Achieving new heights · Geoffrey Bawa in the style of an 18th Century Dutch village, and experience true Sri Lankan hospitality. 10 Serendib Hotels PLC I Annual Report 2012/13 In

Achieving new heights

SERENDIB HOTELS PLCANNUAL REPORT 2012/13

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NAME OF THE COMPANYSerendib Hotels PLC

LEGAL FORM A Public Quoted Company with Limited Liability incorporated on 9 September 1966 under the Companies Ordinance No. 51 of 1938 (Cap 145) and re-registered under the Companies Act No. 7 of 2007.

COMPANY REGISTRATION NOPQ 223

BOARD OF DIRECTORSA.N. Esufally – Chairman (Alt V.H.A. Perera)D.T.R. De Silva – Managing DirectorJ.C.L. De Mel H.N. Esufally - (Alt. Ms. K.A.C. Wilson)W.M. De F. ArsakularatneProf. L.D.K.B. GamageE.J.D. RajakariarM.A. JafferjeeR.N. Athukorala

REGISTERED OFFICELevel 5, Hemas House, 75, Braybrooke Place, Colombo 02.Tel : +94 (11) 4790500-6Fax : +94 (11) 2438933E-mail: [email protected]: www.serendibleisure.com SECRETARIES & REGISTRARSHemas Corporate Services (Pvt) Ltd.Level 9, Hemas House, 75, Braybrooke Place, Colombo 02 Tel : + 94 (11) 4731731Fax : +94 (11) 4731777

MANAGING AGENTSerendib Leisure Management Ltd.

AUDITORSErnst & YoungChartered Accountants201, De Saram Place,Colombo 10. BANKERSCommercial Bank of Ceylon PLCHatton National Bank PLC HOTELAvani Bentota Resort & SpaBentotaTel : + 94 (34) 2275353Fax : + 94 (34) 2275313

Produced by Copyline (Pvt) Ltd Printed by Printel (Pvt) Ltd

cORPORAte inFORMAtiOn

CONTENTS

3 Our Vision, Mission and Core Values

4 Financial Highlights (Group)

6 Serendib Leisure Properties

10 Chairman’s Message

12 Managing Director’s Review

15 Board of Directors

20 Senior Management

24 Management Discussion and Analysis

30 Hotel Management

36 Sustainability Report

41 Risk Management

46 Corporate Governance

57 Report of the Remuneration Committee

58 Annual Report of the Board of Directors

62 Directors’ Interest in Contracts with the Company

65 Report of the Audit Committee

Financial Reports68 Statement of Directors’ Responsibility in Relation to

Preparing Financial Statements

69 Independent Auditor’s Report

70 Statement of Financial Position

71 Income Statement

72 Statement of Comprehensive Income

73 Statement of Changes in Equity (Group)

74 Statement of Changes in Equity (Company)

75 Cash Flow Statement

76 Notes to the Financial Statements

Supplementary Information128 Investor Information

132 Ten Year Financial Review (Group)

133 Notice of Meeting

135 Form of Proxy IBC Corporate Information

Achieving new heights After completing a successful year that saw us moving towards our goal of excellence, we at Serendib Hotels PLC are dedicated to being a leader in hospitality. Achieving record breaking levels of profitability, we are proud to state that our commitment and enthusiasm in providing the best has proved to be a success in the year under review. This has been augmented through the exceptional trust placed in us by our stakeholders that we have rewarded and we will continue to do so in the years ahead...

Serendib Hotels PLC I Annual Report 2012/132

Serendib Hotels PLC I Annual Report 2012/13 3

OUR cORe vALUes| concern for People

| Passion for customers

| Obsession for Performance

| Driven by innovation

OUR MissiOn| create experiences to write home about by exceeding the

expectations of Our Guests at all times

| Our People will be treated with respect, dignity and fairness

| we will improve The Community we work in and obtain their

co-operation to support our industry

| we will strive to deliver superior returns to Our Shareholders

OUR visiOn“to be a leading hotel group in the country operating

lifestyle properties with a Sri Lankan flavour”


Year ended 31 March 2013 2012

Revenue Rs. 000’s 1,447,478 1,047,460

Earnings before Interest, Tax, Depreciation & Amortisation (EBITDA) Rs. 000’s 550,071 236,397

Profit before Tax Rs. 000’s 431,422 111,846

Profit after Tax Rs. 000’s 365,809 91,261

Profit Attributable to Equity Holders of the Parent Rs. 000’s 270,123 40,874

Earnings per Share Rs. 000’s 2.4 0.4

Cash Earnings per Share Rs. 4.4 1.9

Interest Cover Times 11 3

Return on Equity (ROE) % 16 5

Return on Capital Employed (ROCE) % 12 4

Balance Sheet Highlights and Ratios

Total Assets Rs. 000’s 3,887,831 3,143,647

Total Debt Rs. 000’s 1,211,902 801,190

Total Shareholders’ Funds Rs. 000’s 2,265,994 1,933,285

Number of Shares in Issue 000’s 111,526 111,526

Net Assets per Share Rs. 20 17

Debt / Total Equity % 53 41

Debt / Total Assets % 31 25

Market/ Shareholder Information

Market Price of Share Rs. 23.7 24.8

Market Capitalisation Rs. 000’s 2,412,691 2,438,139

Price Earnings Ratio Times 9.8 65.2

FinAnciAL highLights (gROUP)


Rs. 1,447Mn growth 38%Revenue

Rs. 556Mn growth 88%Gross Operating Profit

Rs. 616Mn growth 116% cash generated from Operations

Rs. 431Mn growth 286%Profit Before Tax

2012: Rs. 1,047Mn

2012: Rs. 296Mn

2012: Rs. 112Mn

2012: Rs. 286Mn

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Earnings per Share

12/1

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25.0

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20.0

15.0

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Net Assets per Share

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Market Price per Share12

/13

Rs. Mn Rs. Mn Rs. Mn


One of the leading hotel groups in Sri Lanka,

Serendib Leisure has built up a sound reputation

as a renowned operator of some of the most

unique hotel brands in the island, underscored

by a sustainable tourism philosophy.

The Serendib Leisure Group’s hospitality

offerings encompass the island’s key

attractions: beach, jungle and lagoon.

Each property is known for its stunning

architecture, strategic location and

excellent service.

Avani Bentota Resort & Spa, Avani

Kalutara Resort, Club Hotel Dolphin

and Hotel Sigiriya are popular holiday

destinations in themselves and the

clientele is multi-cultural and hails

from many countries in the world.

Serendib Leisure hotels are nationally

and internationally acclaimed for their

skilled culinary teams and an extremely

professional service staff that goes the

extra mile to make our guests feel special

and cared for.

SerendiB LeiSure PrOPerTieS


Designed by world-renowned architect Geoffrey Bawa, who took inspiration from an 18th century Dutch village to create this home-away-from-home. Located on one of the best beaches on the Southern Coast, this resort is an escape of laid back relaxation.

Nestled in an estuary, where the majestic Kalu Ganga meets the Indian Ocean, AVANI Kalutara Resort blends authentic Sri Lankan culture and old colonial charm with contemporary design flair and all the ingredients that really matter for a quiet romantic holiday.

Situated in close proximity to the airport, Club Hotel Dolphin is the only hotel in Sri Lanka to offer the best of both worlds! Be it an adventure-filled holiday or a chilled out one, Club Hotel Dolphin provides fun, adventure and relaxation for the entire family.

Located at the foot of the magnificent Sigiriya Rock Fortress, this charming but rustic hotel has been in the forefront in energy conservation and has been offering unique cultural experiences to guests for decades.




As you relax near the blue waters of

Bentota, we offer a range of tempting

activities that invigorate and unwind.

Revel in the ambiance of escape

encapsulated in a hotel designed by

Geoffrey Bawa in the style of an 18th

Century Dutch village, and experience

true Sri Lankan hospitality.


In the calendar year 2012, Sri Lanka’s Tourism Industry reached twin milestones – visitor arrivals topped 1 million and industry earnings surpassed US$ 1 Billion. This boosted the economy as it provided valuable foreign reserves and contributed towards job creation.

Having become a billion dollar industry, the tourism sector will continue to play an integral role towards the country’s fortunes and her macro-economic plans.

Global Tourism LandscapeWorld travel continued its forward march in 2012. International tourism receipts grew 4% to US$ 1,075 Bn and international tourist arrivals also grew by 4%, reaching 1,035 Mn travellers across the world. In spite of the challenging global economic conditions, particularly in

chAiRMAn’s MessAge

I am delighted to welcome you to the 45th Annual General Meeting of Serendib Hotels PLC, particularly as we are reviewing yet another record year for your Group of Companies. This excellent result has been achieved in spite of the challenging economic environment and volatile exchange rate fluctuations.

Western Europe, growth in international tourism is expected to continue in 2013 at a similar pace led by growth in Asia Pacific.

Destinations in Asia Pacific recorded a 6% increase in arrivals and earnings of US$ 323 Bn which accounts for 30% of international tourism receipts. In the emerging economies, the highest receipts were recorded by Thailand (+25%) and India (+22%).

While demand from the traditional markets remain stagnant, the emerging economies are proving to be an attractive tourism market. Growth is expected to be fuelled from the BRIC nations with China leading the way. The Russian Federation has risen to the Number 5 position in international terms. In Sri Lanka, India

provides the largest share of visitors to our shores. This trend will require our industry to re-engineer itself to meet the changing requirements of the travellers from these markets.

Your Management is using their binoculars to look into the future and align their marketing strategies to the future trends to ensure they continue to deliver high occupancies and yields at your hotels.

Sri Lanka’s TourismWith mounting accolades, Sri Lanka is attracting the world’s attention as a prime travel destination with over a million tourists arriving in Sri Lanka in 2012. The influx of tourists post-war has continued resulting in a 17.5% growth in visitor arrivals in 2012.

Sri Lanka’s industry is planned to receive 1.2 Mn visitors in 2013. The first 4 months to April reported growth at 11.7% which is ahead of the monthly plan. Coupled with the growth in arrivals, many new hotels are being developed across the country with several international chains entering the hotel management space. With this comes the added value of the branding, international marketing and expertise.

The year under review saw your Associate Company, Avani Kalutara being fully refurbished at a cost of approximately Rs. 600 Mn. It reopened its doors for operation in November 2012. As you are already aware Avani Bentota (formerly Hotel Serendib) was fully refurbished last year. This is in line with the Group’s vision of improving the standards and facilities provided at your hotels. I am also proud to announce that Serendib Leisure is the


first Sri Lankan management company entrusted with managing an International Brand.

Sri Lanka has to compete with other well established and mature destinations in the region. In order to do so, several key strategic issues need to be dealt with at national level, many of which I highlighted in last year’s message too;

• Sri Lanka needs to be branded and marketed internationally. Without this, the Sri Lankan Tourism Industry may not achieve its full potential.

• It is vital to carry out international promotions in emerging new markets. In 2012, China has become the number one source market in terms of tourism expenditure. The Chinese travellers have taken the number one slot In terms of arrivals in Thailand and Maldives.

• The focus on training and skills development of staff at all levels in the tourism industry needs to be accelerated to meet the requirements of the discerning traveller.

• The administrative process for approval of construction of hotels and tourist establishments need to be further simplified to attract international and local investors to invest in the tourism industry in Sri Lanka.

• The protection and preservation of our nation’s tourism assets is critical for the sustainability of the industry.

Group PerformanceThe key highlights are:-

Turnover Rs. 1,447 Mn Up 38% Gross Operating Profit (GOP)

Rs. 556 Mn Up 88%

Profit Before Tax (PBT)

Rs. 431 Mn Up 286%

The performance of the subsidiary Companies have contributed to the success of the Group with Club Hotel Dolphin contributing a PBT of Rs. 230 Mn (up 130%), Hotel Sigiriya contributing a PBT of Rs. 80 Mn (up 55%) and Avani Bentota contributing a PBT of Rs. 126 Mn (up 267%).

I am delighted to report that these are the best ever results achieved by your group both in terms of revenue and profit.

Importance of Good Governance Your Board of Directors has conscientiously ensured that governance standards align with best practices and functions effectively. The Management’s actions are guided by high integrity and they are committed to establishing a transparent and accountable framework that promotes the interests of all stakeholders.

The Board has established guiding principles and processes which provide a framework for the effective governance of the Group which are listed in detail in the Corporate Governance section of this report from page 46 to 56. They continue to ensure that governing mechanisms and standards are current and conform to best practices.

Sustainable TourismThe need for sustainable tourism has become more pressing in order to preserve the nation’s natural assets. Your management is committed to green concepts and have strategically planned hotel operations to leave a minimum ecological footprint.

The Management continues to integrate sustainable practices to all facets of hotel operations by adopting best practices

in environmental and social governance while balancing this with its commercial objectives. As part of the Group’s commitment to sustainability, each hotel aims to enrich the community in which it operates.

In Recognition and AppreciationAs an unprecedented year for the Serendib Hotels PLC come to a close, I would like to thank the Board of Directors of Serendib Hotels PLC for their guidance and unwavering support. We look forward to their continued support in the New Year.

I would like to extend my appreciation to the Board of Management headed by Mr. Ranil De Silva whose leadership and dedication has been paramount in achieving this year’s record results.

I would also like to recognise the formidable effort and dedication of all the employees, who again this year demonstrated their commitment and passion to serve our customers. I express my sincere gratitude to them all.

We remain committed to delivering value to all stakeholders as we move forward in our vision to become a leading hotel group in Sri Lanka.

A.N. EsufallyChairman

21 May 2013


It has been our philosophy to upgrade our hotels since the dawn of peace in 2009, to meet the expectations of the new breed of travellers and cater to their challenging demands. We believe that the only justifiable way to attract better room rates and occupancy is by upgrading both the infrastructure and the service standards in the hotels we operate. As such, we embarked on investing in refurbishment programmes in our hotels, which necessitated the closure of Club Hotel Dolphin in 2010 and Avani Bentota in 2011. In the current year, we refurbished and rebranded Avani Kalutara Resort (formerly known as Kani Lanka) to enhance its guest offering.

Since the post war resurgence of tourism in Sri Lanka we saw the full potential of our group of hotels for the first time during the year under review. Hence, it gives me great pleasure to present this Annual Report to announce a year of record profits for your company, undoubtedly the best in its history.

MAnAging DiRectOR’s Review

Performance ReviewThe benefits of our strategy was clearly evident in the current financial year with Group revenue increasing by 38% to Rs. 1.4 Bn, while profit before tax increased by an astounding 286% to Rs. 431 Mn, from the previous year. The three properties consolidated in our financial results; Avani Bentota Resort & Spa, Club Hotel Dolphin and Hotel Sigiriya, reported exceptional growth in RevPar (Revenue per Available Room), which was also the result of our strategies in developing new markets and new distribution channels. In fact, it was encouraging to note the significant increase of visitors from non traditional markets, such as India and the Middle

East which compensated for the downturn normally experienced during the off-season and ensured consistently high occupancy all year round.

We have identified that web based marketing will be the future of the hospitality trade and thus, will form an important part in our strategy to improve RevPar. This year, over 10% of our group-wide sales were generated via popular OTAs (On-Line Travel Agents), and our own web site. We will continue to invest in developing and improving our web presence, both as a distribution channel, as well as a medium for reputation management.

Another element that strengthened our bottom line is the many control measures we have adopted to minimise waste and contain our costs through sustainable practices. We completed the automation of all our hotels in the current year. This has improved the relevance and the integrity of data, as well as the speed of response and service to our guests.

As much as we are pleased with our performance in 2012/13, we believe it is only the beginning of our journey.

Our DifferentiationOur hotels are renowned for their unique architecture which complements the scenic locations they are situated in. Yet, we strive to differentiate our hotels with great F&B experiences and superior service to our guests. To this end, our partners, Minor International of Thailand has been highly supportive providing our staff with training and cross exposure


experiences at their overseas properties. I am happy to state that our relationship with Minor International, the fastest growing hotel chain in Asia, further strengthened during the year, with the launch of the second Avani Hotel in Kalutara. Although the Minor Hotel Group is more renowned for their flagship brand ‘Anantara’, they opted to launch their second international brand ‘Avani’ with the newly refurbished former Hotel Serendib in 2011. As such, Serendib Leisure is probably the only Sri Lankan hotel management company entrusted with the task of managing an international chain of hotels in the country.

Our PeopleSuccess in the hospitality industry is dependent on the quality of service offered. That is why our people are a vital component of the business mix. Hence, we plan to strengthen our focus on training and skills development of our employees, by drawing on the synergies of our partnership with the Minor Hotel Group.

We are committed to creating the right atmosphere for our people to work with pride, happiness and enthusiasm, which will reflect in the high standard of service and the genuine hospitality extended to our guests. With the guidance from our parent company, Hemas Holdings, which ranks highly on the list of most respected organisations, we will continue our activities to improve employee engagement as it will lead to higher staff satisfaction and motivation.

The quality of our staff accommodation at Club Hotel Dolphin is widely recognised as the benchmark for the industry. In August 2013, we will open the new staff accommodation building in Bentota, replicating similar facilities and comforts.

Outlook for 2013/14Although this has been an exceptionally good year for the Serendib Leisure Group, year 2013/14 poses many challenges. The rising energy prices, coupled with the increase in minimum wages as stipulated by the Wages Board, will disproportionately increase our operating costs. This is in the face of growing concerns that Sri Lanka is perceived as an over-priced destination compared to other popular regional tourism destinations. This is evident from the tapering number of tourist arrivals to the country.

On a positive note, it is comforting that at least the ease of access to the destination may be addressed by more airlines flying to the country. British Airways resumed flights to Sri Lanka in April and Turkish Airlines is also expected to follow suit.

This year, we will continue our programme to upgrade and improve our existing hotels. At Club Hotel Dolphin, we are investing a further Rs. 500 Mn to refurbish 100 rooms, improve banqueting facilities and add more dining options. This refurbishment will affect the operation of the Hotel for six months from May 2013 and will temporarily reduce room capacity in the new financial year. We expect to re-open at full strength in November

2013, in time to welcome our winter guests.

Our unique property in the Cultural Triangle, Hotel Sigiriya will also undergo a Rs. 75 Mn renovation in the new financial year and will be reopened in August 2013, after a short three month makeover.

Marketing the DestinationThe sharp increase in arrivals in the immediate aftermath of war was due to the fact that Sri Lanka was previously seen as inaccessible during wartime, and this has added a sense of mystery to the destination. As a nation, we need to market this sense of discovery by bringing alive the mystique and creating a destination that offers value to a greater cross-section of travellers. Sri Lanka has a distinct advantage in this, because as a destination, we offer a myriad of experiences within a compact space. I believe that the possibilities are endless, if Sri Lanka is branded well and marketed collectively.

Clearly, we need to grow the hotel inventory at a controlled pace and protect our unique culture, while ensuring that our environment and natural assets remain protected. Essentially, we should pursue long-term goals aimed at sustainable tourism, as opposed to seeking short-term gains. The advent of more International brands will play a dual role in this positioning. On the one hand, they will uplift the industry standards, and on the other hand, they can create a comfort zone for international investors, thereby, catalysing further investment.


Future PlansDespite the stagnant economy in the Eurozone, world tourism trends indicate that tourism will continue to grow in spite of the state of the economy, as tourism has now become a basic need rather than a luxury. Therefore, even though our traditional European markets have slowed down, we anticipate a gradual recovery over the next few years. It is our intention to position ourselves to meet this future demand by investing in new capacity at the present time. Consequently, the year 2013/14 will be a year of ‘Investing for growth’.

To expand our capacity, we plan to invest approximately US$ 75 Mn on constructing three new, internationally branded hotels, in the popular southern coast of Sri Lanka. In collaboration with our partners, the Minor Hotel Group, we will commence construction of two high-end, five-star resort hotels in Tangalle and Kalutara, under the revered ‘Anantara’ brand with a collective inventory of almost 300 keys. We also plan to introduce another ‘Avani’ Hotel in Sri Lanka by constructing a 64-key resort, in Ambalangoda. Given the brand strength of both Anantara and Avani, I am confident that both hotels will add to the versatility of the Serendib Leisure portfolio. All three hotels are expected to open to guests by early 2015.

AppreciationsFirst and foremost, I extend my warmest regards to our customers, and make a special mention of our guests that treat our hotels as their home-away-from-

home and return to us every year. I also express my gratitude and appreciation for the visionary guidance and support of the Chairman and Board of Directors of Serendib Hotels PLC and its subsidiaries, and the commitment of the management and staff of our hotels. Their collective efforts have made it possible to achieve such successful results during the year under review. Last but not least, I extend my gratitude to our shareholders, for their confidence in the management and supporting our growth plans. I look forward to the continued support of all our stakeholders in our journey to make Serendib Leisure a key player in Sri Lanka’s leisure sector.

D.T.R. De SilvaManaging Director

21 May 2013

MAnAging DiRectOR’s Review cOntD.


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BOArd OF direCTOrS


1. A.N. EsufallyChairmanAppointed to the Board in 1994 and elected Chairman of the Company in 2003. He is a Fellow of both the Institute of Chartered Accountants of England & Wales and The Institute of Chartered Accountants of Sri Lanka. He has experience of over 35 years in the hotel and tourism sector both in Sri Lanka and overseas and has been in the forefront of the leisure industry in Sri Lanka. He is also the Honorary Consul General of Bhutan in Sri Lanka and an All Island Justice of the Peace. Other directorships include Hemas Holdings PLC, Dolphin Hotels PLC, Hotel Sigiriya PLC, Printcare PLC, Mahaweli Reach Hotels PLC, Royal Palms Beach Hotels PLC and several other companies.

2. D.T.R. De SilvaManaging Director Appointed as the Managing Director of Serendib Hotels PLC in 2010. He is also a Director of Dolphin Hotels PLC and Hotel Sigiriya PLC. He is a Fellow Member of the Chartered Institute of Management Accountants UK, Associate member of the Institute of Chartered Accountants of Sri Lanka and a Member of the Chartered Institute of Marketing UK. He began his career at Ernst & Young and has worked overseas with a multinational for 10 years. Mr. De Silva has wide experience locally in diverse industries having previously held the position of Group CEO of the DCSL Group.

3. J.C.L. De Mel Independent DirectorAppointed to the Board in 2002. Has a Master of Arts Degree from Cambridge University, UK. and the AMP Harvard Business School USA. He counts over 40 years of Board experience having served as a Director of several companies in Sri Lanka and abroad. Presently he serves as Chairman of Hemas Holdings PLC and First Capital PLC.

He has served most of his career at Reckitt Benckiser PlC. UK (a FT 100 Company) and was a main Board Director. He was also a Director CDC PLC, the UK Government arm for investing in developing countries. In Sri Lanka he has served as the Chairman of the Board of Investment and the Chairman of Sri Lanka Telecom PLC and was a Senior Advisor Ministry of Finance. He is also a Trustee of the Cambodia Trust UK.

