitalized as a part of the cost of tbe relevant immature p lantat ion. The capltallzation w il l cease when tHe

crops are ready for commerc ial halvest.

The comparative l 'ot0rmat 'iol1l 'i s re-classi fied wherever necessary tei conform with the current year's'

presentatton {n (Haer. t6 t5rov.ide a better preserrtatton.

d) Fil1ancing CostsComparative !nformation h&~been given for the last period, wherever appl' ie:able.

F inanci ng c osts comp ri se i nte re st payabl e on bor rowings, net fo re ign exchange gai ns and lo sses, net o f

h it er est r ece ivabl e on ; ~unQ5 i nvested, The in ter es t e x'pen~e componen t o f fi nance l ease payment s is

recognized in the lneorne Statement l ;lslng'the effective interest fate method.

2.6 Segment ReRor~i"g

A S~frmeht is ~ dis tinguishable component o f tb .e G roup that i s engaged e it he r i n pmvi 0in~ p roducts o r

servi ces (business segment ) which i s subJ~(l t t o r is k and rewards that a re d iff er ent f rom t hose o f o ther

segcnents.

2.6.1 Reporting Segments

The group 's int er rra] orqan izat ion and managem'~JI lt i s s truc tured based on ind iv idua l product s and servi ces

which are s imilar in nature anClprocess and-where the-risk and return are s imilar.

2;6.1 'Segment Intormatiot_;l

S 'egment inf ormation has been prepared incorsorrni ty w it h t he acccunt inq pol ic ies adopted fer preparing and

presenting tfile consrl>lidatetl financial sl'atemer'it;; of the group.

86

F re e L a nk a C o pi ta t H o ld in gs L td - ln rUo/P , lbilc Offe rr ee L an ka C a pi ta l H o ld il lg s L id - , 'M I I J !Pu b l i c O f f e r



Page2SFREE LANKA PLANTATIO N HO LDINGS CO MPANY (PVT) L IM ITED FREE LANKA PLANTATIO N HO LD INGS CO MPANY (PVT ) L IM ITED Page 26

FO R TH E YEAR ENDED 31 S T MARCH 2010 FO R THE YEAR EN DED 31 S T MARCH 2010NO TES TO THE FINANCIAL STATEMENTS NO TES TO THE FINANCIAL S TATEMENTS

Group Company Group Company

F rom 22nd May From 22nd May From 22nd May From 22nd May

2008 to 2008 to 2008 to 2008 to

3 Revenue 2009/2010 31 s tMa r c h 2009 2009/2010 31 s tMa r c h 2009 6 F i na n c e Cos ts 2009/2010 3 1 s t M a rc h 2 0 09 2009nOlO 31 s tMa r c h 2009

(Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO)

Tota l Revenue 5 ,028 ,970 28,656 4,860 I n te r e st o n Ban kOv e rd raf ts 25,615

Le s s: I n te r G ro up Rev enue (143,229) L ea se I n t e r es t t o J EDB /S LSPC 16,390

4,885 ,741 28,656 4 ,860 Lea se I n t e r es t t o O t h e rs 17 ,257I n te r e st o n Debent u re s 923

3. 1 I n d us t ry S e gm e n t ( R e v e nu e ) I nt er e st o n S h o rt T e rm L o an s 27 ,140

3 ,856 ,878 I nt er e st o n O t h er L o an s 158 ,053 15 ,652

Te a 971 ,206 245,378 15 ,652

Rubber 9 ,148 Le s s: F i na n c eCos t s c a p it a li ze d du r in g t h e Yea r (74,930)

Coconut 5 ,513 170,448 15,652

Hy d ro Powe r 42 ,996 28 ,656 4,860

Others 4,885 ,741 28,656 4 ,860

7 P ro fi t b e fo r e Ta x at io n

3.2 C o st o f S a l e sP ro fi tl (L o ss ) b e fo r e t a x i s s t at e d a f te r c h a rg i n g a l l e x p ens e s i n cl u d i n g t h e f o ll owi n g.

3.2 .1 I n d us t ry S e gm e n t ( C o s t o f S a l e s )

3 ,875,615 Di rec to rs ' Emoluments 3 ,027

Te a 661 ,117 Auditors 'Remuneration

Rubber 6,231 Aud it S e r v ic e 1,796 40 7

Coconut 2,895 Deprec ia t i on l Amort iza t i on 223,223

Hy d ro Powe r 10,238 B a d D e b ts W r it te n O f f ( 491)

Others 4,556 ,096 5 t a ff Co s ts

Salaries & Wages 2,010,639

3. 3 Gross Profit "Defi ned Contribu tion Plan Costs - EPF, 309,139

E l F ,CPPSand ESP5"

3.2 .1 I n du s tr y Segmen t (G r o s sP r o f i t) De f in e d Bene fi t P l an Cos ts - G ra tu i ty 490 ,812

(18,737)

Te a 310 ,089

Rubber 2,917 8 I nc om e l ax E x pe n se

Coconut 2,619

Hy d ro Powe r 32 ,758 8.1 C u r re n t I n com e T a x Ex p e ns e

Others 329 ,646

Cu r re n t I n come TaxE x pens e on Cu r re n t Y ea r' s 37 ,782 779

4 O ther Income Profit

14,906 37 ,782 779

Amo r ti z at io n o f Cap it a l G ra nt s 833

P ro fi t o n S a l e o f P ro pe r ty , P l an t a n d Equ ipmen t 62,909

S a l e o f T re es 50 ,245

S undry Income 34,319S ha re o f P ro fi t f r om J o in t Ven tu r e sl A s s oc i at e s 44

In te res t Income 163 ,256

5 Negat iv e G oodwi ll

1 ,165,290

F re eLan ka Managemen t Co . ( P v t) l .t d ., 1 ,059 ,198

F re eLan ka P l an t a ti o n Co . ( P v t) L t d. , 2 ,224,488

87 88

F re e L a nk a C a pi ta l H o ld il lg s L id - , 'M IOI Pu b l ic O f f e r F r ee L a ll k a C o pi t at H o ld i ll g s L t d ·lnr(iO/ ( ib/Ie Offe r



T he d ef er re d t ax a ss et a ri sin g o n t he t em po ra ry d if fe re nc e o f t he C om pa ny h as n ot b ee n r ec og ni ze d a s a m at te r o f

p ru d en ce a nd t he r es ul ta n t t ax e ff ec t i s d is cl os ed b e lo w . T h e e ff ec t i s c o mp u te d u si ng 3 5% t ax r a te a p pl ic ab le f or f ut ur e

periods.

F RE E L AN KA P LA N TA TI O N H O L DI NG S C OM P AN Y (P V T) L IM IT ED

F O R T H E Y E A R E N D E D 3 1 S T M A RC H 2 01 0N O T ES T O T HE F IN AN C IA L S T A TE M EN T S

F RE E L AN K A P L AN T AT IO N H O L DIN G S C OM P AN Y ( PV T ) L IM IT E D

F O R T H E Y E A R E N D E D 3 1 S T M A RC H 2 01 0N O T ES T O T HE F IN AN C IA L S T A TE M EN TS

Page 28ag e 27

8.1 Num e ri ca l R e c on c il ia t io n b e tw e e n t h e T a x E xp e ns e ( f n co m e ) a n d t h e P r o d uc t of A c c o un t i ng P r o f it / f lo s s ). 8 .3 D ef er re d T axa ti on

Numer i ca l r e co n ci li a ti o n b e tween t h eTa x E x pen s e! (l n come ) a nd t h e p ro du c t o f A c coun ti n g P rof it /( L os s ) mu l ti p li e d b y t h e

a p pl ic ab le t ax r at e d i sc lo si ng a ls o t h e b a si s o n w h ic h t he a p pl ic ab le t ax r at e i s c om p ut ed a re g iv en b e ll ow .

S t at u to r y I n co m e T a x R ot e

Ac coun ti n g P ro fi t/ (L o ss ) B e fo r eTa x ( Rs . )

Less : Ex emp t I n come

I nc om e T a xe d a t 3 5%

A c c o u nt i n g P r o f it / fl o s s) B e f o re T a x t a x ed a t J 5%

TaxE x pens e /( Tax I n come ) o n A c coun ti n g

P ro fi tl (L o ss ) Ta x ab l e a t 1 5%

Add : TaxE f f ec t o f D i sa l lowabl e E x pen s es i n

de te rmin i ng Taxab le Income/(Loss)

Lees : TaxE f f ec t o f A l lowabl e E x pen s es i n

de te rmin i ng Taxab le Income/(Loss)

Add : T a x E ff ec t o f A d ju st ed L os s f ro m t he

Bu si n es s i n d e te rm in i ng Ta x ab l e

Income/(Loss)

Lees : T a x E ff ec t o f E xem pt I nc om e i n

determin i ng Taxab le Income/(Loss)

Lees : TaxE f f ec t o f Deduc t io n s under S e c ti on

32 i n d e t e rm i ni n g Ta x ab l e

Income/(Loss)

T o x E xp e ns e /( ln c om e ) o n t h e T a xa b le S o u rc e s of

t h e B u s i ne s s t a x ed at 15 % a s a b o ve

Add : I n come TaxE x pens e on I n come Tax eda t 3 5%

Lees ; TaxE f f ec t o f Deduc t io n s under S e c ti on

32 i n d e t e rm i ni n g Ta x ab l e

Income/(Loss)

Add : S o c ia l Re s pon s i b i li ty L e vy a t 1 . 5%

Thereon

T o x E xp e ns e /( ln c om e ) o n t h e T o ta l T a xa b le S o u rc e s

of t h e B u s in e s s


From 22nd May From 22nd May

2009/2010 2009/2010

2008 to 2008 to (Rs.'O O O ) (Rs. 'O O O )

2009/2010 31 s tMa r c h 2009 2009/2010 31 st Ma r ch 2009 Temporary Diffe rence of Property, Plan t and E quipment 202 ,432

(Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) Tempora ry D i ff e re n c e o f Re t ir emen t B enef it Ob l ig a ti o ns - G rat u it y (153,061)15 % 15% 15% 15%

Tax Lo s sCa r ri e d Fo rwa rd (804,266)

341 ,061 2 ,224,419 4,040 4,791 Ta xC re d it s Ca r ri e d Fo rwa rd (1,204,260)

(237,785) (2,224,488) (25,281) (4,860) TaxE f fec t (1,959,155)

(31 ,480) (3 ,375)

71,796 (69) (24,616) (69)9 E a rn in g s p e r O r d in a ry S h ar e

9.1 B a si c E a r ni n gs p e r O r di n or y S h o re10,769 (10) (3,692) (10)

T he c om pu ta ti on o f t he B as ic E am in gs p er O r di na ry S h ar e h as b ee n d on e b as ed o n n et p ro fi t a tt ri bu ta bl e t o o rd in ar y

81,454 1 ,118s ha re h ol de rs f or t he y ea r d i vi de d b y w e ig h te d a ve ra g e n umb e r o f o rd i n a ry s ha re s i n i ss ue a s a t t he B a la n ce S h e et d at e a nd

ca l cu la ted as fo l lows .

Group Company

(61,505)

From 22nd May From 22nd May

2008 to 2008 to

2 ,574 2009/2010 31 s t March 2009 2 00 9/ 20 10 3 1s t M a rch 2 00 9

Am o u nt s u s ed a s t h e N u m e ra t or (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO) (Rs . 'OOO)

N e t P ro fi t A t tr ib u ta b le t o O rd in a ry S ha reho ld e rs 80,156 2 ,224,419 3,261 4,791

(3,792)

A m ou nt u se d as t h e De n om i n a to r

(721) W e ig ht ed A v er ag e N um b er o f O r d in ar y S h ar es i n 92,300 90,000 92,300 90,000

Issue(Nos.)

B a si c E a r ni ng s p e r O r di n ar y S h ar e ( R s. ) 0.87 24.72 0.04 0.05

26,206 (10) (10)

9.2 D il ut ed E a rn in gs P e rOrd ina r y Share

11,018 1 ,181T h e c al cu la ti on o f D il ut ed E a rn in g s p er O r d in ar y S h ar e i s b a se d o n N e t P ro fi t a tt ri bu ta b le t o o rd in ar y s ha re ho ld e rs a nd

37,224 (10) 1 ,181 (10) w e ig h te d a ve ra g e n um b er o f o r d in a ry s ha re s o u t st an d in g a ft er a d ju st m en t f or t he e ff ec t o f a l l d il ut iv e p ot en ti al o rd in a ry

(413) s ha re s . The re we re no po te n ti al ly d i lu t iv e s h are s ou t st a nd i ng a t a n y t i me du ri n g y ear / pr e vi o us y ear .

(10) 768 (10)

37,224

12

55 8

37,782 (10) 779 (10)

909




Page 29F RE E L AN KA P LA N TA TI O N H O L DI NG S C OM P AN Y (P V T) L IM IT ED




Page 30

Group Company

10 D Ividen d pe r O rdina ry S hare

2009/2010

(Rs :OOO)

F ro m 2 2n d M ay

2 00 8 t o

3 1 st M a rc h 2 0 09 2 00 9/ 20 1 0

( Rs .' OO O ) (R s: O O O )

F ro m 2 2n d M ay

2008to

3 1 st M a rc h 2 00 9

(Rs . 'OOO)

Group

AsAt As At

31.03.2009

(Rs :OOO)

31.03.2010

(Rs :OOO)

D iv id e nd - N ot e 1 0 .1 1 ,200 1,20011 (a).1 Capitalized Value ( 15thlune'1992)

Leasehold Righ tsAcqu i red /Reva lued

Ba la n ce a s a t 3 1 s tMa r ch

642,856 642,856

756,148 756,148----

756,148 756,148----

1 ,200 1,200

D i vi de nd Pe rO rd i na r y 5ha re ( R5 .) 0.01 0 .01

11 (a).2 Accumulated Amortization

A cc um u l a te d Am or ti za ti on a t t h e b e gi n n i n g o f t h e Y e ar

Amo rt iz a ti on o n Lea seho ld R i gh t s A c qui re d

A dd : A mo un t a mo rt iz ed d ur in g t he Y ea r

A cc um u la te d Am or ti za ti on a t t h e e n d o f t h e Y e ar

207 ,147

1 0. 1 T he d i re ct or s o f t h e c o mp an y h av e r e co mm en de d a d iv id en d o f R s .l. 2 M I n o n t h e o rd in a r y s h ar es o f c om pa ny f or t he y ea r

e n de d a s a t 3 1 st M a r c h '2 0 1 0 o u t o f d i vi de nd s r ec ei ve d f ro m C om p an ie s i n S r i L a n ka . ( P re vi ou s P e ri od - N i I ).

207 ,147

11(a).3 Total Net Carrying Value

15,283----

222A30 20~147----

533.718 549,001====

Group Company

From 22nd May From 22nd M ay

2008 to 2008 to

2009/2010 3 1 st M a rc h 2 00 9 200912010 3 1 s t M a r c h 2 00 9

11 Property, P lan t a nd E qu ipment Notes (Rs .TOOO) ( Rs :OOO ) (Rs . 'OOO) (Rs . 'OOO)

L e as eh o ld R ig ht t o B a re L a n d o f 1 1 ( a ) 533 ,718 549 ,001

(JEDB/SLPC)Estates

Immovab le ( J EDB /S LSPC ) A s se t s o n 11 ( b ) 317,370 342 ,453

F i na n ce Lea se ( O t he r t h an Ba re Land)

Tangi b le A s se t s o t h er t h an 11 ( e ) 1,800,566 1,066,510

Immature/Mature P lan ta t i ons

Immature /Mature P lan ta t i ons 11 ( d ) 3 ,512 ,062 3 ,055,140

Cap i tal Work - In -P rogress 11 ( e ) 94,155 100 ,643

6 ,258 ,471 5,113 ,147

T he L ea se ho ld R ig ht t o B ar e L a nd o f J E D B/ SL S PC E st at es i s b ein g a mo rt iz ed b y e q ua l a mo un ts o ve r a 5 3 y ea r p er io d a nd t he

u ne xp ir ed p er io d o f t h e l ea se a s a t t he B a la n ce S h e et d at e i s 3 5 y e a rs .

1 1 ( a ) L e as eh ol d R ig h t t o B a re L an d o f ( JE DB/ S LP C ) E st at es - G r o u p

Lea seag re ement s o f a l l J ED8/ S LSPCes t at e s h a nded o v er t o t h e Compan y 's S ub s id i a ri e s h a v ebeen e x e cu t ed t o d a te . A l l o f

t he se l ea se a re r et ro ac ti ve t o 1 5 th J un e ' 1 9 9 2, t he d a te o f f o r ma ti on o f t h e C omp an y' s S u bs id ia ries, The l e as ehol d r ig h ts t ot he b ar e l an d o n a ll o f t h es e e st at es h av e b ee n t ak en in to t he b oo ks o f t h e C om pa ny 's S u bs id ia ri es o n 1 5t h J un e' 1 99 2,

i mmed i a te l y a f t e r f o rma t io n o f t h eCompan y 's S ub s id l a r le s , i n t e rms o f t h e ru l i ng o b ta i n e d f r om t h e U rg en t I s su eTa s k Fo rc e

( U ITF ) o f t h e I n st it u te o f Cha r te r ed A c coun t a n ts o f S r i L a n ka . Fo r t h i s p u rp o s e, B oa rd o f t h e c ompa n y 's S ub s id i ar le s d e ci d ed

a t i ts m ee tin gs t ha t le as e b ar e la nd w ou ld b e r ev al ue d a t t he v alu e e st ab lis he d f or t hi s l an d b y V al ua ti on S p ec ia lis t

D rWi ck ra m as in gh e j us t p ri or t o t he f orm at io n o f t he C omp a ny 's S u bs id ia ri es . T h e v al u e t ak en i nt o t he 1 5 th J un e' 1 9 92

Ba la n c eS hee t o f t h e Compan y 's S ub s id i ar ie s a nd t h e a rn o rt lz a ti o n o f t h e l e as ehol d r ig h ts u p t o 3 1 .0 3 .2 0 10 a re a s f o ll ows .

91 92

F re e L a nk a C a pi ta l H o ld in gs L id - ,'MIIJI Pu b l ic O f f e r



FREELANKA PLANTAT ION HOLD INGS COMPANY (PVT ) L IM ITED

FOR TH E Y EA R E N D ED 3 1 ST MAR CH 2010NOTES TO THE F INANC IA L STATEMENTS

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F re e L a nk a C a pi ta l H o ld il lg s L id - , 'M IOI Pu b l ic O f f e r F r ee L a ll k a C o pi t at H o ld i ll g s L t d -lnr(iO/ ( ib/Ie Offe r





11 (e).5



T he se I mm ov ab le /M o va ble a ss et s v e st ed i n t h e C om p an y' s S u bs id ia ri es b y G az et te N ot if ic at io n o n t he d at e o f

f or ma ti on o f t he C o mp an y' s S u bs id ia ri es a nd a ll t he in ve st me nt s m a de in t he t an gi ble a ss et s b y t he C om p an y' s

S ub s id i ar i es s in c e t h ei r f o rma t io n ha v ebeen c l as s if ie d a s abo v e. Thea s s e t s t a ke n o v e r b y way o f f in a n ce l e as e s b y t h e

Company ' s S ub s id i ar ie s a re s e t o u t i n N o t es 11 (a ) a n d 11 (b ) .

11 (e ) .6 Reva lua t ion of P r op e rt y, P l an t a n d E q ui p m en t

F re eh ol d B ui ld in g, E le ct ri ca l E qu ip m en t a nd P en st oc k P ip e L in es o w ne d b y H yd ro P ow er F re e L an ka ( Pv t) L td ., a

s u b s id i a r y o f t h e c ompan y , h a v e been re v al u ed b y an i n d ependen t v a l u e r,M r . K. T .T i ss r a ,Cha r te r e d Va l ua t io n S u r v e yo r .

T h e c u rr en t m a rk e t v a lu e o f t he r ev a lu e d a s se ts a s a t 3 1 st M a rc h 2 0 10 w a s a r r iv ed a t b y d e pr e ci at in g t he e st im a te d

c u r re n t c o s ts o f s im i l ar i te m s. I n t h e a b s en c e o f s im i la r i te m s i n t h e m a rk e t, t he o r ig in a l c o st s h a v e b e e n a d j us te d t ak i n g

i nt o a c co u nt t he e s ca la ti on o f t he p r ic es a n d t h e d e pr ec ia ti on o f r u p e e.

T he re i s n o t a x e ff ec t o n t he a bove revaluation.

1J (e).? Ca r ry i n g Va l ue of R e va l ue d P r op e rt y , P l an t a n d E q ui pm e n t a t C o st M o d e l - G ro u p

T he c ar ry in g v al ue o f r ev al ue d P ro pe rt y, P la nt a nd E qu ip me nt t ha t w o ul d have b ee n in cl ud ed in t he f in an ci al

s ta te m e nt s, h a d t h e a s se ts b e e n c a rr ie d a t u n d e r t he C o st M o de l i s a s fo ll ow s .

C la s s o f A s se t

Bui ldings

E lec t ri ca l Equ ipment

P en st o c k P i pe L i ne

Mo t o r Veh ic l es

O f f ic e Equ ipmen t

Too l s

Computers & Accessories

Fu rn it u re a nd F i tt in g s

Tota l

(Rs . 'OOO)

138,051

103,598

23,063

75

258

2,028

283

90

267,446

95

Cos t

Accumulated

Depreciation

(Rs . 'OOO)

25.125

26.313

6,201

38

239

1,988

231

63

60,198

N et B oo k

V alu e A s A t

31.03.2010

(Rs . 'OOO)

112,926

77,285

16,862

37

19

40

52

27

207,248

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Page 34




Page 35FREE LANKA PLANTATIO N HO LDINGS CO MPANY (PVT) L IM ITED FREE LANKA PLANTATIO N HO LD INGS CO MPANY (PVT ) L IM ITED Page 36



Group I n t h i s e x e rc i s e. f o ll o w in g f a c to r s t o o h a ve b e e n t a k e n i n t o c o n s id e ra t io n a n d a d j u s tm e n t s f o r t h e s e f a c t o rs h a ve a l s o b e e n ma d e .

11 (e) Cap i ta l Wo r k- In -Prog r ess

A sA t

31.03.2010

A s A t

31.03.2009

94 ,75 5 100,643

Co s t o f o b t ai n in g a p p ro v a l f o r f e ll i ng

i i C ost of fe l ling and c uttin g in t o logs

iii C ost of transport to m il l

iv S aw ing costs

v Cost o f saleB al an ce a t t he e nd o f t he Y ea r

(Rs. 'ooOj

94 , 755

( Rs . ' OOO)

100 , 643

1 I (e ). 1 C la ss o f Asset-wise Break-up Ma r g in a l i n cr e a se i n t h e t i m b e r c o n te n t o f Ru b b er T r e e s h a ve a l so b e e n va l ue d o n t h e s ame b a s is .

Build ings

P l a nt a n d Ma ch in e r y

M o to r V e hl d e s

W a t e r S a n i ta t io n

Ro a d sa n d B r i d g es

H y d ro P o w er

Othe r s

28.664 39.165 Company

20,086 13 , 475 Companyand C arry ing C arry ing

5 16 5 00 N o.of S ha res G roup Ho lding % Value Value

3,984 7,226 As A t A s At A s At As A t As A t As A t

29 , 410 36.365 13 I n v es tm e nt s i n S u b s i di a ri e s 31.03.2010 31.03.2009 31.03.2010 31.03.2009 3 1. 03 .2 01 0 3 1. 03 .2 00 9

11 .304- Nos. N os. % % (R s.'O O O) (R s:O O O)

791 3.912 13.1 Unquoted

94 , 755 100 , 643

11 (I) P r op e rt y, P l an t a n d E q ui pm e nt P l ed g ed a s C o l la te ra ls

B a l an c e a sa t 1 s t A p r i l

Tl m be r a nd R ub be r 5 to ck s o n A cq u i s it io n

Add : In crease d ue to N ew Plan ting

G a i n o n F a i r Va l u at i on

- M a rg in al I nc re as e o f T I mb er C on te nt s

B al an ce a t t h e e nd o f t he Y ea r

( Rs . ' OOO)

5 , 642 , 140

( Rs . ' OOO j

13.1.1 Ordinary Shares

Free Lanka M anagem ent

Company Ltd ., 5 ,5 00 ,000 5 ,500,000 5 5 .00% 55.00% 600,000

F ree Lanka P ian ta tio ns

C o m pa n y L td ., 5 ,5 00 ,0 00 5 ,5 00 ,0 00 5 5 .00% 55 .00% 200,000

F re e Lanka P ow er H o ld in gs

C o . ( Pv t ) L td " 100 .000 ,000 100.00% 100.000

F re e La nk a P ow er 3 (pvt)

Ltd., 1 0,000 ,000 100.00 "A l 10,000

121,000,000 11 ,000,000 910,000

13.1.2 Preference Shares

600 , 000P ro pe rt y, P la nt a nd E qu ip me nt p le dg ed b y t he g ro up a s c o ll at er als t o o bt ain f in an ci al a ss is ta nc e f ro m v ar io us

f in a nc ia l i ns t it ut io n s h a ve been d is c lo s ed i n N o t e 36 t o t h e f i na n c ia l s t a teme n ts .

G r oup

12 T im b e r a n d R u bb e r S t o ck s

A s A t

31.03.2010

A s A t

31.03.2009

200,000

5 , 642 , 1408 0 0 . 6 0 0

59 , 454

5,769,166 5 , 642 , 140

a) Non-redeemable and Non-

voting 8% Cumulative

67 , 573

Preference

Rs.IO/=each

Shares at

12.1 "The g r ou p h a se n g a ge d a n I n d ep e n de n t Ch a r te r e d Va l u a ti o n Su r v e yo r M r . K . T .D . T is s e ra n d e t e r m in i n g t h e f a ir v a l ue o f T Im ber and

Ru b b er S t o c k s. T h e Va l u e r h a s va l u e d, a s a t 3 1 s tDe cemb e r 2 0 0 9 , t h e T im b e r a n d Ru b b er S t o c k s o n a p e r t r e e v a l ua t io n b a s is u s i n g

a va il a bl e l o g a n d t r ee p r ic e s i n c i ty c e n te r s l e s s p o i n t- o f- s a le - c os t s . T h e g r o u p h a s va l u ed t h e T im b e r a n d Ru b b e r S t o c k s a t f a ir v a l ue

le ssest ima ted -po in t -o f - sa le- cost a sa t each ba lanceshee t da te : '

Maturate P l a nt a ti o n ( P v t) l.td, 1 , 535 , 581 1 ,5 35 ,581 30.28% 30 .28% 4,0004 , 000

b) Cumulative Preference Shares

T imb er T r e es n ame ly E u ca ly p t us T o r ar iy a n a , A l b e zz i a, G r a ve e l ia , E u ca l y p tu s G r a n di s , A s t o n ia , P i n us , T o o n a, M a h o ga n y , T e a k , J a c k ,

Ru b b er , N a d u n, M a n g o . P e t le n . Ho r a , Domb a , L u n um i d el l a, W a l De l a n d Ma r a o n t h e p l a nt a ti o ns h a ve b e e n t a k en i n to c o n s ld e ra t lo n

i n t h i s v a l u a ti o n o f T im b e r T r e e s .

F r e e L a n ka P l a nt a ti o ns

Company Ltd., 86,5 52 ,838 81 ,55 2,838

8 8, 08 8, 41 9 8 3, 08 8, 41 9

98 .87% 98 .80% 157 ,65 0----'---

161 , 650

107 .650

I n v a l u in g t h e t i m b e r p l an t a ti o n s, u n d er -m e n t io n e d f a c to r s h a ve b e e n t a k e n i n to c o n s id e ra t io n .

M a t u ri t y a g e o f t h e t r e e .

ii A nn ua l m arg in al in cre as e in t im be r c o nte nt .

iii N um be r o f y ea rs t o h arv es t i n ca se o f t re es a re m a tu re d f o r h arv es t.

iv T im ber conten t of ha r vestab le t r ees .

v C urre nt p ric e of t im be r p er c ubic fo ot at t he f arm g ate .

111 .650

2 09 ,0 88 ,4 19 9 4, 08 8, 41 9 1 ,071,65 0 911 ,650

13.1.3 Country of Incorporation

E x ce pt f or M a tu ra ta P la nt at io ns L im it ed , a ll o th er c om p an ie s h av e b ee n i nc or po ra te d u nd er t he C om p an ie s A ct N o. 07 o f

2 00 7 a nd d om ic il ed i n S r i L a nk a.