4. H.N. ESUFALLYNon Executive DirectorAppointed to the Board in 2003. Serves as the Chief Executive Officer of Hemas Holdings PLC. Mr. Esufally was appointed as a member of the Board of Management of the Postgraduate Institute of Management in March this year. Has over 28 years of management experience and holds a Bachelor of Science (Honours) degree in Electronics from the University of Sussex, U.K. Other directorships include Hemas Holdings PLC, Hemas Power PLC and several other companies.

5. W.M. De F. ArsakularatneNon Executive DirectorAppointed to the Board in 2007. Mr. Arsakularatne functions as the Chief Financial Officer of Hemas Holdings PLC. He is also a member of the Board of Management of Hemas Holdings PLC. He has been part of the Hemas Group for the past 9 years and has over 9 years experience in the fund management industry. Mr. Arsakularatne is a CFA charterholder and Fellow Member of the Chartered Institute of Management Accountants (CIMA) U.K. He also holds a MSc in Investment Management from the Cass Business School, U. K., a BSc in Computer Science & Engineering from the University of Moratuwa, Sri Lanka and a Postgraduate Diploma in Marketing from the Chartered Institute of Marketing (CIM), U.K. Other directorships include Hotel Sigiriya PLC , Dolphin Hotels PLC, Hemas Power PLC and several other companies.

6. Professor L.D.K.B. GamageIndependent DirectorAppointed to the Board in March 2008. The President & CEO of the Sri Lanka Institute of Information Technology. An Adjunct Professor of the University of British Columbia, Canada and also at the Curtin University, Australia, is serving the IT industry and the Government of Sri Lanka in such capacities as Chairman, Arthur C. Clarke Institute for Modern Technologies (ACCIMT), Chairman, Lanka Software Foundation (LSF), Advisory Board Member of Sri Lanka Association of Software and Service Companies (SLASSCOM) and has also served these

BOArd OF direCTOrS cOntD.


sectors as the Chairman of the ICT Cluster, the Executive Director of Sri Lanka Export Development Board and Chairman of the IT Task Force, Ministry of Enterprise Development. An Electronic and Telecommunication Engineering graduate from Moratuwa University, holds a Master’s degree in Information Technology from De Montfort University, UK and PhD in Artificial Intelligence and Computer Vision from University of British Columbia, Vancouver, Canada.

7. R.N.A. Athukorala Independent DirectorAppointed to the Board in 2010. He is the Head of National Portfolio Development for Sri Lanka & Maldives for United Nations (UNOPS). He has twice been rated for outstanding performance and is a recipient of the UNOPS 1st global Merit award on the setting up of the first Industrial Zone in the North of Sri Lanka in Atchchuvely. In his tenure of 17 years in top multinationals Reckitt, Lever and JohnsonDiversey in brand marketing and country management he has twice been awarded the Marketing Achiever award in Sri Lanka, Business Achiever award from the Alumni PIM, University of Sri Jayewardenepura and a Global Leadership award from JohnsonDiversey. He was the 8th Chairman Sri Lanka Export Development Board and the 1st Executive Director of the Government’s Economic Council (NCED) under the Presidential Secretariat when Sri Lanka crossed six billion rupees in exports and GDP registered at seven percent.

Currently, on an honorary basis, he serves the country as the Chairman of the Tea Cluster-Ministry of Industries, Board Director-Sri Lanka Export Development Board, Industrial Development Board of Ceylon and Tea Board Marketing Committee. He is Board Member of the Mother Sri Lanka Trust at the President’s Office and the Senior Advisor to the Minister of Industry and Trade. In 2012 he was appointed to the sovereign rating team of the Central Bank of Sri Lanka.

A sought after columnist in the local and international media on business and leadership, he has been invited to address many global conferences such as Asian Development Bank-Manila, The Global CEO Summit-New York, and the Middle Eastern Tea and Coffee conference in Dubai.

Mr. Athukorala has a double degree in Marketing, MBA and is reading for his Doctoral degree in Business Administration. He is an alumnus of the University of Harvard(Boston).

8. Mr. E.J.D. RajakarierNon Executive DirectorAppointed to the Board in 2010. Mr. Dillipraj Rajakarier is the Chief Operating Officer of Minor International Public Company Ltd. and Chief Executive Officer- Minor Hotel Group. He also served as the Deputy Chief Financial Officer of Orient- Express Hotels, Trains & Cruises and Group Financial Controller of Easi Solutions PLC.

He has a Masters in Business Administration, U.K. He is also a Member of UK Institute of Management Information Systems (MIMIS), Associate Member of British Association of Hotel Accountants (ABAHA), Member of Association of Computer Professionals (MACP), Member of Association of Business & Administrative Computing, UK (MABAC) and Member of the Institute of Directors (IOD).

9. M.A. JafferjeeIndependent DirectorAppointed to the Board in 2010, he is the CEO of JB Securities Ltd. and has 20 years of industry experience in the stock market in Sri Lanka. He serves on the Board of Nations Trust Bank as an Independent Director and on the Board of So Others May See (SOMS) – a not for profit organisation. He is the current advocacy chair for CFA Sri Lanka, the local member society of the CFA Institute. He also served on the Board of the Colombo Stock Exchange from August 2007 to July 2009.

He has a Bachelors Degree in Mechanical Engineering and Computer Science from the University of NSW, Australia and a Masters in Financial Economics from the University of Colombo. He is also a Chartered Financial Analyst (CFA).




Merging the ideas of play and pause,

Club Hotel Dolphin is the perfect getaway

for all those who seek peace as well as

adventure. For families and individuals

alike, this hotel offers the opportunity to

have a fun-filled holiday that combines

the best of both worlds.


seniOR MAnAgeMent


1. Ranil De SilvaManaging DirectorRefer to Board of Directors Profile on page 16.

2. Ronald PereraDirector / Consultant Employee Relations and AdminRonnie, as he is commonly known, is arguably the most senior hotelier still serving the industry, since 1968. In 1996, he joined the Serendib Group as Hotel GM and after obtaining certification from the Institute of Personnel Management, shifted to corporate office to head human resources and administration. He has previously served in various capacities at resort belonging to the John Keells Group, including Hotel Ceysands, Hotel Bayroo (now Chaaya Bey) and Hotel Swanee. He was instrumental in formulating the Beruwala Hoteliers Association in 1982 and was a member of the classification committee appointed in 1985 by the then Ceylon Tourist Board to evaluate and recommend changes to the criteria of star class hotels.

3. Indresh Puvimanasinghe FernandoDirector – FinanceJoined the Transportation sector of the Hemas Group in 2006 and moved to the hotel sector in 2011. A fellow of the Chartered Institute of Management Accountants UK, she counts for over 17 years of experience in the accounting profession in diverse sectors such as Financial services, Inbound travel, Telecommunications and Outbound travel.

4. Sanjika Perera Director – Business Development and ProjectsHe possesses extensive Branding, Marketing and General Management experience in diverse sectors such as FMCG, Retail, B2B and Service Sectors in South Asia and Western Europe during a career spanning 19 years. He last served as the Director – UK and Ireland for Sri Lanka Tourism. He read for his MBA at The Postgraduate Institute of Management, University of Jayewardenepura. He is a Fellow of the Chartered Institute of Marketing and a Chartered Marketer. He is a Board Member of CIM – Sri Lanka Regional Office, where he currently serves as the Vice-Chairman to the CIM Sri Lanka Regional Board.

5. Suranjith De FonsekaDirector – Sales and MarketingHe has over 10 years of industry related experience and holds a B.A. (Hons) Degree in Business Administration from Nottingham Trent University, UK and an MBA from the Postgraduate Institute of Management at the University of Jayewardenepura. He is a Sri Lankan prize winner and Member of the Chartered Institute of Marketing – UK and is a Chartered Marketer.

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Beneath the 8th wonder of the world, Hotel Sigiriya offers a taste of culture and nature

in a setting that is designed to create rest, relaxation and a sense of tranquillity that

stays with you long after your holiday.




2012/13 has been a record year for the Serendib Leisure Group both in terms of Revenue and Profits. Revenue of Rs. 1.4 Bn resulted in Gross Operating Profit (GOP) and Profit Before Tax (PBT) for the year of Rs. 556 Mn and Rs. 431 Mn respectively.

MAnAgeMent DiscUssiOn AnD AnALYsis

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Financial review

Overview of Group Performance2012/13 has been a record year for the Serendib Leisure Group both in terms of Revenue and Profits. Revenue of Rs. 1.4 Bn resulted in Gross Operating Profit (GOP) and Profit Before Tax (PBT) for the year of Rs. 556 Mn and Rs. 431 Mn respectively.

The Group comprise of Serendib Hotels PLC and its subsidiaries Dolphin Hotels PLC, Hotel Sigiriya PLC and Serendib Leisure Management Ltd. It also has an associate investment in Jada Resort and Spa (Pvt) Ltd., the owning company of Avani Kalutara Resort. The Group currently manages Avani Bentota Resort & Spa, Avani Kalutara Resort, Club Hotel Dolphin and Hotel Sigiriya with a consolidated inventory of 410 keys.

The year under review, is the first financial year since the end of war that all three of our subsidiary hotels have been fully operational throughout the year. Aided by a welcome increase in tourism into Sri Lanka, our hotels enjoyed high occupancy throughout the year. This enabled the Group to report an average occupancy of 77% whilst enjoying higher room rates which saw a healthy increase compared to the previous financial year, across the three hotels. The increase in rates was fully supported by upgraded facilities and services rendered.

In addition, the relaxation of regulations on foreign currency loans during the previous financial year made it possible

to borrow lower interest bearing foreign currency loans to aid new investments. This enabled the Group to reduce its finance costs by 17% compared to previous year.

To be in line with our operational improvements and increased demand, all our hotels are now equipped with a fully automated Property Management System (PMS). This not only has helped in the day-to-day operations of the hotels but also further improved the internal control systems, strengthening good governance.

RevenueConsolidated revenue increased by an astounding 38% to Rs. 1.4 Bn during the financial year 2012/13 compared to last year, with GOP increasing by 88%. This was boosted by the seasonal peak during the last quarter of the financial year, the increase in web-based sales and by attracting new clientele from the Middle-East during the off peak season between May and October. The increase of 38%

in revenue is commendable given the stiff competition exerted by both regional and local peers in the hotel industry and high inflation regime.

The main contributors to the Group revenue were Club Hotel Dolphin accounting for 53%, while Avani Bentota contributed 28%, followed by Hotel Sigiriya with 17%. It is also positive to note that the Group witnessed growth in all areas of its revenue including rooms revenue, food & beverage revenue and other operating areas.

Profit Before TaxConsolidated PBT witnessed an exceptional rise from last year by 286% to Rs. 431 Mn. The increase in revenue was due to higher yields and occupancy which was a major factor in marking this phenomenal growth. Further, good cost management practices adopted by the Group and centralising the procurement process, enabled the Group to improve its GP margin from 74% to 79%. As a result, the Group witnessed significant improvement in the PBT margin from 11% to 30% in 2012/13 compared to previous year.

Composition of Revenue 2012/13 (Group)

Room 65%

Food & Beverage 30%

Others 5%

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Administrative expense of the Group increased by 26% year-on-year and this is mainly due to Avani Bentota which was in operation for the full financial year in 2012/13 compared to only six months in 2011/12. In addition, the continued rise in energy costs also contributed to this increase.

Sales and marketing expenses of the Group was at 3% of the Net Revenue. It is also noteworthy that the Group was able to write back Rs. 7.5 Mn from its provision for doubtful debts demonstrating the improved efficiency in debt collection.

Cash GenerationThe return to full operation of all hotels, and the excellent performance of the Serendib Leisure Group coupled with good working capital management resulted in the growth of 116% in Cash Generated from Operations compared to previous year amounting to Rs. 616 Mn.

The main contributor to the Cash Generated from Operations was Club Hotel Dolphin, which saw a rise by 37% year on year to Rs. 303 Mn, followed by Avani Bentota and Hotel Sigiriya both reporting an increase of 640% and 58% respectively.

Business Environment

Key Global TrendsIn 2012, international tourist arrivals increased by 4% reaching 1,035 Mn travellers. The growth is equal to the 4% increase in international tourism receipts which hit a new record in 2012, reaching an estimated US$ 1,075 Bn worldwide in spite of continued economic challenges. Asia Pacific showed the highest growth across regions with a 7% increase in arrivals, while Americas achieved the highest increase in tourism earnings of an increase of 7%. South Asia witnessed a healthy increase of 4.2% in tourist arrivals and an increase of 5.2% in receipts.

Looking ahead to 2013, world tourism is expected to show resilience once again with international trips growing in the 3% range demonstrating that tourism is remarkably stable, despite slow global economic growth and the impact of the Euro-Zone crisis.

Long-haul destinations were popular for Europeans in 2012, with a healthy 4% increase in trips to overseas destinations. Europeans travelled more to the Americas and above all to the Asia Pacific, with the number of trips to the region rising by 8%. The boom market was Russia with a 12% rise in outbound travel as the strong economy and increasing affluence combined to generate more international travel. In contrast, Germany, the largest outbound market in Europe, stagnated this year despite the stable economy, while UK outbound travel grew by a slight 1% amidst tough economic conditions.

The internet has now clearly established itself as the main place to buy travel. 54% of all bookings in 2012 were made through the web, well ahead of travel agencies which have slipped back to 24%. Interestingly, this is a global trend with Asians and South Americans now catching up with North Americans and Europeans. Social media are becoming more and more important to help consumers plan and enjoy travel as they switch to online and mobile technology. The dramatic growth of social media platforms such as Facebook, Twitter and YouTube is increasingly being felt in the travel and tourism sector. Consumers are using technology more intensively than ever to talk about their holidays, show pictures and videos, exchange ideas about possible holiday trips and seek opinions and reviews of destinations, hotels, attractions and countless other travel-related activities. About 40% of travellers say that social network comments influenced their travel planning while 50% actually based their travel plans on other people’s reviews.

Composition of Expenses 2012/13 (Group)

Cost of Sales 28%

Administrative 65%

Sales & Marketing 3%

Finance cost 4%

In addition to reducing the finance costs by 17%, the Group was also able to increase its finance income by over 220% to Rs. 40 Mn. In order to achieve the same, the Group Treasury Team used a mix of both short term and long term investments to optimise the returns.

The contribution of the results of the Group’s Associate Hotel, Avani Kalutara Resort was lower in 2012/13 in comparison to previous year since it was closed for refurbishment for six months.

MAnAgeMent DiscUssiOn AnD AnALYsis cOntD.


Key travel and tourism trends in Sri Lanka Sri Lanka crossed the much awaited mark of one million tourist arrivals in 2012 welcoming 1,005,605 visitors to the country, a 17% growth over the previous year. Despite the economic recession, arrivals from traditional Western European countries such as Germany, France and the UK increased during the year with arrivals from Germany recording an increase of 28%, while arrivals from the UK and France increased by 8% and 17% respectively. Meanwhile new markets continued to strengthen and India remained the biggest source market with 176,340 visitors during the year, which was a growth of 3%, while visitors from Russia, Japan and China also contributed to this growth.

However, occupancy levels at graded establishments dropped by 5% across the country from 75% in 2011 to 70% by end-December 2012 with Colombo city, the South coast, East coast, Hill country and ancient cities all reporting lower levels of occupancy during the year.

The positive effect of the tourism boom has been felt across many industries including infrastructure development and construction, as hotels and resorts across the island engage in upgrades and renovations. Several renowned international hotel and resort chains including our partner brand Anantara, Shangri-la, Sheraton and Marriot have committed to investing in Sri Lanka.

However, the rate of growth in arrivals is showing signs of tapering. The sharp rise

in tourism following the end of war has now tapered down from 46% in 2010 to 17% by end 2012. There is also a perception that the country is over-priced against regional competitors such as Thailand, Malaysia and Cambodia.

Operational Review

Avani BentotaStemming from the Sanskrit word for ‘Earth’ Avani Hotels offer relaxed contemporary comfort that fuses traditional warmth with modern lifestyle essentials. An elegant designer hotel, Avani Bentota is known for its gracious architecture modelled according to an 18th century Dutch sea side village designed by the renowned Architect, Geoffrey Bawa.

In its first full year of operation after refurbishment, Avani Bentota achieved average occupancy of 67% with a healthy increase in room rates which culminated in revenue of Rs. 409 Mn and PBT of Rs. 126 Mn, inclusive of Rs. 55 Mn dividends from its subsidiaries. Cash Generated from Operations stood at Rs. 165 Mn achieved as a result of the good performance of the hotel and effective working capital management.

The hotel has seen a steep increase in its online reservations with over 15% of reservations during the financial year 2012/13, being generated via the internet. Germany remained as the main source market with 24% of all bookings followed by United Kingdom which contributed 16%.

Avani Bentota obtained the Crescent rating certifying that the hotel is officially compliant with Islamic food and sanitation standards. This has made it possible to position the hotels to cater to the increasing number of Middle Eastern travellers visiting Sri Lanka.

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India 28%

UK 18%

Middle East 11%

Germany 9%

France 8%

Maldives 8%

Australia 5%

Canada 5%

USA 4%

Netherlands 4%


Club Hotel DolphinClub Hotel Dolphin is positioned as an all-inclusive club hotel that offers a range of sporting and recreational activities for the entire family but also allows for time-out and relaxation. This concept has proved to be extremely popular among the target groups and during the current financial year the hotel reported occupancy of 86%, which is amongst the highest in the country.

Revenue was up by 19% year on year amounting to Rs. 765 Mn with PBT increasing by a staggering 130% to Rs. 231 Mn. The hotel enjoys strong patronage from Western Europe, mainly Germany and the United Kingdom. The hotel has also obtained the Crescent rating in order to cater to the Middle-Eastern travellers.

In accordance with our growth strategy, Club Hotel Dolphin closed operations in May 2013 for a refurbishment programme as outlined in the Managing Director’s Review.

Hotel SigiriyaHotel Sigiriya is located in the vicinity of Sri Lanka’s historic Sigiriya Rock popularly referred to as the eighth wonder of the world. As the hotel is built within the UNESCO World Heritage Site, we have taken all precautions to ensure minimum impact on the environment. In fact, Hotel Sigiriya has been in the forefront of eco friendly practices in the Sri Lankan tourism sector and remains hugely popular with foreign visitors due to the growing interest in sustainable business practices.

During the current financial year, Hotel Sigiriya saw an average annual occupancy of 71% dominated by the German, British and French nationals. Revenue increased by 18% to Rs. 252 Mn during the year, compared to the previous year resulting in PBT to increase by 55% to Rs. 80 Mn. Cash Generated from operations was a healthy Rs. 89 Mn. Sigiriya is also making its presence felt on the web with a significant number of reservations from online sources during the year. The sustainable practices at the hotels have contributed towards lower operating costs such as lower energy costs, while ensuring lower environmental impact.

Avani Kalutara ResortA beautiful coastal hideaway blessed with pristine beaches, perfect surf and warm golden sunshine, Avani Kalutara Resort is a heavenly holiday experience that you will never forget.

In line to bring the hotel to Avani brand conformity, during the current financial year Avani Kalutara Resort was refurbished at a cost of approximately Rs. 600 Mn. Formerly known as Kani

Lanka Resort, Avani Kalutara Resort, was closed in May 2012 for renovations and reopened in October 2012, for the winter 2012/13 season.

Recognition of our standards The service standards of our hotels were recognised as among the best in the world by online travel agents and other awarding bodies. It gives us great pleasure to announce that many of these awards are based on feedback from customers who have experienced our hospitality or as a result of our sustainable practices.

Avani Bentota • Gold Circle Award by AGODA in

2012, for exemplifying a hotel that leads by example in the competitive hospitality industry and as a mark of excellence in online distribution.

• TripAdvisor Certificate of Excellence for 2012.

• Merit Certificate for Energy and Water Conservation and Waste Management by the EU Switch Asia Greening Sri Lankan Hotels awards for 2012.

Hotel Sigiriya• Recognised as one of the Top 25

Hotels in Sri Lanka, in 2013, by winning the Travellers’ Choice Award.

• TripAdvisor Certificate of Excellence, 2012.

• Merit Certificate for Energy and Water Conservation and Waste Management by the EU Switch Asia Greening Sri Lankan Hotels awards for 2012.

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Club Hotel Dolphin• HolidayCheck Award in both 2013

and 2012 for being one of the 99 most popular hotels worldwide in the beach holiday category.

• Travellers’ Choice Award by the TripAdvisor traveller review website 2013.

• TripAdvisor Certificate of Excellence in 2012.

• ITS Red Star Award in 2012 for being one of the best and most popular 60 hotels worldwide.

Our PeopleThe Group has always been committed to investing in its most valuable asset – its Human Capital. The development of Human Capital is therefore an integral part of the Group’s sustainable strategy. As Sri Lanka’s leisure industry is faced with a supply shortage of skilled human resources, Serendib Leisure Hotels too, is grappling with this challenge. Therefore, we are gearing towards best practices in managing our human resources as we encourage continuous development of skills and knowledge of our staff at all levels. In the current financial year, we doubled our training budget, which re-emphasises our commitment towards our people. Along with our partner, Minor International, we also provided many opportunities for cross exposure by sending our staff abroad to international hotels in the Maldives, Dubai and Thailand to get first hand exposure on industry best practices.

Our training programmes have been conducted by industry experts, both by local and foreign trainers. Our primary

focus has always been on customer service, operational excellence and ethical conduct. Training is also provided in language proficiency, first aid, leadership and soft skills such as grooming and personal hygiene. These deliver a two pronged advantage – enhancing the guest experience and satisfying personal development and knowledge building of our people.

ProspectsFollowing the best year in the history of the Serendib Leisure Group, we are now investing for the future, with investments in more hotels, new markets and provision of new facilities and services.

To expand our capacity, we are investing around US$ 75 Mn to build three branded hotels in the popular southern coast of Sri Lanka. In collaboration with our strategic partner, Minor International – Thailand, we are in the process of building two, international five-star Anantara hotels in Tangalle and Kalutara along with the third Avani hotel in Ambalangoda. The three hotels are expected to be operational by early 2015. In addition, we will also continue to upgrade and improve our existing hotels. We are currently investing around Rs. 500 Mn to upgrade 104 rooms at the Club Hotel Dolphin and around Rs. 75 Mn to give Hotel Sigiriya a facelift. Club Hotel Dolphin is scheduled to be fully operational in time for the winter season of 2013, whilst Hotel Sigiriya will be operational from August 2013.

We will continue our market development drive by tapping into new markets such

as the Middle East, Japan, India, China and Russia, while continuing to expand in our traditional markets in Western Europe. Keeping pace with the growing popularity of online and mobile media, we will develop an integrated platform for mobile and online technologies. Plans are also underway to develop a mobile friendly website that allows our guests to book their accommodation at Serendib Leisure hotels via mobile devices. We will also enhance our online presence to increase our share of online sales by further enhancing our corporate website and by marketing via online travel agents.

The tourism sector is facing a situation of rising costs and stringent competition from both local and regional competitors. Increasing energy costs, wages and import tariffs will result in overall increases in operating costs and hotel rates, which may dampen growth momentum of the sector. Amidst this, we are confident of our strategy to differentiate our properties successfully and maintain our market share.