T im b er t r ee s t h a t h a ve n o t c ome u p t o a h a r v es t a bl e s i z e a r e v a l ue d wo r k in g o u t t h e p e ri o d t h a two u l d t a k e f o r t h e s e t r e es t o -g r ow u p

t o a h a rv e s t ab l e s i ze . T he p r es e n t v a l u e o f t h e t r e e s i s e s t ab l is h e d b a sed o n t h e p r o je c t ed s i ze a n d t h e e s t im a t e d n umb er o f y e a rs i t

wo u ld t a k e t o r e ac h t h a t s i z e . Th i s i s c a l c u la t e d o n t h e b a s is o f a n a n n u a l m a r g in a l i n cr e as e o f t i m be r c o n te n t wh i c h n o rma l ly r a ng e s

f ro m 0 .5 5 t o 1 . 5c m p e r y ea r f o r t r ee s o f d ia m e te r g ir th o v er 1 0 e m s

M a tu ra ta P la nt at io ns L im it ed h as b ee n i nc or po ra te d u nd er t he C o mp an ie s A c t N o. 07 o f 2 00 7 i n t er ms o f t he P ro vi si on s

c on ta in ed i n t he C o nv er si on o f P u bl ic C o rp or at io ns o r G o v er nm e nt O w n ed B us in es s u nd er ta ki ng s i nt o P ub li c C o mp an ie s

A c t N o. 23 o f 1 9 8 7 a n d d om ic il ed i n S r i L a nk a.

97 98








Page 38

Th i s c om pa n y i s i n t h e b u s in e ss o f g e n e ra t in g M i n i H y d ro P ow er . 14 I n ve s tm e n ts i n E q u it y

Group

Carry ing Carry ing Carrying

Value Value Tranfers Value

A s A t A s A t O u t on A s A t

3 1. 03 .2 0 09 T ra n fe rs ln 31.12.2009 3 1. 12 .2 00 9 3 1.0 3. 20 10

(R s . ' OOO ) (R s . ' OOO ) (R s.'O OO ) (Rs.'O O O) (R s . ' OOO )

(N ot e 1 4. 2. 1) (N ote 1 4. 2.1 )N o te 1 4 .1

15 ,769 11,261

13.2 Acquisi tion of5ubsldiry during the Year

D u ru n g t he y ea r u nd e r r ev iew, t he G ro u p h as a cq ui re d 5 0% o f t he s ha re s o f H yd ro P ow e r F r ee L a nk a (Pv t ) L t d ., f o r

Rs .105 ,000,000/=.

T h i s acqui s it ion had t he f o ll ow ing e f f ec t on t he G r oup 's as se ts and l iab i li ti e s on t he acqu is i ti on da t e .

N o f a ir v a lu e a d ju s tm e n ts w e re m a d e o n p r e- a cq u is it io n c a rr yi ng am o un t s o n t h e a c qu i si ti on d a te a n d t h e r e co g n iz e d

va l ues on acqu is i ti on H yd ro Powe r F r eeLanka (Pv t ) L t d . , a r eas f o l low s .

Me l fo r t G r eenTeas

(Pv t) L t d ., (MGTPLJ

Amoun t

(R s . ' OOO )

Assets

P r op e rt y, P l an t a n d E q u i pm e n t 216,744

Cap ita l Work-I n -P rog ress 2,839

Trade and O the r Receivables 44 ,040

Deposits, Prepayments and Advances 7,150

Income Tax Recoverable 11,468

Cash and Cash Equivalents 7,436

289,677

Less: Uabi/ltles

Inte rest Beari ng Borrow i ngs 31,075

Re t ir emen t Bene f it O b l i ga t ions 41 3

Expense and O ther Payables 7 ,286

D i rec to rs' Cur ren t Ac co unts 49 1

Curren t Po rtion of In te res t Bearing Bo rrow i ngs 20,4 68

Bank O ve rdraft 20,974

(80,707)

Net Identif iable Assetsand Uabilit ies 208,970

Percentage Acquired 50%

Net Tangible AssetsAcquired to Group 104 ,485

Add: Goodwill on Acqis ition 515

N e t A s s et s A c q u i re d t o G ro u p 705,000

Conside ration Paid, S atisfied in Cash (105 ,000 )

13.3 Investments Made during the Year

H y dr o P ow er F re e

Lanka (Pv t ) L t d . ,

(HPFLPL) Note 14 .2 89,710 242,683 (242,683)

(242,683)5 ,769 89,710 242,683 11,261

G r ou p H o ld in g %

%

46.43%

%

46.43%

N o . o f S h ar es

As A t As A t

3 1. 03 .2 01 0 3 1.0 3. 20 09

Nos. Nos.

650,000 650 ,000

Date No.of S hares

2003.06.16 500 ,000

2004.11.01 150,000

650,000

14.1 Me/fort Green Teas(M) Ltd.,

As A t As At

3 1.0 3.2 01 0 3 1.0 3.2 00 9

D a te s o n w h ic h s h ar es w e r e a c qu ir e d

Principal Acnvtty

Las tAud i ted F i nanc i al S t a t ement s

M a nu fa du re a n d e x p or ti ng o f G r e en T ea

3 1 st M a r c h 2 0 1 0

T h e i nv e st m en t i n MGT PL i s a c c o un t ed f o r i n t h e f in a n ci al s ta t em e n ts u s in g E q ui ty M e th o d o f A c c o u nt in g .

1 4 . 1 . 1 Equity Value of Investment In Associates as at 31 st March 2 01 0 - Group

Figures In RupeesThousand

Eq ui ty V a lu e o f I n ve s tm e n t a s a t 3 1 s t M a r ch 2 0 0 9

Add: S h a re o f P r of it ( A f t er T a xa t io n )

15 ,769

6,867

22,636

(7.312)T h eC om p an y h a s i n ve s te d R s .l 0 0. 0M i n a n d R s .10 . 0M in i n t h e H y dr o P ow er S e c t or b y f u ll y s u bs c ri bi ng t o t h e s ta t ed

cap it a ls o f F r eeLankaPower Ho l d ings Co . ( Pv t) L t d . , and F r eeLankaPower 3 (Pv t) L t d . , r es pec ti v e ly .

Less: D i v i dends Reee iv ed

Fu rt he r, an i nv es tmen t o f R s . 5 0. 0M Inwas made i n Non - redeemab le & Non - vo t ing 6% Cumu l at iv e P r e fe r enceS ha r esa t

R s . 10/ =pe r s ha re i n F r eeLankaP l an t at i ons Co . ( Pv t) L t d . ,

Less: Ad j ustmen t f o r E f f ec t iv e Ho l d ings

E q ui ty V a lu e o f I n ve s tm e n t a s a t 3 1 s t M a rc h 2 0 1 0

15 ,324

(4 ,063)

11,261

99 10 0

F re e L a nk a C a pi ta l H o ld in gs L id - ,'MIIJI Pu b l ic O f f e r



F RE E L AN KA P LA N TA TI O N H O L DI NG S C OM P AN Y (P V T) L IM IT ED Page 39 F RE E L AN K A P L AN T AT IO N H O L DIN G S C OM P AN Y ( PV T ) L IM IT E D P a ge 4 0



14.1. 2 Summari zed fas t aud it ed f inancial s ta tement s o fMGTPL asa t 31st March '20 10 are as follows.

Figures in Rupees Thousand

14.2.2 Summarized last audited f inancial statements of HPFLPLas at 31st March '2010 are asfollows.

159,424

3,823

Figures InRupees ThousandRevenue

Other Income

163,247

(145,572)

Revenue

Cost of Sales

114,919

(25,165)Expenses

Profit/d.oss) before TaxationIncome TaxExpenses

Profit/fLoss) after Taxation

Asat 31st March 20 10

Current Assets

Non-current Assets

TotalAssets

17,675(2,909) Other Income

89,7544,452

14,766

27,120

22,399

Expenses

Profit/it .oss) before Taxation

Income TaxExpenses

Profit/(Loss)after Taxation

94,206

(18,492)

75,714

(20,811)

49,519 54,903

Current liabilities

Non-current liabilities

Total Liabilities

24,382

908

As at 31st March 2010

25,290 Current Assets

Non-current Assets

TotalAssets

33,455

540,879

574,334roup Holding % No. of Shares

14.2 Hydro Power Free Lanka (Pvt) us;As At As At

31.03.2010 31.03.2009

% %

As At As At

31.03.2010 31.03.2009

Nos. Nos.

661,501

Current liabilities

Non-current Liabilities

Total Liabilities

88,456

512

77.50% 22.50% 88,968

Dateson which shareswereacquired Date No.of Shares

31.03.2004

01.04.2005

20.12.2007

326,501

300,000

35,000

Group

15 Long-term Investments

Cost

AsAt

01.04.2009

(Rs . ' OOO )

Cost

AsAt

TranfersOut 31.03.2010

(Rs .'O OO ) (R s.'O OO )61,501

31.12.2009 56,756,786

57,418,287

15.1 Unquoted Investments

Hydro Power Free Lanka(Pvt)Ltd.,( HPFLPL) 89,710 (89,710)-----

======8=9,=71=0=====(8=9=,7=10=)========rincipal Activity

LastAudited Financial Statements

Generation of Mini Hydro Power

31st March 2010

Upto to the t ime ofconsolidation, the investment in HPFLPLsaccounted for in the f inancial statements using Equity

Method of Accoun ting.

During the year under rev iew, the company has invested Rs.100.0Min in the stated capital of Free Lanka Power

Holdings Co. (Pvt) Ltd.,which inturn hasacquired 50% of stated capital of Hydro Power FreeLanka (Pvt) Ltd., and

asa result, theeffective holding of thegroup in HPFLPLhasincreased from 27.50%to 77.50%.

14.2. 1 Equ it y Vafue o f I nvestment i nAssoc ia tes asa t 31st March 2010 -Group Group Company

16 Goodwill

As At As At

31.03.2010 31.03.2009

As At As At

31.03.2009

Figures in Rupees Thousand

89,710

27,452

(R s :O O O ) (Rs :O O O )

31.03.2010

(Rs : OOO )Equity Valueof Investrnent asat 31 stMarch2009

Add: Share of Profit (After Taxation)

(Rs . ' OOO )

101

117,162

(21,830)

Balanceasat 1stApril

Add: Goodwill on Acquisition

Balanceasat 31stMarch

516

Less: Dividends Received 516

Less: Adjustment for Effective Hold ings

EquityValueof Investment asat 31stMarch 2010

Thisrepresentsthe excessof netassetsof Hydro Power FreeLanka(Pvt) Ltd.,acquired bythe company during theyear

'un¢er reviewover theconsideration paid. Further details aredisclosed in Note 132 to the financial statements.

102




Page4JFREE LANKA PLANTATIO N HO LDINGS CO MPANY (PVT) L IM ITED FREE LANKA PLANTATIO N HO LD INGS CO MPANY (PVT ) L IM ITED Page 42

FO R TH E YEAR ENDED 31 S T MARCH 2010 FO R THE YEAR EN DED 31 S T MARCH 2010NO TES TO THE FINANCIAL STATEMENTS NO TES TO THE FINANCIAL S TATEMENTS


As At As At AsAt As At As At As At As At As At

17 Inventories 31.03.2010 31.03.2009 31.03.2010 31.03.2009 31.03.2010 31.03.2009 31.03.2010 31.03.2009

(Rso'OOO) (Rs.'OOO) (Rs.'OOO) (Rso'OOO) (Rs.'OOO) (Rs.'OOO) (Rs.'OOO) (Rso'OOO)

Input Materials 56,144 71,489 21.(b) Unfavourable Balances

Growing Crop Nurseries 25,405 22,131

Harvested Crop Bank Overdrafts 138,477 132,322

Tea 306,490 183,127 138,477 132,322

Rubber 40,532 28,655 22 Stated Capital

Coconut 1,549 397

Consuma bles and Spa res 33,910 11,225 22 (a) Ordinary Shares

464,030 317,02422 (0).1 Number of Shares

18 Trade and Other Rec:elvab l es

Balance as at 1st April 90,000 90,000

Produce Trade Receivable 152,774 105,730 Add: I ssue of Shares dur ing the Year 16,800 90,000 16,800 90,000

Withholding TaxRecoverable 688 546 Balance asat 31st Ma rch 106,800 90,000 106,800 90,000

Economi c Service Charge Recovera ble 25,578 19,B66

Dividend Receivable 4,B60 4,860 22 (0).2 Value of Shares

Other Debtors 130,915 41,556 2,625

Advance and Prepayments 60,024 87,879Balance as at 1st April 900,000 900,000

369,979 260,437 2,625 4,860Add: Issue of Shares dur ing the Year 168,000 900,000 168,000 900,000

Less: Provision for Bad debtors/LossesBalance a sat 31st Ma rch 1,068,000 900,000 1,068,000 900,000

369,979 260,437 2,625 4,860

Amoun ts Due F rom Relat ed Par ti es22 (0).3 The hol de rs o f o rd inar y s ha res a re ent it led t o r ec ei ve d iv idends as dec la red f rom t ime t o t ime and a re ent it led t o one

19vot e per s ha rea t mee ti ngs o f t he Compa ny.

Free Lanka Trading (Pv t) ttd, 78 1,014

Melfort Green Tea s (Pvt) Ltd" 56 1,347 Group Company

Free Lan kaTeas ( Pvt ) l .t d. , 8,936 6,528 As At As At As At As At

Hydro Power Free Lanka (Pv t) Ltd., 12,400 23 Revaluation Surplus 31.03.2010 31.03.2009 31.03.2010 31.03.2009

Free Lanka Power 1(Pvt l Ltd., 681 (Rs.'OOO) (Rs.'OOO) (Rs.'OOO) (Rso'OOO)

Maturate Plantat ions Ltd" 18,000 Balance as at 1st April

F ree Lan kaPower Holdings Co. (Pvt ) l.td, 5,000 Add: Surplus on Revaluation of Property,

9,070 21,289 23,681 Plant and Equipment 230,079

20 Income Tax Recoverable Balance asat 31s t March 230,079

Balance asat 1st April 2,884This represents the group share of the surplus on revaluation of Freehold Bui ld ing, Elect rica l Equipment and Penstock

Income TaxRecoverable on Acquisit ion 2,884

Less: Amoun t T rans fe rr ed t o I nc ome TaxP ipe L ines owned by Hyd ro Power F ree Lanka (Pv t) L td ., a s ubsi di ar y o f t he c ompany , whi ch was acqui red dur ing t he

Payable (2,884)year under review.

Balance asat 31s t March 2,884

24 Minority Interests

21 Cash and Cash Equivalents

The Minor it y Interes t relates to the Net Assets of Free Lanka Plantat ions Company (Pv t) Ltd., F ree Lanka Management

21.(a) Favourable Balances Company (Pv t) Ltd., Hydro Power Free Lanka (Pv t) l .t d. , which isnot represented by the Parent Company 's inves tment.

Cash in Hand 2,431 3,691

Cash in Transit 4,023 2,77B

Cash at Banks 49,500 11,151 6,150 4S

55,954 17,720 6,150 4S,I

\t(

103 104




10 6

F RE E L AN KA P LA NT AT IO N H O LD IN GS C O MP AN Y (P VT ) L IM IT ED Page 43 FR EE LA NK A P LA NTA TIO N H O LD ING S C OM PAN Y (PV T) LIM IT ED

F OR T H E Y EA R E N DE D 31 S T M AR CH 2010

N O TE S T O T HE F IN AN CIA L S TA TE ME NT S

FO R T HE Y EA R E N DE D 31 S T M AR CH 2010

N O TE S T O TH E F IN AN CIA L S T AT EM EN TS

25 Interest Bearing Borrowings

Term Loans

Net ua bllity to Lessor of JEDBfSLSPCEstates

Other Finance Leases

Lanka Orix Leasing Compa ny Co.PLC

25.(0) Amount Payab le a fter One Year

Term Loans

Net LiabUityto Lessor of JEDBISL5PCEstates


Lanka Orix Leasing Compa ny Co.PlC

25.(b} Amount Payab le within One Year

Term Loans

Net l.labUltyto Lessor of JEDBISL5PCEstates


Lanka Orlx leasing Compa ny Co.PlC

25.1 Term Loans

25.1.1 Master Summary

Balance asat 1stApri I

Loans on Acquisit i on of Subsidiary

Add: New Loans Obtained dur ing the Year

Less: Repayments during the Year

Balance asat 31st March

25.1.2 Maturity Analysis

Amount Payable after OneYear

Amount Payable w ithin One Year

25.7.3 Lender-wise Summary

Bank of Ceylon

National Development Bank

Lanka Orlx Leasin9Co.PLC- ADB

Lanka Orix l .easl ng Co.PLC-Others

lshara Traders

Sampath Bank PLC

Asia Development Bank

Hatton National BankPLC

5eylan Bank PLC

Broker's Loan

Cornmerclal Bank PLC

25.2 Net Liability to Lessor of JEDBISLSPCEstates

25.2.1 Gross LiabilityBalance asat 1st April

Balance atthe date of Acquisit ion

Less: Repayments duri ng theYear


25.2.2 Finance Charges allocated to future Periods

Balance asat 1stApril

Balance atthe date of Acquisit ion

Less: Finance Charges Written Offduring theYear


25.2.3 Net Llabllfty

105

Group

As At As At

3 1. 03 .20 10 3 1.0 3. 200 9

(Rs.'OOO) (Rs:OOO)

Note25.1 1,055,795 832,902

Note25.2 313,389 316,950

Note25.3 49,836 43,047

Note 25.4 150.000

1,419,020 1,342,899

Note 25.1.2 667,952 567,190

Note 25.2.2 309,222 312,913

Note 25.3.4 30,286 28,007

Note 25.4.2 150.000

1,007,460 1,058,110

Note 25.1.2 387,842 265,712

Note 25.2.2 4,167 4,037

Note 25.3.4 19,551 15,040

Note 25.42

411,560 284,789

832,902

832,902

574,000

1,406,902 832,902

(351,107)

1,055,795 832,902

667,952 567,190

387,842 265,712

1,055,794 832,902

116,142 140,695

42,429 54,020

88,124 178,901

73,557

242,500

150,163 154,670

105,887

34,535

192,879 50']00

113,494

150,000

1,055,794 832,902

25.3.S Lende r-wi se Summa ry

25.3. S.1Grass Liability

5ey lan Merchant Bank

DFCCBank

Hat ton Nat ional Bank

Lanka Or ix Leasing Co. PLC

Orient F inance Services Ltd.,

Merchant Bankof 5ri Lanka

25.2.4 Matur it y Ana lysi s

a ) N et Li ab il it y t o L es so r o f J EDBI SL SPC E st at es p ay abl e a ft er O ne Y ea r

Amount Payable after One Year

Less: Finance Charges allocated to future Per iods

b ) Net L ia bi li ty to Lesso r o f JEDB/5LSPC Estates payab le a ft er One Yea r



25.3 Other Finance Leases

25. 3. f Gross Liabi/ity

Balance asat 1st Apr il

Amount on Acquisi tion of Subsidiary

Add: New Leases Obtained dur ing the Year

Less; Repayments dur ing the Year

Balance asat 31s t March

25.3.2 F in an ce Cha rges a ll ocated to future Per iods

Balance asat 1st Apr il

Amount on Acquisi tion of Subsidiary

Add: OnNew Leases Obt ai ned dur ing t he Yea r

Less: F inance Cha rges Wri tt en O ff dur ing t he Yea r

Balance asat 31s t March

25.3.3 P re sent Val ue o f L ea se Credi to rs

25.3.4 Matur it y Ana lysi s

a ) L ea se Pa ya bl e a ft er O ne Y ea r



b ) L ea se Pa ya bl e a ft er W it hi n O ne Ye ar



606,317

606,317

606,317

(6.404)

606,317 25.3.S. JF in an ce Cha rges a ll ocated to futur e Per io ds

Seylan Merchant Bank

DFCCBank

Hat ton Nat ional Bank

Lanka Or ix Leasing Co. PLC

Orient F inance Services Ltd.,

Merchant Bankof 5ri Lanka

599,913 ~~---'6"'0"6,-""31::"'7:-

289,367

289,367

289,367

(2,843)286,524 ~~'"""" '= : : - : ; -

313,389

289,367

25..3 .5 .~et L iabi li ty

Page 44

Group

37,994 M,290

(7,708) (6,283)

30,286 28.007

29,853 22,385

(10,302) (7,345)

19 551 15040

16,254 22,900

2,159 378

5,398

17,79616,8377,046 11,162

24,592

67,847 56,675

(3,438) (6,286)

(116) (23)

(648)

(4,435) (3,092)

(1,808) (3,579)

(8,214)

(18,011) (13,628)

49,836 43047

As A t

31.03.201 °(Rs.'OOO)

5n,868

(263,646)

309,222

16,744

(12,5n)

4,167

56,676

36,189

92,865

(25,018)

67,847

13,628

13,196

26,824

(8,814)

18,010

49837

AsAt

31.03.2009

(Rs.'OOO)

589,573

(276,660)

312,913

16,744

(12,707)

4037

56,676

56,676

56,676

13,628

13,628

13,628

43048

F re e L a nk a C a pi ta l H o ld in gs L id - IMol Pu b l ic O f f e r F r ee L a nk a C o pi t at H o ld i ng s L t d - lm U o / {',ib/Ie Offe r



Interest rate applicable to Rescheduled Debentures isone yearweighted average Treasury Bill gross rate (before 10%withholding

tax) which prevaiIsimmediately prior to 11th November every year.



25. 4 Lank a Oril( Leasing Company Co. PLC

Balance asat 1st April

Loans on Acquisit ion of Subsidiary

Less.' Repayments dur ing the Year

Group

26 Rescheduled Debentures

As At As At

31 .0 3.2 01 0 3 1. 03 .20 09

(Rs.'OOOj (Rs.' OOO)

7,500 10,500

(3,000) (3,000)

4 , S I J I J I , S I J I J

1,500 4,500

3,000 3,000

4,500 7,500

26.1 Employees' Trust Fund Board

Balanceasat 1st April

Less: Settlement of Debentures

Balance asa131st March


Amount Payable within OneYear

26.2 Interest RateApplicable

Group

27

As At

31.03.2010

(Rs.'OOO)

As At

31.03.2009

(Rs.'OOO)

Retirement Benefit Obligations

27(0) Gratu ity

Salanceasat 1st April

Add: Amount on Acquisit ion of Subsidiary

Provision made duri ng theYear

740,829

413 740,828

490,813

1,232,055 740,828

(52,666)

1,179,389 740,828

Less: Payments Made during the Year

Sala nee asat31stMarch

10 8

F RE E L AN K A P L AN T AT IO N H O L DIN G S C OM P AN Y ( PV T ) L IM IT E Dage 45 Page 46


Group The Gratuity provision provided for employees in Hydro Power Free Lanka ( Pvt) Ltd.,amounting to Rs.511,425/""asat the year end

is in l ine with the Payment ofGratu it ies Act No.12 of 1983.s At

31.03.2010

(Rs.'OOO)

AsAt

31.03.2009

(Rs.'OOO) Hence,there isa contingent liability of Rs329,135 Min ( Previous Period- Rs.406,965Min) as f ol lows which would c rystal lize only i f

theGroup ceasestobe a90i ngconcern.

150,000 Group Company

As At A s A t As At AsAt

31.03.2010 31.03.2009 31.03.2010 31.03.2009

(Rs.'OOO) (Rs.'OOO) (Rs.'OOO)I R S . I OOO }

Free Lanka Plantat ions Compa ny (Pvt) Ltd. 255,519 297,552

Free Lanka Management Company (Pvt) Ltd., 73,616 109,413

3 2 9 ,1 3 5 2 I 1 J 5 ,9 5 5

28 Deferred Income

capital Grants Not e 28 (a) 539,290 444,632

PHDT Lease Rentil Is Note 28 (b) 8,242 8,779

547,532 453,411

28(a) Capital Grants

28 (a).1 Total Capital Grants Received

Balance asat 1st April 555,330

Total Grants Received o n Acquisition 555,331

Add: Total Grants Received during the Year/Period 109,028

Balance asat 31stMarch 664,358 555,331

28 (a).2 Total Amort isat ion

Balance as at 1st April 110,699

Total Amortization on Acquisition 110,699

Add: Amount Amort ized dur ing the Year/Period 14.369

Balance as at 31st March 125,068 110,699

28 (a).3 Total Unamort ized Capital Grants asat 31 st March 539,290 444,632

150,000

(150,000)

150,000

Company

As At As At

31 .03 .2 01 0 3 1.0 3. 200 9

(Rs.'OOOj { R S . ' O O O j

Company

As At As At

31.03.2009

(Rs.'OOO)

31.03.2010

(Rs.'OOO)

The above c apital gra nts represent the following:

Fu nd s r ece ive d fr om t he P la nt at ion Ho us ing an d Huma n De ve lo pm en t Trust (PHDn, MTIP, MPI for the

development of workers wel fare fad I It ies and improvements to ins tl tu tlona I faci li ties .

I i F unds rec ei ved f rom t he Tea Boa rd f or t he c onst ruct ion o f t he er e Tea Fac tory at Del ta Etate.

i ii F unds rec ei ved f rom t he P lant a t ion Ref orm Pro jed f or t he dev el opment o f F ores tr y P lant at f ons ,

iv Subsidia ry received f rom the Rubber Control ler Depa r tment for Rubber Repla nting.

TheGratuity liability ofthe Group as at 31stDecember'2009 isbased on the estimation carried out consequent to the wage increase

granted in October'2009 by Actuarial & Management Consultants (Pvt) Ltd.,a f irm of Professional Actuaries. Asper the actuarial

valuation, theaccrued liability asat31$IDecember'2009 forall employees isasfollows,

Group

Free Lanka Plantat ions Campa ny ( Pv t ) Ltd.,Free l.anka Management Compa ny (Pvt) Ltd.,

As At

31.03.2010

(Rs.'OOOj

374,508554.419

As At

31.03.2009

(Rs.'OOO)

366,148366.321

928927 732469

Company

As At As At31 .03 .2 01 0 3 1. 03 .20 09

(Rs.'QOOj (Rs.'OOO) The amounts spent iscapi ta lized under the relevent c lass if icat lon of Property, Plant and Equipment . The corresponding

g rant c omponent I s r e fl ec ted under Def er red I nc ome and i s bei ng amo rt iz ed ove r t he use fu l l if e s pan o f t he rel at ed

asset.

Group CompanyI f t he Group had p rovi ded f or g ra tu it y on t he bas is o f f ou rt een day s wages and hal f mon th s al ar y f or eac h c omplet ed y ea r o f

service in I inewith thePayment of Gratuit i esAct N0.12 of 1983,the Iiability would have been asfollows,

Group

FreeLanka Plantations Company ( P v t ) Ltd.

Free Lanka Management Compa ny(Pvt) Ltd.,

As At

31.03.2010

(Rs.'OOOj

630,027

628035

As At

31.03.2009

(Rs.'OOO)

663,700

475735

1 758962 1 )]9435

107

As At

31.03.2010

(Rs.'OOO)

8,779

AsAt

31.03.2009

(Rs.'OOO)

As At As At

28 (b) PHDT Lease Rentals 31.03.2010

(Rs.'OOO)

31.03.2009

(Rs.'OOO)ompany

As At ASAt

31 .03 .2 01 0 3 1.0 3. 200 9(Rs.'OOO) { R S . ' O O O }

Balance asat 1stApr il

Total Amounton Acquisi tion

Less;' Amount Amort ized dur ing the Year/Period

Balance asat31 st March

8,779

(537)-----

8,242 8,779_ _;..._

F re e L a nk a C a pi ta l H o ld il lg s L id - , 'M IOI Pu b l ic O f f e r F r ee L a ll k a C o pi t at H o ld i ll g s L t d - ln r( iO/ { ' , i b /I e Offe r





110

F RE E L AN K A P L AN T AT IO N H O L DIN G S C OM P AN Y ( PV T ) L IM IT E Dage 47 Page 48


28 (b).f Premises at 5t.Andrew 's Drive in Nuwara Eliya has been leased out to Plantat ion Human Development Trust for a per iod

of 20years commenc i ng f rom Aug ust '2oo5 ata tota I lease renta Iof Rs. l0,734,696/=.

33 Contingent l iabi li ties and Assets

Lease Rentals received are deferred and amort ized over the lease per iod commenc i ng f rom Aug ust 2005.