In 2012/13 we were determined in “Achieving New Heights”. As we look to the future, we are confident that our goals and plans will come to fruition, and that the excellent progress made and results delivered, will continue to be a part of our growth trajectory in 2013/14 and beyond.


hOteL MAnAgeMent

Standing from left : Indika De Silva - Resident Engineer,

A.D.G.A. Jayawardane - HR Manager

Seated from left : E.P.D. Zoysa - Community Development & Sales Promotion Manager,

Ms. Himali Perera - Front Office Manager, Ms. Sigrid Stelling - General Manager,

M.A.S. Samarasinghe - Financial Controller


From left :

Saman Dewasurendra - Manager Training and Development,S. Malkanthi Perera - Execuwtive Housekeeper,

Daniel Ludwig - General Manager,Chitra Fernando - Financial Controller,

Dadison Zoysa - Executive Chef


hOteL MAnAgeMent cOntD.

Standing from left :W.A.M.B Wickramarachchi - Executive Chef, T.M.S Kumara - Financial Controller, Suranga Wewegedara - HR Manager,

W.M.S.S Bandara - Ayurveda Doctor, Supun Mindika - Naturalist, E.G.G.N Ekanayeka - Pastry chef

Seated from left :E.G.N Karunaratne - Engineer, A.U Clements - Executive House Keeper,

A.A.C.T Abeysinghe - F & B Manager, E.W.P.C Samarakoon - Front Office Manager, Laksitha Wegodapola - General Manager


Standing from left : W.A.I. Sampath De Silva - Front Office Manager, B. Anparasu - Head of Finance,

P.L. I.U. Alwis - Training Manager, K.V. Ajantha - Chief Engineer, K.K. Pradeep - Executive Chef, A.D.G.A. Jayawardane - HR Manager, N.E.I. Fernando - Executive House Keeper

Seated from left : L. Jude Silva - Resident Manager, Ms. Sigrid Stelling - General Manager




Welcome to the epitome of elegance, a

place where rest and relaxation call your

name. Where beauty and bliss go hand in

hand to make your stay an experience of

a lifetime. A place that will entrance you

with stunning seascapes, lush foliage and

of course the pampering hands of our

talented staff that is sure to make you feel

like royalty. We’re here to make sure that

your holiday is nothing but perfection.


SuSTAinABiLiTy rePOrT

This year, Serendib Leisure Group took its first step to align its CSR activities with its parent company Hemas Holdings PLC. As part of this process we embarked on the development of a sustainability framework for the group, in line with Hemas sustainability principles. We are confident this initiative will support more meaningful efforts towards sustainable business practices by the Serendib Leisure Group.

During the year, we obtained the services of an external consultant to design a sustainable business framework for the Serendib Leisure Group comprising the four hotels, Avani Bentota, Avani Kalutara, Hotel Sigiriya and Club Hotel Dolphin. As part of this process, stakeholder surveys were conducted to identify their views, concerns, and requirements. In depth interviews were held with the immediate communities, relevant regulatory bodies, local government agencies, guests, travel agents, tour operators, employees and international partners. The findings of this survey were then used to develop a sustainability framework that will guide the entire Group in the coming years towards socially, environmentally and financially sustainable business practices.

The Hemas Group itself has a well entrenched sustainability policy based on the overall impact of the organisation’s operations on the environment, society and economy. We believe this approach creates long-term shareholder value

by embracing opportunities and managing risks deriving from economic, environmental and social developments, thereby ensuring long-term viability, profitability and integrity of the Group.

Our commitment to preserve the environment stems from the Hemas Green Pledge where we take responsibility as individuals and collectively as part of the Hemas Group. This will in turn minimise harmful practices and enable the Group to leave a gentler environmental footprint. This philosophy to safeguard the environment drives green practices within the Group. In the year under review, we were able to add further depth and breadth to our conservation efforts and achieved significant gains in distilling our pledge among our employees, who are the key drivers of this green philosophy.

Recognition of our achievements We are proud to announce that during the year, the Group continued to gain recognition for our high standards in the field of hospitality, which proves that our investments towards improving our standards have been effective.

We are pleased to note that both Avani Bentota and Hotel Sigiriya were presented Merit Certificates for Energy and Water Conservation and Waste Management by the EU Switch Asia Greening Sri Lankan Hotels awards for 2012. This is an encouraging recognition of our efforts towards conservation and sustainable business practices. We will strive to keep building on our successes to set the benchmark for the local industry in the area of conservation.

All three of our subsidiary hotels obtained the TripAdvisor Certificate of Excellence

EU Switch Asia Greening Sri Lankan Hotels Award - 2012


2012, while Avani Bentota won the Gold Circle Award by Agoda in 2012. Club Hotel Dolphin was placed among the 99 most popular hotels in the world, in the Beach Holiday category by the premier German online review site Holiday Check, and also won the ITS Red Star Award for being one of the 60 most popular hotels in the world for the third consecutive year. These awards reflect the quality of our customer service standards due to our well trained and hospitable staff.

Training and development of our peopleWe acknowledge that being in the service industry, our people are the key to success. The quality of customer care that makes us stand out from hotels across the world, is due to our people. Their passion, commitment and creativity to go above and beyond the expectation of our customers define the excellence that Serendib Leisure stands for. Therefore, we consider training an integral component of both business success and also as part of our strategy to achieve sustainable employee relations and thus the Group invested over 72,000 hours in the area during the current financial year.

Our vision is to create an atmosphere for our team to work with pride, happiness and enthusiasm which will reflect in the high standard of service and the genuine hospitality extended to our guests. Therefore, the Group invests extensively on training and development of its employees. In addition

to external training programmes, all of our hotels have an In-House Training and Development Manager who is entrusted with the implementation of the annual training calendar in coordination with the corporate office.

During the current financial year, Avani Bentota and Hotel Sigiriya continued to offer internship programmes in collaboration with hotel schools, NAITA, and the German Technical Institute to provide young people with the opportunity to enhance their skills through work experience. We have provided cross exposure for our employees to travel overseas to Anantara Hotels operated by our international partner, Minor International of Thailand. In addition, numerous task force training sessions have also been conducted throughout the year by Minor International at our hotels to raise the service standards to an international level.

During the year, employees of the Group underwent many internal and external training programmes focused on skills development and team building. As part of our team building exercises for the year, several Out Bound Training (OBT) programs were held for our staff at the Kukule Ganga Army Resort.

Employee benefitsWe believe our employees are a key ingredient of our success. In the hospitality industry it is vital for our employees to enjoy coming to work and to have fun at work, while performing at

the highest levels. To this end, we strive to provide a home away from home for our employees by providing them with superior accommodation with all required facilities and comforts. Annual family get-togethers, staff Christmas parties, annual trips and numerous sports events are organised to ensure a strong team spirit and camaraderie which is substantiated by the fact that staff accommodation at Club Hotel Dolphin is considered as the benchmark for the industry. These welfare measures build a sense of loyalty towards the organisation and ultimately contribute towards superior quality of service to our guests. During the year, Avani Bentota also commenced work on its staff accommodation, which is scheduled to be completed by August 2013.

Employee engagement The Serendib Leisure Group hosts many employee events to build relationships and team spirit. Such activities have ensured a culture of trust and cooperation within the Group that has motivated staff to give their best at work. We also value the opinions of our employees and welcome suggestions on how we can improve our service standards. Therefore, we conduct employee satisfaction surveys twice a year to obtain employee feedback and opinions. We strive to add value to such surveys by incorporating the findings into our daily operations. The surveys also contribute towards identifying skill gaps and training needs, while making our employees feel valued.


contributed towards upgrading the Community Centre at a cost of Rs. 1.4 Mn. Beach pollution is a key concern in these areas. The hotels maintain a regular beach cleanup programme, not simply to maintain the beauty of the location but also to have a pollution free home for the marine life. Further, Avani Bentota also conducts annual cleaning and maintenance work at the Bentota Government Hospital.

SuSTAinABiLiTy rePOrT cOntD.

Serendib Leisure Group continued to support the Hemas Outreach Foundation which is an approved charity, managed by a Board of Trustees. The Foundation supports Early Childhood Care & Development (ECCD) through the establishment of child friendly pre-schools across Sri Lanka. At present we foster 36 pre-schools island wide, under the banner ‘Piyawara’, where approximately 3,000 children are receiving their early education.

In keeping with the Philosophy of the Hemas Outreach Programme, all hotels engage in helping local schools and education programmes. Club Hotel Dolphin continued to support St. Odilia College in Kammala and continued English classes for village children at the community centre which has supplemented the school education of the children and improved their future employability. Avani Bentota too

Maintenance of the Bentota Railway StationOpening ceremony of a ‘Piyawara’ school

Supporting the CommunityThe communities we operate in are significant stakeholders of our business. Therefore, we make every endeavour to establish mutually-beneficial relationships with our communities by minimising any adverse impacts and by contributing towards community development. During the year, the Group conducted many programmes with different communities with the aim of improving their living standards.

continued conducting its free English classes for community youth for the third consecutive year with the support of the Udakotuwa Temple. We also promote our loyal repeat guests to contribute towards many of our community projects, and reach out to the community. Our hotels gave back to the community in many different ways during the year. Avani Bentota takes pride in maintaining the Bentota railway station and the Hotel staff contributed towards renovating the rail track. Furthermore Avani Bentota

Bentota and Kalutara are well known for their rich cultural and religious activities. To maintain and sustain this heritage Avani Bentota and Avani Kalutara have been instrumental in supporting places of worship of all religions.

Hotel Sigiriya held a special three day workshop for hotel staff and school children on environmental conservation chaired by Prof. Kotagama and the Field Ornithology Group of Sri Lanka about birds in Sri Lanka, bird conservation


and bird watching techniques. This has helped improve awareness about the rich diversity of birdlife in Sri Lanka and generated an interest in conserving this national asset. They also organised a blood donation campaign in September 2012, where Hotel Sigiriya staff and employees from other hotels donated

Prize giving of the English class at Udakotuwa Temple

Prof. Kotagama and his team on bird conservation

blood. During the year under review they continued the “Village Lunch Excursion” ensuring a regular income for several families at the neighbouring Diyakepilla village. This excursion involves a walk and tour of the village ending with a lunch of typical Sri Lankan dishes all set amidst a typical dry zone chena cultivation.

Such contributions towards community welfare have helped establish the hotels as part of the community with community support for the hotel and its activities, while also helping to improve quality of life for the community.

Conserving the environmentWe have adopted the 3R method; Reduce-Reuse-Recycle at all our hotels for energy and water conservation. A comprehensive environment management system is in place and various energy saving initiatives have been carried out in an extensive manner at all functional and operational levels.

Our sustainability policy guides our commitment to conserving the environment through the process of infrastructure design, implementation and adherence to policies and adaptation of new technology. When it comes to considering new capital investment we take long term view looking at life cycle costs, instead of merely upfront costs. Along with factors such as cost, quality and functionality, environmental impact has become an integral part in our investment decision making process. The new projects are developed with advice from external consultants on energy conserving processes which are incorporated in the new design process.

Hotel Sigiriya was one of the first hotels in the country to adopt a greening policy. In line with this philosophy, Hotel Sigiriya conducted many projects that contributed towards environmental


conservation. The use of aerosols is minimised and used only in emergencies. Further, many of the chemicals used in the hotel are environmental friendly and non hazardous. All organic waste is composted, wet garbage is sent to the piggery and dry garbage is sent for recycling. Furthermore, they use recycled water for up keeping the garden.

All four of the Serendib Leisure Group hotels monitor electricity and water consumption on a daily basis with sub meters and with a colour coded system for light switches. We have replaced all halogen bulbs with LED and CFL bulbs at all our properties and this resulted in a notable reduction in electricity consumption and emissions. Key-tag switches have been installed in all rooms for lighting and A/Cs. A/C controllers have also been installed to minimise energy consumption when not in use. Most of our hotels have switched to solar panels for the hot water system. During the year, energy audits were carried out by specialised consultants at all hotels and appropriate actions have been taken based on the recommendations made. Special energy conservation teams have been appointed at each hotel for data gathering, monitoring and implementation of our green policies and practices. ConclusionThe Group strives to deliver its commitment to all its stakeholders. Accordingly, we strongly believe that our corporate goals should be aligned with our sustainability policies to enhance the

SuSTAinABiLiTy rePOrT cOntD.

Energy Conservation Team - AVANI Bentota

lives of present and future generations of Sri Lankans. Our socially, economically and environmentally sustainable practices have endeared tremendous goodwill and support for our business operations by all our stakeholders. We are confident that our sustainability policies built on the belief in being a responsible corporate citizen will be an example to the entire tourism industry in Sri Lanka.


Risk MAnAgeMent

Serendib Hotels PLC believes that our dynamic approach to risk management ensures that key risks are pro actively identified, assessed and responded. Our ongoing assessment process takes into account the likelihood of an event, its potential impact on the business and the need for mitigation.

We have adopted the ISO 31000 standard of risk management. It elaborates on risk identification, risk assessment, risk response and risk reporting methodologies.

Company’s risk policyOur policy for risk management is to pro actively manage risk to ensure continued growth of our business and to protect our people, assets and reputation. This implies that we will:

• Implement an effective and integrated risk management system while maintaining business flexibility.

• Identify and assess material risks associated with our business, monitor, manage and mitigate risks.

Internal Control and Risk ManagementThe Group reviews and assess significant risks on a regular basis and has implemented an oversight programme to ensure that there is a system of internal controls in place.

Group Risk Management Committee(GRMC) of Hemas Holdings PLC, the ultimate parent of Serendib Hotels PLC overlooks the risk management process of the leisure sector. The GRMC reviews Company’s risk profile and provides guidance on required risk responses on a quarterly basis.

The agenda for the Group Audit Committee contains standing items on internal controls. These include the internal audit reports, quarterly risk reports and compliance statements.

As a part of the risk management process, at the Group level, the Board reviews its strategies, processes, procedures and guidelines on a continuous basis to effectively identify, assess and respond to risks.The Group wide risk management programme is being facilitated by Risk and Control division with the inputs from Business Strategy, Corporate Finance, Group Treasury and Group Human Resource divisions.

Risk facilitation is exercised through risk workshops, risk reviews, essential control checklists and risk reporting.

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BOARD

Audit Committee

Senior Management

Risk Champions

Head of the Department

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Committee

THE BOARD AND RISK MANAGEMENT


Risk MAnAgeMent cOntD.

ISO 31000 RISK MANAGEMENT FRAMEWORK

COMMUNICATION AND CONSULTATION

MONITOR AND REVIEW

TREAT THE RISKS Implement a suitable risk treatment plan

ESTABLISH THE CONTEXTAnalyse business environment and set objectives

IDENTIFY THE RISKSDeviation from achievement of expected results

ANALYSE THE RISKSAnalyse Probability and consequence

EVALUATE THE RISKSPrioritise the risks

Key Risks and Action PlansThe following framework depicts the specific and most relevant risks faced by the Group and the management actions to mitigate the risks.

Risk Risk exposure Mitigating actions

Competition Adverse impact on yields and occupancies.

• Sourcing new markets and developing new channels (eg. Web).• Analyse resources and capabilities to identify core competencies

and differentiate through brand and service levels.• Increase the value addition within the value chain to provide a better

value for money.• Establish a sustainable relationship with travel agents and tour

operators.• Make necessary investments to upgrade facilities.

Human Resource Risk

Risk of losing skilled and trained human capital and recruitment of staff for new hotel developments.Trade union activities resulting in work disruptions.

• Establish career development programs and succession plans in order to retain and motivate the talent pool of the Group.

• Provide focused and structured training for staff at all levels to aid personal and professional development.

• Develop a strong employer brand to attract staff of the right quality.



Project Management Risk

New projects involve high risks and uncertainties in terms of delay and cost overruns. Failure of major projects will affect capital structure and reputation.

• Conduct a PESTEL analysis and a feasibility study before initiating the projects.

• Effective project management to ensure timelines are established communicated and agreed on by all stakeholders.

• Formal processes have been established to ensure transparency in project consultancy, project procurement.

• Project leader / project consultants appointed to ensure that project time and costs are monitored and reviewed on an ongoing basis against set timelines and budget.

Country Risk (Economical)

Rising costs such as higher energy costs, interest rates, inflation, Forex fluctuations and increased minimum wage can have a detrimental impact both in the development of the hotel industry and sustaining long term profitability.

• Ensure that all costs incurred in the operations are scrutinized and streamlined to ensure optimum productivity is achieved.

• Work closely in partnership with industry peers to communicate concerns and suggestions on macroeconomic decisions made by the government.

Health and Safety Risk

Risk of litigation due to non-adherence to laid down health and safety regulations. This could be due to, but not restricted to food poisoning, personal or accidental harm to guest or employee.

• Insurance taken to cover both employee and guest injuries. Further, regular maintenance of the property and equipments is done to ensure all operating equipment are of good operating condition.

• The hotels manageed by the Group takes all precautions from sourcing the supplier to storage and preparation of food to ensure contamination is avoided.

• Tour operator safety standards are complied with and necessary action is taken immediately on any concern area related to health and safety based on audit inspections done by tour operators.

• The company sources its products and services from approved suppliers.

Foreign Exchange Rate Risk

Depreciation of the rupee value and loss on exchange in conversion of loans taken in foreign currency.

• Exchange rate movements are taken into consideration when entering into contracts with travel agents.

• Borrowings in foreign currency are naturally hedged, provided the inflows match the outflows.


Risk MAnAgeMent cOntD.


Fluctuations in Demand

Recession period in the traditional European markets may cause reduction in demand.

• Closely monitor the socio-economic environment of the traditional markets and looking into every possibility to enter new emerging markets.

• Upgrade the corporate website to improve revenue through direct bookings and marketing the hotel by partnering with popular online travel agents to push web based sales.

• Participate in trade fairs both local and foreign in order to promote the property and to attract new tour operators.

• Market the properties to emerging markets in the off-peak season, such as Middle-East, China, Australia and India.

Financing and Interest Rate Risk

Inability to satisfy debt repayments and secure financing for proposed projects.

• Borrowings in foreign currency to bring down finance charges. Foreign currency borrowings are also naturally hedged.

Credit Risk Risk arising due to default of payment. Higher credit risk may adversely impact both liquidity and profitability.

• Credit is allowed only to approved customers which is reviewed yearly.

• Maintain records on debtors for at least six years.• Actively monitor and review the debtor balances.• Advances on bookings are taken from non-credit customers.• Compliance to laid down credit SOPs.• Obtain credit rating of our customers from an international credit

rating agency.

Operational Process Risk

Internal process failures, fraud, pilferage and breakdown of internal controls.

• Outsource internal audits to reputed Audit Firms to review and report on the adequacy of the financial and operational controls.

• Systems and procedures are in place to ensure compliance with internal controls, which are monitored and reviewed for their continued efficiency and effectiveness.

• Required action taken immediately as per employment policy on any staff involved on fraud / pilferage issues.

• Provide focused and structured training to staff at all levels to familiarise processes and procedures.

Fire and Natural Disaster

Fire or natural disaster can halt or cease operation.

• Insurance is taken to cover all aspects of fire and natural disaster• Fire safety drills and training is given to ensure the chances of

occurrence are kept to a minimum. Further, hotel is equipped and maintains firefighting equipment at all strategic locations of the hotel



Statutory and Regulatory Risk

Risk of non-compliance with changes in legal and regulatory environment, taxation, labour and other laws will result in judiciary actions.

• Create awareness of statutory obligations at all levels.• Use an independent external tax consultant to review and advice on

all statutory computations and returns submitted in respect of fiscal levies and taxes.

• Make compliance audits as part of the scope of internal audits.• Seek advice from external consultant and legal division of the parent

company on all matters relating to contracts and litigation.

Reputation Risk Adverse impact on the corporate image and brand equity which is likely to diminish shareholder value. This will finally lead to a decline in market share and customer base.

• Maintenance of highest ethical standards at all times in all business activities.

• Continuous review of guest comments in order to exceed customer expectations and ensure quality standards are adhered and improved upon.

• Proper adherence to the statutory, health and safety concerns by obtaining appropriate quality certification standards including HACCAP and environmental regulations.

• The company plays a corporate citizen role through CSR initiatives in the locale of the hotel.

• Reputation management software (Brand-Gain) is used to monitor, report and respond to the on-line reviews in the public domain/review sites (for e.g. Trip Advisor, HolidayCheck, etc).

In conclusion, Serendib Hotels PLC’s transparent risk management system tackles risks posed to the Group on a broad front. Our risk management process is watertight hence it is entrenched in the core values of the company and the senior management demonstrates leadership in championing the Group's risk management initiative, thereby ensuring the company’s competitiveness and sustainability into the long-term.


IntroductionCorporate Governance is the system by which companies are directed and controlled by the Board in the best interest of the stakeholders and others. The shareholders' role in governance is to appoint Directors and the Auditors to satisfy themselves that an appropriate governance structure is in place.

Company’s Philosophy on Corporate GovernanceSerendib Hotels PLC is fully aware and committed to implementing governance standards that conform to best practices. As part of the corporate culture, it engages and interacts with all the stakeholders in a way that promotes mutual trust, better understanding and good faith.

The main scope of Serendib’s good corporate governance policies encompass; clear description of duties and responsibilities among the Board of Directors, checks and balances, clear business roles and strategies within the Company, ethical business conduct, engagements with stakeholders through risk mitigation, upholding corporate social responsibility in sustaining good corporate citizenship as well as disclosure of material information in a timely and accurate manner.

The extent to which the Company complies with the Code of Best Practice on Corporate Governance issued jointly by the Securities & Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka is set out below:

Corporate Governance Principle

SEC & ICASL Code Reference

Level of Compliance

Board Meetings A 1.1 Five regular Board meetings are scheduled during a year to review the strategic direction of the operational units, annual budgets and progress towards achieving those budgets and key business risks and other matters. Ad hoc meetings are also held when necessary.

Apart from taking decisions at meetings, the Board also takes decisions via circular resolutions. These resolutions are required to be signed by all the Directors.

Responsibilities of the Board

A 1.2 The Directors are responsible for; • Formulating, implementing and monitoring overall business policy and strategy.• Ensuring effective systems to secure integrity of information, internal controls

and risk management.• Ensuring compliance with relevant laws, statutes and regulations.• Ensuring all stakeholder interests are considered in corporate decisions.• Promoting of open and proper communication between the Company and its

stakeholders.Compliance with the law and independent professional advice

A 1.3 The Board collectively and the Directors individually act in accordance with the laws and regulations applicable to the business enterprise.

In discharging their duties, Directors seek independent professional advice from external parties when necessary at the expense of the Company.

cORPORAte gOveRnAnce




Level of Compliance

Company Secretary A1.4 All Directors have access to the advice and services of the Company Secretary who is responsible to the Board in ensuring that proper Board procedures are followed and applicable rules and regulations are complied with.

The appointment and removal of the Company Secretary is a decision taken by the Board as a whole.

Independent judgment A1.5 The Directors exercise independent judgment on matters pertaining to strategy, performance, resource allocation and standards of business conduct and acts free from any undue influence and bias from other parties.

Dedication of adequate time and effort by the Directors

A1.6 The members of the Board dedicate adequate time and effort in discharging their duties and responsibilities towards the Company.

The Board met on five occasions during the year under review and the attendance at these meetings are given below:

Name of Director Capacity No. of meetings attendedMr. A.N. Esufally Chairman/ NED 5/5Mr. D.T.R. De Silva MD 5/5Mr. J.C.L. De Mel ID 5/5Mr. H.N. Esufally NED 4/5Mr. W.M. De F. Arsakularatne NED 5/5Prof. L.D.K.B. Gamage ID 4/5Mr. E.J.D. Rajakarier NED -* Mr. M.A. Jafferjee ID 5/5Mr. R.N.A. Athukorala ID 5/5

NED - Non Executive Director, ID - Independent Director, MD - Managing Director

*Mr. E.J.D. Rajakarier, CEO of Minor Hotel Group has not been able to attend Board meetings during the financial year. However, his observations on the Discussion Papers are sent to the Chairman prior to the Board Meetings in order that his views may be discussed and recorded. He has also had several discussions with the Chairman and Managing Director on matters of the Company which require Board guidance during his regular visits to Sri Lanka.

The Board has delegated some of its functions to its Sub-Committees, while retaining the rights for final decision pertaining to matters under the purview of the Committees. The composition and the functions of these sub-committees are discussed in detail under the relevant sections of this Report.

The operation of the hotel owned by the Company has been delegated to Serendib Leisure Management Ltd., Managing Agents through a formal Management Agreement. The Managing Agent operates the hotel within the policy framework outlined by the Board and is assessed periodically by way of Management Reports and presentations.




Level of Compliance

Induction and Training for Directors

A1.7 An Induction programme is in place which includes the provision of key corporate documents, facilitation of visits to hotels and meetings with the MD and the senior management team.

In addition, the Directors are also encouraged to participate in continuous professional and self-development activities.

Chairman and Managing Director



Level of Compliance

Separation of the role of Chairman & MD

A.2.1. The role of the Chairman and Managing Director is distinct, ensuring the balance of power and authority within the organisation.

Chairman’s Role



Level of Compliance

Role of Chairman in conducting meetings

A 3.1 The Chairman encourages the participation of all the Directors in decision making, seeks and ascertains the views of the Directors and thereby ensures that the Board functions in an efficient manner which is beneficial to the stakeholders and the Company.

Financial Acumen



Level of Compliance

Availability of those with sufficient financial knowledge

A.4 The Board comprise of professional accountants who posses the necessary knowledge and competence to guide the Board on matters pertaining to finance.

Board Balance



Level of Compliance

Non Executive Directors A.5.1 All the Directors except the Managing Director are Non Executive Directors.Independent Directors A.5.2 Four out of the Eight Non Executive Directors are considered independent.

A.5.3 These Directors are independent of management and free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment.

Annual Declaration A.5.4 The Independent Directors have submitted written Declarations of their independence as required by section 7.10.2(b) of the Listing Rules.

cORPORAte gOveRnAnce cOntD.




Level of Compliance

Determination of independence

A.5.5 The Board annually determines the independence of each Non Executive Director based on the Declarations submitted by them.

The Board believes that the independence of Mr. J.C.L. De Mel is not compromised by him serving on the Board continually for a period exceeding nine years from the date of his first appointment.

Therefore, the following Directors are considered Independent in terms of the Listing Rules.• Mr. J.C. L. De Mel• Prof. L.D.K.B. Gamage• Mr. M.A. Jafferjee• Mr. R.N.A. Athukorala

Chairman’s meetings with NEDs

A.5.8 Chairman meets with the NEDs with the Executive Director not being present whenever necessary.

Recording of concerns in Board Minutes

A.5.9 Concerns raised by the Directors on matters of the Company which cannot be unanimously resolved are recorded in the Board minutes.

Supply of Information



Level of Compliance

Management’s obligation to provide appropriate and timely information

A.6.1A.6.2

The Board is provided with appropriate and timely information to discharge its duties. The Directors are also entitled to request for additional information where they consider such information necessary to make informed decisions. The Agenda for the Board meetings and connected discussion papers are circulated to the Directors at least seven days in advance to facilitate the effective conduct of the meeting

Appointments to the Board



Level of Compliance

Nominations Committee A 7.1 The Board has not established a Nominations Committee to make recommendations on Board appointments; instead appointments to the Board are made collectively and with the consent of all the Directors.

Assessment of Board composition

A.7.2 The Board assesses its composition to ascertain whether the combined knowledge and experience of the Board matches the strategic demands facing the Company and takes it into account when new Board appointments are considered.




Level of Compliance

Disclosure of required details of new Directors

A.7.3 On appointment of a new Director, the Company informs the Colombo Stock Exchange a brief resume of the Director which includes;• the nature of his experience in relevant functional area• other Directorships or memberships in Board sub committees; and• whether the Director is considered an Independent, Non Executive or

Executive Director

Re – election



Level of Compliance

Re-election of Directors A.8.1A.8.2

The Company’s Articles require a Director appointed by the Board to hold office until the next Annual General Meeting and seek re-appointment by the shareholders at that meeting.

One third of the Directors including the Chairman retire by rotation at each Annual General Meeting in conformity with the Articles of Association of the Company. Directors who retire are those who have served for the longest period after their re-appointment / re-election.

In addition, a Director who has reached 70 years of age vacates office at the conclusion of the Annual General Meeting commencing next after he attains the age of 70 years or if he is re-appointed as a Director after attaining the age of 70 years at the Annual General Meeting following that re-appointment.

Appraisal of Board Performance



Level of Compliance

Appraisal of the Board and Sub-committees

A.9.1A.9.2A.9.3

The Board undertakes an annual evaluation of its own performance and its committees in the discharge of its key responsibilities.

Disclosure of Information in Respect of Directors



Level of Compliance

Information in respect of Directors

A.10.1 The Biographical details of the Directors, membership in Board sub-committees, attendance at Board and sub-committee meetings and Directors' Interest in Contracts are disclosed under the relevant sections in the Annual Report.



Appraisal of Managing Director



Level of Compliance

Setting of annual targets and appraisal of performance

A.11.1A.11.2

At the commencement of each financial year, the Board in consultation with the Managing Director sets reasonable financial and non-financial goals based on the short, medium and long term objectives of the Company.

The Annual Appraisal of the Managing Director is carried out by the Board at pre-agreed performance targets.

B. DIRECTORS REMUNERATIONRemuneration Procedure



Level of Compliance

Establishment of a Remuneration Committee

B.1.1 The Board has delegated powers to the Remuneration Committee of its Parent Company to make recommendations to the Board on remuneration policy and practice that is consistent with the objectives of the Company.

Composition B.1.2B.1.3

The Remuneration Committee of the Parent Company consists of two Independent Non Executive Directors.

The Chairman of the Committee is an Independent Director appointed by the Board.

The names of the members of the Remuneration Committee are indicated in the Annual Report of the Board of Directors.

Determination of remuneration

B.1.4 In terms of the Articles of Association of the Company, the Board determines the fees payable to the Independent Directors.

Consultation of the Chairman and access to professional advice

B.1.5 The committee consults the Chairman on proposals relating to the remuneration of the Executive Director and has access to professional advice in discharging their duties.

The Level and make up of Remuneration



Level of Compliance

Executive Directors Remuneration package

B.2.1 The Committee structures remuneration packages to attract, retain and motivate Executive Directors and senior management of the required quality.

Comparison of remuneration with other companies and group

B.2.2B.2.3

The Committee ensures that the remuneration of executives at each level of management is competitive and in line with their performance. Surveys are conducted as and when necessary to ensure that the remuneration is competitive with those of comparative companies.

It also takes into consideration data concerning executive pay among the group companies.




Level of Compliance

Performance-related element of remuneration

B.2.4 Performance-based incentives have been determined by the Remuneration Committee to ensure that the total earnings of the Executive Director is aligned with the achievement of objectives and budgets of the Group companies.

Disclosure of Remuneration



Level of Compliance

Disclosures B.3.1. The remuneration policy supports a strong performance-oriented culture and ensures that individual rewards and incentives relate directly to the performance of the individual, the operations and functions for which they are responsible and the group as a whole.

The aggregate remuneration paid to Executive and Independent Directors is disclosed in Note 7 of the Financial Statements.

C. RELATIONS WITH SHAREHOLDERS

Constructive use of the Annual General meeting and conduct of General Meetings



Level of Compliance

Proxy votes C.1.1 The Company counts all proxies lodged on each resolution. Separate resolutions C.1.2 A separate resolution is proposed for each issue at the AGM.Availability of Board sub committee Chairpersons

C.1.3 The Chairpersons of the Board sub-committees are present at the AGM to answer any questions raised by the shareholders if so requested by the Chairman.

Adequate notice of AGM C.1.4 The Notice of the Annual General Meeting and the relevant documents are published and dispatched to the shareholders 15 working days prior to the meeting as required by the Companies Act No. 7 of 2007.

Procedure of voting at General meetings

C.1.5 The procedure for voting at the meeting is circulated along with the Notice of meeting.

Major Transactions



Level of Compliance

Disclosure on major transactions

C.2.1 The Directors ensures that any corporate transaction that would materially affect the net assets base of the Company is communicated to the Shareholders.

There were no major transactions as defined under section 185 of the Companies Act No. 7 of 2007 during the year under review.



D. ACCOUNTABILITY AND AUDIT

Financial Reporting



Level of Compliance

Board’s responsibility for statutory and regulatory reporting

D.1.1 The Board is accountable for presenting the consolidated Financial Statements of the Company and its subsidiaries to regulators as well as the information required to be presented by Statute.

Declarations by Directors.

D.1.2 The Declarations to be made by the Directors are included in the Annual Report of the Board of Directors.

Statement of Directors and Auditors responsibility for the Financial Statements

D.1.3 The Statement of Directors responsibility in preparation of the Financial Statements is given on page 68 while the Independent Auditors Report on page 69 state the Auditors responsibility for the Financial Statements.

Management Discussion Analysis

D.1.4 Management Discussion and Analysis is given on pages 24 to 29 of this Report.

Declaration on Going Concern of business

D.1.4 The Declaration by the Board that the Company is a Going Concern is given in the Annual Report of the Board of Directors.

Internal Control



Level of Compliance

Annual review of the system of internal controls

D.2.1 The Board maintains a sound system of internal control to safeguard shareholders investments and the Company’s assets. The adequacy and the effectiveness of the Internal controls are reviewed by the Internal Auditors under direction of the Audit Committee.

Audit Committee



Level of Compliance

Composition D.3.1 In terms of the Listing Rules, the Audit Committee consists of two Independent Directors and a Non Executive Director. The Chairman of the Committee is an Independent Director.

Duties D.3.2 The main purpose of the committee is to assist the Board in the effective discharge of its responsibilities on financial reporting, risk management and internal control. It also reviews the nature and extent of non-audit services provided by the Auditors seeking to balance objectivity and independence.

Terms of Reference D.3.3 The Committee has written Terms of Reference dealing clearly with its authorities and duties.




Level of Compliance

Disclosures D.3.4 The members of the Committee are indicated in the Annual Report of the Board of Directors.

The Committee met four times during the year under review and the attendance at these meetings are given below:

Name of Director Capacity No. of meetings attendedProf. L.D.K.B. Gamage Chairman/ID 4/4Mr. M.A. Jafferjee Member/ID 4/4Mr. A.N. Esufally Member/NED 4/4

The Report of the Audit Committee is given on page 65.

Code of Business conduct and ethics



Level of Compliance

Disclosure of Code of Business Conduct and Ethics

D.4.1 The Company has adopted a Code of Business Conduct and Ethics and the Directors and members of the senior management are committed to the Code and the principles contained therein.

Corporate Governance Disclosures



Level of Compliance

Corporate Governance Report

D.5.1 The manner and extent to which the Company complies with the provisions and principles of the Code is disclosed in the Report on Corporate Governance.

SECTION 2 : SHAREHOLDERS

E: INSTITUTIONAL INVESTORS

Shareholder voting



Level of Compliance

Communication with shareholders

E.1.1 The Chairman conducts a structured dialogue with the institutional shareholders based on the mutual understanding of objectives and ensures that the views of the shareholders are communicated to the Board as whole.



F : OTHER INVESTORS

Investing /Divesting decision



Level of Compliance

Individual shareholders F.1. Individual investors are encouraged to carry out adequate analysis or seek independent advice in investing and divesting decisions.

The Company places great emphasis on releasing its Financial Statements in a timely manner as to ensure that shareholders have access to information on which they could make informed decisions.

Shareholder Voting



Level of Compliance

Individual shareholder voting

F.2 All shareholders are encouraged to participate at meetings of the Company and a Form of Proxy accompanies each Notice providing shareholders who are unable to attend such meeting the opportunity to cast their vote.

The following table presents the Company’s compliance with Section 7.10 of Listing Rules on Corporate Governance issued by the Colombo Stock Exchange.

CSE Rule No. Applicable Rule Requirement Status of compliance

Board of Directors7.10.1. Non executive

Directors (NEDs)One-third of the total number of Directors subject to a minimum of two. Complied

7.10.2 (a) Independent Directors

One-third of the Non-Executive Directors subject to a minimum of two. Complied

7.10.2 (b) Each Non-Executive Director should submit a declaration of independence/ non-independence.

Complied

7.10.3 (a) and (b) Disclosure relating to Directors Independence

Names of Independent Directors should be disclosed in the Annual Report and the basis for determination of independence of NEDs, if criteria for independence is not met.

Complied

7.10.3 (c) A brief resume of each Director should be included in the Annual Report, including his area of expertise.

Complied

7.10.3 (d) Upon appointment of a new Director a brief resume of the Director to be submitted to the Exchange.

Complied


CSE Rule No. Applicable Rule Requirement Status of compliance

Remuneration Committee 7.10.5 (a) Composition The Committee shall Comprise of a Minimum of two Independent Directors

or Non-Executive Directors, a majority of whom shall be independent.

The Chairman of the Committee shall be a Non-Executive Director.

Complied

7.10.5(b) Functions of the Remuneration Committee

The Committee shall recommend the remuneration payable to the Executive Directors and Chief executive officer or equivalent role.

Complied

7.10.5 (c) Disclosure in the Annual Report

The Annual Report should set out the names of the members of the Remuneration Committee, a Statement of Remuneration Policy and the aggregate remuneration paid to Executive and Non-Executive Directors.

Complied

Audit Committee7.10.6.( a) Composition The Committee shall comprise of two Independent Directors or Non-

Executive Directors a majority of who shall be independent.

The Chairman shall be a Non-Executive Director.

The Chairman or a member should be a member of a recognized professional accounting body.

Complied

7.10.6. (b) Functions • Overseeing the preparation, presentation and adequacy of the disclosures in the Financial Statements in accordance with the SLAS.

• Overseeing compliance with financial reporting related regulations and requirements.

• Overseeing the processes to ensure that internal controls and risk management are adequate.

• Assessing the independence and performance of the external Auditors.• Recommending to the Board the appointment, re- appointment and

removal of the external Auditors and approving their remuneration and terms of engagement.

Complied

7.10.6.(c) Disclosure in the Annual Report

The names of the members of the Audit Committee should be disclosed in the Annual Report

The committee to determine the independence of Auditors and disclose the basis of such determination in the Annual Report.

Annual Report to contain a report by the Audit Committee setting out the manner of compliance in relation with their functions.

Complied



In accordance with the Rules on Corporate Governance issued by the Colombo Stock Exchange, the Remuneration Committee appointed by the Board of the Parent Company, Hemas Holdings PLC functions as the Remuneration Committee of the Company.

Composition of the Remuneration Committee:• Mr. Lalith De Mel (Independent

Director and Chairman of Hemas Holdings PLC).

• Mr. Maithri Wickremesinghe (Independent Director of Hemas Holdings PLC).

Frequency of meetingsThe Committee meets at least five times a year. Additional meetings shall be convened at the request of the Chairman or a member of the Committee.

Remuneration PolicyThe Committee has given full consideration to the principles of Good Governance as set out in the Code with reference to Directors’ remuneration. The main objectives of the policy are to ensure that pay and benefit packages are sufficiently competitive to attract, develop and retain high caliber executives. The Committee will continue in the future to ensure that a competitive and well-balanced package is maintained. It also seeks to align individual reward and incentives with the performance of the Group and hence, with the interests of the shareholders. When carrying out its role the Committee will consider corporate performance on environmental, social and corporate governance issues.

RePORt OF the ReMUneRAtiOn cOMMittee

Role & responsibilities of the Committee The scope of the Remuneration Committee shall cover the following responsibilities:• Compensation philosophy / policies

including stock options and benefits• Fixed pay (based on grading /

evaluation)• Performance Bonus• Special Schemes• Performance Management systems• Annual Goals and performance

targets• Performance assessment and

development plans• Executive search

J.C.L. De MelChairman

21 May 2013


AnnuAL rePOrT OF THe BOArd OF direCTOrS

The Board of Directors of Serendib Hotels PLC takes pleasure in presenting their Report together with the Audited Financial Statements of the Company and Consolidated Financial Statements of the group for the year ended 31 March 2013.

Principal Activity of the Company & GroupThe Principal activity of the Company and its subsidiaries which is hoteliering remained unchanged during the year under review.

The Company owns and operates Avani Bentota Resort & Spa at Bentota. (formerly known as “Hotel Serendib”)

Subsidiaries & AssociatesSerendib Hotels PLC is the major shareholder of Hotel Sigiriya PLC, which owns Hotel Sigiriya in Dambulla and Dolphin Hotels PLC, which owns the Club Hotel Dolphin and Miami Cottages in Waikkal. It also has a 19.9% stake in Jada Resort & Spa (Pvt) Ltd., which owns Avani Kalutara Resort in Kalutara.

The Company’s fully owned subsidiary Serendib Leisure Management Ltd. manages all of the above properties.

The Directors to the best of their knowledge and belief confirm that neither the Company nor its subsidiaries have been engaged in any activity that contravenes laws and regulations.

Review of Operations & Future DevelopmentsThe financial and operational performance of the Company during the year under review and future developments are discussed in the Chairman’s Review and

the Management Discussion & Analysis. These Reports together with the Audited Financial Statements reflect the state of affairs of the Company and the Group.

Corporate GovernanceThe Directors confirm that the Company is in compliance with the Rules on Corporate Governance laid down by the Colombo Stock Exchange. The Corporate Governance practices of the Company are given from pages 46 to 56 of this report.

Risk ManagementThe Company has put in place a process to identify, evaluate and manage any significant risks faced by the entity. The principal risks and mitigating action are reviewed by the Audit Committee regularly. A detailed overview of the Risk Management process is outlined in the Risk Management Report from pages 41 to 45.

Going ConcernThe Board of Directors after considering the financial position, operating conditions, regulatory and other factors and such matters required to be

addressed in the Corporate Governance Code, have a reasonable expectation that the Company possesses adequate resources to continue its operations for the foreseeable future. For this reason, the Company continues to adopt the ‘Going Concern basis’ in preparing the Financial Statements.

Financial StatementsThe Financial Statements of the Company and Group as at 31st March 2013 are given from pages 70 to 127 of the Annual Report.

Auditor’s ReportThe Auditor’s Report on the Financial Statements of the Company and the Group is given on page 69.

Accounting PoliciesThe Accounting Policies adopted in the preparation of the Financial Statements are given from pages 76 to 87.

ResultsThe Financial Results of the Company and Group as at the Balance Sheet date is tabulated below:

Group Company2013 (Rs) 2012 (Rs) 2013 (Rs) 2012 (Rs)

Revenue 1,447,478,145 1,047,459,644 408,823,970 138,462,687Gross Profit 1,138,169,534 777,612,331 335,292,635 97,993,107Profit Before Tax 431,422,359 111,846,260 126,308,174 (75,830,204)Income Tax expenses

(65,613,776) (20,585,171) (7,683,230) 5,345,539

Profit/(loss) After Tax 365,808,583 91,261,089 118,624,944 (70,484,665)Attributable to:Equity holders of the Parent

270,122,976 40,873,544 - -

Non Controlling Interest

95,685,607 50,387,546 - -


The Directors have not recommended the payment of a dividend for the financial year 2012/13. (2011/12 - Nil).

Property Plant & Equipment The capital expenditure incurred by the Group and Company during the year amounted to Rs. 69,628,697/- (2012 – Rs. 653,735,759/-) and Rs. 40,420,635/- (2012 - Rs. 595,418,311/- ) respectively.

Details of Property, Plant & Equipment and their movement during the financial year is disclosed under Note 10 to the Financial Statements.

Details of Land and Buildings held by the Company is given below:

Location Extent Tourist Resort, 3 Acres 1 Rood Bentota 3 Perches

Stated CapitalThe stated capital of the Company as at 31 March 2013 amounted to Rs. 913,121,694 (2012 - Rs. 913,121,694/-) divided into 75,514,738 (2012-75,514,738) ordinary voting and 36,011,056 (2012 - 36,011,056) ordinary non voting shares.

Events Occurring After the Balance Sheet DateNo circumstances have arisen since the Balance Sheet date that would require adjustment to or disclosure in the Accounts other than those disclosed in Note. 29 to the Financial Statements.

Statutory Payments & Compliance with Laws and regulations The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries as at the Balance sheet date have been paid or where relevant provided for in the Financial Statements.

The Company has also ensured that it complies with the applicable laws and regulations including the Listing Rules of the Colombo Stock Exchange.

Employment Permanent and Contract employees in the Group as at the Balance Sheet date were 640 (2012 - 664).

The Group adopts a non discriminatory policy in recruitment and employment which gives full and fair consideration to persons in selection, training, development and promotion ensuring that all decisions are based on merit.

Corporate DonationsDonations made by the Group and Company during the year under review amounted to Rs. 2,757,846/- (2012 – Rs. 361,904/-) and Rs. 17,749/- (2012 – Rs. 262,258/-) respectively.

DirectorsThe Board of Directors of the Company as at 31 March 2013 is given below:

Mr. A.N. Esufally – ChairmanMr. D.T.R. De Silva – Managing Director

Mr. J.C.L. De Mel Mr. H.N. EsufallyMr. W.M. De F. ArsakularatneProf. L.D.K.B. GamageMr. E.J.D. RajakariarMr. M.A. JafferjeeMr. R.N. Athukorala Mr. V.H.A. Perera (Alternate Director to Mr. A.N. Esufally)Ms. K.A.C. Wilson (Alternate Director to Mr. H.N. Esufally)

Mr. A.N. Esufally and Prof. L.D.K.B. Gamage retire by rotation in terms of Article 85 of the Articles of Association of the Company and being eligible offer themselves for re-election, with the unanimous support of the Board.

Mr. J.C.L. De Mel, who reached the age of 76 years on 6th May 2013 vacates office in terms of Section 210 (2) (b) of the Companies Act No. 7 of 2007. A resolution to re-appoint Mr. J.C.L De Mel in accordance with Section 211 (1) of the Statute, is given in the Notice convening the meeting. He is therefore eligible for re-appointment with the unanimous consent of the Board.