33.1 Company

Group

As At As At

29 Trade and O ther Payables 31.03.2010 31.03.2009

(Rs.OOO) (Rs.OOO)

Trade Payables 379,630 526,712

VA T Payable 6,375 26,985

Accrued Charges 48,513 36,402

Employees' Profit Share 25,917 18,545

Paya ble on Share Acqui sition 11,650 11,650

Other paya bles 227,175 301

Adjustments 68

699,260 620,663

30 Amounts Due To Related Parties

Name of Related Party

Free Lanka Trading Company Ltd., 11,461 3,206

Cricket CI ub Cafe 8 8

Browns Investments (Pvt) Ltd., 600

Perpetual Hold ings Co. Ltd., 600

Free Lan kaPower 3 (Pv tj Ltd.,

F ree Lan kaPlantat i ons Co. (Pv t) l td

12,669

31 Income Tax Payable

Balance asat 1s tApr il

Add: Cur rent I nc ome Tax Expense on Cur rent

Year's Profit

Income TaxPayable on Acquisit ion

7,563

37,782

10,476

Less: Tranfer f rom Income Tax Recoverable

Payments made dur ing the Year

Balance asat 31stMarch

55,821

(2,884)

(18,333)

------34,604

32 Event s a ft er t he B lanc e Sheet Dat e

3,214

7,563

7,563

7,563

Company

The company does not an ti ci pa te any c on ti ngen t l iabi l i ti es t oa r is e out o f any c ont ingent event a s at the balance sheet

date.AsAt As At

31.03.2010 31.03.2009

(Rs.OOO) (Rs. OOO)

33.2 Group

33.2.1 Contingent Liabilities

40733.2.1.1 Maturata Plantations Ltd.,

11,650 11,650 Deben tu r e i ss ued on 19t h J une 1997 t o t he v a l ue o f R s. 150M I nhave been c onve rt ed t o ordi nary sha reson 22nd June

20 02 a s s tip ul ate d i n th e a gr eeme nt. T he b as is a nd o r r ati o of co nv er si on h as b ee n co nte ste d by t he g ol de n s ha re

holder inyear 2008.12,057 11,650

33. 2. 1. 2 The Group does not ant ic ipat e any c on ti ngen t l iabi li ti es t oa r is e out o f any c on ti ngen t event as a t t he bal ance s heet

date, other tha n t hos e d i sclosed in Notes 27and 33.2.1.1 tothe f inancial s tatements.

33.2.2 Contingent Asset s

218 117

There isno contingent assetsasat the balance sheet date.

600

600

10,000

5,000

34 Unrecognized Contractual Commitments

Th er e h ave be en n o ca pi ta l commi tmen ts co nt rac te d b ut no t p ro vi ded f or , o r a ut ho ri ze d b y t he b oa rd bu t n ot

contrac ted for , outsta nding asat the balance sheet date.

16,418 117

35 Related Party Disclosures

35.1 5ubstantlal5hareholding and UltimateParent Company

779The company i s a J oi nt Ven tu re o f B rowns I nv es tmen ts (Pv t) L td ., and Perpe tual Hol di ngs Co. L td ., eac h hol ds 50%of

ord l nary sharesof the compa ny.

77935.2 KeyManagement Personnel Information

The D ir ec to rs o f t he c ompany have I nt er es t i n t he t rans ac ti ons det ai led bel ow and some d ir ec to rs hel d t he pos t o f

D i rec tors of such related compan ies dur ing the year.779

MLKAloysius , MLGAAloys ius and Mr. l.C.Nanayakkara, the direc tors of the company are also direc tors of companies as

disclosed in Note 353 below.

There have been no mater ia l events occurred between Balance Sheet date and the date on which the f inancial s tatements

are authorized for issue that requi re adjus tments toor disclosures inthe F inancial Statements.

10 9

35.3 Related Party Transactions

The company has a related par ty relat ionship w ith i ts related group companies asdisc losed hereunder . The fol lowing

tr an se ct io ns h ave b ee n ca rr ie d o ut wi th r el at ed pa rti es d ur in g th e ye ar e nd ed 3 1st Ma r ch 2 01 0 un de r no rma l

"commercial terms.

F re e L a nk a C a pi ta l H o ld il lg s L id - , 'M IOI Pub lic O ffe r F ree Lal lk a C opi ta t H o ld illg s L td - ln r( iO/ { ' , i b /I e Offe r





Page 49 F RE E L AN K A P L AN T AT IO N H O L DIN G S C OM P AN Y ( PV T ) L IM IT E D Page 50


35.3.1 Transactions with Companies Inwhkh Directors of the Company hold OtherDirectorships Group}

The Company has carried out t ransactions with ent it ies where the Chairman or a Director of the Company is the

Chairman ora Directorof suchentities asdetailedbelow,

35.3.1.1 Transactions withJoint Venturer

b}.1 FreeLanka Plantations Company (Pvt) Ltd.,( FLPCPL

b}.1.1 Receiving of Servkes

Name of Related

Companyompany did not have any transactlons with itsJoint Venturers M/s.Browns Investments (Pvt) Ltd, and M/sPerpetual

Holdings (Co)Ltd,

35.3.1.2 Transactions with Other Related Componies

a} Company

aJ.l Receiving of Services

Nome of Related Name of

Company/Entity Partner/Director

lsharaTraders(IT) Mr. l.CNanayakkara

FreeLanka Power 3 Mr.KAloys ius

(Pvt) Ltd., ( FLP3PL) Mr.GAAloysi us

Free Lanka Mr.KAloysius

Piantations Co.(Pvt) Mr.GAAloysi us

Ltd.,( FLPCPL)

a}.2 Providing of Services

Name of Related

Company Name of D irector

FreeLanka Power 1 Mr.KAloys ius

(Pvt) l.td.,(FLPlPL) Mr.GAAloysius

Maturata Plantations Mr.KAloysius

l.td, (MPL) Mr.G.A.Aloysius

Mr.l.CNanayakka ra

FreeLankaPowerHoldings Co.(Pvt)

Ltd.,( FLPHCPL)

Mr.KAloysiusMr.GAAloysius

a}.3 Obtaining Guarantees

Relationship

Partner

Director

Director

Director

Director

Relationship

Director

Director

Director

Director

Director

DirectorDirector

Name of

Director/Partner Relationship

----------------Directorusseliawa Mr.KAloysius

Piantations Ltd, (PPL)Mr.G.A.Aloysius

Mr.l.cNanayakkara

Mr.A.L.Devasurendra

Description of Transaction

Company has obta ined and se ttl ed a l oan o f

RS.105,000,OOOI= fr om I T dur ing the year . T he

interest costincurred isRs.15,652,63/=. LankaOrixLeasing

Co.PLC( LOLC)

Company has obtained an interes t f ree loan of

RS,l0,000,000/=from FLP3PLduring theyear.

Company has obtained an interes t f ree loan of

Rs,5,000,000/=from FLP3PLduring the year.


Company hasgranted an interest free advance of

Rs.681000/= to FLP1PL.

Mr.l.CNanayakkara

Company hasgranted a loan of Rs.18,000,000/=to

MPL. Interest earned during the year is

Rs.3,375,000/=.

Rainforest Ecolodge Mr.G.A.Aloysius

(Pvt) Ltd.( REPL)

Company hasgranted an interest free advance ofRs5,000,000/=to FLPHCPL.

FreeLankaTrading

Co.Ltd.,( FLTCL)

Thecompany hasobtained a"Lettersof Comfort" from FreeLankaTrading Co.Ltd, and FreeLankaPlantations Co.(Pvt)

Ltd" for Rs.75Min for loansobtained from Asian Development Bank; through Seylan Bank PLC,details of which are

disclosed in Note36.2.1b) to thefinancial statements.

Thecompany hasobtained a "Corporate Guarantee" from FreeLankaTrading Company Ltd, for loans ob~i~d Lanka'1",\.

OrexLeasing PLCdeitails of which total aredisclosed 362.1.c).

IsharaTraders( IT)

Mr.KAloysius

Mr.GAAloysi us

Mr.l.cNanayakkara

Director

Director

Director

Director

Director

Director

Director

Partner

112


FLPCPLhasearned a fixed reimbursement on MPL

veh ic le used for PPL opera ti ons amounting to

Rs.480,OOO/=Previous Year- Rs.480,000/=).

FLPCPL has paid Rs.663,s04/=, Rs.163,875/=and

Rs.3,875/=,for purchaseof Rubber Trees,GearBox

& 5undry Expense and Gratu it y Payment Rs

45,000/=, Rs5,810.64 for e-mai l charges and

Rs.25,000/=for Rubber Consulting feesraimbursed.

FLP(PL has rece iv ed Commerci al Loans o f

Rs.65,000,OOO/=uring the year.

FLPCPLhaspaid off Rs5,654,276/=( Previous Year-

Rs.25,763,828/= ) in set tlement of Commerdal

Loans & loans obtained under ADB Plantat ion

development Project through LOLC

FLPCL has i ncu rr ed an i nte re st e xpens e o f

RS.18,108,036/=( Previous Year· RS.21,129,675/=)

for loansobtained from LOLC.

FLP(PL has paid off Rs.l1,903,792/= ( excluding

Input VAT) ( Previous Year - RS.8,379,276/=)in

settlement of loansobtained under finance leasing

arrangements from LOLC

FLPCPLhasincurred Rs.6,982,775/=( Previous Year-

R s .4 , 98 8 ,5 1 9 1= ) f or t he green leaf bought f rom

REPL.

FLPCPL has received a temporary loan of

Rs.5,OOO,oOO/=reimbursement of e-mail expensesRs.4,800/=.

FLPCPLhas incurred a vehic le rent expense of

Rs.905,OOO/= Previous year - Rs.915,000/= ) for

obtaining vehicles on rent.The interest expense on

the loan for yearwas Rs.1093,549/=( PreviousYear

- 797,945/=).

FLPCPL has received loan of Rs250,000,000/=

during the first three months and paid of

Rs.7,s00,000/=Inth Isperiod from IT.




114



b).1.2 Rendering of Services

Name of Related

Company Name of Director

Rainforest Ecolodge Mr.GAAloysius

(Pvt) Ltd.( REPL)

FreeLanka Power 1

Co.(Pvt) Ltd

(FLP1CPL)

Mr.KAloyslus

Mr.GAAloysius

FreeLankaPower 2

Co.(Pvt) Ltd

(FLP2CPL)

Mr.K.Aloysius

Mr.GAAloysius

FreeLankaPower 3

Co.(Pvt) Ltd

(FLP3CPL)

Mr,KAloysius

Mr.G.A.Aloysius

Relationship

Director

Director

Director

Director

Director

Director

Director

b).2.1 Receiving of Services

b ).2 Fr eeLankaManagement Company (Pvt) Ltd.,(FLMCPL J

Name of Related


Matura Plantations Mr.KAloysius

Ltd.,(MPL) Mr.GAAloysi us

MrJ.MS.De.Mel

Mr.l.C.Nanayakkara

bJ.2.2 Rendering of Services

Name of Related


Pussellawa Mr.K.Aloysius

Plantations l.td, (PPL) Mr.GAAloysi usMr.GJAloysius

MrJ.MS.De.Mel

Matura Plantations Mr.K.Aloysius

Ltd.,(MPL) Mr.GAAloysi us

MrJ.M.5.De.Mel

Mr.l.C.Nanayakkara

Ceylon EstateTeas Mr.K.Aloysius

(Pvt) ltd., (CETPL) Mr.GJ.Aloysius

Mr.GAAloysi us

Relationship----------------

Director

Director

Director

Director


Director

DirectorDirector

Director

Director

Director

Director

Director

Director

Director

Director

/73

F RE E L AN K A P L AN T AT IO N H O L DIN G S C OM P AN Y ( PV T ) L IM IT E DageSJ PageS2


bJ.2J Purchase of Goods

Name of Related

Company Name of DirectorDescription of Transaction

Description of Transactionelationship

FLPCPLhaseamed RS.6,357,6951= (Previous Year-

R s5 ,5 60 ,5 8 4/ = ) asreimbursement of expensesmet

bythe FLPCLon behaIfof REPL.

CeylonEstateTeas Mr.KAloys ius

(Pvt) t.td, (CETPL) Mr.GJAloysius

Mr.G.A.Aloysius

Director

Director

Director

FLMCPLhasIncurred RS.482,880/=( PreviousYear-

Nil) for purchaseofTea from CETPL.

FLMCPLhasincurred Rs354A82J=-(Previous Year-FLPCLhas incurred expenditure of Rs.1575,002/=

on behalf of FLP1CPL perta ining to Hydro Power

Projects.Nil) forobtaining other servicesfrom CETPL.

b)J Pussellawa Plantations Ltd.,( PPL)

FLPCPLhas incurred expenditure of Rs.136,8591=bJ.3.1 Sale o f Goods

on behal f o f FLP2CPL per ta in ing to CompanyName of Related

Company Name of Director-------------


Description of Transactionncorporation & itsHydro Power Projects.

FLPCPLhas incurred expenditure of Rs.908,9091= Melfort GreenTeas

(Pvt) Ltd, (MGTPL)

Director

Director

PPL hasearned Rs.19,617,88QI=( Previous Year-r.KAloysius

Mr.G.A.Aloysiuson behal f o f FLP3(PL per ta in ing to Company

R s. 8A 4 6, 5 90 I= ) forsaIeofGreenLeaf to MGTPL).

incorporation & itsHydro Power Projects.

35,4 T ransactt ens wit h KeyManagement Personnel (KMP)o f t heCompany orParen t


Key management personnel are those persons having authori ty and responsibil ity for planning, directing and

control ling the act iv it ies of the company aswell as i ts related parties, directly or indirectly, inc luding any director

(whether executive or otherwise) of thecompany.

aJ Loans to DirectorsFLMCPLhas incurred Rs.85,81I1= ( Previous Year-

Noloanshave been given todirectors ofthe company and itsparent company.

R sA , 25 0 1= ) for obtaining other servicesfrom MPL.b) Compensations to KeyManagement Personnel of theCompany and its company

Noemolu mentsto thedirectors ofthe company were paid during theyea r.

Other than those disclosed above, there are no material t ransactions with the key management personnel of the

company andItsparentcompany.Description of Transaction

35.5 Amounts receivable f rom and payable to related parties are setout in Notes 19and 30 to the Finandal Statements.

Thesereceivables and payabl esareunsecuredand haveno fixed repayment terms.LMCPLhas earned Rs.115,646,0131= Inclusive of

VAT ) as management f ees ( P revi ous Yea r -RS.910 80 ,1 95 1; = ) for rendering management

servicesto PPL

36 Assets Pledged as Co lIatera Is

36.1 AssetsPledgedasCol/aterals bythe Company

FLMCPLhas earned RS.8312 56 1= ( Previous Year- Noassetshave been pledged bythe company.

R s .1 2 0, oOO I = ) for rendering other servicesto MPL.36.2 AssetsPledgedas Cotlaterots by the GroupCompanies

The fol lowing assetsof the Group have been pledged ascol laterals for overdraft fac il it ies and Loans obtained

bythe Group to the respective financialinstitution concerned.LMCPL has met an expenses of Rs.3,083,736/=

( PreviousYear-Nil) onbehalf of CETP.lli::. . . . ,

F re e L a nk a C a pi ta l H o ld il lg s L id - , 'M IOI Pub lic O ffe r F ree Lal lk a C opi ta t H o ld illg s L td -lnr(iO/ ( ib/Ie Offe r





36.2. f AssetsPledged by Maturata Plantations Limited

Nameof the

Financial Institution

a) SeylanBank PLC

b) Asian Development

Bank" through Seylan

BankPLC

cJ LankaOrix Leasing

PLC

Facility

Granted

Rs .

125,000,000

50,000,000

26,000,000

201,000,000

41,911,105

18,736,597

2,273,650

10,600,000

13,732,250

380,408

87,634,010

4,427,148

38,506,166

59,20S,S82

I S , O O O , O O O

50,000,000

167,138,896

12S,939,614

Page 53 F RE E L AN K A P L AN T AT IO N H O L DIN G S C OM P AN Y ( PV T ) L IM IT E D Page 54


SeylanMerchant Bank

d) ttd,

e) SeylanMerchant

Leasing PLC

f) DFCCBank.

g) Merchant Bankof Sri

Lanka

Lanka Or ix Leasing

h) Company Ltd.,

for Rs.50Mnover leasehold rightsof Gonapitiya Estate.i) Orient Financial

ServicesCorporation

Ltd.,

Balance

Outstanding

AsAt

31.03.20 J 0 Securities Pledged

Rs .

64,610,61 Mortgage over leasehold rights of Bramley Estatefor RS.13.0

Mn.

37,496,00( Primary Mortgage for Rs.36.0MnSecondary Mortgage bond

23,833,00(

Mortgage over leasehold rights of Alma Estatefor Rs26.0

Mn.

38,602,5S~ Mortgage over leasehold rights of estate land, bui ldings,

17,487,09;

fixed and floating assetsof RagallaEstatefor RS.74.7SMn.

2,098,6()( Mortgage over leasehold rights of estate land, bui ldings,

10,000,00(

13,034,00(

327,60

81,549,860

fixed and floating assetsofMaha UvaEstatefor RS.1950Mn.

Mortgage over leasehold rights of estate land, bui ldings,

fixed and fI oat ing assetsof Enselwatte Estate for Rs.l0225

Mn.

3,279,344 Prlmary Contin ulngmortgage bond for Rs.42.93Mn over the

unexpired leasehold rights over the land called

Anningkanda and Panilkanda Estates in Deniyaya and

Freehill Bungalow inNuwara Eliya.

26,703,51f Primary continuing mortgage bond on aI I that unexpired

leasehold rights over Land, Estate and Premises cal led

"HayesGroup" in Deniyaya/Rath napura.

59,205,S8~

14,350,911 Primary Continuing mortgage bond for Rs.42.93Mn over the

unexpired leasehold rights over the land called

Anningkanda and Panilkanda Estates in Deniyaya and

FreehiliBungalow in Nuwara Eliya.

153,539.353

175

50,000,00C Primary continuing mortgage bond on all that unexpired

leasehold rights over Land, Estateand Premisescalled and

known as"51.Leonards Estate".____ .L

3,6S0,000

17,809,119

11,488,365

19,620,000

32,704,394

8,906,000

94,177.878

549,950,784

3,386,292 Absolute ownershlp of theasseton financelease.

14,818,347 -do-

2,418,608 -do-

27,543,120 -do -

19,931,621 -do-

7 ,890,733 -do -

75,988,721

437,017,548

116

F re e L a nk a C a pi ta l H o ld il lg s L id - , 'M IOI Pu b l ic O f f e r F r ee L a ll k a C o pi t at H o ld i ll g s L t d - ln r( iO/ { ' , i b /I e Offe r




FOR TH E Y EA R E N D ED 3 1 ST MAR CH 2010NOTES TO THE F INANC IA L STATEMENTS

'"Qo~ t2"!:.-

; '"&I&I

~Q

;;

~ < 2<= !

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..;.. ,..:. . . :

'"

N

N

<: >. . . _

s'":>~

sM

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177

Page 55

o

8"-

N


FOR TH E Y EA R E N D ED 3 1 ST MAR CH 2 01 0NOTES TOTHE F INANC IA L STATEMENTS

"·10

'"N'eoEE

~'"; : : : :

'"0'" .'"Z

. . . .1 " " 1

po

1 " " 1

01oo. . . . . .;,..; a:q

4; po

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118

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Page 56

co..,'"NtoEE~co

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F r ee L a nk a C a p, ro Ia l dm g s L I d - l n il i QI P u /) ! Jc O f f e rf re e L an ka C ap i/ aJ H al di ng s L Id -IMol Pu b l iC O i f 2 1



14.4 INTERIM F IN A NC IA L S TA TEMEN TS A S A T 3 1 ST D EC EMBER 2 01 0. P ag e - 1 FREELANKA CAP ITA L HOLD INGS LTD P ag e - 2

PROVI SI ONAL F I NANCI AL STATEMENTSAS AT 3 1ST D ECEMBER , 2 0 1 0

CONSOLIDATED BALANCE SHEETGroup Company

31.12.2010 31 .12 .2009 31 .03 .2010 31 .12 .2010 31 .12 .20 09 31 .03 .20 1 o(R s:O O O ) (R s.'O O O ) (R s:O O O ) (R s:O O O ) (R s.'O O O ) (R s:O O O )

(Audited ) (Audited )

A S S E T S

Non -c u rr e n t A s s et s

Leasehold P roperty 522 ,359 537 ,505 533 ,718

P r op e rt y , P la n t a n d E q u ipm e n t 6,098,220 5 ,011,982 5 ,724,753

T i mb e r S t o ck s 6,070,334 5,761,979 5,769,166

I n ve s tm e n t i n S u b s i d ia r ie s 1,084,250 911 , 650 1,071,650

I n ve s tm e n t i n E q u i ty A c c ou n te d 16,042 12,893 11,261lnvestees

L o n g- te r m I n ve s tm e n ts 101,838

12,706,956 11,426,197 12,038,898 1,084,250 911 , 650 1,071,650

Goodw ill 10,492 516

C u rr e nt A s s et s

Invento ries 781 ,775 563 , 258 464 , 030

T r ad e a n d O t h er R e c ei va b le s 411 , 036 358 ,566 369 ,979 106,500 2,625

A m ou n ts D u e F ro m R e la te d P a rt ie s 4 {l,628 42 ,021 9,070 197,831 18,055 23 , 681

Income Tax Recove rab le 3 ,087

S hort T erm Inves tm en ts/Deposits 8 ,291

C a s h a n d C a s h E q ui v al e nt s 395 , 4 52 87246 55954 10,635 6150

1,637 ,182 1 ,054 ,178 899 , 033 197,831 135,190 32 ,456

T o ta l A s se t s 14 ,354,630 12 ,480,375 12 ,938 ,447 1,282 ,081 1,046 ,84 {) 1,104,106

E QU ITY A ND L I AB I LI T IE S

S t at ed C a pi ta l a n d R e se rv e s

S t a t ed Cap i ta l

Reva Iu a t io n Rese rve 1,068 ,000 918 ,000 1 ,068 ,000 1,068,000 918 ,000 1,068 ,000

Re tained Earnings 221 ,818 230 , 079

T o t at E q ( 1i t y a r r r i bu f a bl e to Eq(1 i ty 3,422,960 2,253,638 2,300,475 46 , 702 5,100 6 ,852

h o to e rs o f [ he C o m p an y

4,712,778 3 ,171,638 3 ,598,5 54 1 ,114,702 923 , 100 1,074,852M i no r it y I n te r e st

Tota l Equ ity 5 ,286,956 5 ,080,438 5,249,442

Non- cu rr en t L i ab il i ti es 9 ,999,734 8 ,252,076 8 ,847,996 1,114,702 923 , 100 1,074,852

I n te r es t B e a ri n g B o rr o wi n gs

Rescheduled Deben tu res 1,067 ,088 1 ,271 ,469 1 ,007 ,460

Re tirement Bene fit O b liga tions 3 ,000 1,500

D e fe r re d I n com e 1,389,673 1 ,115 ,884 1 ,179 ,389

De ferred Tax 575 ,411 515 ,473 547 ,532

Tota l n on -curren t L iabilities 25 ,576

3,057,749 2,905,826 2,735,881

Cur r ent l i ab i l it i es

T ra d e a n d O t he r P ay a bl es 794 , 228 865 , 484 699 ,260 11,875 10 9 12,057

Amoun ts Due To Related Parties 1,981 26 ,923 12,669 25 ,292 16,668 16,418

Income Tax Payable 37 ,601 8 ,557 34,604 341 4{l0 779

S hort term borrow ings 20 ,000 55,000

Bank Over d r a ft s 122,824 161 ,977 138,477 3,282

Rescheduled Deben tu res 1,500 1,500 3,000

C u r re n t P o rt io n o f I n t er es t B e ar ; n g319 ,013 258 ,032 411 ,560 126 ,589 106563

Borrowings

To t a l Cur r en t L i ab il i ti es 1 2 9 7 1 4 7 1,322 ,473 1 ,354 ,570 167379 123740 29254

Total Liabi l i ti es 4,354,896 4 ,228,299 4 ,090,451 167,379 123,74{) 29 , 254

T o ta l E q ui ty a n d L i ab i li ti e s 14,354,630 12 ,480,375 12 ,938 ,447 1,282 ,081 1,046 ,84 {) 1,104 ,106

N e t A s s et s p e r S h a re ( Rs ) 4 .41 2 .97 3.37 1.04 0.86 1.01

FREELANKA CAPI TA L HOLD INGS LTD

PROVIS IONAL F INANC IAL STATEMENTSFORTHE PERI OD FROM 1ST APRI L, 20 1 0 TO 3 1ST D ECEMBER , 2 0 1 0

CONSOLIDATED INCOME STATEMENT

Group Com panyNi n em o n t h s e n d ed 3 1 st D e c em b e r

2010 2009 Change 201O 2009 Change

(R s.'O O O ) (R s.'O O O ) % (R s.'O O O ) (R s.'O O O ) %

Revenue 4 ,7 35 ,6 26 3 ,5 77 ,3 68 32 46,347 17,631 16 3

C o s t o f S a l e s 3 ,9 30 ,2 15 3 ,4 77 ,0 01 13

GrossProf i t 805 ,4 11 100,367 (702) 4 6,34 7 17 ,631 16 3

G a in o n C h a ng e i n F a ir V a lu e o f T im b e r S t o c k s 307,414 237 ,784 29

O the r I nc ome 180,274 99,430 81

Adm i n is t ra t ion Expenses (2 04 ,4 27 ) (1 34 ,4 61 ) 52 (4 ,14 6) (6,34 3) (35 )

F i nanceCos t (113 ,594 ) (156,613) (27 ) (94 2) (10 ,5 79 ) (91 )

P r o fi t Be f o r eTax 975 ,078 146,507 (566) 4 1,25 9 709 5 ,719

I nc omeTaxExpense (53,773 ) (9,04 5) 49 5 (341) (4 00) (15 )

P r o fi t f o r t he Pe r iod 921,305 137,462 (570) 40,918 30 9 13,142

A t tr ib u ta b le t o ;

E q ui ty H o ld e rs o f t h e C om pa n y 390,521 44 ,600 40,918 30 9

M i no ri t y I n t er es t 530,784 92,862

921,305 137,462 40,918 30 9

Ea r n ingspe r Sha r e (Rs ) 0.366 0,042 0 .038 0 ,000

D i v idends pe r Sha r e (R s ) 0.001 0.001 0 .001 0 ,001

N o te : T h e a b ov e f ig u r es a r e p ro vi s io n a I a n d s u b je ct t o a u d i t

\" •Th\b""9"'' '' P " " " " O O ' andsubjec toaudit.

Ch ~a nc e O ffice r

T h e B o ar d o f D ir ec to rs i s r e sp o ns ib le f or t he p re p ar at io n a n d p re s en ta ti on o f

t h es e F i na n c ia l S t a tem e n ts .

5i fo r a nd on b eh alf o f th e B oa rd b y,

Colombo

0 8 th F eb ru a ry , 2 0 11

Dire

11 9

Colombo

0 8 th F e br ua ry , 2 0 11

120



f r ee L a nk a C a pi / aJ H o Jd i ng s L I d - I M lo J P u b li c O i f2 1 f re e L a nk a C a p , ( Q J H o Jd ln g s L I d - J I l i l i Q J Pu /) !J c O f f e r



FREELANKA CAPITALHOLDINGSLTD

INTERIM REPORT FORTHE PERIOD 01ST APRIL, 2010TO 31ST DECEMBER, 2010

FREELANKA CAPITAL HOLDINGS LTDag e-S P age - 6

CONSOLIDATEDCASHFLOWSTATEMENT

PROVISIONALFINANCIALSTATEMENTSFORTHEPERIODFROM 1STAPRIL,2010 TO31STDECEMBER,2010

CashFlows from Operating ActivitiesProfit/floss) before taxAdjustments for:

Provisionfor Retiring GratuityDepreciation on Property, Plantand EquipmentAmmortization of Deferred Income

Gain on Changein FairValue ofTimber StocksShareof Profit of JointVenture/AssociatesCapital Grants AmortizedFinanceCostInterest IncomeAdjustments to PPE

Gain on Disposal of Property,Piant& Equipment

Operating Profit BeforeWorking Capital Change

(lncrease)/decrease in Inventories(lncrease)/ Decreasein Tradeand Other Receivables(lncrease)/Decrease in Related Party ReceivablesIncrease/(Decrease) inTrade and Other PayablesIncrease/(Decrease) in Related Party Payables

CashGenerated From Operations

Income TaxlESCJSRLPaidRetiring Gratuity Paid

Interest Paid

NetCashFlows From Operating Activities

CashFlows FromInvesting ActivitiesAcquisition/Investments in SubsidiariesInvestments in ShortTerm DepositsPurchase & Construction of Property, Plant& Eqp.Capital Grants Received

Interest Income ReceivedProceedsfrom Saleof Property, Plant& EquipmentDividend Income

Net CashFlows From Investing Activities

CashFlows FromFinancing ActivitiesLeaseRentals PaidShortTerm LoansReceived/PaidIssueof Ordinary/Preference Shares

CashPaidfor ShareAdvancesTerm& Other LoansRepaidTerm& Other LoansReceivedDividends Paid

Net CashFlowsFrom Financing Activities

Net IncreaseJ(Decrease)in Cash& CashEquivalentsCash & CashEquiva tents atbeginni ngof the Year

Cash& Cash Equivalents at Endof the Period (Note A)

Note A:Analysis of Cash& CashEquivalents at Endof the PeriodCashin Hand & Bank

BankOverdrafts

Note .The above figures areprovisional andsubject to audit.

Colombo08thFebruary,ze n

PROVISIONAL FINANCIAL STATEMENTSGroup Company EXPLANATORY NOTESTO THE FINANCIAL STATEMENTS

2010 2009 2010 2009

(Rs.'OOO) (Rs.'OOO) (Rs.'OOO) (Rs.'OOO)

975,078 146,507 41,259 709 1 . ACCOUNT ING POLICIES

The Inter im F inancial S ta tements have been prepared inaccordance w it h t he account ing pol ic ies set out i n t he

283,665 406,553aud i ted account s f or t he year ended 31s t March 2010.

194,166 160,0462. COMPARATIVE INFORMATION

(307,414) (237,784) The previous year' s f igures and phrases have been re-ar ranged wherever necessary to conform to the cur rent(8,042) (39,206) period's presentationJc lassification.(15,348) (10,877)146,890 219,064 942 10579

3. CHANGE OF COMPANY'S NAME(552)

(5,139) (1,826) The Company 's name was changed f rom "Free Lanka P lantat ion Holdings Co. (Pv t) L td" t o "Free Lanka Capit al

(26,798) 12 Holdings (Pv t) L td" e ff ec ti ve f rom 30th Augus t 2010. The Company was subsequentl y convert ed int o a Publi c

1,236,506 642,489 42,201 11,288 limited liabi li ty Company on 31st J anuar y 2011 unde r sect ion 11(1) o f the Compani es A ct No . 7 o f 2007.

(280,192) (246,234) Accordingly Free Lanka Capital Holdings (Pvt) Limited wil l be changing i ts name to FreeLanka Capital Holdings

(74,884) (116,586) 2,625 (101,640) Limited.(22,297) (44,898) (174,150) (18,055)154,543 56,286 (182) 16,551 4 . TIMBER STOCKS(11,630) 274,362 8,874 (9,979)

The T imber S tocks of two subsidiar ies namely Maturata P lantat ions l td and Pusse ll awa P lantat ions Ltd were1,002,046 565,419 (120,632) (101,835)

valued asat 31st Decem ber, 201° byMr.K T DTissa ra. ani ndependent Char tered VaIuat i on Surveyor on a t ree

basis . T he ga in on c hange i n f air va lue o f T imber St ocks dur ing t he i nte rim per iod amoun ti ng t o Rs. 307 .41(49,394) (5,424) (779)

mil lion has been recognized in the Income Statement .(73,379) (31,497)(137,371) (173,189) (942) (10,579)

741,902 355,309 (122,353) (112,414) 5. CONTINGENT LIABILITIES

There has been no s igni fi cant change in the nature of t he contingent l iabi li ti es o ther t han those d is closed in

(73,483) (12,600)the audited f nanc ia I s ta tements f or t he year ended 31st March 2010.

(179,822)Thes ta tus quo of t he Convers io n of Redeema ble Debentu res in Matura ta P iantations Limited descri bed under(663,417) (447,732)

43,228 72,604 the "Emphasis o f Mat ters " i n t he Aud i to rs Repor t f or t he year ended 31st March 201 ° is remaining unchanged.552

164,0596. EVENTS AFTERTHE BALANCE SHEETDATE

5,850 29,142There have been no other event s subsequent t o t he Balance Sheet date which requi re d is closure in t he Inter im

(703,033) (345,986) (12,600)Financial Statements other than those stated below;

(47,118) (74,442) Trans fer o f Ord inary Shares of t he Free Lanka Capit al Holdings (Pv t) L td(35,000) (31,416)

The one O rd inar y Shares eac h hel d by Mr . K Aloysius & Mr. G A A loys ius have been t rans ferred to Perpetual355,804 18,000 18,000

(2,809) Holdings limited.

(141,824) (122,248)241,589 263,525 126,589 105,000 The two share holders namely Browns Investments (Pvt) Ltd and Perpetual Holdings Limited have transferred(57,269) (20,061) (1,068)

37,380,000 shares each to Free Lanka Capit al (Pv t) L im it ed on 14th October 2010. Free Lanka Capit al (Pv t) l td"U6,182 30,5.49 125,521 m,ooo

holds 70% of i ssued Ord inary Shares of t he Company subsequent t o t he t rans fer.

355,051 39,872 (9,432) 10,586(82,523) (114,602) 6,150 48 Sub D iv is ion of Shares in Free Lanka Capit al Holdings (Pv t) L td272,528 (74,730) (3,282) 10,634 The issued shares asat 30th September 2010 have been sub d iv ided on the bas is o f 10shares per 01ex is ti ng

Ordinary Share.

395,052(122,524)

87,247(161,977)

10,634 IPO of Hydro Power Free Lanka PLC

The Sub Subsidiary o f FLCH had an ini ti al pub li c i ssue of 35,0000,000 Ord inary Shares at Rs.10/- each in Octo-

ber 2010 which was over subscribed f if ty seven t imes. The Group's effective stake in the company has declined

to 52.70% f rom a previous holding of 77.50%

(3,282)

272,528 (74,730) (3,282) 10,634

123 124

f r ee L a nk a C a pi /a J H o Jd in g s L I d -IMo! Publ ic O if21 fre e L anka C apito! HoJd lng s L Id - !IliliQ! Pu /) !J cOf fe r



7. DIVIDENDS P a q e -?

The Company has paid a D iv idend of Rs.=/01 per Ord inary Share total ing to Rs. 1.07 mil lion during the Interim

financial period.

8. INVESTMENTS IN SUBSIDIARIES

Du ri ng t he In te rim F inanci al per iod the Company has in vest ed i n the Ordi na ry Shares o f fo ll owi ng St ar t up

Subsid iaries:

Name of Subsidiary No. of Ordinary Shares Holding%

The Tea Leaf Resort Holdings (Pvt) Ltd

Free Lanka Power 2 (Pvt) Ltd

Free Lanka Capital Propert ies (Pvt) Ltd

2S0,000

10,000,000

10,000

SO.OO%

100.00%

100.00%

Convers ion of Shares in Subsidiaries

In September 2010, 86,552,838 nos . o f P re ference Shares held by the Company in Free Lanka P lantat ions Co.

(Pv t) L td a subsidiary, was convert ed int o Ord inary Shares on the bas is o f 01 Ordinary Share for 01 Preference

Share. Consequently, the share holding percentage of the Company in Free Lanka Plantat ions Co. (Pvt) Ltd has

increased from 55% to 95.34%.

Asaresu lt , anamount o f Rs.740.87 Mn represent ing the dec li ne in t he holding percentage of minor it y i nt eres t

has been transferred to consolidated revenue reserve from minority interest.

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F r ee L a nk a C a p, ro Ia l dl n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap i/ al H al di ng s L Id -IMol Pub l ic o n e .



ANNEXURE A 3. Eligible Applicants

Applications are inv ited from the fol lowing categories of applicants:

P R O CE D UR E F O R A P PL IC A TI O N

1. The Prospec tus and Appli ca ti on Form

C it izens of S ri Lanka who are res ident in S ri Lanka and are above 18years of age.

Companies, Corporations, Societies and other corporate bodies incorporated or established within Sri Lanka.

Approved provident funds, Trust Funds and approved contributory pension schemes regis tered I

incorporated I established in Sri Lanka.

Citizens of SriLanka resident 0uts ide Sri Lankaand areabove 18yearsof age.

Corporate bodies incorporated or established outside Sri Lanka.

Foreign c it izens above 18years of age (Irrespective of whether they are res ident in Sri Lanka or overseas).

G l obaI ,Reg ionaIand Country f unds approved by the SEC.

Appli ca ti ons mus t be made on Appli ca ti on Forms , which accompany and const it ut e a par t o f t h is P rospec tus.

App li ca ti ons are permi tt ed on exact s ize photocopies of t he Appli ca ti on Form issued w it h t he Prospec tus.

App li cant s using photocopies are requested to inspect t he Prospec tus, which i sava il ab le f or i nspect ion and

a lso i ssued f ree of charge by the par ti es l is ted under "Annexure C - Col lect ion Points"

Care mus t betaken to fol low the ins truc ti ons on the reverse of t he Appli ca ti on Form. App li ca ti ons that do not

strictly conform to such instructions and other conditions set out below or which are illegible may be

rejected.

App li ca ti ons by Companies , Corpora ti ons, Soc ie ti es and other corpora te bod ies, approved Provident Funds ,

Trust Funds and approved contributory Pension Schemes regis tered / incorporated I established in Sri Lanka

should be made under t he ir common sea lor i n any other manner asprovided by the ir A rt ic les of Assoc ia ti on

or such other const it ut iona l documents of such app li cant s or asper t he s ta tu tes governing them. In the case

of approved Provident Funds , T rust Funds and approved Contr ibutory Pension Schemes , t he app li ca ti ons

shoul d be in the name o f t he T rustees I Board o f Management i n o rder t o f ac il ita te t he opening o f the CDS

accounts.

Please note that upon the allotment of shares under this offer, THE ALLOTTED SHARES WOULD BE

CREDITED TOTHE APPLICANT'S CDS ACCOUNT and NO SHARE CERTIFiCATES WILL BE ISSUED. You may

open a CDS account, through anyone of the Members and Trading Members of the CSE as set out in

Annex u re Co r t h r oug hany one o f t he Custod i an Banks as se t out i nA nnexu re E.

4. Ident if icat ion Inform ation

Appl ic an ts have the opt io n o f havi ng t he ir shar es 'I ocked'* i n t he CDS. Sha res that a re l oc ked* wou ld not

be av a i la b l e f or t rad i ng pu rposes and wou Id not be v i si b le t o t he part ic ipant. Such appl ica nts wou t d have

to fi ll in a sepa ra te secti on i n t he IPO Appl ica ti on Form fo r t his pur pose . I f t he appl icant has not spec if ie d

that h is /her shares need to be deposi ted t o h is/her ' Io ck ed '* bal ance , pl ease note t ha t t he sa id s ha res

would be depos it ed to app li cant 's ' trad ing' balance.

A Sri Lankan c it izen mus t s ta te h is I her N IC number in t he Appli ca ti on Form. I n t he caseof corpora te ent it ies,

the Com pany Regi stratton Number mus t beg iven. A fore ig n c it iz en mus t s ta te h is / her Passpor t number in t he

space provi ded. A Sri Lankan c it izen cans tate the Passpor t number only when the N lCnumber i snot ava i l able.

The NIC number o r Passpor t number s hou ld be i n l in e wi th t he NIC o r Pas spor t number s gi ven in the CDSaccount of the applicant .

* D ef in it io n a n d o p e ra ti on of a l o ck e d b a la n c e in t he C D S .

I n o r de r t o p r es e rv e t he c o nf id e n ti al it y of s ha re ho ld e r i nf or m at io n a n d to e n su re th e s ec ur it ie s a re n o t m a de

a va ila ble fo r tr ad in g fo r th os e s ha re ho ld er s w ho d o n ot w an t to tra de th e s ec ur it ie s th e C DS w ou ld p ro vid e a

m e c ha n is m w h e re s e cu ri ti e s c a n b e 'lockedin t h e CD S a c c o u n t .

P l ea s e n o t e t ha t u p o n a ll o tm e n t o f s h ar e s u n d e r t hi s o ff e r, T H E A L L O T TE D S H A R E SW O U L D B E C R E D IT E D T O T H E

f l .e eL / _C~ f o [ f5 ~CQSA (CO _U f o [ [a nd { YD_SHA8ECERT IE LCATESWI LLBE JSS UED.. Y o u m a y o p e n a CDSoc c oun t t h r ough

anyone of th e N ll ). 'm b er s a nd T ra di ng M e m be rs o f t he C S f a s s et o u t i n A n ne xu re C o r th ro ug h a ny on e o f th e

C u s to d ia n b a nk s a s s e t o u t i n A n n e x ur e E.

T he C D S w o ul d m a in r ai n t wo b al an ce s f or e a ch C D S a cc ou n t, n a me ly a tr ad in g b al an ce a n d a lo c ke d b al an ce . T he

tr ad in g b al an ce w o ul d b e v i si bl e t o t he C D S pa rti ci pa n t a n d a ll d e al in g s a n d tr ad in g w o ul d b e p e rm it te d o n th e s a id

t ra d in g b a la n c e, a s d o n e p re s e nt ly .

In the event t he name o raddress o f t he Appl icant menti oned i n t he Appl ica ti on Form d iff er f rom the name o r

address asper CDSrecords, the name and address asper the CDS records shaI Ipreva i I a nd becons idered as the

name and address of such Appli cant . There fore Appli cant s are adv ised to ensure that t he name and address

mentioned in the Appli ca ti on Form taIl yw it h t he name and add ressg iven in t he CDS Accountasmentioned in

the Application Form.

A s o p p os e d to t he t ra d in g b a la n c e, t he l oc k ed b a la n ce w i ll not be v i s i b le to th e C D S p a rti ci pa n t a n d a ll d e al in g s o n

s uc h l oc ke d b al an ce w o ul d b e s us p en d ed t he re by m a in ta in in g c on fi de n ti ali ty of th e in fo rm atio n a nd a ls o

s a fe g ua rd in g t he a cc ou n t h ol de r f ro m a n u n au th or iz ed s al e b y a b ro ke r.

5. Joint Applications and Multiple Applications

A t t he o p ti on a n d r e qu e st of t h e a c c o u n t h ol de r th e C D S w ou ld t ra n sf er a n a m e d q u an ti ty o f s h ar es f ro m t he l oc ke d

b al an ce t o t h e tr ad in g b al an ce o f a C D S a cc ou n t a n d! o r f ro m t he tr ad in g b al an ce t o t h e l o ck ed b al an ce .

2. Number of Shares Applied

Jo in t Appl ica ti on Forms a re permi tt ed onl y fo r nat ur al per sons not e xceed ing t hr ee app li cants . J oi nt

App li cant s should note that a ll par ti es should e it her be res idents of S ri Lanka or non-res idents , An app li cant o f

a jo in t app li ca ti on shal l n ot appl y th rough a sepa ra te app li ca ti on e it he r i ndi vi duall y o r j oin tly. On ly one

app li ca ti on w il l beaccepted on behal f o f a person.

App li ca ti ons should be made fo r a min imum of two thousand (2,000) shares and app li ca ti ons exceeding the

min imum shoul d be in mul ti p iesof 1 ,000 shares.Appl i ca ti ons for l ess tha n 2,000 sharesar f or a number ,wh ich

i snot i nmult ip les of 1 ,000 w il l bere jected.

127 128

F r ee L a nk a C a p, ro Ia l dl n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap i/ al H al di ng s L Id -IMol Pu b l ic O i f 2 1

Multiple Applications will be rejected. If anapplicant hasapplied under more than oneApplication Form it will Applications could also be handed over to the Managers to the Offering, the branches of the Bankersto the



be const rued as mul ti ple app li ca ti ons. An appli cant o f a joint App li ca ti on , app ly ing through another

Appli ca ti on Form is a lso deemed to have made mul ti ple app li ca ti ons. An appli cant who has made an

Application under a margin trading account should not apply individually orjointly on aseparate Application

Form.SuchApplications will also beconstrued asmultiple Applications.

Offering and CSEMember Firmsas set out in"Annexure C- Col lect ion Points': All applicat ions handed over

should reach t he o ff ic e o f t he Regi st ra rs t o t he Of fe ring bef ore 4 .30pm on t he dat e o f c lo su re o f t he

Offering.

The Company reserves the r ight to rejec t a ll mul ti ple app li ca ti ons or suspected mul ti ple app li ca ti ons.

App li ca ti ons wil l a lso not beaccepted f rom ind iv idua ls under the age of 18years,or in the names of sole

proprietorships, partnerships and unincorporated or non-corporate bodies.

Applications received from Seylan Bank branches in Jaf fna, Vavunyia, Trincomalee, Batt icaloa & Ampara

shouId reach the off ice of the Registrarsto the Offeri ng before 12.00pm0nthe day after the cI osureof the

offering.

6 . Applkat lons made under Power of Attorney (POA)

Applications sent by post should reach the off ice of the Registrarsto the Offering at least by4:30p.m. on the

succeeding market day immediately upon the closureof the Subscription list. Anyapplications received after

the saiddurat ion wil l berejected eventhough they carrya postmark dated prior to theclosing date.

The Application Forms may be signed by a person on behalf of the applicant(s) provided that such person

holds the Power of Attorney (POA)of theApplicant(s). Acopy of such POA,cert if ied bya Notary Publicshould

accompany t he app li ca tion and shou ld be lodged w it h t he Reg is trar s t o t he Of fe ri ng a long w it h t he

Application Form.The original POAshould not beattached.

M O DE O F P AY ME NT

7. Direct Lodgment inthe CDS.

1. Payment shouIdbe made separately in respect of eachappl icat ion bywayof a cheque,bankdraf tor bank

guarantee. Remittances on Applications will bedeposited ina separate bank account in the name of "Free

Lanka Capital Holdings Limited - Ini tial Public Offering"

In order to lodge the sharesa ll ot ted d irec tl y to the Appli cant 's account maintained with the CDS,he/she

should sta te the CDSaccount number correct ly in the space provided in the Appli ca ti on Form. In such a

situation the sharesaIlotted to him/he r wiIIbe directiydeposited to his/her CDSaccount.Directlodgment with

t he CDS wi ll t ake p la ce w it hin a per iod o f e ight een (18 ) marke t days f rom t he dat e o f c lo su re o f t he

Subscript ion Listand wil l be not i fied bydispatch of Let tersof Direct Lodgment within two (2) market daysof

credi ting the CDSaccounts. Application Forms stat ing third party CDSaccount numbers, instead of their

own CDSaccount numbers, except inthe caseof Margin Trading Accounts, wil l be rejected.

2. Cashwil l not beaccepted. Anyone wishing to pay cashshould obtain a bankdraft f rom any Commercial

Bankin SriLanka.

3. ResidentSriLankan Applicants should subscribe to the issuein one of thefol lowing ways:

8. Margin Trading

aJ Cheques or Bank Drafts

• Chequesor BankDraf tsshould bedrawn onanycommercial bankin SriLankaandcrossed"Account

Payee0nIy" andmadepayable to "FreeLanka CapitaI Holdings Limited - Init ia IPublic Offeri ng"

• Payments for app li ca ti ons for values less than Sri Lankan Rupees One Hundred Mil li on (Rs.

100,000,0001-) should beby way of a Chequeor BankDraft . Cheques and bank dra ft s w il l not be

accepted for values above and inclusive of RupeesOne Hundred Mil lion (Rs.100,000,0001-).

• I n the event that cheques are not rea li zed within three (3)market daysf rom the day of present ing

the sameto the bank for c lear ing, the cheque wil l bere turned and no allotment o f shareswil l be

made to the investors.

• I nves to rs res id ing in out st at ion a reas f rom whi ch cheque c learance may t ake ove r two (02 )

Market Daysare advised to make payment via bank drafts to avoid any delays.

• Cheques must be honored on f irst presentat ion for the app li ca ti on to be val id . App li ca ti ons

supported bycheques which arenot honored onthe f irst presentat ion wil l be rejected.

App li cants who wish to app ly through the ir Margin Trading Account should submi t the app li ca ti on in the

name of the"Margin ProviderlAppl icants Name" signed by the margin provider. I f the applicant wants the

sharesto be uploaded to the CDSMargin Trading Account, the relevant CDSAccount number relat ing to the

Margin Trading Account should beindicated inthe spaceprovided inthe Application Form.

The NIC,passport or company reg is trat ion number of the app li cant asthe casemay be, must bestated In

the Application Form.

Acopy ofthe Margin Trading Agreement must besubmit ted along with theapplicat ion.

Margin Providers can apply under i ts own name and such appli ca ti ons wil l not be const rued asmult ip le

appiications.

Registrarsto the Offering

SSPCorporate Services(Pvt) Ltd

No.101,Inner Flower Road,

Colombo 03.

b) Bank Guarantees

• BankGuarantees should bein aform acceptable to the Company and theRegistrarstothe issueand

should beissued bya LicensedCommercial Bankin SriLankapayable on demand unconditionally to

"Free Lanka Capital Holdings L im ited - Ini ti al Pub li c Offer ing' : The Bank Guarantees wil l be

presented to the respective Banksonly after the shareshavebeen allotted 1allocated.• Payment for App ll ca tl ons for values above and Inc lusi ve of Rupees One Hundred Mil li on (Rs.

100,000,0001-) should only be supported bya bank guarantee.

• App li cants are adv ised to ensure that suf fi cien t funds are ava il ab le inorder to honour the Bank

Guaranteesinclusiveof charges,when caIIedupon to do so.It isadvisablethat theapplicants discuss

with their respective bankers, all matters concerning the issuance of Bank Guarantees and all

charges involved.

9 . Submission of Applications

TheApplication Form properly filled inaccordance with the instructions thereof, together with the remittance

(cheque, bank draft or guarantee) for the full amount payable on applicat ion should beenclosed ina sealed

envelope marked "Free Lanka Capital Holdings L im ited - Ini ti al Pub li c Offer ing" and be addressed and

dispatched bypostor del ivered byhandto the "Registrarsto the Offering"at the following address:

129 13 0


4. EachAppl icat ion Form should be accompanied by not more than one Cheque, Bank Draft or Bank b) Resident Guest Foreign Currency Account (RGFCA)



Guarantee forthe aggregateamount payable.Applications with two or more cheques,BankDraftsor Bank

Guaranteeswill be rejected at the outset.

5. The amount payable should becalculated by multiplying the number of Sharesapplied for, bythe share

Offer Price. I f there isdiscrepancy inthe amount payable and the amount speci fied inthe cheque, bank

draft or bankguarantees, the application wil l berejected, and thecheque or bankdraft wil l not besent for

c lear ing and sha ll be ret urned v ia o rd inary pos t a t t he r is ko f t he app li cant , o r in t he caseo f jo in t

applicants, to the first named applicant.

Inaddit ion to the payments madethough SIAand FCBUmentioned above,a foreign cit izen resident in

SriLankaunder the Resident Guest Schememay invest through the Resident Guest Foreign Currency

Account (RGFCA)maintained with any Commercial Bank in SriLanka. An investor who wishes to avail

h im / hersel f o f t hi s f ac ili ty should make t he payment f or sha res t hrough a bank d ra ft o r a bank

guarantee against the funds inthe RGFCAand made payableto "Free LankaCapItaIHoIdings - InitiaI

Public Offering"

6. Al l cheques / bank d ra ft s o r bank gua rant ees received i n respect o f App li ca ti ons wi ll be banked

immediately after the closureof the Subscription l. ist , in terms of the CSElisting rules.TheCompany shall

endeavour to make allotment w ithin seven (7) market days f rom the c losure of the Offer ing. Thesea llotments w il l be made in a fai r manner. The Company does not intend to make any pre ferent ia l

allotments. (ReferSection 5.6)

c)RupeeAccounts for Non - Resident Sri Lankan Investment (RANS!)

Non-res ident Sri Lankans can remit money for investment purposes through Rupee Accounts for

Non-Resident SriLankan Investment (RANSI)maintained with authorized dealers.

• SriLankanci t izens who havelef t the country to take upemployment businessor a profession and

continue to resideabroad and those cit izens of SriLankawho havemade their permanent place of

abode outside SriLankaare eligible to operate a RANSIwith authorized dealers.

Remit tances bynon - resident SriLankan inconnect ion with this shareApplication Formmust be

made via bank dra ft s purchased out o f funds in the RANSI . (There are no exchange control

restrict ions on remit tance of funds that may beavailable inthe RANSI)

Where a RANSIho lder i sa l so a holder o f a Non - Res ident Foreign Currency (NRFC)account,

movement of funds between aRANSIanda NRFCaccount of theaccount hoider isfreely permitted,

solong asthe account holder cont inues to resideabroad and does not ceaseto bea cit izen of Sri

Lanka.Therefore, Funds in the NRFCaccount could be transferred to a RANSIthrough which

investment in sharescould bemade.

•

FORE IGN CURRENCY REM ITTANCE •

Thissect ion isappl icab le to the c it izens of Sri Lanka who are above 18 years of age who are resident overseas,

corporate bodies incorporated or established outside SriLanka,Foreigncitizens above 18 yearsof age(irrespective of

whether they areresident inSri Lankaor overseas)andregional or country funds approved by the Ministry of Finance

/ Securities Exchange Commission (SEC)of SriLanka.

Applications inrespect of such Applicants should bemade inconformity with the requisite declarations accompanied

bythe documentat ion st ipulated bythe control ler of Exchangeof SriLanka.

2. Cheques,bankdrafts or bank guarantees should beendorsed bythe issuing custodian bank, to the effect

that, such payments hasbeen made against funds available inthe individual's SIA,FCBUor RGFCAaccount.

Theendorsement must be cI early indicated on thecheque,bank draft or the bankguarantee.Alternatively,

a document detail ing the endorsement could besubmitted along with the payment and applicat ion.Such app li cant s should make the ir payment s I none of the fof /owing ways:

3. Bankdraf tsdrawn ona RANSIaccount should alsobe endorsed inl inewith the above.a) Securit ies Investment Account (SIA)

ForeignInvestorsand NonResidentSri Lankans mayinvest through a Securities Investment Account (SIA)

maintained with anyLicensedCommercial Bankin SriLanka.

4. Applicat ions supported by foreign currency remittances should be made in conformity with requisite

declarations accompanied by the documentation stipulated bythe Controller of Exchange.

• Aforeign investor mayusethe service of acustodian bank asan intermediary when investing inthe

SriLankan securities market.

The intermediary may open a SIAon the investor's behalf. In conjunct ion with a SIA,anaccount

must beopened with theCDS.

Payment for sharesshould bemade through bank dra ft s purchased out o f funds in the SIAand

made payable to "Free Lanka Capital Holdings Limited -Jnlttal Public Offering"

I n respect of g loba l, r eg iona l o r count ry f unds in vest ing f or t he f ir st t ime in S ri Lanka , t he

intermediary will facilitate the approval processregulated bythe SEC.

5. Restr ictions Applicable to Foreign Cit izens Resident in Sri Lanka.

Foreign citizens resident in SriLanka maymake payments through SriLankaRupee Accounts only if they

possessduel cit izenship with SriLanka. Foreign cit izens having Sri Lankan cit izenships should attach a

certified copy of the citizenship certificate with the Application Form.•

•

•

Foreign cit izens residing in Sri Lanka having valid residency visas should note that they cannot make

remittances viacheques or bank drafts or bank guarantees drawn on SriLanka RupeeAccounts held in Sri

Lanka but may do soviaSIA/ FCBU/ RGFCAaccount asdetai led inthe above section of ForeignCurrency

Remittance. Applications made by foreign citizens not inaccordance to the foregoing shall berejected.

a) Foreign Currency Banking Units (FCBU)

A foreign investor may also invest through Inward remit tances of foreign currency held in a Foreign

Currency Banking Unit (FCBU)accountof the applicant maintainedwith anyLicensedCommercial8ankin SriLanka.

• Theappl icant should forward his/her Application Formsupported bya bankguarantee [ if the value

isSriLankan RupeesOne Hundred Mil lion (Rs,100,000,000) or above] drawn on the applicant 's

FCBUaccount inl ieuof draft or cheque pending allotment of shares.

• Upon allotment of shares,payment for thesharesallot ted would becalled on the BankGuarantee.

Foreign currency to the extent of the Sri Lankan Rupee equivalent value of the sharesal lot ted

should then becredi ted to a SIAopened infavour of the applicant via the aforement ioned FCBU

Account and payment forsuchsharesshould bemade through thefunds inthe SIA.

• T hi s p r oc ed ur e w ou ld p ro te ct a p ro sp ec ti ve i nv es to r f ro m a ny l os se s ac cr ui ng d ue t o fluct~ating

REJECTION OF APPLICATIONS

1. Application Formsand the accompanying Cheques, Bank drafts or BankGuarantees,which areillegible orincomplete in any way and/or are not inaccordance with the terms and conditions of this Prospectus or

the ins truc ti ons on the reverse of the Appli ca ti on Form, w il l be rejec ted at the sole d iscret ion of the

Company, and the cheque, bank draf t or bank guarantee received in respect of the Application wil l be

returned viaordinarypost atthe riskof the applicant.In the caseofjoi nt appiicants,appIication monieswiII

be returned to first named applicant.

exchange rates.

2. Wherethe Applicat ion Formisaccepted and thecheque, bankdraft or bankguarantee isnot honoured at

the firstpresentation, the Appl ication wiIIbe rejected andthe cheque, bankdraft or bankguarantee wiIIbe

returned viaordinarypost at the riskof the applicant.l nthe caseofjoint applicants,appIicationmonies wiII

b- e returned to the first named applicant.