Board CommitteesThe following members served on the Audit & Remuneration Committees of the Board:

Audit CommitteeProf. L.D.K.B. Gamage - ChairmanMr. M.A. Jafferjee Mr. A.N. Esufally


Remuneration CommitteeThe Remuneration Committee of the Parent Company, Hemas Holdings PLCfunctions as the Remuneration Committee of the Company. The names of the members of the committee are given below:

Mr. J.C.L. De MelMr. M.E. Wickremesinghe Remuneration & Other Benefits of DirectorsDetails of Directors emoluments paid during the year are disclosed in Note 7 of the Financial Statement.

Interest RegisterIn compliance with the requirements of the Companies Act No. 7 of 2007, an Interest Register was maintained by the Company during the accounting period ended 31 March 2013.

In terms of Section 192 of the Companies Act, the Directors have declared their interests in contracts in the Company and have refrained from voting on matters in which they were materially interested. Directors Interest in contracts with the Company is disclosed from page 62 to 64 of the report.

Directors’ interest in sharesIn compliance with Section 200 of the Companies Act, the Directors have disclosed their relevant interest in shares of the Company.

AnnuAL rePOrT OF THe BOArd OF direCTOrS cOntD.

The shareholdings of the Directors during the financial year were as follows:

2013 201231.03.13 01.04.12 31.03.12

Mr. A.N. Esufally 16,565 16,565 16,565Mr. J.C.L. De Mel 661,925 661,925 661,925Mr. H.N. Esufally 500 500 500Mr. W.M. De F. Arsakularatne - - -Prof. L.D.B.K. Gamage - - -Mr. E.J.D. Rajakarier - - -Mr. R.N.A. Athukorala - - - Mr. M.A. Jafferjee - -Mr. D.T.R. De Silva 7,681 7,681 7,681

Related Party transactions exceeding 10% of the equity or 5 % of the Total assets of the Company.Transactions carried out by the Company with its related parties during the year ended 31 March 2013 did not exceed 10% of the shareholders equity or 5% of the total assets of the Company.

Company Secretaries & Registrars Messrs Hemas Corporate Services (Pvt) Ltd. of Level 9 Hemas House, 75, Braybrooke Place, Colombo 02 functions as the Secretaries & Registrars of the Company.

Internal ControlThe Board has reviewed the internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of its effectiveness.

ShareholdersThe Company has made all endeavours to ensure equitable treatment to all its shareholders. AuditorsDuring the year under review Messrs Ernst & Young, Chartered Accountants served as the External Auditors of the Company. The Audit Fees payable and fees paid for other services rendered are as follows;

Audit Fees: Rs. 696,736/- (2012 - Rs. 577,800/-)

Fees for Non-Audit Services: Rs. 174,440/- (2012 - Rs. 195,740/-)

The Directors have confirmed that to the best of their knowledge the Auditors have had no interest in or relationship with the Company or its subsidiaries other than that of External Auditors.


The Auditors have confirmed that they are independent in accordance with the Code of Ethics of the Institute of Chartered Accountants of Sri Lanka.

Messrs. Ernst & Young have expressed their willingness to continue in office. A resolution to re-appoint them and to authorise the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

By Order of the Board ofSerendib Hotels PLC

A. N. Esufally D.T.R. De Silva Chairman Managing Director

Hemas Corporate Services (Pvt) Ltd.Secretaries

21 May 2013


DiRectORs' inteRest in cOntRActs with the cOMPAnY

Related party disclosures as required by the Sri Lanka Accounting Standards No. 24 on Related Party Disclosures is detailed in Note 31 to the Financial Statements. In addition, the Company carried out transactions in the ordinary course of business with entities where the Directors of the Company are Directors of such entities.

COMPANY DIRECTORS NATURE OF TRANSACTION

Rs. 2012/13

Rs.2011/12

Dolphin Hotels PLC A.N. EsufallyH.N. Esufally - Resigned 17.10.2012W.M. De F. ArsakularatneD.T.R. De Silva - Appointed 17.10.2012

Purchases of goods / services

Sale of properties & other assets

Finance charges payable

Interest income receivable

Expenses incurred on behalf of the company

Settlement of dues from related parties

Settlement of dues to related parties

Expenses incurred on behalf of others

Finance charges paid

Loan capital paid/granted

(93,022)

-

(4,492,447)

-

2,647,998

(1,670,279)

5,892,914

(6,718,858)

4,866,124

(62,287,450)

-

317,831

-

(648,772)

(643,760)

(2,179,545)

-

2,205,138

275,096

(62,287,450)Hotel Sigiriya PLC A.N. Esufally

H.N. Esufally - Resigned 17.10.2012W.M.De F. ArsakularatneD.T.R. De Silva - Appointed 17.10.2012









(445,933)

-

1,429,968

(1,971,725)

2,272,307

(2,221,454)

462,919

2,500,000

-

(98,308)

(32,435)

(2,306,494)

2,128,990

797,301

81,323

(2,500,000)



Rs. 2012/13

Rs.2011/12

Serendib Leisure Management Ltd.

A.N. EsufallyD.T.R. De SilvaE.J.D. Rajakarier


Management fee payable





Management fee paid


-

-

-

1,881,692

(3,186,059)

39,976,727

-

(35,893,789)

85,486

(10,645,315)

(310,227)

(8,629,762)

(13,920,054)

10,839,246

6,714,108

1,863,919Jada Resort & Spa (Pvt) Ltd.

A.N. EsufallyE.J.D. Rajakarier








-

(47,342)

7,154,342

(5,594,242)

(15,405,705)

16,720,815

81,315

265,143

(168,580)

-

(811,676)

134,606

1,178,042

-Peace Haven Resorts Ltd. A.N. Esufally

H.N. EsufallyD.T.R. De Silva


Income received on behalf of the company

208,750

(40,000)

365,975

(464,998)

Diethelm Travels Lanka (Pvt) Ltd.

A.N. EsufallyH.N. EsufallyW.M. De F. Arsakularatne

Sale of goods / services



-

9,475,251

(9,065,283)

4,088,956

-

(4,438,697)



Rs. 2012/13

Rs.2011/12

Hemas Corporate Services (Pvt) Ltd.

H.N. EsufallyW.M. De F. Arsakularatne

Accounting fee payable



Accounting fee paid

-

410,235

(3,216,731)

-

(232,704)

-

-

232,704Hemas Holdings PLC J.C.L. De Mel

A.N. EsufallyH.N. Esufally






Finance income received


Loan Settlement

-

-

115,674,101

(119,271,002)

-

-

-

-

228,571

(4,730,576)

(1,380,000)

-

78,407

4,932,526

(11,796,250)

65,306,554

DiRectORs’ inteRest in cOntRActs with the cOMPAnY cOntD.


RePORt OF the AUDit cOMMittee

Composition of the CommitteeThe Audit Committee comprises two Independent Directors namely Prof. Lalith Gamage (Chairman) Mr. Murtaza Jafferjee and a Non Executive Director Mr. Abbas Esufally.

The Managing Director, Director Finance of the Managing Agent and the Head of Risk & Control of the Group attend meetings by invitation. The Company Secretary serves as the Secretary to the Committee.

As permitted by the Listing Rules of the Colombo Stock Exchange, the Committee also functions as the Audit Committee for its quoted subsidiaries M/s Dolphin Hotels PLC & Hotel Sigiriya PLC.

Role & Responsibilities The Audit Committee operates within the Terms of Reference outlined in the Its Charter and the main role and responsibility are to assist the Board in fulfilling their oversight responsibilities in the following areas:

(i) quality and integrity of the Company’s Financial Statements and financial reporting process including the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with the Sri Lanka Accounting Standards;

(ii) system of internal accounting and financial control of the Company;

(iii) compliance with legal and statutory requirements including financial reporting requirements, disclosure requirements of the Companies Act and other relevant financial reporting related regulations and requirements;

(iv) performance of internal audit function including the process to ensure that the internal controls and

risk management of Company are adequate to meet the requirements of the Sri Lanka Auditing Standards.

(v) assess the independence and performance of the external auditors of the Company and make recommendations to the Board pertaining to the appointment, re-appointment and removal of external auditors and approve the remuneration and terms of engagement of the external auditors.

Main activities carried out during the yearThe Audit Committee met four times during the year ended 31 March 2013 and carried out the following activities; • Reviewed of the un-audited quarterly

Financial Statements and discussion of these statements with the management.

• Reviewed the audited Financial Statements for the financial year and discussion of the financial statements with both the management and external Auditors.

• Discussed the management letter issued by the external auditors and monitoring follow up action by the management.

• Reviewed of the Internal Audit Plan of the Company and monitoring the performance of the Internal Auditors

• Reviewed of the Internal Audit reports and monitoring follow-up action by the management.

• Reviewed the Report on statutory and regulatory compliance submitted by the management

• Recommended to the Board for approval the revised Terms of Reference for the committee.

Internal Audits The Internal Audit function of the Company is carried out by M/s BDO Burah Hathy, Chartered Accountants.

Internal audit independently reviews the risks and control processes operated by management. It carries out independent Audits in accordance with an Internal Audit Plan which is approved by the Audit Committee before the commencement of the financial year.

The Internal Audit Report which includes recommendations to improve internal controls together with agreed management action plans to resolve the issues, is presented to the Audit Committee for review. The Group Internal audit follows up the implementation of recommendations and reports progress to the Audit Committee.

External AuditThe External Audit function of the Company is carried out by M/s Ernst & Young, Chartered Accountants.

The Committee is satisfied that the independence of the External Auditors has not been impaired by any event or service that gives rise to a conflict of interest. Confirmation has been obtained from the external auditors of their compliance with the independence guidance given in the Code of Ethics of the Institute of Chartered Accountants of Sri Lanka.

Having reviewed the effectiveness of the external audit, the Committee recommends to the Board that M/s Ernst & Young, Chartered Accountants be appointed external auditors of the Company for the year ending 31 March 2014, subject to approval by the shareholders at the forthcoming Annual General Meeting.

Prof. L.D.K.B. Gamage Chairman – Audit Committee

21 May 2013


From your first glimpse to a fond farewell, we promise that your stay at

Avani Kalutara is nothing short of paradise. And as you step on warm

sands and gaze out at the endless sea, you can be sure that your first

taste of our brand of luxury will not be your last…



Serendib Hotels PLC I Annual Report 2012/1368 Serendib Hotels PLC I Annual Report 2012/1368

STATeMenT OF direCTOrS’ reSPOnSiBiLiTy in reLATiOn TO PRePARing FinAnciAL stAteMents

In accordance with the Companies Act No. 7 of 2007, the Directors are required to prepare Financial Statements which give a true and fair view of the state of affairs of the Company and of the Group as at the end of the financial year and the profit and loss of the Company and the Group for the financial year.

The Directors are required to ensure that in preparing the Financial Statements;• appropriate accounting policies

are used, selected and applied in a consistent manner, and material departures, if any, have been disclosed and explained.

• all applicable and relevant Accounting Standards have been followed

• judgment and estimates have been made which are reasonable and prudent.

The Directors have taken responsibility to ensure that the companies within the Group maintain accounting records, which disclose with reasonable accuracy the financial position of the Company and the Group and that the Financial Statements comply with the Companies Act No. 7 of 2007, Sri Lanka Accounting Standards and the Listing Rules of the Colombo Stock Exchange.

The Directors having reviewed the Group’s future financial projections cash flows and current performance are satisfied that the Company has adequate resources to continue its operations in the foreseeable future. The Directors have thus adopted the ‘Going Concern basis’ in preparing the Financial Statements.

The Directors have also taken reasonable steps to safeguard the assets of the Company and of the Group and to

establish proper systems of internal control with a view to detect and prevent any irregularities.

The Directors are of the view that they have discharged their responsibilities as set out in this Statement.

COMPLIANCE REPORTThe Directors confirm that to the best of their knowledge, all statutory payments relating to employees and the Government that were due in respect of the Company and its subsidiaries as at the Balance Sheet date have been paid or where relevant provided for the in Financial Statements.

By order of the Board ofSerendib Hotels PLC

Hemas Corporate Services (Pvt) Ltd.Secretaries 21 May 2013



inDePenDent AUDitOR’s RePORt

TO THE SHAREHOLDERS OF SERENDIB HOTELS PLC

REPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying financial statements of Serendib Hotels PLC (“Company”), the consolidated financial statement of the Company and its subsidiaries which comprise the Statements of Financial Position as at 31 March 2013, and the Income Statements, Statements of Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTSManagement is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

SCOPE OF AUDIT AND BASIS OF OPINIONOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

OPINIONIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2013 and the financial statements give a true and fair view of the Company’s financial position as at 31

March 2013 and its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the Consolidated Financial Statements give a true and fair view of the statement of the financial position as at 31 March 2013 and its the financial performance and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the Shareholders of the Company.

REPORT ON OTHER LEGAL AND REGULATORY REqUIREMENTSThese financial statements also comply with the requirements of Section 151(2) and Section 153(2) to 153 (7) of the Companies Act No. 07 of 2007.

21 May 2013Colombo



Group Company Note As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

ASSETSNon-Current AssetsProperty, Plant and Equipment 10 2,243,073,801 2,290,250,094 1,510,295,437 843,294,521 857,512,775 201,069,019Leasehold Property 11 36,549,090 38,380,081 40,207,704 34,033,948 35,735,645 37,437,342Intangible Assets 12 178,476,561 177,845,911 178,941,205 1,433,348 1,801,989 1,826,989Investments in Subsidiaries 13 - - - 260,497,335 260,497,335 260,497,335Investment in an Associate 14 220,736,225 179,398,523 168,001,628 360,623,100 319,873,970 319,873,970Other Non Current Financial Assets 15 12,000,010 10,000,000 10,000,000 4,000,010 3,333,340 3,333,340Deferred Tax Assets 8 4,171,719 11,082,268 2,534,199 3,517,525 10,368,084 2,534,199 2,695,007,406 2,706,956,877 1,909,980,173 1,507,399,787 1,489,123,138 826,572,194Current AssetsInventories 16 17,017,415 17,791,423 17,672,960 5,460,315 5,777,490 4,031,755Trade and Other Receivables 17 207,387,262 271,047,278 277,992,166 65,419,910 94,283,938 91,957,533Taxation Recoverables 1,581,897 9,793,073 9,093,503 1,581,898 1,399,380 -Other Current Financial Assets 15 747,663,420 - - 23,463,420 - -Cash and Cash Equivalents 18 219,173,998 138,058,042 89,730,615 74,899,965 35,073,194 26,278,166 1,192,823,992 436,689,816 394,489,244 170,825,508 136,534,002 122,267,454Total Assets 3,887,831,398 3,143,646,693 2,304,469,417 1,678,225,295 1,625,657,140 948,839,648

EqUITY AND LIABILITIESEquityStated Capital 19.1 913,121,694 913,121,694 411,659,117 913,121,694 913,121,694 411,659,117Other Component of Equity 20 180,198,391 185,685,931 99,892,912 44,016,582 46,710,556 49,392,406Other Revenue Reserve 20 19,940,000 19,940,000 19,940,000 14,500,000 14,500,000 14,500,000Retained Earnings 701,344,418 425,554,791 383,081,015 178,084,296 56,765,378 128,309,628Equity Attributable to Equity holders of the parent 1,814,604,503 1,544,302,416 914,573,044 1,149,722,572 1,031,097,628 603,861,151Non Controlling Interest 451,389,880 388,983,314 292,824,109 - - -Total Equity 2,265,994,383 1,933,285,730 1,207,397,153 1,149,722,572 1,031,097,628 603,861,151

Non-Current LiabilitiesInterest Bearing Loans and Borrowings 21 605,438,365 666,987,520 462,061,828 321,834,272 307,787,285 143,420,167Deferred Tax Liabilities 8 68,090,347 62,132,583 62,690,774 - - -Employee Benefit Liability 22 31,150,606 26,112,590 26,483,472 9,296,951 7,912,132 8,406,500Deferred Income 23 1,214,932 1,333,836 1,452,740 - - - 705,894,250 756,566,529 552,688,814 331,131,223 315,699,417 151,826,667Current LiabilitiesTrade and Other Payables 24 281,879,633 309,552,897 212,633,467 97,915,530 150,249,706 59,279,562Dividends Payable 26 3,619,070 3,519,125 10,866,246 1,385,354 1,385,354 1,395,786Income Tax Liabilities 22,772,590 5,313,881 5,451,248 - - 3,041,903Other Current Financial Liabilities 27 400,000,000 - - - - -Non-interest Bearing Loans and Borrowings 25 1,207,000 1,207,000 1,207,000 - - -Interest Bearing Loans and Borrowings 21 206,464,472 134,201,531 314,225,489 98,070,616 127,225,035 129,434,579 915,942,765 453,794,434 544,383,450 197,371,500 278,860,095 193,151,830Total Equity and Liabilities 3,887,831,398 3,143,646,693 2,304,469,417 1,678,225,295 1,625,657,140 948,839,648 These Financial Statements are in compliance with the requirements of the Companies Act No.07 of 2007.

Indresh Puvimanasinghe FernandoDirector Finance

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.Signed for and on behalf of the Board by,

A.N. Esufally D.T.R. De SilvaChairman Managing Director

The Accounting Policies and Notes on page 76 through 127 from an integral part of the Financial Statements.

21 May 2013Colombo

stAteMent OF FinAnciAL POsitiOnAs at 31 March 2013


incOMe stAteMentYear ended 31 March 2013

Group Company Note 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Revenue 3 1,447,478,145 1,047,459,644 408,823,970 138,462,687Cost of Sales (309,308,611) (269,847,313) (73,531,335) (40,469,580)Gross Profit 1,138,169,534 777,612,331 335,292,635 97,993,107Dividend Income 4 - - 55,241,150 11,306,446Other Operating Income & Gains 5 2,956,134 13,377,991 815,999 5,497,392Sales & Marketing Expenses (35,524,528) (37,352,974) (15,541,507) (13,522,178)Administrative Expenses (710,744,962) (564,777,223) (246,348,650) (141,193,658)Operating Profit 394,856,178 188,860,125 129,459,627 (39,918,891)Finance Cost 6.1 (41,237,607) (49,614,862) (25,243,991) (19,631,849)Finance Income 6.2 40,411,592 12,605,220 5,510,910 9,608,605Exchange Gain/(Loss) 36,803,624 (51,401,117) 16,581,628 (25,888,069)Share of Results of Associate 14 588,572 11,396,894 - -Profit Before Tax 431,422,359 111,846,260 126,308,174 (75,830,204)Income Tax Expense 8 (65,613,776) (20,585,171) (7,683,230) 5,345,539Profit for the Period 365,808,583 91,261,089 118,624,944 (70,484,665)

Attributable to:Equity Holders of the Parent 270,122,976 40,873,544Non-Controlling Interest 95,685,607 50,387,546 365,808,583 91,261,090

Earnings Per Share-Basic 9 2.42 0.38 The Accounting Policies and Notes on page 76 through 127 form an integral part of the Financial Statements.


Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Other Comprehensive Income

Profit for the Period 365,808,583 91,261,089 118,624,945 (70,484,665)

Other Comprehensive IncomeSurplus/(Deficit) on Revaluation - 141,849,741 - (765,472)

Deferred Tax Attributable to Revaluation Surplus - 664,860 - 777,596Other Comprehensive Income for the Year, Net of Tax - 142,514,601 - 12,124

Total Comprehensive Income for the Period, Net of Tax 365,808,583 233,775,690 118,624,945 (70,472,541)Attributable to:Equity Holders of the Parent 270,122,976 132,031,703Non Controlling Interest 95,685,607 101,743,988 365,808,583 233,775,691

The Accounting Policies and Notes on page 76 through 127 form an integral part of the Financial Statements.

stAteMent OF cOMPRehensive incOMeYear ended 31 March 2013


stAteMent OF chAnges in eQUitY (gROUP)Year ended 31 March 2013

Attributable to Equity Holders of the Parent

Stated Other Retained Other Total Non- Total Capital Components Earnings Revenue Controlling of Equity Reserves Interests Revaluation Reserve Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 1 April, 2011- (SLFRS) 411,659,117 99,892,912 383,081,015 19,940,000 914,573,044 292,824,109 1,207,397,153

Net Profit for the Year - - 40,873,544 - 40,873,544 50,387,546 91,261,090Other Comprehensive Income - 91,158,159 - - 91,158,159 51,356,442 142,514,601

Total Comprehensive Income - 91,158,159 40,873,544 - 132,031,703 101,743,988 233,775,691

Right Issue 501,462,577 - - - 501,462,577 - 501,462,577Transaction Cost of Right Issue and Share Subdivision - - (3,753,559) - (3,753,559) - (3,753,559)Depreciation Transfer on Revaluation Surplus for Building - (5,365,140) 5,365,140 - - - -Dividends - - - - - (5,584,783) (5,584,783)Adjustments - - (11,349) - (11,349) - (11,349)

Balance as at 31 March, 2012 913,121,694 185,685,931 425,554,791 19,940,000 1,544,302,416 388,983,314 1,933,285,730

Net Profit for the Year - - 270,122,976 - 270,122,976 95,685,607 365,808,583Other comprehensive income - - - - - - -

Total comprehensive income - - 270,122,976 - 270,122,976 95,685,607 - 365,808,583

Depreciation Transfer on Revaluation Surplus for Building - (5,666,651) 5,666,651 - - - -Deferred Tax Effect of Items Taken Directly to or Transferred from Equity - 179,111 - - 179,111 109,911 289,022Dividends - - - - - (33,388,952) (33,388,952)Other comprehensive income - - - - - -Balance as at 31 March, 2013 913,121,694 180,198,391 701,344,418 19,940,000 1,814,604,503 451,389,880 2,265,994,383



stAteMent OF chAnges in eQUitY (cOMPAnY)Year ended 31 March 2013

Attributable to Equity Holders of the Parent Stated Other Retained Other Total Capital Components Earnings Revenue of Equity Reserves Revaluation Reserve Rs. Rs. Rs. Rs. Rs.

Balance As at 1 April, 2011 - (SLFRS) 411,659,117 49,392,406 128,309,628 14,500,000 603,861,151

Net Profit for the Year - - (70,484,665) - (70,484,665)Other Comprehensive Income - 12,124 - - 12,124

Total Comprehensive Income - 12,124 (70,484,665) - 70,472,541

Rights Issue 501,462,577 - - - 501,462,577 Depreciation Transfer on Revaluation Surplus for Building - (2,693,974) 2,693,974 - - Transaction Cost of Rights Issue and Share Subdivision - - (3,753,559) - (3,753,559)

Balance As at 31 March 2012 913,121,694 46,710,556 56,765,378 14,500,000 1,031,097,628

Net Profit for the Year - - 118,624,944 - 118,624,944

Total Comprehensive Income - - 118,624,944 - 118,624,944

Depreciation Transfer on Revaluation Surplus for Building - (2,693,974) 2,693,974 - -

Balance As at 31 March 2013 913,121,694 44,016,582 178,084,296 14,500,000 1,149,722,572

The Accounting Policies and notes on page 76 through 127 form an integral part of the Financial Statements.


cAsh FLOw stAteMentYear ended 31 March 2013

Group Company Note 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Cash Flows From/(Used in) Operating Activities

Net Profit/(loss) Before Income Tax 431,422,359 111,846,260 126,308,174 (75,830,204)Adjustments forDepreciation of PPE 10 115,050,031 84,745,709 54,474,955 22,707,170Amortization 11 & 12 2,772,842 2,795,460 2,070,338 1,766,697Foreign Currency (Gains)/Losses (36,803,624) 51,401,117 (16,581,628) 25,888,069Dividend Income - - (55,241,150) (11,306,446)Finance income 6.2 (40,411,592) (12,605,220) (5,510,910) (9,608,605)Finance Costs 6.1 41,237,607 49,614,862 25,243,991 19,631,849Share of Results of Associate (Net of tax) 14 (588,572) (11,396,894) - -Loss/(Gains) on Disposal of Property, Plant and Equipment 78,888 (5,730,967) 61,294 2,422,353Writing Back of Grant Received (118,904) (118,904) - -Movements in Provisions, Pensions and Government Grants 8,102,743 4,185,318 1,998,669 171,532 520,741,778 274,736,741 132,823,733 (24,157,585)Working Capital Adjustments:(Increase)/Decrease in Inventories 16 774,008 (118,463) 317,176 (1,745,735)(Increase)/Decrease in Trade and Other Receivables 17 63,691,797 7,375,852 28,864,028 (2,506,180)Increase/(Decrease) in Trade and Other Payables 24 31,141,220 3,797,835 3,084,354 (2,151,451)Cash Generated from Operations 616,348,803 285,791,965 165,089,291 (30,560,951)

Repayment of Project Creditors (58,814,484) - (55,418,530) -Finance Cost Paid 6.1 (41,237,607) (49,614,862) (25,243,991) (19,631,849)Defined Benefit Plan Costs Paid 22 (3,064,727) (4,556,200) (613,850) (665,900)Income Tax Paid (26,718,394) (23,003,371) (1,015,187) (5,972,259)Net Cash Flows from Operating Activities 486,513,591 208,617,532 82,797,732 (56,830,959)

Investing ActivitiesAcquisition of Property, Plant and Equipment and Intangibles 10 & 12 (69,628,697) (653,735,759) (40,420,034) (596,371,906)Proceeds from Disposal of Property, Plant and Equipment 103,571 17,011,997 102,040 7,114,751Acquisition of Investment 14 & 15 (42,749,140) (34,077) (41,415,800) -Loans Granted to Related Parties (743,200,000) - (157,000,000) -Loans Settled by Related Parties 395,536,580 - 133,536,580 -Interest Received 6.2 40,411,592 12,605,220 5,510,910 9,608,605Dividend Received - - 55,241,150 11,306,446Net Cash Flows Used in Investing Activities (419,526,094) (624,152,619) (44,445,154) (568,342,104)

Financing ActivitiesNet Proceeds From Rights Issue - 497,709,018 - 497,709,018Proceeds from Interest Bearing Loans and Borrowings 21 65,274,721 923,908,855 147,114,189 588,621,150Repayment of Interest Bearing Loans and Borrowings 21 (59,280,357) (789,671,938) (156,497,201) (418,568,265)Dividend Paid (33,388,952) (7,347,121) - (10,432)Net Cash Flows From Financing Activities (27,394,588) 624,598,814 (9,383,012) 667,751,471

Effect of Exchange Rate Changes on Cash and Cash Equivalents 36,803,624 (51,401,117) 16,581,628 (25,888,069)Net Increase/(Decrease) in Cash and Cash Equivalents 39,592,909 209,063,727 28,969,566 42,578,408Cash and Cash Equivalents at the Beginning of the Year 18 84,848,097 (72,814,513) 12,285,774 (4,404,565)Cash and Cash Equivalents at the End of the Year 18 161,244,630 84,848,097 57,836,968 12,285,774



nOtes tO the FinAnciAL stAteMentsYear ended 31 March 2013

1. Corporate InformatIon1.1 GeneralThe Company is a limited liability Company incorporated and domiciled in Sri Lanka. The registered office is located at Level 5, Hemas House, 75, Braybrooke Place, Colombo 2.

1.2 Consolidated Financial Statements

The Consolidated financial statements of the Company for the year ended 31 March 2013 comprise Serendib Hotels PLC (“Company”) and all its Subsidiaries and Associates whose accounts have been consolidated therein (The “Group”).

1.3 Principal Activities and Nature of Operations

The principal activity of the Company is hotel operation.

1.4 Parent Entity and Ultimate Parent Entity

The Company’s ultimate parent undertaking and controlling party is Hemas Holdings PLC, which is incorporated in Sri Lanka.

1.5 Date of Authorisation for IssueThe Financial Statements of the Company for the year ended 31 March 2013 were authorised for issue in accordance with a resolution of the directors on 21 May 2013 2.1 Basis of Preparation and

Adoption of Slas (SLFRS and LKAS) Effective from the Financial Period Beginning on or After 1 April 2012

The Financial Statements of the Company and its subsidiaries have been prepared in accordance with Sri Lanka Accounting Standards, comprising SLFRSs/LKASs (hereafter "SLFRS") as issued by the

Institute of Chartered Accountants of Sri Lanka.

For all periods up to and including the year ended 31 March 2012, the Company and its subsidiaries prepared its Financial Statements in accordance with Sri Lanka accounting standard (SLAS). These Financial Statements for the year ended 31 March 2013 are the first the Group has prepared in accordance with SLFRS.

The Financial Statements of the Group have been prepared on and under the historical cost conversion unless otherwise stated. The Financial Statements are presented in Sri Lankan Rupees, which is the Group’s functional and presentation currency. The preparation and presentation of these Financial Statements are in compliance with the Companies Act No. 07 of 2007.

Subject to certain transition elections and exceptions disclosed in Note 2.6,the Group has consistently applied the accounting policies used in preparation of its opening SLFRS statement of financial position at 01 April 2011 through all periods presented, as if these policies had always been in effect.

Note 2.6 discloses the impact of the transition to SLFRS on the Group’s reported financial position and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Group’s Consolidated Financial Statements for the year ended 31 March 2012 prepared under SLASs.

2.1.1 Going ConcernThe Directors have made an assessment of the Company’s ability to continue as

a going concern and they do not intend either to liquidate or to cease trading.

2.2 Basis of ConsolidationThe Consolidated Financial Statements comprise the Financial Statements of the Serendib Hotels PLC and its Subsidiaries and Associates as at 31 March 2013.

The Financial Statements of the subsidiaries are prepared for the same reporting period as the Parent Company and in compliance with the Group’s accounting policies unless specially stated.

All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

(a) SubsidiariesSubsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases.

Subsidiaries are those enterprises controlled by the parent. Controlled exists when the parent holds more than 50% of voting rights or otherwise has a controlling interest. Non-Controlling Interests represent the portion of profit or loss and net assets that is not held by the group and are presented separately in the Consolidated Statement of Comprehensive Income and within equity in the consolidated Statement of Financial Position separately from parent shareholders’ equity.


(b) Investment in AssociateThe Group’s investments in associates is accounted for using the equity method. An associate is an entity in which the Group has significant influence.

Under the equity method, the investment is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of associate since acquisition date.

Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

The income statement reflects the Group’s share of results of operations of the associate. When there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The Group’s share of the profit or loss of an associate is shown on the face of the income statement and represents profit or loss after tax and non-controlling interests in the subsidiaries of the

associate. The Financial Statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment

loss on its investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in ‘share of losses of an associate’ in the income statement. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognised in profit or loss.

(c) Business Combination and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree at the fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions

as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in income statement.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration which is deemed to be an asset or liability that is a financial instrument and within the scope of LKAS 39 Financial Instruments: Recognision and measurement, is measured at fair value with changes in fair value either in profit or loss or as a change to other comprehensive income (OCI). If the contingent consideration is not within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS. Contingent consideration that is classified as equity is not reameasured and subsequent settlement is measured at fair value with change in fair value either in the income statement or as a change to the other comprehensive income (OCI).

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of


impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination transferred; the gain is recognised in profit or loss.

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

2.3 Summary of Significant Accounting Policies

2.3.1 Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue and associated costs or to be incurred can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts value added taxes.

The following specific recognition criteria must also be met before revenue is recognised:

(a) Apartment, Food & Beverage Sales

Apartment revenue is recognised on the rooms occupied on a daily basis, and food and beverage are accounted for at the time of sales.

(b) Rendering of ServicesRevenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

(c) Interest IncomeFor all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement.

(d) DividendsRevenue is recognised when the Company’s right to receive the payment is established.

(e) Rental IncomeRental income is recognised on an accrual basis.

(f) OthersOther income is recognised on an accrual basis.

2.3.2 Foreign CurrenciesThe Group’s/Company’s consolidated Financial Statements are presented in Sri Lankan Rupees, which is also the parent Company’s functional currency. For each entity the Group determines the functional currency and items included in the Financial Statements of each entity are measured using that functional currency. The Group uses the direct method of

consolidation and has elected to recycle the gain or loss arises from this method.

(a) Transactions and BalancesTransactions in foreign currencies are initially recorded by the Group entities their respective functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. Differences arising on settlement or transaction of monitory items are recognised in Profit or Loss with the exception of all monetary items that forms part of a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

The gain or loss arising on translation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to the translation difference (translation differences on items whose gain or loss is recognised in other

nOtes tO the FinAnciAL stAteMents cOntD.Year ended 31 March 2013


comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss respectively).

2.3.3 Taxation(a) Current TaxesCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the Commissioner General of Inland Revenue. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date in the country where the Company operates and generates taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

The provision for income tax is based on the elements of income and expenditure as reported in the Financial Statements and computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and amendments thereto.

(b) Deferred TaxationDeferred income tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except;

i) Where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects

neither the accounting profit nor taxable profit or loss; and

ii) In respect of taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:

i). Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ii) In respect of taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the

carry-forward of unused tax credits and unused tax losses can be utilised except:

i). Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ii). In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as at the reporting date.


Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.

(c) Tax on Dividend Income Tax on dividend income from subsidiaries is recognised as an expense in the Consolidated Income Statement.

2.3.4 Property, Plant and EquipmentProperty, plant and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment

losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Company derecognises the replaced part, and recognises the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statement as incurred.

Where items of Property, Plant and Equipment are subsequently revalued, the entire class of such assets is revalued. Any revaluation surplus is recognised in other comprehensive

income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. A revaluation deficit is recognised in the income statement, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

Depreciation is calculated on straight line basis over the estimated useful lives of the assets as follows:


2013 2012 As at 1 April 2011Buildings (Old) on Leasehold Land Over the remaining

Lease Period Over the remaining

Lease Period Over the remaining

Lease PeriodBuildings (New) on Leasehold Land 60 Years 60 Years -Buildings on Freehold Land 60 Years 60 Years 66 YearsFurniture and Fittings 5 - 10 Years 5 - 10 Years 5 - 10 YearsMotor Vehicles 5 - 10 Years 5 - 10 Years 5 - 10 YearsPlant and Machinery and Equipments 5 - 10 Years 5 - 10 Years 5 - 10 YearsSoil Erosion Prevention 10 Years 10 Years 10 Years

Energy Saving Technique 5 - 15 Years 5 - 15 Years 5 - 15 Years

Paintings, Murals etc. 4 - 9 Years 4 - 9 Years 4 - 9 YearsLandscaping Over 60 Years Over 60 Years Over 60 Years

An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset

(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

a) Operating LeasesOperating lease payments are recognized as an operating expense in the income statement on straight line basis over the lease term.


2.3.5 Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

2.3.6 Intangible assetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing

the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

2.3.7 InventoriesInventories are valued at the lower of cost and net realisable value, after making due allowances for obsolete and slow moving items.

The cost incurred in bringing inventories to its present location and conditions are accounted using the following cost formulae:Foods and Beverages Stocks:At actual cost on weighted average basis.Maintenance and Others:At actual cost on weighted average basis.

Net realisable value is the estimated selling price in the ordinary course

of business, less estimated costs of completion and the estimated costs necessary to make the sale.

2.3.8 Financial Instruments - Initial Recognition and Subsequent Measurement

i) Financial AssetsInitial Recognition and MeasurementFinancial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets, as appropriate and determine the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus transaction costs of assets, in the case of investments not at fair value through profit or loss.

The financial assets include cash and short-term deposits, trade and other receivables, other financial assets.

Subsequent MeasurementThe subsequent measurement of financial assets depends on their classification as follows:

Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the


EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance cost.

Available-for-Sale Financial InvestmentsAvailable-for-sale financial investments include equity and debt securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the income statement in finance costs and removed from the available-for-sale reserve. Interest income on available-for-sale debt securities is calculated using the effective interest method and is recognised in profit or loss.

The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive

markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

For a financial assets reclassified out of the available for sale category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortized cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the assets is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement.

DerecognitionA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when,

i) The rights to receive cash flows from the asset have expired

ii) The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either

• The Group has transferred substantially all the risks and rewards of the asset, or

• The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the company’s continuing involvement in it.

In that case, the Group also recognises an associated liability. The transferred assets and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

ii) Impairment of Financial AssetsThe Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the



financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortised CostFor financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding

future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the income statement.

Available-for-Sale Financial InvestmentsFor available-for-sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement, is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairments are recognised directly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.


iii) Financial Liabilities

Initial Recognition and MeasurementFinancial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, other financial liabilities or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, and other financial liabilities carried at amortised cost. This includes directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, other financial liabilities.

Subsequent MeasurementThe measurement of financial liabilities depends on their classification as follows;

Loans and Borrowings / Other Financial Liabilities.After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.

DerecognitionA financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

iv) Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

v) Fair Value of Financial Instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long position and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.

2.3.9 Impairment of Non - Financial Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is



also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

GoodwillGoodwill is tested for impairment annually as at 31 March and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible AssetsIntangible assets with indefinite useful lives are tested for impairment annually as at 31 March either individually or at the CGU level, as appropriate and when circumstances indicate that the carrying value may be impaired.

2.3.10 Cash and Short Term DepositsCash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less.

For the purpose of the Company statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

2.3.11 ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to

the passage of time is recognised as a finance cost.

2.3.12 Retirement Benefit Liability

(a) Defined Contribution Plans - Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund Contributions and Employees’ Trust Fund Contributions in line with the respective statutes and regulations. The Company contributes 12% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

(b) Defined Benefit Plan – GratuityThe Group measures the present value of the promised retirement benefits of gratuity which is a defined benefit plan with the advice of an actuary using the projected benefit valuation method. Actuarial gains and losses for defined benefit plans are recognised in full in the period in which they occur in the income statement.

However, as per the payment of Gratuity Act No. 12 of 1983 this liability only arises upon completion of 5 years of continued service.The gratuity liability is not externally funded.

2.4 Significant Accounting Judgments, Estimates and AssumptionsThe preparation of the Group financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty


about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

JudgmentsIn the process of applying the company accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements:

Deferred Tax AssetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Defined Benefit PlansThe cost of defined benefit plans-gratuity is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, futures salary increases and retirement age. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are reviewed at each reporting date.

2.5 Standards Issued But not yet Effective

The following SLFRS have been issued by the Institute of Chartered Accountants of Sri Lanka that have an effective date in the future and have not been applied in preparing these Financial Statements. Those SLFRS will have an effect on the Accounting policies currently adopted by the group and may have an impact on the future Financial Statements.

(i) SLFRS 9- Financial Instruments: Classification and Measurement

SLFRS 9, as issued reflect the first phase of work on replacement of LKAS 39 and applies to Classification and Measurement of financial Assets and Liabilities. This is standard will be effective from the financial period beginning on or after 1 January 2015.

(ii) SLFRS 13- Fair Value measurements SLFRS 13 establishes a single source

of guidance under SLFRS for all fair value measurements. SLFRA 13 provides guidance on all fair value measurement under SLFRS.

This standard was originally effective for the financial period beginning on or after 01 January 2013 and early application was allowed. However effective date has been deferred subsequently.

In addition to the above, following standards were also issued with an original effective date of 01 January 2013, which were also deferred subsequently. SLFRS 10-Consolidated Financial

Statements SLFRS 12-Disclosure of Interest in

Other EntitiesThe Group will adopt these standards when they become effective. Pending a detailed review, the financial impact is not reasonably estimate as at the date of publication of these Financial Statements.

2.6 FIRST TIME ADOPTION OF SLFRS

These financial statements, for the year ended 31 March 2013, are the first the Company has prepared in accordance with SLFRS. For periods up to and including the year ended 31 March 2012, the Company prepared its financial statements in accordance with Sri Lanka Accounting Standards (SLAS).

Accordingly, the Group has prepared financial statements which comply with SLFRS applicable for periods ending on or after 31 March 2013, together with the comparative period data as at and for the year ended 31 March 2012, as described in the accounting policies. In preparing these financial statements, the Group’s opening statement of financial position was prepared as at 1 April 2011, the Group’s date of transition to SLFRS. This note explains the principal adjustments made by the Company in restating its SLAS statement of financial position as at 1 April 2011 and its previously published SLAS Financial Statements as at and for the year ended 31 March 2012.



Exemptions AppliedSLFRS 1 First-Time Adoption of Sri Lanka Financial Reporting Standards allows first-time adopters certain exemptions and exceptions from the retrospective application of certain SLFRS. Set out below are the applicable exemptions and exceptions under SLFRS 1 applied by the Company in preparing the first Consolidated Financial Statements for the year ended 31 March 2013 under SLFRS.

Optional Exemptions which the Group has Opted to Apply

Business CombinationsSLFRS 3 Business Combinations has not been applied to acquisitions of subsidiaries, which are considered businesses for SLFRS or of interests in associates and joint ventures that occurred before 1 April 2011.

Use of this exemption means that the local SLAS carrying amounts of assets and liabilities, which are required to be recognised under SLFRS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with SLFRS. Assets and liabilities that do not qualify for recognition under SLFRS are excluded from the opening SLFRS statement of financial position. The Group did not recognise or exclude any previously recognised amounts as a result of SLFRS recognition requirements.

SLFRS 1 also requires that the local SLAS carrying amount of goodwill must be used in the opening SLFRS statement of financial position (apart from adjustments for goodwill impairment and recognition or derecognition of intangible assets). In accordance with SLFRS 1, the

Group has tested goodwill for impairment at the date of transition to SLFRS. No goodwill impairment was deemed necessary at 1 April 2011.

The Group has not applied LKAS 21 retrospectively to fair value adjustments and goodwill from business combinations that occurred before the date of transition to SLFRS.

Investments in Subsidiaries and AssociatesThe basis of measurement of an investment in a subsidiary or associate is at its deemed cost in the separate SLFRS financial statements of the subsidiary, jointly controlled entity or associate. The group has applied the previous carrying value under SLAS on 1 April 2011 as the deemed cost of such investments.

Designations of Previously Recognised Financial InstrumentsThe Group has designated unquoted equity instruments held at 1 April 2011 as available-for-sale investments.

Exceptions the Group has not Applied Retrospectively

EstimatesThe estimates at 1 April 2011 and at 31 March 2012 are consistent with those made for the same dates in accordance with SLAS (after adjustments to reflect any differences in accounting policies).

De-recognition of Financial Assets and Financial LiabilitiesThe Group has applied the derecognition requirements in LKAS 39 prospectively to transactions occurring after 1 April 2011. Therefore the non-derivative financial assets or non-derivative financial liabilities

which were previously de-recognised under SLAS as a result of a transaction that occurred before the transition date 1 April 2011 has not been re-recognised in the SLFRS Financial Statements.

Non-Controlling InterestsThe following requirements of LKAS 27 are applied prospectively from the date of transition to SLFRS.(i) to attribute total comprehensive

income to non controlling interest irrespective of whether this results in a deficit balance.

(ii) to treat changes in a parent’s ownership interest that does not result in a loss of control as equity transactions.

(iii) to apply LKAS 27 to loss of control of a subsidiaries.


2.6.1 Group/Company Reconcilation of Equity as at 1April 2011 (Date of transition to SLFRS)

Group Company Note SLAS Re- SLFRS SLAS Re- SLFRS Balance measurements as at Balance measurements as at 1 April 1 April 2011 2011 Rs. Rs. Rs. Rs. Rs. Rs.

ASSETS

Non-Current AssetsProperty, Plant and Equipment A 1,515,111,736 (4,816,299) 1,510,295,437 202,896,008 (1,826,989) 201,069,019Leasehold Property 40,207,704 - 40,207,704 37,437,342 - 37,437,342Intangible Assets G & A 22,252,564 156,688,641 178,941,205 - 1,826,989 1,826,989Investments in Subsidiaries - - - 260,497,335 - 260,497,335Investment in an Associate G - 168,001,628 168,001,628 - 319,873,970 319,873,970Other Non Current Financial Assets G 329,873,970 (319,873,970) 10,000,000 323,207,310 (319,873,970) 3,333,340Deferred Tax Asset 2,534,199 - 2,534,199 2,534,199 - 2,534,199 1,909,980,173 - 1,909,980,173 826,572,194 - 826,572,194Current Assets

Inventories 17,672,960 - 17,672,960 4,031,755 - 4,031,755Trade and Other Receivables B & D 279,395,926 (1,403,760) 277,992,166 74,397,181 17,560,352 91,957,533 Amounts Due from Related Parties D 893,321 (893,321) - 17,401,812 (17,401,812) - Taxation Recoverable 9,093,503 - 9,093,503 - - -Cash and Cash Equivalents 89,730,615 - 89,730,615 26,278,166 - 26,278,166 396,786,325 (2,297,081) 394,489,244 122,108,913 158,540 122,267,454Total Assets 2,306,766,498 (2,297,081) 2,304,469,417 948,681,107 158,540 948,839,648

EqUITY AND LIABILITIES

EquityStated Capital 411,659,117 - 411,659,117 411,659,117 - 411,659,117Reserves D 119,832,912 (119,832,912) - 63,892,406 (63,892,406) -Other component of Equity D - 99,892,912 99,892,912 - 49,392,406 49,392,406Other Revenue Reserve D - 19,940,000 19,940,000 - 14,500,000 14,500,000Retained Earnings B & C 384,514,059 (1,433,044) 383,081,015 128,151,088 158,540 128,309,628Equity Attributable to Equity Holders of the Parent 916,006,088 (1,433,044) 914,573,044 603,702,611 158,540 603,861,151Non Controlling Interest B & C 293,688,146 (864,037) 292,824,109 - - -Total Equity 1,209,694,234 (2,297,081) 1,207,397,153 603,702,611 158,540 603,861,151

Non-Current LiabilitiesInterest Bearing Loans and Borrowings 462,061,828 - 462,061,828 143,420,167 - 143,420,167Deferred Tax Liability 62,690,774 - 62,690,774 - - -Employee Benefit Liability 26,483,472 - 26,483,472 8,406,500 - 8,406,500Deferred Income 1,452,740 - 1,452,740 - - - 552,688,814 - 552,688,814 151,826,667 - 151,826,667Current LiabilitiesTrade and Other Payables D 212,173,145 460,322 212,633,467 48,431,490 10,848,072 59,279,562 Amounts Due to Related Parties D 460,322 (460,322) - 10,848,072 (10,848,072) - Dividends Payable 10,866,246 - 10,866,246 1,395,786 - 1,395,786Income Tax Liabilities 5,451,248 - 5,451,248 3,041,903 - 3,041,903Non-interest Bearing Loans and Borrowings 1,207,000 - 1,207,000 - - -Interest Bearing Loans and Borrowings 314,225,489 - 314,225,489 129,434,579 - 129,434,579 544,383,450 - 544,383,450 193,151,830 - 193,151,830Total Equity and Liabilities 2,306,766,498 (2,297,081) 2,304,469,417 948,681,107 158,540 948,839,648



2.6.2 Company Reconcilation of Equity as at 31 March 2012

Group Company Note SLAS Re- SLFRS SLAS Re- SLFRS Balance measurements as at Balance measurements as at 31 March 31 March 2012 2012 Rs. Rs. Rs. Rs. Rs. Rs.