131 132

F r ee L a nk a C a p it o ! H o ld i ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H o ld in gs L Id -IMol Pu b l ic O i f 2 1

Applicat ions with two or more Cheques, Bank Drafts or BankGuarantees wil l be rejected. Application Applicant 's have the opt ion of hav ing t he ir shares t ocked" i n t he COS.Shares t ha t a re locked wou ld not be



133

forms accompanied by cashwill not be accepted. available for t rading purposes and would not bevisible to the participant . Such applicants would have to f il l in

a separate section in the IPOAppl icat ion Form for this purpose. I f the applicant has not speci fied that his/her

shares need to be deposited to his/her 'locked" balance, please note that the said shares would bedeposi ted to

applicant's 'trading' balance.

3. Applications delivered by hand to the off ice of the Registrarsto the issueor to thecol lect ion points l isted

in Annexure Cafter the Subscription Listis closed will be rejected. Applications received bypost after 4:30

p.m. on the succeeding market day immediately following the date of closure of the Offering, wil l alsobe

rejected evenif they carrya postmark dated prior to the closing date of the Offering. Refunds

4. Appl icat ionsfor lessthan2,000Sharesor for anumber,which isnot inmulti piesof 1,000wiI Ibe rejected. Where an application isaccepted only in part , the balance of the application money wil l be refunded.

Wherean Applicat ion isrejected infull , the application money wil l berefunded intotal . All refunds wil l be

made by crossed cheques and sent by ordinary post at the riskof the applicant , before the expiry of ten

(10)market daysf rom the date of c losure of the Offer ing (exclud ing date of c losure of the Offer ing) as

required by the CSEListing Rules.Applicants will be entitled to receive interest, five percentage (5.00%)

points above the last quoted Average Weighted Prime Lending Rate(AWPLR),publ ished by the CentralBankof SriLanka,on any refunds not made before the expiry of theabove ment ioned period.

S . Only one appli ca ti on w il l beaccepted on behal f o f a person or corpora te body. Any app li cant o f a joint

application wil l not be eligible to submit a separate application either individually or joint ly. Multiple

applications or suspected multiple applications will be rejected.

6. Applicat ion forms stat ing third party CDSaccount numbers, instead of their own CDSaccount number,

except in the caseof Margin Trading Accounts, will be rejected.a) Refunds via Sri Lanka Inter Bank Payment Systems (SLIPS)

7. Any Applicat ion Formwhich does not provide the NI(' passport or company registrat ion numbers asthe

case maybe,will be strictly rejected.I f the applicant hasprovided accurate and complete detai ls of hisI herbank account in the Application

Form, the refund payments wil l be madeto this bank account through SLIPSon or before the expiry of

ten (10)market daysfrom the closuredate asperthe CSEList ing Rules,and a payment advice shall be

issuedto the applicant provided that the applicant hassubmitted accurate and complete details of his

bank account in the Application Form.

8. Applicat ions that are from individuals under the age of 18years,or inthe names of saleproprietorships,

partnerships and unincorporated trusts or non-corporate bodies will be rejected.

9 . Notwi thstanding any provision conta ined herein, the Directors of the Company hereby a lso reserve

t he r ight t o ref use any app li ca ti on in t ot al o r t o accep t any app licat ion i n par t on ly , a t t he ir sole

discretion.

Refunds via SLIPtransfers would accommodate only up to the maximum of Rupees Fivemill ion (Rs.

5,000,000/-) . Ifthe amount to be refunded exceeds RupeesFivemillion (Rs.S,OOO,OOOI- ) , the full refunds

wil l bemade bycrossed cheques drawn infavour of the applicant (the f i rst named applicant inthe case

ofjoint applications) and sent byordinary post to thegiven address inthe Application Form. (Refernote

below)LOSURE OF THE OFFERING

The Offering wil l close at 4:30 p.m.on 5th April 2011 being fourteen (14)market daysfrom the date of opening the

Offering.TheDirectorson providing oneday'snotice to the market havethe discretion of closing the SubscriptionList

on any market day within the said per iod of fourteen (14) market days, i rrespect ive of the number of shares

subscribed to under this invitat ion. However inthe event of anoversubscription, the l istwi ll closeat 4:30p.m.on the

date onwhich i t isfully subscribed, upon giving not ice inwrit ing to the CSE.

b) Refunds via crossed Cheques

ACCEPTANCE AND REFUNDS

If theapplicant hasnot provided or hasprovided inaccurate I incomplete detailsof the bank account, or

the refunding amount exceeds RupeesFivemillion (Rs .5 ,OOO,OOOI- ) ,the refund payment wil l bemadeby

acrossed cheque infavour of the applicant and sent byordinary post at the riskof theapplicant . Inthe

caseof joint appiicat ions, the cheques wiI Ibedrawn infavour of the appI icant 's name appearing f i rst in

the Application Form. (Refernote below)

Acceptance

SuccessfuIappl leantswi ll benot i f ied on their al lotmen t of sharesnot laterthan (10)market daysfrom the

closureof the issue.

Refunds on shares,which havenot been allot ted, wouIdbe posted before theexpiryof ten (10)market

daysfrom the date of closure of the Offering (excluding date of closure of theOffering).

CDSLodgments

The sharesal lot ted wil l be directly uploaded to the respect ive CDSaccount given in their applicat ions

before the exp iry o f e ighteen (18) market days, f rom the date of c losure of the Offer ing. A wri tt en

confi rmation of the allotment wiI Ibesentto the appllcantwithin two (2)market daysof credit ing theCDS

account, by ordinary post to the address provided byeach applicant in their respective application form.

Note:

I n t he e vent t he name or address given in th e Appli ca tio n F orm d if fe r f rom t he name o r addr ess as per

CDSrecords, the name or address asper CDSrecords shall prevail .

4. Transferabil ity of Shares

A llot ted shares sha ll not be t ransferable by the shareho lders dur ing the per iod between the date of

a ll otment o f the offer ing and upto the date of l is ti ng (exclud ing the date of l is ti ng) o f the sharesof theCompany onthe CSE.

The Securities & Exchange Commiss ion of Sri Lanka has d irec ted to mandate the lodging of share

certificates pertaining to all listed securities at the Central Depository Systems.P leaseno te t ha t upon the

allotment of shares under this offer, THEALLOn-ED SHARESWOULD BECREDITED TOTHEAPPLICANT'S CDS

ACCOUNT and NO SHARE CERTIFICATESWILLBE ISSUED. Youmay open a CDSaccount through anyone of

t he Members and Trading Members o f t he CS f as set out in Annexure C or t hrough anyone of t he Custodian

Banks asset out in Annexure E.

5. Declarat io n to the Colom bo Stock Exchange and Secondary Market Tradlng

The Company shall submit to the CSEa'Declaration' assetout inAppendix 2Cof the List ing Rulesof the

CSEon the Market day immediately fol lowing the day on which the sharesarecredited to the investors'

CDSaccounts , and t rading of the saidshares wil l commence on or before the thi rd market day upon

receipt of the declarat ion bythe CSE.

Interms of the CSEIist ingrulesthesharesmaybe l isted upon the complet ion of the CDSdirect uploads and receipt

of the~eclarat ion mentioned above bythe CSE. / .

134

F r ee L a nk a C a p, ro Io l di n gs L I d - l n il i QI P u /) ! Jc O f f e rr ee L an ka C ap i/ al H ol di ng s L Id -IMol Pu b l ic O i f 2 1

ANNEXURE 8 (4) Beforethe Company offersor agreesto purchaseits own shares,the Boardof the Company shouldreso lve that-



(i) the acquisi tion isinthe interests of the Company;

E X TR AC TS FROM THE A RT IC LE S O F A SSOC IA TI ON O F TH E C OMPA NY

SHARES

(ii) the terms ofthe of fer oragreement and theconsiderat ion to bepaidforth esharesisinthe opinionof the

Company'sauditors afair value;and

3.

(1) Subject to art icles 3{2)and 3(3),of these art icles, the Boardmayissuesuch sharesto such persons asi t thinks

f it i n accordance with section 51 of the Act .Where the sharesconfer r ights other than those speci fi ed in

subsect ion (2)of section 49of the Act, or impose any obl igat ion on the holder, the Board must approve the

terms of issuewhich set out the rights and obl igat ions attached to the sharesasrequired bysubsect ion (2)of

sect ion 51of the Act.

( ii i) i t i snot aware of any information that has not been d isclosed to shareho lders which ismater ia l t o an

assessmentof the value of the shares,andas a resul t of which the terms of anoffer or the consideration

offered for the sharesareunfair to shareholders accepting the offer.

(5) Before the Company-

(2) Before i t i ssuesshares, the Board must dec ide the considera tion for which the shareswi ll be i ssued.The

consideration must befair and reasonableto the Company and to allexisting shareholders.

(I) makesanoffer to acquiresharesother than ina manner which wiI I i f i t isaccepted infuI I , leaveunaffected

the relative voting and distribution rights of allshareholders; or

(3) Wherethe Company issuesshareswhich rank equally with or prior to existing shares,those sharesmust unless

the Company determines otherwise bySpecial Resolut ion beoffered to the holders of theexist ing sharesin a

manner which would, i faccepted, maintain the relat ive vot ing and distribut ion rights of those shareholders.

The offer must remain open foracceptance fora reasonable t ime. The company may ata t ime of making said

offer request the holders of exist ing shareswho desire an allotment of shares in excessof their respect ive

proport ions to state how many of the excessshares heor she desires should any of the exist ing holders of

sharesexpresslydecline to accept the whole of their respect ive proport ions. The sharessodeclined may be

allot ted insuch numbers asthe Directors decide or may be allot ted and issued to suchother persons asthe

Directors consider appropriate. Provided however that an issueof Redeemable PreferenceSharescarrying a

f ixed orvariable coupon shall not require anoffer to bemade to the holders of exist ing shares.

(ii) agrees to acqui re shares other than in a manner which leaves unaffec ted the relat ive vot ing and

distribution rights of allshareholders;

(6) the Board sha ll resolve that the making of the offer orentry into the agreement , as the casemaybe, i s fai r t o

those shareholders to whom the offer isnot madeor with whom noagreement isentered into.

Theshare which maybe sopurchased shall be cancelled immediately upon purchase.

7.

(1) TheCompany mayissueshareswhich areredeemable,

( i) A t the opt ion of theCompany;

(4) Subject to Article 3(1)the Board may issueanyshareswith any preferent ial rights orprivi leges orsubject to anyspecial terms orcondi tio nswith orwithe utanyspecialdesignat ionand from timeto t imeto modify,commute,

abrogate, or dealwith any rights, privi leges, terms conditions or designat ions for the t ime being attached to

anyclassof sharesin accordance with the provisions herewith.

( ii ) A t the opt ion of the holder o f theshare;

(ii i) Ona date speci fied inthese presents;

(5) Nothing inthese Presentscontained shall preclude the Boardfrom recognizing and act ing on a renunciat ion

of allotment of any share bythe allot tee thereof inf a v ou r of anyother person.

Redempt ion would befor a speci fied consideration by the Board at the t ime of issue or a consideration

which i s ca lcul at ed on a f ormu la o r t o be f ixed by an i ndependen t f inancia l adv isor having such

qualifications asthe Board maythink fit.

(6) The rights at tached to sharesshal lnot , unlessotherwise expressly provided by the terms of issueof that class,

bedeemed to bevar ied bythe creation or issueof further sharesranking paripassutherewith.

4 . Inthe event of the Directors having issuedany shareswhich are part ly paid, the Directors may from time to

t ime makecal ls upon the holders of such sharesin respect of any money unpaid ontheir shares,subject to a

period of not lessthan fourteen (14)daysnotice being given for payment.

(2) The Company may exercisethe opt ion referred to in 7(1)(i )above, only after the Board has resolved that the

redemption isin the interests of the Company.

(3) Where sharesareredeemed inaccordancewith art icle 7(1){ii landthe holder of the sharegives proper not ice to

the Company requiring the Company to redeemthe share,

5. The Company may give f inancial assistancedirect ly or indirect ly for or in connect ion with the acquisi tion of

own sharesand inaccordancewith sect ions 70and 71of theAct.

(i) the Company should redeem the shareon thedate speci fied inthe not ice or i f nodate isspeci fied, onthe

dateof thereceipt of thenot ice;

6 .

(1) The Company may by Special Resolut ion reduce i ts stated capital to such amount asi t thinks appropriate in

accordance with sect ion 59of the Act.

(ii) theshareshould becancelled on thedate of redemption; and

(i ii ) f rom the date of redemption theformer shareholder wil l rankasan unsecured creditor of the Companyfor

the sumpayable on redemption.

(2) The Company sha ll in accordance w it h Ar ti cle 9 (vi ) is suea share cer ti fi ca te f or t he number o f sha res

consequent to suchreduction in lieu of the sharecertificates held bythe shareholder.(4) Wheresharesare redeemed in accordancewith article 7 (1)(iii);

(3) The Company may agree to purchaseor otherwise acquire i ts own shareswith the approval of the Board.(i) the Company should redeemthe sharesonthat date;

135 136

theshareisdeemed to be cancelledon thatdate;

F r ee L a nk a C a p it o ! H a ld l ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H a ld in gs L Id -IMol Pu b l ic O i f 2 1

(vi ) Where the Company issuessharesor the transfer of any sharesis entered on the share register, the Company8.



(1) TheCompany mayby SpeciaIResolution andsubject to the provisionsof theAct must within one month (or sucht ime period asspecif ied bythe l isting Rulesof the Colombo stock Exchange

from time to t ime) complete and havereadyfor del ivery asharecerti ficate inrespect of theshares.

(i) consolidate orspl it (i.e.subdivide) all orany of i ts sharesinissuein suchproport ions asi t may seemfi t, ina

manner which would leave the relat ive vot ing and distribut ion rights of all shareholders substant ially

unaffected;

(vi i ) I fa ShareCert if icate bedefaced, lostor destroyed, i t may berenewed onpayment of suchfeenot exceedingRs.

100/- and on suchterms asto evidence and indemni ty and the payment o f out -o f-pocket expensesof the

Company in investigati ngevidence asthe Oirectors'thi nkfit.

(ii ) capitaI izeany part of the amountsfor thet ime being standingto thecredit of anyof the Company'sreserve

accounts in a manner which would leave the relat ive vot ing and distribut ion rights of all shareholders

substantially unaffected;

(vii i) Notwithstanding anything to the contrary inthese Art icles, aslong asthe sharesof the Company arequoted in

the Colombo StockExchangeor anyother LicensedStockExchange,

(2) Theconsolidation, split or capitalization shalltakeeffecton suchday asmaybe determined inthe said resolution

or bythe Board.

(a) such sharesshal l be freely transferable and registration of the transfer of such l isted sharesshal l not be

sub ject to any restr ic ti on , save and except to the extent requi red for compl iance with s ta tu tory

requirements.

(3) The Company shall within one month issue a share cert if icate for the number of shares consequent to such

consolidation and split in lieu of the share certificates held by the shareholder. (b) The Board may register without assuming any liability therefore any transfer of shares which is in

accordancewith therulesand regulat ions inforce for the t ime being andfrom time to t ime aslaiddown by

such LicensedStockExchangeand anyagency whose primary object isto actascentral depository for such

exchange.

(4) Inthe event of ashareholder becoming entitled to afraction of ashare,consequent to theconsolidation, split or

capitalization, the Directors shall have the power to sell such fractional entitlements and donate the proceeds

therefromto acharity of theirchoice.

D IRECTORS AND SECRETARY

SHARE REGI ST ER , S HARE CERT I FI CATE SAND TRANSF ERAND TRANSMI SS ION OF SHARES23.

(1) The number ofdirectors shaIInot belessthan three (3)nor more thantwelve (12)in number.9.

(i) The Company must maintain a shareregister,which compl ies with section 123of the Act.The shareregister

must bekept at theregisteredoff ice of theCompanyor any other place inS rlLanka,not ice of which hasbeen

given to the Registrarin accordancewith subsection (4)of section 124of the Act.

(2) The Directors shall havepower at any t ime to appoint any person to bea director to f il l acasualvacancy asan

addit ion to the exist ing d irec tors sub ject to the maximum number set out inar ti cle 23(1) . Any Director so

appointed shallhold office until the next following Annual GeneralMeeting andshallbe eligible for re-election

and not becounted for article 23(6)below.(ii ) Where sharesare to betransferred,aform oftransfersignedby the holder or byhi5 legaIrepresentative shallbe

delivered to the Company.Thetransfermust besigned by the transferee ifthe shareimposesany Iiability on its

holder.(3) Adirector may beappointed orremoved byordinary resolut ion passedata meeting cal ledfor the purpose. The

shareholders mayonly vote ona resolut ion to appoint adirector i f-

(ii i) (a) The Boardmay resolveto refuse to register a transfer of ashare within sixweeks of receipt of the transfer,

i fanyamount payable to theCompany inrespectof the shareisdue but unpaid. The Board shalldecline to

registerany sharein the name of more than three (03) personsasthe joint holders (including the principal

holder), except in the caseof executors, administrators or heirs of a deceased shareholder. I f the Board

resolvesto refuse to register atransfer forthis reason, i t must give not ice of the refusal to theshareholder

with in0neweek ofthe date of the resolut ion.

(a) the resolut ion isforthe appointment of one director, or

(b) the resolut ion isasingle resolut ion for the appointment of two or more personsasdirectors,and aseparate

resolut ion that i t besovoted on hasf i rst been passedwithout a vote being castagainst i t.

(b) The Directors may alsodecl ine to registera transferof ashareon which the company hasa l ien.

(4) A d irec tor may res ign by del iver ing a s igned wri tt en not ice of res ignation to the reg is tered off ice of the

Company.Subject to section 208 of the Act, the not ice iseffect ive when it isreceivedat the registered office or

at anylatertime specified inthe notice.

(iv) Where ajoint holder of a sharedies, the remaining holders shall betreated bythe Company asthe holders of

that shareoWherethe sole holder of asharedies,that shareholder's legaI representative shaIIbe theonly person

recognized bythe Company ashaving any t it le to or interest inthe share.

(5) Adirector vacatesof f ice i fhe -

(a) resigns inaccordance with art icle 23(4);

(v) Any person who becomes ent it led to a share asa consequence of the death , bankruptcy or insolvency or

incapacity of ashareholde r maybe registeredasthe holder of that sharehoider's sharesupon making a request

in wri ti ng to the Company to be so reg is tered, accompanied by proof sat is factory to the Board of that

entitlement. TheBoardmay refuseto register atransfer under this article inthe circumstances setout in article

9(iii).

(b) isremoved from off ice inaccordancewith the provisions of the Act or these art icles;

(c) becomes disqual i fied from beinga director pursuant to section202of theAct;

(d) d ies;or

Where the Company issuessharesor the transfer of any sharesisentered on the share register, the Company

must within one month (or sucht ime period asspecif ied bythe Listing Rulesof the Colombo stock Exchange

from time to t ime) complete and havereadyfor del ivery asharecerti ficate in respect of theshares.

(e) vacatesoff ice pursuant to subsect ion (2)ofsection 210of theAct, onthe ground of hisage.

137 138

F r ee L a nk a C a p it o ! H o ld i ng s L I d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H o ld in gs L Id -IMol Pu b l ic O i f 2 1

(6) At eachannual general meet ing one third of the Directors for the t ime being subject to reti rement byrotat ion (d) atransaction ora seriesof relatedtransactions which havethe purposeor effect of substantially altering the



shallretirefrom office.A Director retiring ata meeting shallretainoffice until the closeof the meeting including

anyadjournment thereof.

nature of the businesscarried on by the Company

Inth issection the reference to"Assets"includeproperty of anykind,whether corporeaI or incorporeaI.

(7) Thedirectors to retire at each annual general meeting shallbe those directors who, being subject to retirement

byrotat ion, havebeen longest inof f ice sincetheir lastelection or appointment, but asbetween persons who

became or were last reelected directors on the sameday the directors to ret ire shall (unlessthey otherwise

agreeamong themselves) bedetermined by lot. A retiring director shallbe eligible for reelection.

25.(1) A d irec tor who is interested ina t ransaction to which the Company isa party must d isclosethat interest in

accordance with section 192 ofthe Act.

(8) The Company at the meeting at which adirector ret iresin the manner aforesaid shall f il l the vacatedoff ice by

electing apersonthereto, and indefaul t the ret iring director shall bedeemed to havebeenreelected unless:

(2) Subject to article 25(3),adirector of the Company isinterested ina transact ionto whichthe Company isaparty,

i f,andonly i f, the director -

(a) isaparty to orwi ll or may derive amaterial f inancial benef i t f rom the transact ion;

(a) at such meet ing i t isexpressly resolved not to f il l suchvacated off ice, ora resolut ion for the reelect ion of

suchdirector isput to the meeting and lost ;or (b) hasa material f inancial interest inanother partyto thetransact ion;

(b) suchdirector hasgiven not ice inwrit ing to the Company that heisunwil ling to bereelected or isoverthe

age of 70;or

(c) i sa d irec tor, o ff icer or t rustee of another party to, or personwho wil l o r may der ive a mater ia l f inancial

benef it f rom the transact ion, not being aparty or person that is-

(c) (i) shall not act ina manner which isrecklessorgrossly negligent ;

(i) the Company's holding company, being a holding company of which the Company isa wholly-owned

subsidiary;

(li) awholly-owned subsidiary of the Company;or(i i) shaIIexercisethe degreeofskiIIand carethat mayreasonably beexpected of apersonof hisknowledge

and experience. (iii) awholly subsidiaryof a holding company of whichthe Company isalsoawholly-owned subsidiary;

(4) The Companyshall not enter into any majort ransact ion unlesssuchtransact ion is -(d) i s the parent, chi ld or spouseof another party to or person who wil l o r may der ive a mater ia l f inancial

benefit from the transaction; or

(a) approved bySpecialResolution; (e) isotherwise directly or indirectly materially, interested in the transaction.

(b) contingent on approval by Special Resolution; (3) Adirector of theCompany isnot interested ina transact ion to which the Company isa party, i f the transact ion

compr ises only the g iv ing by the Company of secur it y to a thi rd party which has no connect ion with the

d irec tor, a t t he request o f the thi rd party , i n respect o f a debt or obl igat ion of the Company for which thedirector or another person has personal ly assumed responsibi li ty in whole or in part , under a guarantee,

indemnity or bythe deposit of asecurity.

(c) consented to inwrit ing byal l theshareholders of the Company; or

(d) atransaction which the Company isexpressly authorised to enter into bya provision in i ts art icles, which

wasincluded in it at the time the Company wasincorporated. (4) Art icle 23(2)doesnot apply to any remunerat ion orother benef it given to adirector inaccordance with sect ion

216 of the Act,or,to anyinsuranceor indemnity provided inaccordance with section2' 8of the Act .However,theabove shaIInot applyto

(5) Adirectorof theCompanywho isinterestedina transactionenteredintoorto beenteredinto bytheCompany,may-

(i) a transaction under which theCompany gives oragreesto give af loat ing charge overal lor any part of

the property of the Company;(a) vote ona matter relat ing to the transact ion;

(ii) atransaction entered into bya receiver appointed pursuant to an instrument creating afloating charge

over all orany part of the property of theCompany;

(b) attend ameeting of directors atwhich a matter relat ing to the transact ion arisesand beincluded among

the directors present at the meet ing forthe purpose of aquorum;

(c) signa document relat ing to thetransact ion on behalf of theCompany; and

(i i i) A transact ion entered into byan administratoror l iquidator of the Company.(d) doany other thing inhiscapaci ty asadirector in relat ion to the transact ion, asi f hewere not interested in

the transaction.A major transaction means-

(a) the acquisi tion of oran agreement to acquire whether contingent or not , assetsofa value which isgreater

than half the value of the assetsof theCompanybeforethe acquisition;

(6) Adirector of the Company who hasinformat ion inhiscapaci ty asadirector or employee ofthe Company which

wauld not otherwise beavai lable to him,must not disclosethat informat io nto anyperson or makeuseofor act

on the information, except-

(b) the disposi tion of the agreement to dispose of,whether cont ingent or not . thewhole or more than half by

value of the assetsof the Company;

(a) for the purposesofthe Campany;

(b) asrequ ired by law;or

(c) a t ransaction which has or i s l i ke ly to have the effec t o f the Company acqui ri ng r ights or interests or

incurri ng obl igat ions or l iabi li ti es of a value which is greater than hal f t he value of the assetsbefore

acquisition; or

(c) inaccordancewith art icle 25(7).

139 14 0


(7) A d irec tor o f t he Company may d isclose, make use of orac t on inf ormation i f- (b) ensure the d irec tors who vote in f avour o f t he d iv idend mus t s ign a cer ti fi ca te of so lvency the ir opinion the



Company wil l sat is fy the solvency test immediately after the dis tribut ion ismade; and

(a) t he d irec tor i s fi rs t authori zed to do soby the Board under art ic le 25(8) ; and

(c) obtain acert if ic ate of so lvency f rom the aud it ors.

(b) particulars of the authorization are entered in the interests regis ter.

(4) The Company isdeemed to have sat is fi ed the solvency tes t i f-

(8) The Board maya uthor ize ad i rector t o d is close, make useof orac ton inf ormation , i f i t i s sa ti sf ied that t odo sow i I I

not be likely to prejudice the Company. (a) it is able to pay its debts as they fall due in the normal course of business; and

(9) A d irec tor mus t d is close a ll dea li ngs inshares of t he Company inwhich hehasa relevant int eres t, i naccordance

w it h sec ti ons 198,199and 200 of t he Act .

(b) t he value of i ts asset s i sgreater t han the sum of t he value of i ts l iabi li ti es and i ts s ta ted cap it al .

(10) The Boardmay approve;

(5) Before the D irec tors make any d ist ri bu ti ons, t hey may set aside, out o f t he pro fi ts o f t he Company , such sum as

they think proper asa reserve fund or f unds.

( a) t he payment o f any r emune ra ti on and/ or the prov isi on of o ther benefi ts b y t he Company t o a Di re ct or f or

services asDirector or for services rendered to the Compa ny ina nyother capacity.

(6) Sub ject t o t he provi sions of A rt ic le 36(3) , t he Board may authori ze a d is tr ibut ion byway ofa d iv idend to be paid

to t he shareho lders according to the ir r ight s and interes ts in t he pro fi ts and may f ix t he t ime for payment .

(b) t he payment by the Company to a D irec tor ora former D irec tor o f compensat ion for l ossof o ff ice,

( c) t he ente ri ng i nto o f a contr ac t to do any o f t he above ,

(7) Any d iv idend or in teri m div idend wh ich may beauthor ized by the D i rectors, may bepa id bymeansof cash orby

the d is tr ibut ion of speci fi c asset s and, in par ti cu lar, o f paid-up shares, debentures or debenture s tock of t he

Com pany oro f anyother com pany or in specie or ina nyone or more of such waysand where anyd if fi cu lt y ar ises

inregard to the d is tr ibut ion, t hey may set tl e t he same as they think exped ient and inpart icular may f ix t he value

for d is tr ibut ion of such speci fi c asset sor any par t t hereof and may determine that cashpayments sha ll be made

to any member upon the footi ng of t he value sof ixed inorder t o adjus t t he r ight s o fa l l par ti es and may ves t any

such speci fic assets in t rustees upon such trusts for the persons ent it led to the div idend asmay seem expedient

to the Board.

i f t he Board i s sati sf ied that t o do so is f a i r t o t he Compa ny.

(11) The Compa nymay byord inary resolu ti on a lsovote ext ra remunerati on and / oro ther benef it s t o t he D i rectors or

t o any D irec tor asmay berecommended by the Board for t he per formance of ext ra servi ces to the Company .

(12) The D irec tors sha ll a lso beenti tl ed to be repaid a ll t rave li ng , hotel or o ther expenses properl y incur red by them

inor w it h av iew to the per forma nce of t hei rduti es inc lud ing att endance at Board Meeti ngs .

(8) No shareho lder sha ll beenti tl ed to receive payment o fanyd ividend oranya l lo tment and issue of sharesc red it ed

as fu ll y paid up in respect o f h i s shares whi ls t anymoneys may bedue orow ing f rom him (whether a lone or joi n tl y

with any other person) to the Company in respect of such share or shares or otherwise howsoever.

( 13 ) No th ing in these Ar ti cl es shall p re vent the payment to a Di re cto r o f any fu rther r emunerat io n fo r se rvi ce s

performed by him by v irtue of a ny other office or position held by h im in c onjunction with his d irectorship. (9) No d ividend shall bear interest against the Company.

D ISTR IBUTI ON AND RESERVES

( 10 ) The Di re ct or s may deduct fr om t he d ivi dend payabl e t o any sharehol de r a ll sums of money due f rom him

(whether a lone or jo in tl y w it h any other person) t o t he Company and notwi thstanding that such sums sha ll not

be payable unt il after the date when such div idend ispayable.

36.