ASSETS

Non-Current Assets Property, Plant and Equipment A 2,293,971,100 (3,721,006) 2,290,250,094 859,314,764 (1,801,989) 857,512,775Leasehold Property 38,380,081 - 38,380,081 35,735,645 - 35,735,645Intangible Assets A & G 22,252,564 155,593,347 177,845,911 - 1,801,989 1,801,989Investments in Subsidiaries - - - 260,497,335 260,497,335Investment in an Associate G - 179,398,523 179,398,523 - 319,873,970 319,873,970Other Non Current Financial Assets G 329,873,970 (319,873,970) 10,000,000 323,207,310 (319,873,970) 3,333,340Deferred Tax Asset 11,082,268 - 11,082,268 10,368,084 - 10,368,084 2,695,559,983 11,396,894 2,706,956,877 1,489,123,138 - 1,489,123,138Current Assets Inventories 17,791,423 - 17,791,423 5,777,490 - 5,777,490Trade and Other Receivables B & D 271,449,120 (401,842) 271,047,278 89,921,761 4,362,177 94,283,938Amounts Due from Related Parties D 1,968,250 (1,968,250) - 5,860,464 (5,860,464) -Taxation Recoverable 9,793,073 - 9,793,073 1,399,380 - 1,399,380Cash and Cash Equivalents 138,058,042 - 138,058,042 35,073,194 - 35,073,194 439,059,908 (2,370,092) 436,689,816 138,032,289 (1,498,287) 136,534,002Total Assets 3,134,619,891 9,026,802 3,143,646,693 1,627,155,427 (1,498,287) 1,625,657,140

EqUITY AND LIABILITIES Equity Stated Capital 913,121,694 - 913,121,694 913,121,694 - 913,121,694Reserves D 205,625,931 (205,625,931) - 61,210,556 (61,210,556) -Other component of Equity D - 185,685,931 185,685,931 - 46,710,556 46,710,556Other Revenue Reserve D - 19,940,000 19,940,000 - 14,500,000 14,500,000Retained Earnings B & C 416,216,799 9,337,992 425,554,791 58,263,665 (1,498,287) 56,765,378 1,534,964,424 9,337,992 1,544,302,416 1,032,595,915 (1,498,287) 1,031,097,628Equity Attributable to Equity Holders of the Parent Non Controlling Interest B & C 389,294,504 (311,190) 388,983,314 - - -Total Equity 1,924,258,928 9,026,802 1,933,285,730 1,032,595,915 (1,498,287) 1,031,097,628

Non-Current Liabilities Interest Bearing Loans and Borrowings 666,987,520 - 666,987,520 307,787,285 - 307,787,285Deferred Tax Liability 62,132,583 - 62,132,583 - - -Employee Benefit Liability 26,112,590 - 26,112,590 7,912,132 - 7,912,132Deferred Income 1,333,836 - 1,333,836 - - - 756,566,529 - 756,566,529 315,699,417 - 315,699,417Current Liabilities Trade and Other Payables D 296,559,213 12,993,684 309,552,897 136,997,226 13,252,480 150,249,706 Amounts Due to Related Parties D 12,993,684 (12,993,684) - 13,252,480 (13,252,480) - Dividends Payable 3,519,125 - 3,519,125 1,385,354 - 1,385,354Income Tax Liabilities 5,313,881 - 5,313,881 - - -Non-interest Bearing Loans and Borrowings 1,207,000 - 1,207,000 - - -Interest Bearing Loans and Borrowings 134,201,531 - 134,201,531 127,225,035 - 127,225,035 453,794,434 - 453,794,434 278,860,095 - 278,860,095

Total Equity and Liabilities 3,134,619,891 9,026,802 3,143,646,693 1,627,155,427 (1,498,287) 1,625,657,140


2.6.3 Company Reconciliation of Comprehensive Income for the Year Ended 31 March 2012

INCOME STATEMENT Group Company Notes SLAS Re- SLFRS SLAS Re- SLFRS Balance measurements as at Balance measurements as at 31 March 31 March 2012 2012 Rs. Rs. Rs. Rs. Rs. Rs.

Revenue F 1,015,148,101 32,311,543 1,047,459,644 133,805,485 4,657,202 138,462,687Cost of Sales F (237,535,770) (32,311,543) (269,847,313) (35,812,378) (4,657,202) (40,469,580)Gross Profit 777,612,331 - 777,612,331 97,993,107 - 97,993,107Dividend Income - - - 11,306,446 - 11,306,446Other Operating Income & Gains 13,377,991 - 13,377,991 5,497,392 - 5,497,392Sales and Marketing Expenses B (37,291,312) (61,662) (37,352,974) (11,865,351) (1,656,827) (13,522,178)Administrative Expenses (564,777,223) - (564,777,223) (141,193,658) - (141,193,658)Operating Profit 188,921,787 (61,662) 188,860,125 (38,262,064) (1,656,827) (39,918,891)Finance Costs (49,614,862) - (49,614,862) (19,631,849) - (19,631,849)Finance Income 12,605,220 - 12,605,220 9,608,605 - 9,608,605Exchange Gain/(Loss) (51,401,117) - (51,401,117) (25,888,069) - (25,888,069)Share of Results of Associate (Net of tax) G - 11,396,894 11,396,894 - - -Profit before Tax 100,511,028 11,335,232 111,846,260 (74,173,377) (1,656,827) (75,830,204)Income Tax Expense (20,585,171) (20,585,171) 5,345,539 5,345,539Profit for the Year 79,925,857 11,335,232 91,261,089 (68,827,838) (1,656,827) (70,484,665)

Attributable to:Equity-holders of the Parent 30,091,159 10,782,385 40,873,544Minority Interest 49,834,699 552,847 50,387,546 79,925,858 11,335,232 91,261,090

STATEMENT OF COMPREHENSIVE INCOME

Other Comprehensive Income Surplus/(Deficit) on Revaluation E - 141,849,741 141,849,741 - (765,472) (765,472) Deferred Tax Attributable to Revaluation Surplus E - 664,860 664,860 - 777,596 777,596 Other Comprehensive Income for the Year, Net of Tax - 142,514,601 142,514,601 - 12,124 12,124 Total Comprehensive Income for the Year, Net of Tax - 233,775,690 233,775,690 - (70,472,541) (70,472,541) Earnings Per Share - Basic 0.27 0.38 Attributable to: Equity Holders of the Parent 132,031,703 Non-Controlling Interest 101,743,988 233,775,691



2.6.4 Notes to the Reconciliation of Equity as at 1 April 2011 and 31 March 2012 and Comprehensive Income for the year ended 31 March 2012

A. Transfer from PPE to Intangible

Assets

Computer software that are not integral to operate the hardware were reclassfied as a separate intangible assets at the date of transition to SLFRS. Therefore net book value of Rs. 4.8 Mn in Group and Rs.1.8 Mn. in Company were transferred to intangible assets as at 01 April 2011. In year 2011/12 net book value of Rs. 3.7 Mn. in Group and Rs.1.8 Mn. in Company were transfered to intangible assets.

B. Impairment of Trade

Receivables

Under current practice, the provision for impairment of receivables consists of both a specific amount for incurred losses and general amount for expected future losses. SLFRS does not permit recognition of impairment for expected future losses and amount of Rs. 8.1 Mn. in the Group and Rs. 4 Mn. in the Company have been eliminated against retained earnings at 1 April 2011. A debtor or a group of debtors are deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the debtor (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the debtor or the group of debtors that can be reliably estimated. Accordingly Group recognised an impairment of Rs. 10.3 Mn. and Company recognised Rs. 3.6

Mn. as at 1 April 2011. The effect on Retained Earnings for the year ended 31 March 2011 was Rs. 2.3 Mn. for the Group and Rs. 0.2 Mn. for the company and for the year ended 31 March 2012 Rs. 0.06 Mn. for the group and Rs. 1.7 Mn. for the Company are also recognised in profit under SLFRS.

C. Fair Valuation of Staff Loans

Under SLAS staff loans were initially measured at cost. As per LKAS 39 financial assets are initially measured at fair value. Hence, staff loans given at below market rates should be fair valued. The effect of valuing staff loan at fair value Rs. 0.01 Mn. was recognised in profit for the year 2011 under SLFRS."

D. Reclassification

Reserve amounting to Rs. 119.8 Mn. in the Group and Rs. 63.9 Mn. in the Company were reclassified as Other Component of Equity amount of Rs. 99.9 Mn. for Group and Rs. 49.4 Mn. for the Company and Other Revenue Reserve Rs. 19,9 Mn. in Group and Rs. 14.5 Mn. in Company under SLFRS as at 01.04.2011. In the year 2012 Reserve amounting to Rs. 205.6 Mn. in the Group and Rs. 61.2 Mn. in the Company were reclassified as Other Component of Equity amount of Rs. 185.7 Mn. for Group and Rs. 46.7 Mn. for the Company and Other Revenue Reserve Rs. 19.9 Mn. in Group and Rs. 14.5 Mn. in Company. During the year 2011, and 2012, the Group/Company has reclassified Amount due from Related Parties balance under Trade and Other Receivables amounting to Rs. 17.4 Mn. and Rs. 5.8 Mn. in the Company and Rs. 0.9 Mn. and Rs. 1.97 Mn. in the Group in year 2011

and 2012 respectively. Further Amount due to Related Parties balance has also reclassified under Trade and Other Payables amounting to Rs. 10.8 Mn. and Rs. 13.3 Mn. in Company and Rs. 0.5 Mn. and Rs. 13 Mn. in the Group in year 2011 and 2012 respectively.

E. Revaluation

Revaluation surplus on Land and Building in year 2012 has been recognised under the Other Comprehensive Income amounting to Rs. 142.5 Mn. in the Group and Rs. 0.01 Mn. in the Company.

F. Revenue and Cost of Sales

Under the Previous practice, Group and Company had not grossed revenue for Nation Building Levy and Tourism Development Levy. Therefore revenue and cost sales have been restated by Rs. 32.3 Mn. In Group and Rs. 4.7 Mn. In Company.

G. Investment in Associate

Investment in Jada Resorts and Spa (Pvt) Ltd, amounting Rs. 320 Mn. was de-recognised from Other Non-Current Investment and recognised Rs. 168 Mn. as an investment Associate by recognising Goodwill arising on acquisition, Rs.152 Mn. as an Intangible assets as at 01 April 2011. During year ended 31 March 2012, Rs. 11.4 Mn. was recognised as share profit of the Associate. In Company, investment in Jada Resorts and Spa (Pvt) Ltd., amounting Rs. 320 Mn. was de-recognised from Other Non-Current Investment and recognised as an investment Associate as at 01 April 2011 and 31 March 2012.



3. REVENUE Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Rendering of Services 1,401,893,551 1,015,148,101 395,775,165 133,805,485Tourism Development Levy 14,096,806 9,947,449 4,061,846 1,423,524Nations Building Tax 31,487,788 22,364,094 8,986,959 3,233,678 1,447,478,145 1,047,459,644 408,823,970 138,462,687

4. DIVIDEND INCOME Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Income from Investments - Related Parties - - 55,241,150 11,306,446 - - 55,241,150 11,306,446

5. OTHER INCOME AND GAINS Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Rental Income from - Related Parties - - - 1,444,800 - Others 601,390 540,000 - -Write Back of Grant Received 118,904 118,904 - -Write Back of Unclaimed Salaries and Service Charges 572,881 - - -Profit on Disposal of Property Plant and Equipment 1,566,397 6,589,357 748,540 -Sundry Income 96,562 6,129,730 67,459 4,052,592 2,956,134 13,377,991 815,999 5,497,392


6. FINANCE COST AND INCOME Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

6.1 Finance Costs Interest Expense on Overdrafts 29,701 4,153,574 18,379 739,882Interest Expense on Loans and Borrowings - Related Parties 7,409,116 5,117,174 8,096,879 5,961,744Interest Expense on Loans and Borrowings - Others 33,798,790 40,344,114 17,128,733 12,930,223 41,237,607 49,614,862 25,243,991 19,631,849

6.2 Finance Income Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Interest Income from - Related Parties 34,233,821 - 4,268,156 - - Others 6,177,771 12,605,220 1,242,754 9,608,605 40,411,592 12,605,220 5,510,910 9,608,605

7. PROFIT BEFORE TAX Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Stated after Charging/(Crediting)

Included in Administrative ExpensesEmployees Benefits including the following 333,950,753 174,882,477 85,725,253 53,160,649 - Defined Benefit Plan Costs - Gratuity 8,102,743 4,185,318 1,998,669 171,532 - Defined Contribution Plan Costs - EPF and ETF 19,948,569 16,451,154 5,004,797 3,755,813Depreciation 115,050,031 85,713,546 54,474,955 22,707,170Amortisation 2,772,842 2,491,819 2,070,338 1,766,697Loss on Disposal of Property, Plant and Equipment 1,566,397 858,390 - 2,422,353Directors’ Fees and Remuneration 28,407,014 22,220,667 3,700,652 918,562Auditors’ Remuneration (Fees and Expenses) 1,746,338 1,462,323 696,736 577,800Management Fees - 62,795,647 25,827,060 4,816,915Legal Fees 428,267 130,720 62,750 46,220Donations 2,757,846 361,904 17,749 262,258

Included in Selling and Marketing ExpensesAdvertising & Sales Promotion Cost 29,142,718 22,973,971 8,384,199 8,428,808Impairment of Debts (7,472,521) 6,398,266 (1,614,054) 2,522,132Others 13,854,331 7,980,737 8,771,362 2,571,238


8. INCOME TAX EXPENSE Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Current Income TaxCurrent Tax Expense on Ordinary Activities for the Year (8.1) 47,446,720 25,288,377 797,895 1,609,131Under/(Over) Provision of Current Taxes in respect of prior years (1,128,185) 2,481,913 34,776 101,619Tax on Dividends 6,137,906 1,256,272 - -Deferred Income Tax Deferred Taxation Charge/(Reversal) (8.2) 13,157,335 (8,441,390) 6,850,559 (7,056,289) Income Tax Expense reported in the Income Statement 65,613,776 20,585,171 7,683,230 (5,345,539)

8.1 Reconciliation between Current Tax Expense and the product of Accounting Profit Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.

Accounting Profit/(Loss) Before Tax 431,422,359 100,511,028 126,308,174 (74,173,377)Aggregate Disallowed Items 165,385,506 340,470,466 65,304,026 40,302,863Aggregate Allowable Items (336,994,014) (95,545,957) (196,433,425) (128,839,921)Trade Business Losses Incurred During the Year 4,821,224 (162,710,435) 4,821,224 (162,710,435)

Taxable Trade Profit 221,519,560 182,725,102 - -Taxable Profit from Interest Income 39,759,336 12,119,953 - 8,841,377Tax Losses Brought Forward and Utilised 19,916,553 (10,823,800) 1,534,413 (3,094,482) 281,195,449 184,021,255 1,534,413 5,746,895

Income Tax - 12% (2012-12%) 34,309,245 19,678,181 - -Income Tax - 28% (2012-28%) 13,137,475 5,610,196 797,895 1,609,131Current Income Tax Expense 47,446,720 25,288,377 797,895 1,609,131

Tax Losses Brought Forward (246,097,935) (94,211,300) (242,564,534) (82,948,581)Tax Losses Incurred During the Year - (162,710,435) - (162,710,435)Tax Losses Utilised 19,916,553 10,823,800 1,534,413 3,094,482Tax Losses Carried Forward (226,181,382) (246,097,935) (241,030,121) (242,564,534)



8. INCOME TAX EXPENSE (CONTD.)

8.2.1 Group Balance Sheet Income Statement As at 2013 2012 1 April 2011 2013 2012 Rs. Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 71,671,516 57,229,319 55,547,654 14,428,031 1,681,665Revaluation of Buildings (Directly in Equity) 26,261,080 26,550,102 27,214,972 97,932,596 83,779,421 82,762,626Deferred Tax AssetsDefined Benefit Plans 3,738,072 4,908,234 3,102,793 1,184,328 (1,805,441)Carry Forward of Unused Tax Losses 30,275,896 27,820,872 19,503,258 (2,455,024) (8,317,614) 34,013,968 32,729,106 22,606,051Deferred Income Tax - Income 13,157,335 (8,441,390)Net Deferred Tax Liability 63,918,628 51,050,315 60,156,575

Balance Sheet As at 2013 2012 1 April 2011 Rs. Rs. Rs.

Deferred Tax Liability 68,090,347 62,132,583 62,690,774Deferred Tax Assets (4,171,719) (11,082,268) (2,534,199)Net Deferred Tax Liability 63,918,628 51,050,315 60,156,575

8.2.2 CompanyDeferred Tax Assets, Liabilities and Income Tax Relates to the Followings ;

Balance Sheet Income Statement As at 2013 2012 1 April 2011 2013 2012 Rs. Rs. Rs. Rs. Rs.

Deferred Tax LiabilityCapital Allowances for Tax Purposes 25,920,723 15,829,246 8,528,639 10,091,477 7,300,607Revaluation of Buildings (Directly in Equity) 1,953,282 1,953,282 2,730,878 27,874,005 17,782,528 11,259,517Deferred Tax AssetsDefined Benefit Plans 1,115,634 949,456 1,260,975 (166,178) 311,519Carry Forward of Unused Tax Losses 30,275,896 27,201,156 12,532,741 (3,074,740) (14,668,415) 31,391,530 28,150,612 13,793,716Deferred Income Tax - Income 6,850,559 (7,056,289)Net Deferred Tax Liability/(Assets) (3,517,525) (10,368,084) (2,534,199)


9. EARNING PER SHARE

9.1 Basic Earnings Per Share amounts are calculated by dividing the net profit for the year attributable to ordinary equity holders of the Ordinary Shareholders by the weighted average number of ordinary shares outstanding during the year.

9.2 The following reflects the income and share data used in the Basic Earnings Per Share computation

Group 2013 2012 Amounts Used as the Numerator: Rs. Rs. Rs.

Profit Attributable to Ordinary Shareholders 270,122,976 40,873,544

Number of Ordinary Shares used as the denominator: 2013 2012 Number Number

Weighted Average Number of Ordinary Shares in Issue Applicable to Basic Earnings Per Share 111,525,794 108,284,744

Earnings Per Share - Basic 2.42 0.38

As there were no potential ordinary shares outstanding as at the year end, Diluted Earnings per Share is equal to the Basic Earnings per Share for the year.



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10. PROPERTY, PLANT AND EqUIPMENT CONTD.

10.1.4 Net Book Value 2013 2012 As at 1 April 2011 Rs. Rs. Rs.

At CostFreehold Land 5,719,000 5,719,000 -Buildings on Leasehold Land 1,163,787 - 84,671,968Land Improvements 2,440,591 2,440,591 11,524,633Buildings on Freehold Land 1,337,752 - -Plant and Machinery 128,536,306 122,984,807 53,989,382Furniture, Fittings and Equipment 222,557,741 247,504,551 127,215,161Paintings, Murals etc. 13,953,449 16,807,268 560,612Motor Vehicles 4,145,324 4,841,919 8,269,467Soil Erosion Prevention 5,237,483 6,084,593 6,931,702Energy Saving Technique 2,792,557 3,042,544 3,042,544Landscaping 3,092,783 3,092,783 - 390,976,774 412,518,057 296,205,469

At ValuationFreehold Land 205,269,751 205,269,751 91,020,001Buildings on Leasehold Land 718,992,138 734,735,915 191,396,812Land Improvements 1,250,000 1,250,000 1,250,000Buildings on Freehold Land 907,489,455 922,662,450 922,570,000 1,833,001,344 1,863,918,116 1,206,236,813In the Course of ConstructionBuilding Work in Progress 19,095,683 13,813,921 7,853,155 19,095,683 13,813,921 7,853,155

Total Carrying Amount of Property, Plant & Equipment 2,243,073,801 2,290,250,094 1,510,295,437

10.1.5 The Group acquired Property, Plant and Equipment to the aggregate value of Rs. 68,056,197/- during the financial year (2012 - Rs. 720,190,278 and 2011 - Rs. 569,871,914/-). Cash payments amounting to Rs. 68,056,197/- (2012 - Rs. 653,735,759 and 2011 - Rs. 569,871,914/-) were made during the year for purchase of Property, Plant and Equipment.

10.1.6 Freehold Land of Hotel Sigiriya PLC has been acquired by the State in terms of the Land Acquisition Act, by the time it was sold to the Company. Whilst steps have been taken to institute legal action against the land owners seeking damages for the illegal deed transfers, the company has been taken steps of finding the possibilities of retaining this land with the company under a long term lease. The Company is confident that the relevant Government authorities will consider favorably the request of the company.

10.1.7 Property, Plant and Equipment includes fully depreciated assets having a gross carrying amounts of Rs. 136,074,515/- (2012 Rs. 100,115,990/- and 2011 Rs. 109,510,118/-).

10.1.8 During the year an amount of Rs. Nil (2012 - Rs. 12,028,825 and 2011- Rs. 13,732,104 /-) was capitalised as borrowing costs to Buildings.


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10. PROPERTY, PLANT AND EqUIPMENT CONTD.

10.2.5 The Company acquired Property, Plant and Equipment to the aggregate value of Rs.40,420,034/- during the financial year (2012 - Rs. 687,338,982 and 2011 - Rs.15,122,469/-). Cash payments amounting to Rs.40,420,634/- (2012 - Rs. 596,371,906 and 2011 - Rs.18,716,657/-) were made during the year for purchase of Property, Plant and Equipment.

10.2.6 Property, Plant and Equipment includes fully depreciated assets having a gross carrying amounts of Rs.17,032,647/- (2012 - Rs. 21,788,255/- and 2011 - Rs. 8,920,525/-).

10.2.7 During the year an amount of Nil (2012 - Rs. 12,028,855 and 2011- Nil /-) was capitalised as borrowing costs to Buildings on Leasehold Land.