(1) The Compa nymay make d ist ri bu tt ons to shareho lders inaccorda nce wi th sec ti on 56of t he Act Sub ject t o art ic le

36(2) , every d iv idend mus t beapproved by the Board and by anordinary resolut ion of shareho lders. The Board

must be sat is fied that the Com panywi ll immediately after the dist ri but ton. sat is fy the solvency test. The directors

who vote in f avour o fa d iv idend mus t s ign acert if ic ate of so lvency to that e ff ec t.

(11) Unless otherwise d irec ted any d iv idend may be paid bycheque orwarrant sent bypost t o t he reg ist ered add ress

of t he shareho lder ent it led there to or, i n t he caseof joint -holders . t o t he reg is tered address of t he joint -holder

whose name s tands f irst on the reg is ter i n respect o f t he joint -holding ; but t he Company sha ll not be l iable or

respons ib le f or t he lossof any such cheque ord i vidend warrant sent t hrough the pos t.

(2) The Board may f rom t ime to t ime approve the payment o f an in terim div idend orany f ixed pre ferent ia l d iv idend

to shareho lders, where that appears to be jus ti fi ed by the Company's pro fi ts , w it hout t he need for approva l byan

ordinary resolution of shareholders.

(12) A ll d iv idends unc la imed for one (1)year a ft er hav ing been dec lared may be invested oro therwise made use ofby

the Boa rd f or t he benef it o f t he Company unti l cl aimed and the Company shal l n ot bec onsti tu ted a t r ustee in

respect t hereof . A ll d iv idends unc la imed for s ix (6) years aft er hav ing been dec lared sha ll be for fe it ed and sha ll

revert to the Company.

(3) The Board mus t;

(a) besati sf ied that t he Company w il l immedia te ly a ft er t he d iv idend ispaid under (1) or (2) above, sat is fy t he

solvency test,

(13) Every d iv idend payab le in respect o f any share held by several persons joint ly may be paid to and anef fectua l

receipt given by, anyone of such persons.

14 1 142


ANNEXURE C MEMBERS AND TRADING MEMBERS OFTHE COLOMBO STOCK EXCHANGE



COLLECTION POINTS CSEMEMBERS - DEBT & EQUITY

Free Lanka Capital Holdings Limited

No. 168, Negombo Road,

Peliyagoda.

Tel: +94-117990001 / +94-117891010

Website: www.freelankacapital.com

Acuity Stockbrokers (Pvt) Ltd.

Level 06, Acuity House

No. 53,Dharmapala Mawatha

Colombo 03

Tel : +94-112206206 Fax :+94-112206298/9

E-mail: [email protected]

Asha Phi ll ip Securit ies Ltd.

Level 04, "Mi llennium House"

No. 46/58, Navam Mawatha

Colombo 02

Tel: +94-112429100, Fax: +94-112429199


BUSINESS OFFICE OF THE COMPANY

Taprobane Holdings Limited

No. 10, Gothami Road,

Colombo 08.

Tel: +94-115328119, +94-115328100

Asia Securit ies (Pvt) l td.

Level 21,WestTower

World Trade Centre, Echelon Square

Colombo 01

Tel: +94-1 12423905, +94-115320000

Fax:+94- 112336018


Asset line Securit ies (Pvt) Ltd.

No. 282, Kaduwela Road

Batta ramuIia

Tel: +94-1 1470011 1,+94-112307366

Fax: +94-114700112


Web site: www.dpgsonline.com

MANAGERS TO THE OFFERING

John Keefls Capital

A D iv is ion of John Keell s Holdings PLC

No. 130, Glennie Street,

Colombo 02.

Tel: +94-112306167

Bartleet Mal lory Stockbrokers (Pvt) Ltd.

Level "G'~"Bartleet House"

No 65, Braybrooke Place

Colombo 02

Tel:+94-1 15220200 Fax:+94-1 12434985


Capital TRUST Securit ies (Pvt) Ltd.

No. 42, Sir Mohamed Macan Markar Mawatha

Colombo 03

Tel:+94-1 15335225 Fax:+94- 115365725

E-mail: inqulrteseacapitaltrust.lk

Web site: www.capitaltrust.lk

SSPCorporate Services (Pvt) Ltd

No. 101, Inner Flower Road,

Colombo 03.

Tel: +94-112573894

Ceylinco Stockbrokers (Pvt) Ltd.

Ceylinco House, Level 09

No. 69, Janadhipathi Mawatha, Colombo 01

Tel: +94-1 14714300, +94-114714388

Fax: +94-112387228


Web site: www.ecsbl.com

CTSmith Stockbrokers (Pvt) Ltd.

4-14, Majestic City

No. 10, Station Road

Colombo 04

Tel:+94-112552290 - 4

Fax: +94-112552289


REGISTRARS TO THE OFFERING

Seylan Bank PLe

Millennium Branch,

No.90, Galle Road,Colombo 03.

Tel:+94-112456135,+94-112452502

ON H Financial (Pvt) Ltd.

Level 16,West Tower,

World Trade Center

Colombo 01

Tel: +94-11-5732222 Fax: +94-11-5736264


J BSecuri ties (Pvt) Ltd.

No. 150, S1.Joseph Street

Colombo 14

Tel: +94-112490900, +94-77-2490900

Fax: +94-112430070

E-mail: jbseejb.lk

BANKERS TO THE OFFERING

(Refer t he l is t o f branches on Pages 146 & 147 of the Prospectus).

John KeeJls Stockbrokers {Pvt) Ltd.

No. 130, Glennie Street

Col ombo 2

Tel: +94-112326003, +94-112338066

Fax:+94-1 12342068

E-mail: jkstockeekeells.com

Lanka Securit ies (Pvt) Ltd.

No. 228/2, Gal le Road

Colombo 04

Tel: +94-1 14706757, +94-1 12554942

Fax:+94- 114706767

E-ma1l: [email protected]

Web site: www.lsl.lk

14 3 14 4

NOB Stockbrokers (Pv t) L td .

f r ee L a nk a C a p i/ a J H o J di n gs L I d - I n o tl o ! PubliC Oif21 f re e L an ka C a pi to ! H oJ dl ng s L Id - !IliliQ! P U I J / o C O f f e r

SC Securit ies (Pvt] Ltd. S E YL AN B AN K P LC B R A NC HE S






http://www.dpgsonline.com/


http://www.capitaltrust.lk/


http://www.ecsbl.com/




http://www.lsl.lk/

http://www.lsl.lk/




http://www.ecsbl.com/


http://www.capitaltrust.lk/


http://www.dpgsonline.com/








5th Floor, NOB Building

No.40, Navam Mawatha

Colombo 02

Tel:+94-1 12314170-8 Fax:+94- 112314180


Somervi lle Stockbrokers (Pvt) Ltd,

No. 137, Vauxhall Street

Colombo 02

Tel: +94-1 12329201 -5, +94-1 12332827

Fax:+94- 112338291


T RA DI NG M EM B ER S - D EB T & EQUITY

Capital All iance Securit ies (Pvt) Ltd.

Level 05, "Mi llennium House"

No.46/58, Navam Mawatha

Colombo 02

Tel: +94-112317777 Fax: +94-112317788

First Guardian Equities (Pvt) Ltd,

32nd Floor, EastTower, World Trade Centre

Colombo 01,

Tel:+94-115884400 Fax:+94- 115884401


IIFL Securities Ceylon (Pvt) Ltd.

27th Floor, EastTower, World Trade Centre

Colombo 01

Tel: +94-112333000 Fax: +94-112333383


5MB Securities (Pvt) Ltd.

No.47, Dharmapala Mawatha

Colombo 03

Tel: +94-1 , 5539593 Fax: +94-112339292


TKS Securities (Pvt) Ltd.

No. 14,Reid Avenue

Colombo 07,

Tel: +94-1 , 2675200 Fax: +94-112682553


146

2nd Floor

No, 55, D.R.Wijewardena Mawatha

Colombo 10

Tel: +94- 114711000 Fax: +94-112394405

E-mail: cscreseesltnet.lk

Branch Branch Address Telephone

Ambalangoda ['lo. 2 4 A, Galle Road, A mbalangoda. 091-2258010

Ampara Regal Cinema Complex, No. 129, Ampara. 063-2224897

Anurad ha pu ra No. 250, Main Street, Anuradhapura , 025-2224649

Attidiya No. 214, Main Road, Attidiya, Dehiwela. 011-2738453

Avissawella No. 71, Ratnapura Road, Avissawella. 036-2222007

Badulla No. 10,Cocowatta Road, Badulla. 055-4499524

Balangoda No.123, Barns Ratwattha Mawatha, Balangoda. 045-2287007Bandaragama No. 17 A, Horana Road, Bandaragama. 038-2290706

Bandarawela No. 240, Badulla Road, Bandarawela. 057-2223144

Batticaloa No. 06, Lloyds Avenue, Batticaloa. 065-2224587

Beliatta No. 50,Walasmulla Road, Beliatta. 047-2243619

Bora lesgam uwa No. 24, Kesbewa Road, Boralesgamuwa. 011-2517550

Borella No. 1119, Maradana Road, Borella, Colombo 08. 011-2681191

Ceylinco House No. 69, Janadhipathi Mawatha, Colombo 01. 011-2445840

Chilaw No. 46, Kurunegala Road, Chilaw, 032-22221 21

Cinnamon Gardens No.4, Baptist Chapel Road, Colombo 07. 011-2694966

Colombo South No. 30, Galle Road, Colombo 06. 011-2593405

Dam Street No. 203, Dam Street, Colombo 11 011-4718344

Dehiwela No. 166 D, Galle Road, Dehlwela. 011-2738843

Embi Iipitiya NewTown Road, Embilipitiya. 047-2230340First C ity Office No. 33, Sir 8aron Jayathilake Mawatha, Colombo 01. 011-2437902

Free Trade Zone Unit 3, Plaza Complex, KIPZ, Katunayake. 011-2252566

Galle No. 34, 1st Cross Street, Talbot Town, Galle 091- 2232242

Gampaha No.1 J , Bauddhaloka Mawatha, Gampaha. 033-2222618

Gampola No. 44, Kandy Road, Gampola. 081-2352741

Ganemulla No.187 /A, Ki rindiwita Road, Ganem uIla. 033-2260230

Grandpass No. 401, Prince of Wales' Avenue, Colombo 14. 011-2331726

Hambantota No. 32 & 34, Wilmet Street, Hambantota. 047-2220507

Hatton No. 42, Dunbar Road, Hatton. 051-2222347

Havelock Town No. 164,166, Havelock Road, Colombo 05. 011-2596550

Homagama No. 96, High Level Road, Homagama 011-2855065

Horana No. 49, Panadura Road Horana. 034-2261176

Ja-ela No. 74, Negombo Road, Ia-ela 011-2237421

Jaffna No. 560 & 562, Hospital Road, Jaffna 021-2223047

Kadawatha No. 288, Ganemulla Road, Kadawatha. 011-2925594

Kalubowila No. 32, S.De S. Jayasinghe Mawatha, Kalubowila, Dehiwela. 011-4202648

Kalutara No. 338, Main Street, Kalutara. 034-2225035

Kandy No. 65, Kings Street, Kandy 081-2233833

Katuneriya No. 99/1, Chilaw Road Katuneriya. 031-2257764

Kegalle No. 143, Colombo Road, Kegalle. 035-2222007---~

J o : l i riba.,tl)gpdoSl' No. 121, Ma kola Road, Ki riba thgoda 011-2910581

Richard Pieris Securities (Pvt) Ltd.

No, 69, Hyde ParkCorner

Colombo 02.

Tel: +94-777281281


Claridge Stockbrokers (Pvt) Ltd

No.1 0,Gnanartha Pradeepa Mawatha,

Colombo 08

Tel: +94-112697974 Fax: +94-112677576

E-mail: fonsekaeemackwoods.corn

Heraymila Securit ies Ltd,

Level 08, South Wing, "Mi llennium House"

No,46/58, Navam Mawatha, Colombo 02

Tel: +94-112359100 Fax: +94-112305522

E-mail: info-hasfeherayrnila.corn

SKM Lanka Holdings (Pv t) L td .

No, 377/3, Gal le Road

Colombo 03

Tel: +94-112372413-4 Fax: +94-112372416


Taprobane Securit ies (Pvt) Ltd.

2nd Floor, No. 10,Gothami Road

Colombo 08

Tel: +94-115328200 Fax: +94-115328277

E-mail: [email protected]@taprobane.lk

Web site: www.taprobanestocks.com

145


ANNEXURE D









mailto:[email protected]@taprobane.lk

http://www.taprobanestocks.com/

http://www.taprobanestocks.com/

mailto:[email protected]@taprobane.lk











Branch Branch Address Telephone

Kochchikade No. 66, Chilaw Road, Kochchikade. 031-2277661

Kollupitiya No. 428, RA De Mel Mawatha, Colombo 03. 011-2576911

Kottawa No. 34, N awasiri Building, Highlevel Road, Kottawa. 011-2842682

Kul iya pitiya No. 137. HettiEola Road, Kuliyapitiya. 037-4696450

Kurunegala No. 54, Colombo Road, Kurunegala. 037 -2223581

Maharagama No. 201, Highlevel Road, Maharagama. 011-2841997

Malabe No. 11,Athurugiriya Road, Malabe. 0114404323

Maradana No. 250, Sri Sangaraja Mawatha, Colombo 10. 011 -2473281

Marandaga hamula No. 150, Divulapitiya Road, Marandagahamula. 031-2246377

Matale No. 166, 168, Main S treet, Matale. 066-2223241

Matara No. 45, Dharmapala Mawatha, Matm:it, 041-2221181

Mathugama No. 06,Aluthgama Road, Matugama. 034-2247544~--Mawane"l"la 035~2246007

Millennium 011-2456103

Mirigama No. 70/1, Giriulla Road, Mirigama. 033-2273001

Moratuwa No. 433. G alle Road. Rawathawatte. Moratuwa. 011-2655555

Mount Lavinia No. 198, Galle Road, Mount Lavinia. 011-2731266

Nawala No..1015, Narahenpita Road, Nawala. 011-2807329

Negombo No. 141, Rajapaksha Broadway, Negombo. 031-2224336

Nittambuwa No. 195/1, Colombo Road, Nittambuwa, 033-2295270

Nugegoda No. 211, High Level Road, Nugegoda. 011-2811180

Nuwara Eliya No. 48, Park Road, Nuwara Eliya. 052-2223026

Old Moor S treet No. 315/ 317, Old Moor S treet, Co lombo 12. 011-2331773

Panadura No. 401, Galle Road, Panadura. 038-2233172

Pettah' :No.96, Main Street, Colombo 'It. 011-2337823

Polonnaruwa Lake View Building, Polonnaruwa. 027-2223168

Puttalam No. 56, K. K. Street, Puttalam. 032-2265194

Raddolugama No. 171, N H S,Raddolugama 011-2292778

Ratnapura No.06, Goodshed Road, Ratnapura. 045-2225801

Sarikkamulla No. 97,Galle Road, Sarikkamulla, Panadura. 038-4282844

Soysapura No. 164/2, Soysapura, Moratuwa. 011-2622756

Tissama hara ma No. 547, Debarawewa, Tissamaharama. 047-2237161

Trincomalee No. 289, Central Road, Trincomalee. 026-2227701

Vavuniya No. 45,2nd Cross Street, Vavuniya. 024-2224800

Warakapola No. 192, Main Street, Warakapola. 035-2267629

Wattala No. 276,Negombo Road, Wattala. 011-2933589

Welimada No.1 07, Nuwara-Eliya Road, Welimada. 057 -2245617

Weliweriya No. 477/ 20 / 1 5, Edwi na Estate, Main S1.,Wei iweriya, 033-2255291

Yakkala No. 104, Kandy Road, Yakkala. 033-2226378

A N NU A L R A IN F AL L D A TA

Rakwana (Millimeters)

Year Jan F~~ Mar Apr May Jlitl Jyl Aqg Se~ Oct Noy De c

, i i l j;I 00 71.9 376.~ 273.7 1~1.4 ~5411 364 .4 ' 9 5Q 247.1 338.2 ~ 5 ' l l . E k 260.1 :~33 " .2

Z Q t H 290.6 194.3 136.0 319.2 133.0 190.8 190.4 86.4 340.5 313.4 307.4 338.4

2002 34.0 79.1 156.2 525.4 382.0 198.2 246.7 154.6 92.6 385.8 325.9 135.3

.io03- -

96.4 111.6 360.2 257.6 348.2 199.2 328.0 215.2 219.1 287.1 431.0 68.7

200>1- 92.9 85.2 308.2 304.6 471.2 275.6 283.7 148.3 394.8 288.4 163.5 210.2

2005 162.4 102.4 153.0 395.7 191.0 224.8 434.9 169.5 352.5 444.4 309.0 176.6,

2006_ 125.8 117.2 333.6 234.0 290.8 27S.3 126.6 303.9 228.4 658.4 489.1 260.5

2007 47.0 78.2 255.8 383.6 91.2 238.4 158.4 324.5 395.2 441.4 226.2 273.7

2008 236.2 338.4 431.0 787.0 252.2 276.6 386.9 131.2 75.5 465.6 416.2 187.5

20£)9 53.0 88.0 213.5 74.0 384.4 165.0 42.0 135.0 349.5 307.5 1875 360.5

2010 165.5 105.0 141.0 290.0 405.0 ·9.9M -9.9M -9.9M -9.9M -9.9M -9.9M -9.9M

Note - M issing data values are coded as -9.9M

S o u rc e : D e p a rt m e nt o f M e te o ro l og y

Deniyaya. (Millimeters)

'tear Jan Feb Mar Apr May Jun Jul Aug Sep Oct tilbv Dec

2001 399.3 248.1 158.2 410.4 94.4 117.9 170.9 79.7 280.6 253.1 231] 213.9

2002 70.9 34.2 160.4 696.7 366.1 217.8 284.5 182.7 152.5 466.9 525.0 248.8

2 0 0 3 -9.9M 174.0 558.1 388.4 1140.0 268.1 371.3 1695 302.6 318.2 5035 339.7

2004 212.7 273.1 253.7 513.1 356.1 226.9 276.4 68.2 351.5 304.7 155.4 211.2

2005 193.9 174.4 178.3 432.5 152.8 174.3 208.8 147.3 287.2 508.1 -9.9M 281.6

2006 145.8 210.4 513.2 206.5 385.2 141.5 186.6 309.2 229.7 704.2 707.9 106.5

2007 58.0 116.6 174.5 620.9 100.2 241.0 131.8 209.3 486.0 518.0 371.6 442.5

20Q8 152.8 360.6 575.4 491.3 425.1 306.0 432.5 131.0 79.0 544.5 433.0 269.0

40(:)9 170.0 36.5 470.0 432.5 512.0 479.0 96.5 3175 489.5 391.0 342.0 386.0

2010 62.0 38.5 63.5 325.0 -9.9M 352.5 267.5 288.0 -9.9M -9.9M -9.9M -9.9M

Note - M issing data values are coded as -9.9M

S o u rc e : D e p a r tm e n t o f M e te o ro l og y

14 7 14 8

A NN EX UR E E

f r ee L a nk a C a pi /a J H o Jd in g s L I d -IMo! Pu b l ic O i f 2 1 F re e L a nk a C ap it o! H oJ dl ng s L Id - !IliliQ! Pu /) !J cOf fe r

A N N E X U R E F



C US T O DIA N B AN KS

Bank of Ceylon

Head Office

11th Floor, No. 04, Bank of Ceylon Mawath a

Colombo 01

Tel:+94-112448348, +94-112338742 / 55,

+94-112544333

Clti BankNo.65 C, Dharmapala Mawatha

P.O.Box: 888

Colombo 07

Tel: +94-112447316/8, +94-112447318,

+94-112449061, +94-112328526, +94-114794700

Deutsche Ban k

p.o. Box: 314

No. 86, Gal le Road, Colombo 03

Tel: +94-112447062, +94-112438057

The Hong Kong and Shangha i Banking Corpora ti on Ltd .

No.24, SirBaron Jayathilake Mawatha

Colombo 01

Tel: +94-112325435, +94-112446591, +94-112446303,

+94-112346422

People's Bank

Head Off ice, 5th Floor

S ir Chi tt ampalam A.Gardiner Mawatha, Colombo 02

Tel:+94-112781481, +94-11237841 - 9,

+94-112446316 - 15,+94-112430561

Sam path Bank Ltd .

No. 110, Sir James Peiris Mawatha, Colombo 02

Tel: +94-115331441, +94-112472097

Seylan Bank Ltd.

Level 08, Ceylinco Seylan Towers,

No. 90, Gal le Road, Colombo 03

Tel: +94-112456789, +94-114701812,

+94-114701819, +94-114701829

Nat ionsTrust Bank Ltd.

No. 256, 5ri Ramanathan MawathaColombo 15

Tel: +94-114313131

Pan Asia Banking Corpora ti on PLC

Head Office

No. 450, Gal le Road

Colombo 03

Tel: +94-112565565

14 9 15 0

F RE E LA N K A P OW ER 2 ( P VT ) L T D

Forecasted Income Statement

Banque Indosuez

C/O Hatton Nat ional Bank Limited

Cinnamon Garden Branch

No.251, Dharmapala Mawatha

Colombo 07

Tel: +94-1 12686537, +94-112689176

(Rs.)

For the Year Ended 31st March Nate 2010/2011 2011/2012 2012/2013 2013/2014

Revenue 1 144,772,866

Administrative Expenses 2 933,000 29,611,750 30,080,650 53,111,490

Profit / (Loss) Before Taxation (933,000) (29,611,750) (30,080,650) 91,661,376

Income Tax ExpensesProfi t / (Loss ) f or t he Year (933,000) (29,611,750) (30,080,650) 91,661,376

Commerc ia l Bank of Cey lon Ltd .Commercial House

No.21, Bristol Street

P.O.Box: 853

Colombo 01

Tel : +94-112445010 - 15, +94-11238193 - 5

Hat ton Nat iona l Bank Ltd .

HNBTowers

No.479, T.8. Jayah Mawatha

Tel: +94-112664664

Forecas ted Balance Sheet

(Rs.)

As at 31 st Ma~ch Notes 2010/2011 2011/2012 2012/2013 2013/2m4

ASSETS

Non -Current Assets

Property, Plant & Equipment 3 31,000 23,250 450,022,506 427,514,406

Work in Progress 4 3,007,006 450,007,006

3,038,006 450,030,256 450,022,506 427,514,406

Current Assets

Cash and Cash Equivalents 5 1,067,000 (30,537,000) (60,745,016) 8,424,460

1,067,000 (30,537,000) (60,745,016) 8,424,460

Total Assets 4,'05,006 419,493,256 389,277,490 435,938,866

EQUITY AND LIABILITIES

Capital and Reserves

Stated Capital 6 5,000,000 180,000,000 180,000,000 180,000,000

Retained Earnings (1,030,110) (30,641,860) (60,722,510) 30,938,866

Shareho lder Funds 3,969,890 149,358,140 119,277,490 210,938,866

Current Liabilities

Other Payables 7 135,116 270,135,116 270,000,000 225,000,000

135,116 270,135,116 270,000,000 225,000,000

Total Equity and Liabilities 4,105,006 419A93,256 389,277,490 435,938,866

S tandard Chart ered Bank

No.37, York Street

P.O.Box: 112

Colombo 01

Tel: +94-1 14794400, +94-112480000

S ta te Bank of I nd ia

No. 16,Sir Baron Jayathilake Mawatha

Colombo 01

Tel:+94-1 12326133 - 5,+94-1 12439405 - 6,

+94-112447166

Union Bank of Colombo Ltd .

No. 15A, Alf red Place

Colombo 03.Tel:+94-1 12370870

Nat ional5avings Bank

No. 255, Gal le Road

Colombo 03

Tel:+94-112573008 - 15

Public Bank Berhad

No.340, R . A.De Mel MawathaColombo 03

Tel:+94-112576289, +94-117290200 - 07

F RE E LA NK A P OW ER 2 ( PV T) L TD

f r ee L a nk a C a pi /a J H o Jd in g s L I d -IMo! Pub liC Oif21 fre e L anka Capito! HoJd lf1gs L Id - !IliliQ! Pu /) !J cOf fe r

FREELANKA POWER2 (PVT) LIMITED



Forecasted Cash Flow Statement

IFor theYearEnded 31stMarchCash Flows From/(Osetfin} Operating Activities

Profit before taxation

Adjustment for:

Depreciation

Operating profit before working capital changes

Decrease J (Increase)in trade and other recievables(Decrease) / Increasein other payables

CashGenerated from / (Usedin) Operations

Interst paid

Income TaxPaid

Ne r CashFlowFrom/ (Used In)Operating activities

Cash Flows From/(Used In) Investing Activities

Interest Received

Purchasesof property,plant and equipment

Investment inCapital- Work- In- Progress

Written backamount payable

Net CashFlows From/(Used In)Investing Activit ies

Cash Flows From/(Used In) Financing Activities

Dividend paid

Invest in shares

Loan Received

Repayment of Borrowing

Net CashFlowsFrom/(Used In) Financing Activities

(Decrease) / Increase In cash and cash equivalents

Cash and Cash Equivalents at Beginning of Period

Cash and Cash Equivalents at End of Period

Notes to the Forecasted Financial Statements

(Rs.)

2010/2011 2011/2012 2012/2013 2013/2014

3. 8. ~ ~ § s-- ; !: ~

~ ~ ~~~.i ~ I i: ~ ~ ~~

(93 3,00 0) (29 ,611 ,75 0) (30,080,650 ) 91,661,376~~H ~~

~~7,750 7,750 22,508,100 ~~ ~ ~ s

I~8 ~

(933,000) (29 ,604 ,00 0) (30 ,07 2,90 0) 114,169,476 ~ ~~-

-I~~H ~

, ~ ~• « - ~

~H~ ~

33,006 (135,116) ~~~ ~~I

(899,994) (29,604,000) (30,208,016) 114,169,476 ~ J §i l~H~ ~ , ; q~~8G ~ 8 §

0 d

~$~:~~H

(899,994) (29,604,000) (30,208,016) 114,169,476 ~ ;. ~ ~g~:

'~ ,n ~ ~

!~

~~

(31,000);, 2. ' ~

2 ' ~..:~ ~ -: ~

(3,002,006) (447,OOO,000). : ; ~ 7 . :

i I 8. 8 S ~ ~, ~

- • ~I ~ ~ ~(3,033,006) (447,000,000) ~~~t

"" .H ~

'~!L- § ~5,000,000 , 75,000,000 ~i~ "

270,000,000

(45,000,000) - :~ ; I ~§. ' §. §

, ~,~ ~ ~5 ,000,000 445,000 ,000 (45,000,000) 0 ~ r-

~ 1 1 ~~ 'E~H~ ~1~I~. §. ~ 8

_::' ~S~~8~ ~ " ~ ~1,067,000 (31 ,604,000) (30,208,016) 69,169,476 ?l,~ ~ "~~ . ;:~ ~ I

H ,nup ~ <.,

88 ,nH

' 8

1,067,000 (30,537,000) (60,745,016) ~ : ; : ~"~88 .I ii Ii- " Q ~ _H~~

~,, ~1 ,067 ,00 0 (30 ,537 ,00 0) (60,745,016 ) 8A24,460

n, ,H~88n ~~ 3. 3. 3 ' 3 ' ~ n :. C88:':~~ ~'f"' :; 'H ~ ~ ;; ~ 3 i

~,

3 § i ~ - I ~! ~ § ~~~~ ~

H ,n ,tI . I

8 ' § , 8 88 H ' -8~ ~ :: :~~ 3·

? U~-

-ot ~ ~ ~

! ~ i te~ s ~~~ ; ~

j ~~ ~

,f: .d

~ c • It ~~

~ i 1 ; " ' H~~ c ~ " £ ~

i I!~~

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FREE LANKA PO WER 3 (PVT) LTD FREELANKA PO WER 3 (PVT) LTD



Forecasted Income Statement

(Rs.) Forecasted CashFlow Statement

(Rs.)

For the Year Ehded 31.st March Note 2016/2011 2011'/2012 2012/2013 2013/2014 IForthe Year Ended 31st March 2010/2011 2011/2012 .2012/2013 2_0U/2014

Revenue 44,531,470 222,205,199

Administrative Expenses 2 279,882 4,658,172 45,731,714 80,329,113 CashFlows From/(Used In) Operating Activities

Profit / (Loss) Before Taxation (279,882) (4,658,172) (1,200,244) 141,876,086 Profit before taxation (279,882) (4,658,172) (1 ,200,244) 141,876,086

Income Tax ExpensesAdjustment for:

Profit / (Loss) f or the Year (279,882) (4,658,172) ( 1,200,244) 141,876,086Depreciation 7,750 7,750 33,589,552

Operating profit before working capital changes (279,882) (4,650,422) (1,192,494) 175,465,638

Forecasted Balance Sheet Decrease/ (Increase) int rade and other rec ievabl es

(Rs . ) (Decrease) / Increase in other payables 1,735,418 (2,726,662)

IAsat 31st March Notes 2010/2011 2011/2012 2012/2013 2013/2014CashGenerated from / (Used in) Operations 1,455,536 (4,650,422) (3,919,156) 175,465,638

Interst paid

Income TaxPaid

ASSm Net CoshFlow From/ (Used in) Operating activit ies 1,455,536 (4,650,422) (3,919,156) 175,465,638

Non - Current Assets

Property, PIant & Equipment 3 31,000 23,250 671,651,536 638,061,984 CashFlows From/(Used In) Investing Activities

Work in Progress 4 27, 532, 036 671 ,636 ,036 Interest Received

27,563,036 671,659,286 671,651,536 638,061,984 Purchasesof property,plant andequipment (31,000)

Current AssetsInvestment inCapital -Work· In- Progress (26,654,536) (644,104,000)

Cash and Cash Equivalents 113,770,000 (3,984,422) (7,903,578) 10,562,060Written backamount payable

Net CoshFlows From/(Used In)Investing Activit ies (26,685,536) (644,104,000)113,770,000 (3,984,422) (7,903,578) 10,562,060

Total Assets 141,333,036 667,674,864 663,747,958 648,624,044CashFlows From/(Used In) Financing Activities

EQUITY AND LIABILITIES Dividend paid (90,000,000)

Capital and Reserves Invest in shares 139,000,000 129,000,000

Stated Capital 5 , 39,000,000 268,000,000 268,000,000 268,000,000 Loan Received 402,000,000

Retained Earnings (393,626) ( 5, 051, 798) ( 6,252 ,042 ) 45,624,044 Repayment of Borrowi ng (67,000,000)

Shareholder Funds 138,606,374 262,948,202 261,747,958 313,624,044 Net CoshFlows From/(Used In)Financing Activit ies 139 ,000 ,00 0 5 31,0 00,0 00 (157,000,000)

Current Liabilities (Decrease) / I nc rease incashandcashequiva lent s 113,770,000 (117,754,422) ( 3, 919 ,156 ) 18,465 ,638

Other Payables 6 2,726,662 404,726,662 402,000,000 335,000,000

2,726,662 404,726,662 402,000,000 335,000,000 Cashand CashEquivalents at Beginning of Period 113,770,000 (3, 984 ,422 ) ( 7,903 ,578 )

Total Equity and Liabi li ties 141,333,036 667,674,864 663,747,958 648,624,044

Cashand CashEquivalents at Endof Period 113,770,000 (3,984,422) (7,903,578) 10,562,060

15 3 15 4

f re e L an ka C a pi ta l H o ld in gs L Id -IMo! Pu b l ic O i f 2 1

FR EE LA NKA P OWER 3 ( PV T ) L IM IT E D

f re e L an ka C a pi to ! H o ld in gs L Id - !IliliQ! Pu /) !J cOf fe r



N o te s t o t h e F o re c as te d F in an c ia l S ta tem en ts

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ForecastedBalanceSheet m 0'1 00 I- ..0 .". (»

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I , A S at 31 March "otes 2010/2011 2011/2012 2012/2013 2013/2014 ~ 88 ~~ §§~ (» I-

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ASSETS 00 ...0 m NN...... . . . . . . -

Non - Current Assets

Property, Plant & Equipment 2 785,070,000 745,320,0000 8 § s §§ 8 , §~~~

...0

§ ~85,070 ,000 745 ,320 ,000U" ~. . . . . . . . . . . .d "I

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0'\ I N 0'\ 0'\ wr -- .. .. .. <.0 <.0. . . . . . !::. . t : : . . . . . . . - "

"Cash and Cash Equivalents 1,000,000 66,956,136 228,349,821

: : : l II'l LI 00

~~,000,000 ~ r-- I- ~ ~oo

4,000,000 1,000,000 66,956,136 228,349,821 c2 .60\ ¢1" 1- !'-'. . . . . . . . . . . . N "I

8~0 00 Mm

Total Assets 4,000,000 1,000,0Cl0 852,026,136 973,669,821do oS 00'

~ ~;:::II :!.~

EQUITY AND LIABILITIES 0§ 0 0§

Capital and Reserves8 8 8

§ §~ § § §'Stated Capital 5,000,000 5,000,000 625,000,000 625,000,000 M ~ M ..,f . . . . . .'

Retained Earnings (1,000,000) (4,ooo,000) 70,255 ,303 235 ,648 ,988

Shareholder Funds 4,000,000 1,000,000 695,255,303 860,648,988

Non Current liabilities

10% Loan 156 ,770 ,833 113 ,020 ,833156 ,770 ,833 113 ,020 ,833

§ § 8 §Current Liabilities § §' § g 'Other Payables ,....t LI- '<T' '<T'

Total Equity and Liabilities 4,000,000 1,000,000 852,026,136 973,669,821

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TheTea Leaf Resort Holding (Pvt) Ltd. Free Lanka Capital Propert ies (Pvt) Ltd



Notes to the Forecasted Fnancial Statementsforecasted Income Statement

For t he Year Ended 31s t March 2010/2011 2011/2012 2012/2013 2013/2014

1 Administration Expenses

PreIiminary Expenses 1,000,000 3,000,000

General Expenses 8,780,000 37,260,000

Depreciation 9,930,000 39,750,000

3,000,000 18,710,000 77,010,000

Notes 2010/2011 2011/2012 2012/2013 2013/2014

Revenue - - 96,000,000 100,800,000

Cost O f Sales - - - -

GrossProfit I(Los s) - - 96,000,000 100,800,000

OtherIncom e 6,000,000 6,300,000

Distribution Cost - - - -

Admin istrativeExpenses 1 - - 20,625,000 21,125,000

Finance Cost - - 30,000,000 27,000,000

Net ProlitJ(Loss) Before Tax - - 51,375,000 58,975,000

3 PROPERTY,PLANTAND EQUIPMENT

Cost

Opening Balance 795,000,000

Additions 795,000,000

Disposals

Colsing Balance 795,000,000 795,000,000

Depreciarion

Depreciation f or the Year 9,930,000 39,750,000

Accumu Iated Depreci ation 9,930,000

Colsing Balance 9,930,000 49,680,000

Net Book Value 785,070,000 745,320,000

Assumot!ons & Disclosures

1 Avarage occupancy 7 r : t ' 1 o (Season / Off - Season) and number of operating days- approximately 360days.

Forecasted Balance Sheet

Note 31-Mar-l1 31-Mar-12 31-Mar-13 31-Mar-14

Assets

Non -(ummtassets

Property,Plant & Equipment 2 800,000,000 784,375,000 768,750,000800,000,000 784,375,000 768,750,000

Current Assets

Cash and Cash Equivalents 115,000,000 168,000,000

115 ,000 ,000 168 ,000 ,000

Total Assets 800,000,000 899, 375, 000 936 ,750 ,000

EQUrTYAND LIABILITIES

Capital and Reserves

Stated Capital 560,000,000 560,000,000 560,000,000

Retained Earnings 51,375,000 110,350,000

Shareholder Funds 560,000,000 611,375,000 670,350,000

Non Current Liabilities

Term Loan (125%) 240,000,000 240,000,000 216,000,000

240,000,000 240,000,000 216,000,000

Current Liabilities

Rental Advance 48,000,000 5 0 A O O , O O O

Total Equity and Liabilities 800,000,000 899,375,000 936,750,000

2 Roomcharges fu ll board - USS 150per day.

3 Number of rooms ofGi ragama & Ayr would be58& 34 respectively.

4 Cos to f l odging, f ood & beverages would be55%of the revenue

5 Room rate s & costof sales remain unchanged during the period.

6 Miscellaneous income would be 15%from the total revenue & costof sales 40%from the revenue

7 Admin i s trat ton cos t & Distri bUD onCostwou Idbe 8%& 2%respect ive Iy f rom the revenue at100%room occupancy

8 1 USS Equals LKR115.00

9 Commencement o fCons truc ti on of t he Pro ject -Apri l 2011

Commencement of Commercial operations- November 2012

15 9 160

Free lanka Capital Properties (Pvt) ltd

f r ee L a nk a C a p i ta l H o l d in g s LId -IMo! Pu b l iC O i f 2 1 f re e L a nk a C a p i to ! H o l d in g s L Id - !IliliQ! Pu /) !J c Of f er

Free lanka Capital Properties (Pvt) ltd



Forecasted Cash FlowStatement

FOf the Ye~r Ended 31st March

Cash FlowsFromIUsed in) Operating Activit ies

Received From Customers

Payments to Suppli rs

Payments to others

CashFlow FromOperating Activities

Interest Paid

Net CashFlow From Operating Activities

CashFlows From I fUsed In] Investing Activities

Acquisition of Fixed Assets

Interest Received

Net CashFlows From / (Used In)Investing Activities

CashFlows From I (Used In] Financing Activities

Issueof Share capital

LoanReceived / (Repayments)

RentAdvance

Net CashFlows From / (Used In) Financing Activities

(Decrease) / Increase in cash and Cashequivalents

Cashand Cash Equivalents at Beginning of Period

Cashand Cash Equivalents at Endof Period

2010/201.1

16 1

(Rs.)

16 2

2011/2012 2012/2013

96,000,000

5,000,000

91,000,000

(30,000,000)

61,000,000

(800,000,000)

6,000,000

(800,000 ,000 ) 6 ,000 ,000

560,000,000

240,000,000

48,000,000

800 ,000 ,000 48 ,000 ,000

115,000,000

115,000,000

Notes to the Forecasted Financial Statements

(Rs.)

2013/2014 :2010/2011 2011/c2012 20U/~01l 2013/2£1:14

1 Adminis trat ion Expenses

Overheads

Depreciatio n

100,800,000 5,000,000

15,625,000

5,500,000

15,625,000

21,125,000,500,000 20,625,000

95,300,000

(27,000,000)

68,300,000 2 PROPERTY,PLANTAND EQUIPMENT

Cost

Opening Balance 800,000,000 800,000,000

Additions 800,000,000

Disposals

Closing Balance 800,000,000 800,000,000 800,000,000

Depreciation

Depreciation for the Year 15,625,000 15,625,000

Accum uIated Depreci ation 15,625,000

Closing Balance 15,625,000 31,250,000

Net Book Value 8 O O,C XJ O ,C XJ O 7 8 4 , 3 7 S ,C XJ O 7 6 8 J S O ,C XJ O

6,300,000

6,3oo,0CXl

(24,000,000)

2,400,000

(21,6OQ,0CXl)

53,000,000

115,000,000

Assumptions & Disclosures168,000,000

1 Revenue isexpected to grow by5%annual ly .

2 The Company wil l charge 6months rental in advance askey money and wil l increase periodically in-line with the

incrementsof rental charges.

3 Keymoney receivedw i I I be inves ted at12.5%p.a .

4 3 0 " A . of the costof the project isexpected to be f inanced through abank Loanat the rate of 12.5%p.a. The Company wil l

receive agrace period of 1year only for the repayment of capita! portion.

5 Admin i st ra ti on cos tw il l i nc rease by 1 0 " A . annually.

6 Commencement of Construct ion of the Project -April 2011

Commencement of Commercial operations- April 2012


ANNEXURE G TABLE 1 : C AS H FL O W F O R 20 Y E AR S ( Rs .Mn)



Ensa lwat ta [I) M H P P ro je ct - Viharahena - Deniyaya

Year Capital Cost of Gross Re:payment of Capital Net-lnoorne

Expe~¢litu re Mai ht.ena nee Income + Interest

OthYear 12O

° ° ° °stYear - 2.62 49.89 16+ 12 21.89

2nd Year - 2.62 49.89 16+ 9 .6 24.29

3rd Year - 2.62 49.89 16+ 7.2 26.69

4th Year - 2.62 49.89 16 + 4.8 29.09

5th Year - 2.62 49.89 16+ 2.4 31.49

6th Year - 2.62 49.89 - 49.89

7th Year - 2.62 49.89 - 49.89

8th Year - 2.62 49.89 - 49.89

9th Year - 2.62 49.89 - 49.89

10th Year - 2.62 49.89 - 49.89

11th Year - 2.62 49.89 - 49.89

12th Year - 2.62 49.89 - 49.89

13th Year - 2.62 49.89 - 49.89

14th Year - 2.62 49.89 - 49.89

15th Year - 2.62 49.89 - 49.89

16th Year - 2.62 49.89 - 49.89

17th Year - 2.62 49.89 - 49.89

18th Year - 2.62 49.89 - 49.89

19th Year - 2.62 49.89 - 49.89

20th Year - 2.62 49.89 - 49.89

E XT RA CT S F RO M T HE F EA S IB IL IT Y S T UD IE S

1. POWER PROJECTS

Source : Pre-Feasibility Studycarried out byG&IConsultant Engineers (Pvt J Ltd

INTRODUCTION

The Stream cal led Kal la Dola i sone of t he main branches of r iver Maha Dola. Maha Dola fal ls t o r iver GinGanga at Kiriwa lagama. The project "Ensalwat ta (I) Mini H ydropower P ro ject " i s l ocated on the s trea m cali ed

Kal la Dala. The r iver sys tem and pro ject area are shown in the 1:50,000 tapa sheet prepared by Survey

depar tment o f S ri Lanka. (Sheet No. 81- Rakwana). There are no exist ing hydro power pro ject s in up s tream

or down s tream of t he pro ject area. S ince the pro ject i sa run off t he r iver t ype scheme i tw i ll not regulate t he

river flow.

The scope of t he s tudy i s t o eva luate the feasibi li ty o f bui ld and opera te a 600 K W min i hydro power pro ject

at Kal la Dola, Viharahena, Deniyaya, to sel l elect rical energy to Ceylon Electrici ty Board.

EVALUATION AND CONCLUSION

• ProfltabilityAnalys;s

Cost and Benef it

T o ta l C o s t ( R s. )

Total Cost for civil work 53,000,000 Note: Assumptions 1. Loan component of the capital expenditure = Rs.80 Million

2. I nt eres t f or Loan = 1S%p.a.

32,000,000 3. Opera ti on and maintenance Cos t o f t he pro ject = 5%of t he Income

IRRfor 10Years 22%

= 35,000,000 IRRfor 15Years 26%

IRRfor 20 Years 27%

= 120,000,000

Total Cost for penstock

(including insta Ilation)

Total Cos t f or E& M

Total

Total Benefit

Energy Output f or t he year 3.602 GWHrs

Present t ar if f f or a uni t o f energy = Rs.14.58

Annual Gross Income = (3.602 x 14.58) 1,000,000

Rs.52,517,160

Operation & maintenance Cost (5%) = Rs.2,625,858

Net income for t he year = (52,517,160 - 2,625,858)

= Rs.49,891,302

163 164


T AB LE 2 : P A Y B A CK P E RI O D F OR CA PI TA L I NV ES TMEN T Sensitivi ty Analysis of IRR to capital Cost



Assume: (a)Loan Capital = Rs.80 Mil lion, (b) r= 15%

Total Project cost = Rs.120Million

Assumethe tarif f wil l besamefor future 15years period.

Ifcost increases

Year Net Income Net Income at Cumulative Net Income

from Table 1 Present Value at P resent value

(Rs.Mn) (Rs.Mn)

OthYear 0 0 0

1stYear 21.89 19.04 19.04

2ndYear 24.29 18.21 37.25

3rd Year 26.69 17.61 54.86

4th Year 29.09 16.58 71.44

5th Year 31.49 15.43 86.87

6th Year 49.89 21.45 108.32

7th Year 49.89 18.45 126.77

8th Year 49.89 15.96 142.73

9th Year 49.89 13.96 156.69

10th Year 49.89 11.97 168.66

T AB LE 3

TTotal Cost IRR IRR

( Rs. Mn ) f or 1 0 Ye a rs {OL 1 5 Y e ar s

120 22% 26%

130 20% 24%

140 18% 23%

150 16% 21%

160 15% 20%

170 13% 19%

180 12% 17%

CONCLUSIONS AND RECOMMENDATIONS

Hence, PayBackperiod for loan capital wil l be5th yearaf ter construct ion

PayBackperiod for total capital will be7 yearsafter construction

Theanalysis showsthat it ispossible to obtain 3.602GWHrsof electrical energy with 68%plant factor from kolla Dola

catchment of Ensalwatta (I) Mini Hydro Power Project at Deniyaya.The capital cost per GWHris only about Rs.33.0

mil li on . The interna l rate of return for the pro ject for 20 years i s 27%, which is favourab le , compared to other

investments in the present world. Further, since the proposed project area does not include human habitat and

construct ion of weir does not inundate agricul tural lands, the social problems could not be encountered during

implementation of the project. Therefore, Ensalwatta(I) mini hydro power project isa viable project.Ca l c u l a t i o n of P r es e nt W e i G ht e d A v e r ag e C o s t of Cap i t a l

Total Project cost

LoanCapital

= Rs.120Million

= Rs.80 Million

= 15%

= Rs.40 Million

= 18%

Rateof interest for loan capital

Investment (Ordinary Capital)

Expected Rateof interest

H e n c e .

PresentWeighted AverageCostof capital = (80 x 0.15+ 40x 0.18) 100

80+40

= 16.00%

165 166


Ensalwatta (Il l MHP Project - Viharahena - Oeniyaya T AB LE 1 : C AS H FL O W F O R 2 0 Y EA RS (R s. M n )

~ ',;;,



Total Cost for c iv il work = 47,000,000

Year Capital Cost pJ Gross Net IncomeRep~Y!T!ent ofrEapjtal1

ExpendIture Ma~intel'lah€e' Il'lcom"e + Interest

Oth Year 280

° ° ° °stYear - 6.59 125 36+ 27 62

2nd Year - 6.59 125 36+ 21.6 67.4

3rd Year - 6.59 125 36 + 16.2 72.8

4th Year - 6.59 125 36 + 10.8 78.2

5th Year - 6.59 125 36+ 5.4 83.6

6th Year - 6.59 125 - 125

7th Year - 6.59 125 - 125

8th Year - 6.59 125 - 125

9th Year - 6.59 125 - 125

10th Year - 6.59 125 - 125

11th Year - 6.59 125 - 125

12th Year - 6.59 125 - 125

13th Year - 6.59 125 - 125

14th Year - 6.59 125 - 125

15th Year - 6.59 125 - 125

16th Year - 6.59 125 - 125

17th Year - 6.59 125 - 125

18th Year - 6.59 125 - 125

19th Year - 6.59 125 - 125

20th Year - 6.59 125 - 125

Source: Pre-Feasibility Study carried out by G&I Consultant Engineers (Pvt) Ltd

INTRO DUCTIO N

The Strea m ca II ed Kal la Dola i sone of t he mainbranches of r iver Maha Dola.Maha Oola fa li s t o r iver Gin Ganga

at Kiriwalagama. The project "Ensalwat ta (II) Min i Hydro power P ro ject " i s l ocated on the s tream cal led Kal la

Dola. The r iver sys tem and pro ject area areshown in the 1: 50,000 tapa sheet prepa red by Survey depa rtment

of Sri Lanka. (Sheet No. 81- Rakwa na) .There areno exist ing hyd ropower pro ject s inup s trea m ordown s trea m

of t he pro ject area. S ince the pro ject i sa run off t he r iver t ype scheme i tw i ll not regulate t he r iver f low.

The scope of t he s tudy i s to evaIuate the feasi b i I it y o f bu i Id and opera te a 1,500 KWmin i hyd ro power pro ject

at Kal la Dola, Viharahena, Deniyaya, to sel l elect rical energy to Ceylon Electrici ty Board,


• Profi tabi li ty Analysis

Cost and Benef it

Total Cost (Rs.)


( inc lud ing insta Ilation)

140,000,000

Total Cos t f o r E& M = 93,000,000

Note: Assumptions 1. Loan component of the capital expenditure

2. I nt eres t f or Loan

3. Opera ti on and maintenance Cos t o ft he pro ject

= Rs.180 Million

= 15%p.a.

= 5% of t he Income

Total = 280,000,000

Total Benefit

Energy Output f or t he year = 9.05 GWHrs

IRRfor 10Years

IRRfor 15Years

IRRfor 20 Years

27%

29%

30%

Present t ar if f f or a uni t o f energy = RS.14.58

Annual Gross Income "" (9.05 x 14.58) 1,000,000

Rs.131,949,000


Net income for t he year = (131,949.000 - 6,597,450)

::::: Rs.125,351,550

167 168


T A BL E 2 : P AY B A CK P ER IO D F OR CA PI TA L I NV E S TME NT Sensitivi ty Analysis of IRRto capital Cost



Assume: (a)LoanCapital =: Rs.180Million, (b)r::=15%

Total Project cost::=Rs.280 Million

Assumethe tarif f wil l besamefor future 15yearsperiod.

Ifcost increases

Year Net Income Net Income at Cumulative Net Income

from Table 1 Present V alue at P resent v alue

(Rs.Mn) (Rs.Mn)

OthYear 0 0 0

1st Year 62 53.9 53.9

2ndYear 67.4 50.55 104.45

3rdYear 72.8 48.04 152.49

4th Year 78.2 44.57 197.06

5th Year 83.6 40.96 238.02

6th Year 125 53.75 291.77

7th Year 125 46.25 338.02

8th Year 125 40 378.02

9th Year 125 35 413.02

10th Year 125 30 443.02

T A BL E 3

Total Cost {RR IRR

{Rs.Mnl for 10Years for iL S Years

280 27% 29%

290 26% 29%

300 25% 28%

310 24% 27%

320 23% 26%

330 22% 25%

340 22% 25%

CON CL US I O NS A N D RE COMMENDA TI O NS

Hence, PayBackperiod forloancapital wil l be4th yearaf ter construct ion


Theanalysisshowsthat i t ispossible to obtain 9.05GWHrsof electrical energy with 69% plant factor f rom kol la Dola

catchment of Ensalwatta (II )Mini Hydro Power Project at Deniyaya.The capital cost per GWHrisonly about Rs.30.9

mil li on . The interna l rate of return for the pro ject for 20 years i s 30%, which is favourab le , compared to other

investments in the present world. Further, since the proposed project area does not include human habitat and

construction of weir does not inundate agricul tural lands, the social problems could not be encountered during

implementation of the project.Therefore, Ensalwatta(II) mini hydro power project isa viable project.Calculation of Present Weighted Average Cost of Capital

Total Project cost Rs.280 Million

Loan Capital ::= Rs.180Million

Rateof interest for loan capital ::= 15%

Investment lOrdinary CapitaI) As.100Million

Expected Rateof interest ::= 18%

Hence,

Present Weighted Ave r age Cost of capital : :=18 )(0.15+ 100x 0.18) 100

180+100

::= 16.00%

169 170


Ensalwatta Tea Factory MHP Pro ject - Kadifipana - Deniyaya T AB LE 1 : C AS H FL O W F O R 2 0 Y EA RS (R s. M n )

~ ',;;,



Total Cost for c iv il work = 19,000,000



Oth Year 48 1° ° °

1stYear - 1 19.11 8 +4.8 6.31

2nd Year - 1 19.11 8+3.6 7.51

3rd Year - 1 19.11 8 + 2.4 8.71

4th Year - 1 19.11 8 + 1.2 9.91

5th Year - 1 19.11 19.11

6th Year - 1 19.11 - 19.11

7th Year - 1 19.11 - 19.11

8th Year - 1 19.11 - 19.11

9th Year - 1 19.11 - 19.11

10th Year - 1 19.11 - 19.11

11th Year - 1 19.11 - 19.11

12th Year - 1 19.11 - 19.11

13th Year - 1 19.11 - 19.11

14th Year - 1 19.11 - 19.11

15th Year - 1 19.11 - 19.11

16th Year - 1 19.11 - 19.11

17th Year - 1 19.11 - 19.11

18th Year - 1 19.11 - 19.11

19th Year - 1 19.11 - 19.11

20th Year - 1 19.11 - 19.11

Source: Pre-Feasibility Study carried out by G&IConsultant Engineers (Pvt) Ltd

INTRO D UCTION

The Stream cal led K ir iweldo la Kandura i sone of t he branches of r iver Maha Oola. Maha Oola fal ls t o r iver Gin

Ganga at Kiriwalagama. The project "Ensalwat ta Tea Factory Mini Hydro power Project"is located on the stream

K ir iwe ldo la Kandura. The r ive r sy stem and p ro je ct a rea are s hown in t he 1 : 50,000 t apa sheet p repa red by

Survey depar tment o f S ri Lanka. (Sheet No. 81 - Rakwana). There are no exist ing hydro power pro ject s in up

stream or down stream of the project area. Since the project is a run off the river type scheme it will not

reg ulate the river f low.

The scope of t he s tudy i s t o eva luate the feasibi li ty o f bui ld and opera te a 225 I(W min i hydro power pro ject a t

Kiriweldola Kandura, Kadil ipana, deniyaya, to sel l elect rical energy to Ceylon Electrici ty Board.


• Profitabiflty Analysis

Cost and Benef it

T o ta l C o st ( Rs .)


(l ncludi ng instaI lat ion)

12,000,000

Energy Output f or t he year

= 17,000,000 Note: Assumptions

= 48,000,000

IRRfor 10Years

IRRfor 15Years

= 1.38 GWHrs IRRfor 20 Years

= Rs.14.58

= (1.38 x 14.58) 1,000,000

Rs.20,120,400

1. Loan component of the capital expenditure



= Rs.32 Million

= 15%p.a.

= 5% of t he Income

Total Cos t f o r E& M

Total

Total Benefit 24%

27%

28%

Present t ar if f f or a un it o f energy

Annual Gross Income


Net income for t he year = (20,120,400 - 1,006,020)

Rs. 19,114,380

171 172





Assume: (a)LoanCapital = Rs.32 Mil lion, (b)r = 15%

Total Project cost = Rs.48 Million


Ifcost increases

Year Net Income Net I ncome at Cumulative Net Income

from Table 1 Present Value at P resent value

(Rs.Mn) (Rs.Mn)

OthYear 0 0 0

1st Year 6.31 5.48 5.48

2ndYear 7.51 5.63 11.11

3rd Year 8.71 5.66 16.77

4th Year 9.91 5.64 22.41

5th Year 19.11 9.36 31.77

6th Year 19.11 8.21 39.98

7th Year 19.11 7.07 47.05

8th Year 19.11 6.11 53.16

9th Year 19.11 5.35 58.51

10th Year 19.11 4.58 63.09

T A BL E 3

Total Cost {RR IRR

{Rs.Mnl for 10Years for iLSYears

48 24% 27%

50 23% 26%

52 22% 25%

54 21% 24%

56 20% 24%

58 20% 23%

60 19% 22%




Theanalysis shows that it ispossible to obtain 1.38GWHrsof electrical energy with 69%plant factor from TeaFactory

(Kiriweldola Kandura) catchment in Deniyaya.The capital cost per GWHr isonly about Rs.30.9million. The internal

rateof return for the project for20 yearsis28%,which isfavourable, compared to other investments inthe present

world. Further, since the proposed project areadoes not include human habitat and construction of weir does not

inundate agricul tural lands, the social problems could not be encountered during implementation of the project .

Therefore,TeaFactorymini hydro power project isa viable project.Calculation of Present Weighted Average Cost of Capital

Total Project cost Rs.48Million

Loan Capital = Rs.32Million

Rateof interest for loan capital = 15%

Investment lOrdinary CapitaI) Rs.16Million

Expected Rateof interest = 18%

Hence,

PresentWeighted Average Cost of capital = (32)(0.15+ 16x 0.18) 100

32+16

= 16.00%

173 174


Beverly MHPProject - Kadilipana - Deniyaya T AB LE 1 : C AS H FL O W F O R 2 0 Y EA RS (R s. M n )

~ ',;;,



Total Cost for civil work 60,000,000



OthYear 140 0 0 0°

1stYear - 3.43 65.21 20+ 13.5 31.71

2nd Year - 3.43 65.21 20 + 10.5 34.71

3rd Year - 3.43 65.21 20+ 7 .5 37.71

4th Year - 3.43 65.21 20+ 4 .5 40.71

5th Year - 3.43 65.21 20 + 1.5 53.71

6th Year - 3.43 65.21 - 65.21

7th Year - 3.43 65.21 - 65.21

8th Year - 3.43 65.21 - 65.21

9th Year - 3.43 65.21 - 65.21

10th Year - 3.43 65.21 - 65.21

11th Year - 3.43 65.21 - 65.21

12th Year - 3.43 65.21 - 65.21

13th Year - 3.43 65.21 - 65.21

14th Year - 3.43 65.21 - 65.21

15th Year - 3.43 65.21 - 65.21

16th Year - 3.43 65.21 - 65.21

17th Year - 3.43 65.21 - 65.21

18th Year - 3.43 65.21 - 65.21

19th Year - 3.43 65.21 - 65.21

20th Year - 3.43 65.21 - 65.21

Source: Pre-Feasibility Study carried out by G&IConsultant Engineers (Pvt) Ltd

INTRO DUCTIO N

The S tream cal led Koluotuwe Dola (ki riwe l Dola) i sone of t he main branches of r iver Maha Dola. Maha Dola

f al ls to r ive r Gi n Ganga at Ki ri wa lagama . The p ro je ct " Beve rl y Mi ni Hyd ro powe r Proj ect" is l oca ted on the

st ream ca ll ed Ko luotuwe Do la . The r ive r system and proj ect a rea a re shown i n the 1 : 50, 000 topo shee t

prepared by Survey depar tment o f S ri Lanka. (Sheet No. 81 - Rakwana). There are no exist ing hydro power

pro ject s in up s tream or down s tream of t he pro ject area. S ince the pro ject i sa run off t he r iver t ype scheme i t

w il l not regulate t he r iver f low.

The scope of t he s tudy i s to evaIuate thefeas ib i I it y o f bui I dand opera te a 750 KWmin ihydro power pro ject a t

Koluotuwe Dola, KadiJ ipana, Deniyaya, to sel l elect rical energy to Ceylon Electrici ty Board.


• ProfitabiliryAnalysis

Cost and Benef it

T o ta l C o st ( Rs .)


(includi ng insta Ilation)

30,000,000

Energy Output f or t he year

Note: Assumptions

= 50,000,000

:= 140,000,000

IRRfor 10Years

IRRfor 15Years

IRRfor 20 Years

= 4.708 GWHrs

= Rs.14.58

= (4.708 x 14.58) 1,000,000

Rs.68,642,640

1. Loan component of the capital expenditure



= Rs.90 Million

= 15%p.a.

= 5% of t he Income

Total Cos t f o r E& M

Total

Total Benefit

27%

31%

31%

Present t ar if f f or a uni t o f energy

Annual Gross Income


Net income for the year (68,642,640 - 3,432,132)

= Rs.65,210,508

175 176





Assume: (a)LoanCapital = Rs.90 Mil lion, (b)r = 15%

Total Project cost = Rs.140Million


Ifcost increases

Year Net Income Net I ncome at Cumulative Net Income

from Table 1 Present V alue at P resent v alue

(Rs.Mn) (Rs.Mn)

OthYear 0 0 0

1st Year 31.71 27.58 27.58

2ndYear 34.71 26.03 53.21

3rdYear 37.71 24.51 78.12

4th Year 40.71 23.2 101.32

5th Year 53.71 26.31 127.63

6th Year 65.21 28.04 155.67

7th Year 65.21 24.12 179.79

8th Year 65.21 20.86 200.65

9th Year 65.21 18.25 218.9

10th Year 65.21 15.65 234.55

T A BL E 3

Total Cost {RR IRR

{Rs.Mnl for 10Years for iL S Years

140 27% 31%

150 25% 29%

160 23% 27%

170 22% 26%

180 20% 24%

190 19% 23%

200 17% 22%



PayBackperiod fortotal capital wil l be6 yearsafter construction

The analysisshows that i t ispossible to obtain 4.708 GWHrsof electrical energy with 71% plant factor f rom Beverly

catchment Deniyaya.Th e capital cost per GWHris only about Rs.29.0mi ll ion, which iscomparat ively lessthan the

capitaIcost forather simi lar mini hydro power projects. The internaI rateof return forthe project for 20yearsis 31%,

which isfavourable, compared to other investments in the present world. Further,since the proposed project area

does not include human habitat and construction of weir does not inundate agricul tural lands, the social problems

could not be encountered during implementat ion of the project . Therefore, Beverly mini hydro power project isa

viable project.Calculation of Present Weighted Average Cost of Capital

Total Project cost Rs.140Million

Loan Capital = Rs.90Million

Rateof interest for loan capital = 15%

Investment lOrdinary CapitaI) Rs.50Million

Expected Rateof interest = 18%

Hence,

PresentWeighted Average Cost of capital = (90)(0.15+ 50x 0.18) 100

90+50

= 16.00%

177 178


2 . LE IS U R E PRO JEC T S EVALUATIONANDCONCLUSION.

• Objecti ve



Giragama Project

EXECUTIVESUMMARY

Objective of this chapter isto evaluate the proposed project using projected cashf low statement for the

operationa Iyears0 - 10,to ascertain the;

a) Financial Feasibility

b} Loan repayment capacity

c)Sensitivity of possible fisk elements

Source: Financial Feasibility Study carried out by B.R.De Silva& Company (Chartered Accountants).

This report examines the financial feasibility of proposed project "Tea Leaf Giragama"at Kandy.The primary

objective of this project isto establ ish a hotel catering to foreign and local tourists. Theest imated total costof

the project is;• Evaluat ion Technique

Hotel Backup 118.6

Theevaluation isbasedon the following financial models.

a}Pay- Backperiod.b)Account ing rateof return - ARR

c)Netpresent value - NPV

Capital Item Rs:Mn

Building 383.0

Preliminary Expenses 2.4 • Projected Cashf lows( R s .Mn J

Total 504.0

TermLoan 110.3

Year Cash generation from Cash generation from Cash generation from Net c ash f low

operation financing activities investing activities

0 - 503.9 (503.9) -

1 95.7 (37.3) - 58.4

2 146.6 (34.6) - 112.1

3 139.7 (31.8) - 107.9

4 152.7 (29.1) - 123.7

5 168.3 - - 168.3

6 174.5 - - 174.5

7 181.1 - - 181.1

8 187.6 - - 187.6

9 194.3 - - 194.3

10 201.2 - - 201.2

The costof the project isexpected to bef inanced asfol lows;

Method Rs:Mn

Equity Financing 393.7

Total 504.0

Summary of the financial highlights aregiven below,

Bvaluatiolil metRed Result

Payback Period 4 Years

NPV 350.8Mn

ARR 35.1%

• Evaluat ion under Pay- BackPeriod method

Pay- Backperiod isthetime required forthe cashinflows froma capital investment project to equalthe cashout.

(Rs .MnJonc l u s i o n

B a s ed o n a b ov e a n a ly s is it c o ul d b e c o n c lu d ed t ha t p ro p o se d p r oj ec t w o u ld b e f in a nc ia ll y v ia b le t o t he i nv e st or .

179

Year Initial Investment Projected Cumulative

Cash In Flows CashFlows

0 (503.9) - (503.9)

1 95.7 (408.2)

2 146.6(261.5)

3 139.7 (121.8)

4 152.7 30.9

5 168.3 199.2

6 174.5 373.7

7 181.1 554.8

8 187.6 742.5

9 194.3 936.8

..f'! 10 201.2 1,138.0

. (Jr 180

INTRODUCTION

This report examines in detail the f inancial viabi li ty of set t ing up a hotel at Giragama (Kandy) under a 3 Star

Category to cater to foreign tourists.

The Report wil l present the f inancial feasibil ity of proposed project to prospect ive investors, bankers, and

other stakeholders. Thecontents of the report will include Industry analysis,economic forecasts, investment

andfinancial viability of the proposed project.

F r ee L a nk a C a p , ro Ia l dl n gs L t d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H a ld in gs U d -IMol Pu b l ic O i f 2 1

The total i nves tment o f t he pro ject couId berecovered w it hi na per iod of4 years. An NPVof Rs:350.8Mn (approx) ata discount rate of 10% ref lects a strong f inancial v iabi li ty of the project .

• Eva luat ion under Account ing Rate of Return (ARR)method • D eb t s e rv ic e c o ve r



( R s .M n )

The Account ing rate of return means, the rat io of the average annual net profi t on average capital investment over

the project duration.

Debt service cover iscalculated on the basis given bel low.

( R s .M n )Debt Service cover Profit berore Inle1!E!stand Tax

Loan tnterestli'fearc Rrofif Before E>eprecj-atio 0, Depredatron Prdfit Before'lnterest &

lnrerest &Tax T a x

1 157.5 34.0 123.5

2 153.0 34.0 119.1

3 145.4 34.0 111.44 182.1 34.0 148.1

5 189.1 34.0 155.2

6 196.4 34.0 162.4

7 203.8 34.0 169.8

8 211.4 34.0 177.4

9 219.1 19.2 200.0

10 227.1 19.2 207.9

Estimated Total Profit 1,574.9

Year Profit before Tax Loan Interest Payments PBI&T Debt service

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

1 113.8 9.8 123.5 12.7

2 112.1 7.0 119.1 17.0

3 107.2 4.2 111.4 26.2

4 146.6 1.5 148.1 99.2

5 155.2 - 155.2 -

6 162.4 - 162.4 -

7 169.8 - 169.8 -

8 177.4 - 177.4 -

9 200.0 - 200.0 -

10 207.9 - 207.9 -

Estimated Avg. Annual Profit after Depreciation

before Interest & Tax

1575Project would earn enough return to repay interest.

Avg. Book Value of Capital employed. 448.5• S e n si ti v it y A n a l ys is

ARR 35.1%Sensitivi ty to decrease Avg.Occupancy Rateup to 60%

Year P ro jected Net Cash F lows D iscounting Rate @ 10% Discounted Cash Flows

0 (503.9) 1 (503.9)

1 58.4 0.909 53.1

2 112.1 0.826 92.6

3 107.9 0.751 81.0

4 123.7 0.683 84.5

5 168.3 0.621 104.5

6 174.5 0.564 98.5

7 181.1 0.513 92.9

8 187.6 0.467 87.5

9 194.3 0.424 82.4

10 201.2 0.386 77.6

Year aiscou Rted cash flow @ 1€I% Debt serrv,icecov¢r

(R ! ; . M _ n )

0 (504) -

1 35 9.60

2 68 12.73

3 59 19.19

4 49 57.22

5 64 -

6 60 -

7 56 -

8 53 -9 49 -

10 46 -

Anaverage Account ing Rateof Return of 35.1%isfairly a high rate of return.

• E v al ua ti on u nd e r N e t P r e se n t V a lu e ( N P V / m e th od

Discount rate for the NPVcalculation isconsidered as10%.This isarrived after considering cost of t he Equit y and

Debt.

NPV 35

18 2

NPV 350.8

18 1


Conc l u s i o n

PayBack "" 4Years Ayr Project



NPV

ARR

"" Rs:350.8Mn

"" 35.1% Source: F inancial Feasibi li ty S tudy car ri ed out by B .R .DeS i lva & Company (Chartered Accountants).

Total cos t o f t he pro ject cou ld be recovered w it hin a per iod of t he 4 years.This isa good indicat ion of the strong

financial viability of the project.

EXECUTIVE SUMMARY

The NPVof approximately Rs:350.8Mn isa good indicat ion. Potential cashf lows after year 10arenot considered for

t h i seva luat ion. The fac t t ha t t he est imated l if e t ime of t heprojec t wou ld not beI im it ed to 10year per iod needs to

be considered. After the ful l set tlement of the loan, project 's cashf lows would be more favorable.

This repor t examines the f inancial f easibi li ty o f t he proposed pro ject "Tea Leaf Ayr" a t Padukka. The primary

objec ti ve of t hi s pro ject i s to estab li sh a hotel cater ing to foreign and local t ouri st s. The est imated total cos t o f

t he pro ject i s;

Inthis evaluat ion we have not considered the recovery of res idual value of investment, (value of bui lding & other

f ixed assets) asthe project isnot l imited to period of 10years. Recovery of res idua Ivalueof investment would also

be a relevant cash inf low which needs to beconsidered by potential investors.

Capital Item Rs:Mn

Building 225.0

Hotel Backup 69.4

Preliminary Expenses 1.6

Total 296.0ash f low before int eres t i nd icates that t he pro ject has adequate capac it y t o servi ce the loan and interes t o f t he

proposed loan. This isa good indicat ion. Potential investors would consider this fact.

Based on above analysis i t could be cond uded that proposed pro ject wou ld bef inanc ia I ly v iab le f rom the poin t o f

an investor.

The cos t o f t he pro ject i sexpec ted to be f inanced as fol lows ;

Method Rs:Mn

Equity Financing 231.4

Term Loan 64.6

Total 296.0

Summary of t he f inancial h ighl ight s are g iven below ,

IEvaluation method Result

Payback Period 4 Years

NPV 19S.5Mn

ARR 34.1%

Conc l u s i o n

B a s ed o n a b ov e a n a ly s is itc ou ld b e c o nc lu d ed t ha t t he p r op o s ed p r oj e ct w o u ld b e f in a n C ia ll y v ia b le to a n i n v es t o r.

INTRODUCTION

This repor t examines in detai l t he f inancial v iabi li ty o f set ti ng up a hotel a tPadukka under a3 S tarCategory to

cater to foreign tourists.

The Repor t w il l p resent t he f inancial f easibi li ty o f proposed pro ject t o prospec ti ve inves tors , bankers , and

other stakeholders. The contents of the report wil l inc lude Industry analysis, economic forecasts , investment

and f inancial v iabi li ty of the proposed project .

183 184


EVALUATION AND CONCLUSION. The total i nves tment o f t he pro ject couId berecovered wi th i n aperiod of4 yea rs,

• Objective • Eva luat ion under Account ing Rateof Return (ARR)method



• P ro jected Cash f lows( R s .M n )

Objec ti ve of t hi s chapter i s t o eva luate the proposed pro ject using pro jected cash f low s ta tement f or t he

operational yea rs 0- 10, t o ascer ta in t he;


b) Loan repayment capacity

c) Sensi tivi ty of possi ble risk elements

The Account ing rate of return means, the rat io of the average annual net profi t on average capital investment over


(Rs .Mn)

The eva luat ion i sbased on the fol lowing f inancial models.

a) Pay- Back period.

b)Accounting rate of ret urn - ARR

c )Net present value - NPV

'(ear P,r0fit Before DepreciatiOti, Depreciation ;Pront B'efore Interest &

Interest & fax laxI I

1 90.8 19.9 70.9

2 88.1 19.9 68.2

3 83.3 19.9 63.4

4 105.0 19.9 85.0

5 108.9 19.9 88.9

6 112.8 19.9 92.9

7 116.9 19.9 97.0

8 121.0 19.9 101.1

9 125.3 11.3 114.0

10 129.5 11.3 118.3

• Evaluat ion Technique

Year Cash generation from Cash generation from Cash generation from Net cash flow


0 - (296.1) 296.1 -

1 57.8 - (21.9) 35.9

2 84.2 - (20.3) 63.9

3 79.9 - (18.7) 61.2

4 87.7 - (17.1) 70.6

5 96.8 - - 96.8

6 100.5 - - 100.5

7 104.1 - - 104.1

8 107.6 - - 107.6

9 111.3 - - 111.3

10 115.0 - - 115.0

Estimated Total Profit 899.6



90.0

Avg. Book Value of Capital employed. 263.7

ARR 34.1%

Anaverage Accou nting Rateof Returnof 35.1% is fair lya high rate of return.

• E v al ua ti on u nd e r N e t P r es en t V a lu e ( N P V / m e th od

• Eva luat ion under Pay - Back Per iod me thod

Pay - Backper iod i s the t ime requi red for t he cash inf lows f rom acapi ta l i nves tment pro ject t o equal t he cashout.

( R s .M n )

Discount rate for the NPVcalculation isconsidered as10%.This isarrived after considering cost of the Equity and

Debt.

(Rs.Mn)

Year Initial Investment Projected Cumulative

Cash In Flows Cash l1!ows

0 (296.1) - (296.1)

1 57.8 (238.3)

2 84.2 (154.1)

3 79.9 (74.2)

4 87.7 13.5

5 96.8 110.3

6 100.5 210.8

7 104.1 314.8

8 107.6 422.5

9 111.3 533.7

10 115.0 648.7 1 \

~18 5 J-

IYear Proj ected Ne t ( ash F lows Di scoun ti no Ra te @ 10% Discounted Cash Flows

0 (296.1) 1.0 (296.1)

1 35.9 0.9 32.6

2 63.9 0.8 52.8

3 61.2 0.8 46.0

4 70.6 0.7 48.2

5 96.8 0.6 60.1

6 100.5 0.6 56.7

7 104.1 0.5 53.4

8 107.6 0.5 50.2

9 111.3 0.4 47.2

10 115.0 0.4 44.3

NPV 195.5

186


NPV o f t he p r oj ec t i s R s : 1 9 5. 5 Mn ( a pp ro x ) a t d i s co u nt in g r a te 1 0% r e f le c ts s tr on g f in a nc ia l v ia b il it y o f t h e p r oj ec t. Conclusion

• D eb t s er vi ce c ov er PayBac k " " 4 Y ea rs



NP V

AR R

" " R s :194 . 5Mn

" " 3 4 .1%e b t s e rv ic e c o ve r i s c a lc u la t ed o n t he b a si s g i v en b e ll ow .

D e b t S e r vi ce c o ve r P r o fi t be f o re I n te r est an f il ": r ax

Loan I n te r estT ot al c os t o f t he p ro je ct c ou ld b e r ec ov er ed w it hi n a p er io d o f t h e 4 y ea rs . T h is is a g oo d i nd ic at io n o f t he s tr on g

f in a n ci al v ia b il it y o f t h e p r oj ec t.

Year P rofit before Tax Loan Interest Payments PBI&T Debt service

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

1 65 .2 5.7 70.9 12.4

2 64.1 4.1 68.2 16.6

3 60.9 2.5 63.4 25 .4

4 84 .1 0.9 85 .0 97 .0

5 88.9 - 88.9 -

6 92.9 - 92.9 -

7 97.0 - 97.0 -

8 lOLl - 101.1 -

9 114.0 - 114.0 -

10 118.3 - 118.3 -

T h e NPV o f a p pr o xi ma t el y R s : 1 95 .5 M n i s a g o o d i nd ic a ti on . P o te n ti al c a sh f lo w s a f te r y e ar 1 0 a r e n o t c o ns id e re d f o r

t his e va l u at io n. T he f ac t t ha t t he e st i m at ed l if e t i me o f t h e p ro je ct w ou I d n o t b e l im i te d t o 1 0 y e a r p e ri od n ee ds t o

b e c o n s id er ed . A ft er t he f u I I se tt le m en t o f t h e l oa n, p ro je c t' s c a sh f lo w s w o u I d b e m o re f av o ra b le .

I n t hi s e va lu at io n w e h av e n ot c on si de re d t he r ec ov er y o f r es id ua l v al ue o f i nv es tm en t, ( va lu e o f b ui ld in g & o th er

f ix ed a ss et s) a s t he p ro je ct i s n ot l im it ed t o p er io d o f 1 0 y e a rs . R ec ov er y o f r es id u a l v a Iu e o f t he i nv es tm e nt w ou I d

a ls o b e a r el ev an t c as h i nf lo w w h ic h n e ed s t o b e c o n si de re d b y p ot en ti al i nv es to rs .

C as h f lo w b ef or e i nt er es t i nd i ca te s t ha t t he p ro je ct h as a de qu at e c a p ac i ty t o s er vic e t he l oa n a n d in te re st o f t he

p ro p os e d l oa n . T h i s i s a g o o d i nd ic a ti on . P o te n ti al i nv e st o rs w o ul d c o ns id e r t hi s f a ct .

B as ed o n a b ov e a n a ly si s i t c o u I d b e c o n cl ud ed t ha t p ro po se d p ro je ct w ou I d b e f i na n ci al ly v ia bl e f ro m t he p oi nt o f

an i nves t or .

P ro je ct w ou ld e ar n e no ug h r et ur n t o r ep ay i nt er es t.

• Sensitivity Analysis

S e ns it iv it y t o d ec re as e A vg . O c c up a nc y R at e u p t o 6 0%

Year Discounted €ash flow @ 10% I Deb t s e r ~ vi c e cover

('8s . Mn J

0 (296.1) -

1 21.6 9.3

2 38.1 12.2

3 32.6 18.2

4 26.9 S 4.2

5 36.1 -

6 33.8 -

7 31.5 -

8 29.3 -

9 27.3 -

10 25.3 -

NP V 6. 5

A t t h is s ta g e t h e P r oj ec t w o ul d e a rn R s : 6. 5 Mn p ro f it .

187 188


3 . R E AL E S T AT E & C O MM ER CIA L P RO P ER TY D EV LO P ME NT P RO J EC TS • Evaluat ion Technique

Free Lanka Capital Properties (Pvt) Ltd The eva luat ion i sbased on the fol lowing f inancial models.



a)Pay- Back period.

b)Accounting rate of ret urn - ARR

c )Net present value - NPV

Source: F inancial Feasibi li ty S tudy car ri ed out by B .A .De S il va & Company (Chartered Accountants).

EXECUTIVE SUMMARY• Pro jected Cash f lows

This repor t examines the f inancial f easibi li ty o f proposed commerc ia l propert y development a t No. 17Cast le

street, Colombo 08.

(Rs.Mn)

Building 625.0

Year Cash g eneration from Cash g eneration from Cash generation from Net cash flow


0 - 800.0 (800.0) -

1 89.4 (54.0) (38.4) (3.0)

2 83.4 (51.0) (9.1) 23.3

3 89.4 (48.0) (4.8) 36.7

4 97.2 (45.0) (5.2) 47.0

5 103.6 (42.0) (5.7) 55.8

6 112.5 (39.0) (6.3) 67.2

7 122.2 (36.0) (7.0) 79.3

8 133.0 (33.0) (7.7) 92.3

9 144.8 (30.0) (8.4) 106.4

10 152.5 {27.0} (9.3) 116.2

Capital Item Rs:Mn

Land 175.0

Total 800.0

The cos t o f t he pro ject i sexpec ted to bef inanced as fo ll ows;

Methpd LRs:Mn

EquityFinanci ng 560.0

Term Loan 240.0

Total 800.0

Summary of t he f inancial h ighl ight s are g iven below , • Eva lua tio n under Pay - Back Pe ri od me thod

Pay- Backperiod is the t ime required for the cash inf lows from a capital investment project to equal the cashout .

Payback Period 8Years

NPV (478 Mn) (Rs.Mn)

ARR 15% I Year Initial Investment Projected Cumulative

Cash In Flows Cash Flows

0 (800.0) - (800.0)

1 89.4 (710.6)

2 83.4 (627.2)

3 89.4 (537.8)

4 97.2 (440.6)

5 103.6 (337.0)

6 112.5 (224.5)

7 122.2 (102.3)

8 133.0 30.7

9 144.8 175.5

10 152.5 328.0

INTRODUCTION

This repor t examines indeta il t he f inancial v iabi li ty o f proposed Commerc ia l propert y development a t No. 17,

Castle Street, Colombo 08.

I twi ll present the f inancial feasibi li ty to prospective investors, bankers, and other stakeholders

EVALUATION AND CONCLUSION.

• Objective

Objec ti ve of t hi s chapter i s t o eva luate the proposed pro ject using pro jected cash f low s ta tement f or t he

opera ti ona I years 0 - , 0 , t o ascer ta i n t he;


b) Loan repayment capacity

c)Sensit iv ity of possible risk elementsThe total i nves tment o f t he pro ject couId berecovered w it h ina per iod of8 years .

189 19 0

F r ee L a nk a C a p , ro Ia l dl n gs L t d - l n il i QI P u /) ! Jc O f f err ee L an ka C a pi /a l H a ld in gs U d -IMol Pu b l ic O i f 2 1

• Evaluation under Accounting Rate of Return (ARR) method NPVof the project is Rs:(478Mn) (approx) at discounting rate 10% reflects a negative. In evaluating cash flows under

the NPVmethod, cashf low generated after year 10hasbeen ignored. The fact that the est imated econom ic l i fe t ime

of t he pro ject wou ld not beI im it ed upto year 10needs to beconsidered.he Account ing rate of return means, the rat io of the average annual net profi t on average capital investment over



( R s .M n )


( R s .M n )

Further, Residual value/Market appreciat ion of the investment property inc luding land has not been considered

s ince the inves tment i snot recovered at t he end of year 10.

Year Profit Before Depreciation, Depreciation Profit Before Interest &

Interest & Tax Tax

1 67.8 (15.6) 52.2

2 85.1 (15.6) 69.4

3 94.6 (15.6) 79.0

4 105.1 (15.6) 89.5

5 116.8 (15.6) 101.1

6 129.7 (15.6) 114.0

7 143.9 (15.6) 128.3

8 159.8 (15.6) 144.1

9 177.2 (15.6) 161.6

10 196.6 (15.6) 181.0

• D eb t s e rv ic e c o ve r

Debt service cover iscalculated on the basis given bel low.

Debt Service cover = Profi t before Interest and Tax

Loan Interest

Estimated Total Profit 1,120.3

Year Profit before Tax

:1

Interest PBI&T Debt service

(Rs.Mn) ~(Rs.Mn~ ~(Rs.Mn) cover

1 22.2 30.0 52.2 1.74

2 42.4 27.0 69.4 257

3 55.0 24.0 79.0 3.29

4 68.5 21.0 89.5 4.26

5 83.1 18.0 101.1 5.62

6 99.0 15.0 114.0 7.60

7 116.3 12.0 128.3 10.69

8 135.1 9.0 144.1 16.01

9 155.6 6.0 161.6 26.94

10 178.0 3.0 181.0 60.33



101.8

Avg. Book Value of Capital employed. 680.0

ARR 15.0%Project would earn enough return to repay interest due.

Average account ing rate of return of 15% isfairly high rate of return. • S e n sI ti v it y A n a l ys is

• E v al ua ti on u nd e r N e t P r e se n t V a lu e ( N P V / m e th od Sensitivi ty to decrease Avg. Occupancy upto 60%.

NP V (478)

Year Discou nted cash f low @ 10% Debt service cover

(Rs.MnJ

0 (800) -

1 (16) 1.07

2 (4) 1.34

3 2 1.75

4 7 2.32

5 9 3.12

6 13 4.29

7 15 6.12

8 18 9.28

9 20 15.77

10 19 35.67

ifear Projected NetLCasl1 Flows Dis<l :OI!Hi lt ingRate@ 1.0% li>is-G'ountedCash FI0WS

0 (800.0) 1 (800)

1 (3.0) 0.909 (3)

2 23.3 0.826 19

3 36.7 0.751 28

4 47.0 0.683 32

5 55.8 0.621 356 67.2 0.564 38

7 79.3 0.513 41

8 92.3 0.467 43

9 106.4 0.424 45

10 116.2 0.386 45

NPV (716)

191 192


A t t h i s st ag e t he P ro je ct w ou ld e a rn R s: 7 16 M n .

Conclus ion



PayBac k

N P V

AR R

'" 8Years

= Rs :(478) Mn

= 15%

T ot al c os t o f t he p ro je ct c ou ld b e r ec ov er ed w it hi n a p er io d o f t h e 8 y e a rs . T hi s i s a g o o d in d ic at io n o f t h e f in a nc ia l

v ia b il i ty o f t h e p ro je c t.

T he N P V o f a p p ro xi ma te ly R s: (478M n ) i s n o t a g o o d i nd ic at io n. T he f ac t t ha t t he p ot en ti a I c a sh f lo ws a ft er y ea r 1 0

a re n ot c on si de re d a n d t h at t he e st im a te d li fe t i m e o f t he p ro je ct w ou I d n o t b e Iim i te d t o a 1 0 y e a r p e ri od n ee d s t ob e c on sid e re d. A ft er t he f u I I se tt le m en t o f t h e l oa n, p ro je ct 's c as h f l ow s w o u I d b e m o re f avora ble.

I n t h is e va lu a ti on w e have n ot c on sid e re d t he recovery o f r e si du a l v a lu e ( M ar ke t a p pr ec ia ti on ) o f t h e i nv e st m en t,

( va l u e o f L an d, b u i Id i n g & o th er f ix ed a ss et s) a s t he p ro je ct i s n ot l im i t ed t o p er io d o f 1 0 y e a rs . R ec ov er y o f r e si d u al

va l u e o f in ve st me n t w ou I d a I so b e a r el ev a n t c as h i n fl ow w hi ch n ee ds t o b e c o ns id e re d.

C a sh f lo w b e fo re i nt er es t i nd ic at es t ha t t he p ro je ct h as a de qu at e c ap ac it y t o s er vi ce t he l oa n a nd i nt er es t o f t he

p r op o se d l oa n . T h is i s a g o od i nd ic a ti on . P o te n ti al i nv e st or s w o ul d c o ns id e r t h is f ac t.

B ase d o n a bove a na l ys is it c ou I d b e c on d u de d th at c on sid eri n g it s n et c as h g e ne ra tio n a fte r t he y ea r lO a n d

p ro je ct's a bilit y t o m ee t its d eb t w ith in p erio d o f 1 0 y e ars a nd c as h in flo w g en era tio n fro m recovery o f r es idua l

v al ue o f i nv es tm e nt , a lt ho ug h p ro je ct w o ul d n ot b e p ro fi ta bl e w it hi n p er io d o f 1 0 y e ar s, N e t c a sh f lo ws w ou ld b e

s tr on g a ft er y ea r 1 0 f ro m t he p oin t o f a n i n ve st or .This page is intent ionally kept blank

Free Lanka Capital Holdings - Prospectus

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