10.2.8 The carrying amount of revalued assets that would have been included in the financial statements had the assets been carried at cost less depreciation is as follows:

Net Cumulative Carrying Depreciation Net Net Amount If assets Carrying Carrying As atClass of Asset were carried Amount Amount 1 April Cost at Cost 2013 2012 2011 Rs. Rs. Rs. Rs. Rs.

GroupBuildings on Freehold Land 804,252,335 77,694,862 726,557,473 739,691,678 739,065,950Buildings on Leasehold Land 654,774,609 109,487,460 545,287,149 566,522,154 83,880,459

CompanyBuildings on Leasehold Land 550,777,483 55,124,235 495,653,248 504,832,873 58,708,485

11. LEASEHOLD PROPERTY Group Company As at As at 1 April 1 April 2013 2012 2011 2013 2012 2011 Rs. Rs. Rs. Rs. Rs. Rs.

As at 1 April 38,380,081 40,207,704 42,035,327 35,735,645 37,437,342 39,139,039Amortisation for the year (1,830,991) (1,827,623) (1,827,623) (1,701,697) (1,701,697) (1,701,697)As at 31 March 36,549,090 38,380,081 40,207,704 34,033,948 35,735,645 37,437,342

The Company has obtained leasehold rights to two lots of land situated in Bentota from the Sri Lanka Tourist Board by the agreement dated 19/02/1969 and 28/02/1973 respectively (the lease expires on 01/02/2019 and 28/02/2033 respectively).

The revised UITF ruling does not permit further revaluation of Leasehold Property. An amount of Rs. 42,548,432/- and Rs. 3,148,141/- in Serendib Hotels PLC and Hotel Sigiriya PLC respectively is remaining in equity under Revaluation Surplus relating to previous revaluation of Leasehold rights to land.



12. INTANGIBLE ASSETS At Cost Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Computer SoftwaresAt the Beginning of the Year 5,094,136 6,687,498 6,687,498 1,908,205 1,868,205 1,868,205Additions 1,572,500 40,000 - - 40,000Transfers/Disposals During the Year - (1,633,362) - - -At the End of the Year 6,666,636 5,094,136 6,687,498 1,908,205 1,908,205 1,868,205

Amortisation and ImpairmentAt the Beginning of the Year 1,373,130 1,871,199 1,447,059 106,216 41,216 -Amortisation 941,851 664,196 424,140 368,641 65,000 41,216Transfers/Disposals - (1,162,265) - - - -At the End of the Year 2,314,981 1,373,131 1,871,199 474,857 106,216 41,216

Carrying Value 4,351,655 3,721,005 4,816,300 1,433,348 1,801,989 1,826,989 12.1 Goodwill

At Cost Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at the Beginning of the Year 174,124,906 174,124,906 22,252,564 - - -Acquired Goodwill during the Year - - 151,872,342 - - -Balance as at End of the Year 174,124,906 174,124,906 174,124,905 - - -

178,476,561 177,845,911 178,941,205 1,433,348 1,801,989 1,826,989

12.2 Intangible assets are amortised over there useful economic life and useful economic life is estimated as 5-10 years.

13. INVESTMENTS IN SUBSIDIARIES - COMPANY Market Market Market Cost Value Country of Holding% As at Cost Value Cost Value As at As at Incorporation 2013 2012 1 April 2011 2013 2013 2012 2012 1 April 2011 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

a) quoted InvestmentsDolphin Hotels PLC Sri Lanka 64.85% 64.85% 64.85% 203,692,502 676,750,074 203,692,502 648,039,465 203,692,502 1,058,191,025Hotel Sigiriya PLC Sri Lanka 61.97% 61.97% 61.97% 56,704,833 286,841,969 56,704,833 259,973,228 56,704,833 337,458,677Total quoted Investments in Subsidiaries 260,397,335 963,592,043 260,397,335 908,012,693 260,397,335 1,395,649,702

b) Non-quotedSerendib Leisure Management Ltd Sri Lanka 100% 100% 100% 100,000 - 100,000 - 100,000 -Total Non-quoted Investments in Subsidiaries 100,000 - 100,000 - 100,000 -Total Net Carrying Value of Investments in Subsidiaries 260,497,335 963,592,043 260,497,335 908,012,693 260,497,335 1,395,649,702


14. INVESTMENTS IN ASSOCIATES - GROUP/COMPANYThe Group has a 19.90% interest in Jada Resorts & Spa (Pvt) Ltd., which is involved in the hotel operation, Jada Resort & Spa is a private entity that is not listed on any public exchange. The following table illustrates summarised financial information of the Group’s investments in Jada Resorts & Spa (Pvt) Ltd.

Jada Resorts & Spa (Pvt) Ltd 2013 2012 As at 1 April 2011 No. of No. of No. of Shares Rs. Shares Rs. Shares Rs.

Balance as at Beginning of the Year 20,374,567 179,398,523 20,374,567 168,001,629 20,374,567 168,001,629Investment of shares under Right Issue 4,074,913 40,749,130 - - - -Share of Results of Associate - 588,572 - 11,396,895 - -Balance as at End of the Year 24,449,480 220,736,225 20,374,567 179,398,523 20,374,567 168,001,629 As 1 at 2013 2012 April 2011 Rs. Rs. Rs.

Share of the associate’s statement of financial position: 19.90% 19.90% 19.90%Current assets 81,807,196 38,686,524 21,199,747Non-current assets 315,108,197 157,460,644 165,237,735 Current liabilities (71,578,810) (15,194,799) (17,657,934)Non-current liabilities (104,600,358) (1,553,847) (777,918)Equity 220,736,224 179,398,522 168,001,628Share of the associate Revenue 48,008,787 75,037,010 -Profit 588,572 11,396,894 - Carrying amount of the investment 220,736,225 179,398,523 168,001,628

As at 1 AprilCompany 2013 2012 2011 Rs. Rs. Rs.

Jada Resorts & Spa (Pvt) Ltd. 360,623,100 319,873,970 319,873,970 360,623,100 319,873,970 319,873,970



15. OTHER FINANCIAL ASSETS Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs. Non Current Investments in Equity Securities 12,000,010 10,000,000 10,000,000 4,000,010 3,333,340 3,333,340 12,000,010 10,000,000 10,000,000 4,000,010 3,333,340 3,333,340 Current Loans Due from Related Parties 747,663,420 - - 23,463,420 - - 747,663,420 - - 23,463,420 - -Total Other Financial Assets 759,663,430 10,000,000 10,000,000 27,463,430 3,333,340 3,333,340

15.1 Non Current Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Investment in Equity Securities - Non Current (Note 15.1.1) 12,000,010 10,000,000 10,000,000 4,000,010 3,333,340 3,333,340 12,000,010 10,000,000 10,000,000 4,000,010 3,333,340 3,333,340

15.1.1 Investment in Equity Securities - Non Current Group Company No. of Carrying No. of Carrying Shares Value Shares Value Rs. Rs. Rs. Rs.

Non-quotedRainforest Ecolodge (Pvt) Ltd. 1,200,000 12,000,010 400,000 4,000,010 1,200,000 12,000,010 400,000 4,000,010

15.1.2 Investment in Rainforest Ecolodge (Pvt) Ltd. is carries at cost due to impracticability of assessing the fair value of the investment.


15. OTHER FINANCIAL ASSETS CONTD.

Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

15.2 Current Loans due from Related parties (Note 15.2.1) 747,663,420 - - 23,463,420 - -Total Current Financial assets 747,663,420 - - 23,463,420 - -

15.2.1 Loans due from Related parties Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Relationship Rs. Rs. Rs. Rs. Rs. Rs.

CurrentHemas Holdings PLC Ultimate Parent 747,663,420 - - 23,463,420 - - Company 747,663,420 - - 23,463,420 - - Re payment Term - On DemandInterest Rate - Prevailing Market Rate

16. INVENTORIES Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Food Stuff 3,478,097 4,245,798 5,284,903 1,472,996 1,637,947 1,254,084Beverage 4,882,803 5,937,370 5,293,443 2,064,761 2,245,632 961,276House Keeping and Maintenance 5,439,731 6,128,785 5,833,878 1,508,138 1,377,513 1,081,771Printing and Stationery 816,416 923,877 772,035 343,832 318,102 399,108Linen and Cutlery 2,400,368 555,593 488,701 70,588 198,296 335,516 17,017,415 17,791,423 17,672,960 5,460,315 5,777,490 4,031,755



17. TRADE AND OTHER RECEIVABLES Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Trade Receivable - Related Parties (17.2) 8,887,548 18,553,563 18,553,557 1,383,234 498,826 848,567 - Other 153,440,398 166,204,542 212,880,053 39,864,233 32,327,903 70,628,542Less: Debtors’ Collective Impairment (17,314,795) (16,171,622) (10,385,453) (7,789,215) (6,377,513) (3,855,381) 145,013,151 168,586,483 221,048,157 33,458,252 26,449,216 67,621,728

Other Debtors 34,397,009 84,548,359 41,981,074 22,003,549 57,303,092 2,434,798Advances and Prepayments 18,623,625 15,453,867 13,253,991 5,591,427 4,393,299 4,355,103Less: Debtors’ Impairment (587,412) (479,819) (479,819) - - - 52,433,222 99,522,407 54,755,246 27,594,976 61,696,391 6,789,901

Festival Advances (17.3) 1,251,505 970,138 1,295,442 354,552 277,867 144,092Non Trade Dues from Related Parties (17.4) 8,689,384 1,968,250 893,321 4,012,130 5,860,464 17,401,812 207,387,262 271,047,278 277,992,166 65,419,910 94,283,938 91,957,533

17.1 Trade Debtors Age Analysis

Total Current 30-90 days 91-120 days >120 days

Group2013 145,013,151 109,554,544 34,418,392 1,039,111 1,1042012 168,586,483 121,756,753 45,446,254 1,096,620 286,856As at 1 April 2011 221,048,157 118,215,630 88,486,649 10,564,190 3,781,688

Total Current 30-90 days 91-120 days >120 days

Company2013 33,458,252 25,215,235 7,691,342 550,570 1,1052012 26,449,216 17,189,860 9,067,455 191,901 -As at 1 April 2011 67,621,728 24,234,552 40,414,901 1,650,359 1,321,917


17. TRADE AND OTHER RECEIVABLES CONTD.

17.2 Trade Dues Receivables from Related Parties Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Relationship

Hemas Holdings PLC Ultimate Parent Company 918,545 - - - - -Hemtours (Pvt) Ltd. Group Company 115,041 212,594 97,553 - 97,553 97,553Diethlem Travel Lanka (Pvt) Ltd. Group Company 4,246,165 5,309,362 6,962,886 811,241 401,273 751,014Peace Haven Resorts Ltd. Affiliate Company - 78,065 115,041 - - -Jada Resorts & Spa (Pvt) Ltd. Associate Company 3,607,797 12,953,542 11,378,077 463,893 - -Serendib Leisure Management Ltd. Subsidiary - - - 108,100 - - 8,887,548 18,553,563 18,553,557 1,383,234 498,826 848,567

17.3 Festival Advances Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

SummaryBalance as at Beginning of the Year 970,138 1,295,442 1,120,856 277,867 144,092 102,570Loans Granted During the Year 3,370,223 3,717,740 3,562,446 1,007,034 1,007,034 1,007,034Less: Repayments During the Year (3,088,856) (4,043,044) (3,387,860) (930,349) (873,259) (965,512)Balance as at End of the Year 1,251,505 970,138 1,295,442 354,552 277,867 144,092



17. TRADE AND OTHER RECEIVABLES CONTD.

17.4. Amounts Due from Related Parties Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Relationship

Hemas Ultimate ParentHoldings PLC Company 7,155,843 228,571 - - 228,571 -Hotel Sigiriya PLC Subsidiary - - - 234,315 776,072 2,285,264Dolphin Hotels PLC Subsidiary - - - - 927,810 584,386Serendib Leisure Management Ltd. Subsidiary - - - - 2,561,514 14,532,162Hemtours (Pvt) Ltd. Affiliate Company 27,003 27,003 49,082 - - -Peace Heaven Resorts Ltd. Affiliate Company - - - - - -Jada Resorts &Spa (Pvt) Ltd. Associate Company 1,255,138 1,461,276 844,239 3,777,815 1,366,497 -Kammala Hoteliers (Pvt) Ltd. Affiliate Company 251,400 251,400 - - - - 8,689,384 1,968,250 893,321 4,012,130 5,860,464 17,401,812

18. CASH AND CASH EqUIVALENTS IN THE CASH FLOW STATEMENTComponents of Cash and Cash Equivalents

18.1 Favourable Cash and Cash Equivalent Balances Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Cash and Bank Balances 219,134,252 108,023,965 85,696,538 74,899,965 25,073,194 26,278,166 Fixed Deposit 39,746 30,034,077 34,077 - 10,000,000 - Treasury Bills - - 4,000,000 - - 219,173,998 138,058,042 89,730,615 74,899,965 35,073,194 26,278,166 18.2 Unfavourable Cash and Cash Equivalent BalancesBank Overdraft (57,929,368) (53,209,945) (162,545,128) (17,062,997) (22,787,420) (30,682,731)Total Cash and Cash Equivalents for the Purpose of Cash Flow Statement 161,244,630 84,848,097 (72,814,513) 57,836,968 12,285,774 (4,404,565)


19. ISSUED CAPITAL - GROUP AND COMPANY 2013 2012 As at 1 April 2011 No. of No. of Shares Rs. Shares Rs. Number Rs.

19.1 Fully Paid Ordinary Shares (19.1.1) 75,514,738 614,282,951 75,514,738 614,282,951 12,082,358 244,260,725Fully Paid Non-Voting Ordinary Shares (19.1.2) 36,011,056 298,838,743 36,011,056 298,838,743 5,761,769 167,398,392 111,525,794 913,121,694 111,525,794 913,121,694 17,844,127 411,659,117

19.1.1 Fully Paid Ordinary Shares 2013 2012 As at 1 April 2011 No. of No. of No. of Shares Rs. Shares Rs. Shares Rs.

Balance as at Beginning of the Year 75,514,738 614,282,951 12,082,358 244,260,725 12,082,358 244,260,725Issue of Shares Under Right Issue (Note 19.2) - - 15,102,948 370,022,226 -Sub-Division of Shares (Note 19.2) - - 48,329,432 - -Balance as at End of the Year 75,514,738 614,282,951 75,514,738 614,282,951 12,082,358 244,260,725

19.1.2 Fully Paid Non-Voting Ordinary Shares 2013 2012 As at 1 April 2011 No. of No. of No. of Shares Rs. Shares Rs. Shares Rs.

Balance as at Beginning of the Year 36,011,056 298,838,743 5,761,769 167,398,392 5,761,769 167,398,392Issue of shares under Right Issue (Note 19.2) - - 7,202,211 131,440,351 - -Sub-Division of Shares (Note 19.2) - - 23,047,076 - - -Balance as at End of the Year 36,011,056 298,838,743 36,011,056 298,838,743 5,761,769 167,398,392

19.2 Sub Division of Shares and Right IssueThe ordinary shares of the Company were subdivided on 29 April 2011 on the basis of 5 for every one share held and Right Issue on 29 May 2011 on the basis of 1 for every four shares held. The number of shares of the Company increased from 17,844,127 to 111,525,794 with a change in stated capital from Rs. 411,659,117/- to Rs. 913,121,694/-.

19.3 Rights, Preference and Restrictions of Classes of CapitalThe Holders of Ordinary Shares confer their right to receive dividends as declared from time to time. The holders of Voting Ordinary Shares are entitled to one vote per share at a meeting of the Company.



20. RESERVES Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Summary(a) Capital ReservesAsset Revaluation Reserve (20.1) 180,198,392 185,685,931 99,892,912 44,016,582 46,710,556 49,392,406

(b) Revenue ReservesGeneral Reserve (20.2) 19,940,000 19,940,000 19,940,000 14,500,000 14,500,000 14,500,000 200,138,392 205,625,931 119,832,912 58,516,582 61,210,556 63,892,406

20.1 Revaluation ReserveOn: Property, Plant and Equipments Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at the Beginning of the Year 185,685,931 99,892,912 102,507,254 46,710,556 49,392,406 51,682,284Revaluation Surplus During the Year - 90,326,240 1,946,027 - (765,472) -Depreciation Transfer on Revaluation Surplus (5,666,651) (5,365,140) (5,365,140) (2,693,974) (2,693,974) (2,693,974)Deferred Tax attributable to Revaluation Surplus 179,112 831,919 804,771 - 777,596 404,096Balance as at the End of the Year 180,198,392 185,685,931 99,892,912 44,016,582 46,710,556 49,392,406

20.2 General Reserve which is a Revenue Reserve represents the amounts set aside by the Directors for general application.


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-


21. INTEREST BEARING LOANS AND BORROWINGS CONTD.

21.3 Bank Loans Balance Loans Repayment Exchange Balance Repayment Rates of As At Obtained (Gain)/ As At Terms Interest 01.04.2012 Loss 31.03.2013 Rs. Rs. Rs. Rs Rs. Serenib Hotels PLCHatton National Bank PLC 116,837,000 - (11,445,598) (5,533,272) 99,858,130 60 Instalments 3 Months- Foreign Currency from Oct '12 EURIBOREUR 700,000 +3.5%p.aHatton National Bank PLC 64,974,000 - (6,417,063) (3,629,193) 54,927,744 60 Instalments 3 Months- Foreign Currency from Oct '12 LIIBORGBP 325,000 +3.5%p.aHatton National Bank PLC 57,976,800 - (3,820,066) (3,326,786) 50,829,948 60 Instalments 3 Months- Foreign Cuurency from Jan '13 EURIBOREUR 615,000 - Non Current +3.5%p.aHatton National Bank PLC 102,649,650 - (5,027,023) (5,013,159) 92,609,468 60 Instalments 3 Months- Foreign Currency from Dec '12 LIIBORGBP 290,000 - Non Current +3.5%p.aHatton National Bank PLC - 107,580,000 - (2,963,400) 104,616,600 60 Instalments 3 Months- Foreign Currency from Sep '13 EURIBOREUR 660,000 - Non Current +3.5%p.aDolphin Hotels PLC At 3.75Commercial Bank of 135,580,994 - (9,253,736) (6,517,474) 119,809,784 72 Instalments OverCeylon PLC - Foreign from Nov '12 1 monthCurrency (EUR) Loan Euro LIBOR p.aMiami Beach Hotels Ltd. At 3.75Commercial Bank of 264,494,160 - (17,966,890) (15,321,996) 231,205,274 72 Instalments Over 1Ceylon PLC - Foreign from Nov '12 monthCurrency GBP Loan GBP LIBOR p.aHotel Sigiriya PLC Commercial Bank of 466,501 - (349,981) - 116,520 60 Instalments 6.5% p.aCeylon PLC - from Aug '09 E-Friends II Loan 742,979,105 107,580,000 (54,280,357) (42,305,279) 753,973,469



22. RETIREMENT BENEFIT OBLIGATION Group Company As at As at 1 April 1 April 2013 2012 2011 2013 2012 2011 Rs. Rs. Rs. Rs. Rs. Rs.

GratuityBalance as at Beginning of the Year 26,112,590 26,483,472 18,690,932 7,912,132 8,406,500 5,950,127Interest Cost 3,177,836 2,992,180 2,056,003 870,335 856,830 742,242Current Service Cost 3,356,736 4,620,514 3,254,779 781,504 1,191,714 691,771Benefits Paid (3,064,727) (4,556,200) (1,626,060) (613,850) (665,900) (161,800)Actuarial (Gain)/Loss 1,568,171 (3,427,376) 4,107,818 346,830 (1,877,012) 386,637Transfers - - - - 797,523Balance as at End of the Year 31,150,606 26,112,590 26,483,472 9,296,951 7,912,132 8,406,500

Messers K.A. Pandith Actuaries, Consultants and Actuaries, carried out an actuarial valuation of the defined benefit plan gratuity on 31.03.2013. Appropriate and compatible assumptions were used in determining the cost of retirement benefits. The principle assumptions used as follows:

The Principal Assumptions Used were as Follows: Group Company As at As at 1 April 1 April 2013 2012 2011 2013 2012 2011

Discount Rate 11% 11% 11% 11% 11% 11%Future Salary Increment Rate 9% 9% 9% 9% 9% 9%Retirement Age 50-60 Years 50-60 Years 50-60 Years 50-60 Years 50-60 Years 50-60 Years

23. DEFERRED INCOME Group As at 2013 2012 1 April 2011

As at Beginning of the Year 1,333,836 1,452,740 1,571,644Less: Amortization During the Year (118,904) (118,904) (118,904)As at End of the Year 1,214,932 1,333,836 1,452,740

The Hotel Sigiriya introduced a gasifier system for the steam boiler to replace the existing diesel burner with a wood burner. This has been considered as an environment friendly project and The Ceylon Chamber of Commerce has granted facility for such projects under promotion of Eco Efficient Productivity (PEP) projects. The Hotel Sigiriya PLC received 50% of the total project cost as a grant (Rs. 1.75 Mn). The gasifier started generating steam from 1 October 2008 and the grant is amortised to the income statement on a straight-line basis over the expected useful life of the gasifier of 15 years.


24. TRADE AND OTHER PAYABLES Group Company As at As at 1 April 1 April 2013 2012 2011 2013 2012 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Trade Payable - Related Parties (24.1) - - - 36,366 - -Trade Payable - Other 31,284,768 41,498,475 41,620,211 9,139,227 9,826,636 7,845,043Other PayablesSundry Creditors Including Accrued Expenses 229,616,595 255,060,738 170,552,934 76,162,934 127,170,590 40,586,447Non Trade Payables to Related Parties (24.2) 20,978,270 12,993,684 460,322 12,577,003 13,252,480 10,848,072 281,879,633 309,552,897 212,633,467 97,915,530 150,249,706 59,279,562

24.1 Trade Payable - Related Parties Relationship CompanyHemas Phamacuiticals (Pvt) Ltd. Group Company 3,885 - -Hemas Manufacturing (Pvt) Ltd. Group Company 32,481 - - 36,366 - -

24.2 AMOUNTS DUE TO RELATED PARTIES Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Relationship Rs. Rs. Rs. Rs. Rs. Rs.

Hotel Sigiriya PLC Subsidiary - - - - 67,840 2,147,408Dolphin Hotels PLC Subsidiary - - - 2,627,391 3,987,630 2,970,194Serendib Leisure Management Ltd. Subsidiary - - - 2,154,857 7,386,842 5,354,891Peace Haven Affiliate Resorts Ltd. Company 227,444 396,195 - 227,445 396,195 297,172Hemas Holdings PLC Ultimate Parent Company 5,584,227 10,007,700 - 4,748,330 1,380,000 78,407Diethlm Travels Lanka (Pvt) Ltd. Group Company 267,014 158,486 139,737 - - -Jada Resorts and Associate Spa (Pvt) Ltd. Company 4,548,303 190,466 297,172 - 33,973 -Hemas Corporate Group Services Ltd. Company 4,814,365 - 23,413 2,806,495 - -Hemas Developments Group (Pvt) Ltd. Company 5,251,205 1,984,711 - - - -

Hemas Travels (Pvt) Ltd. Group Company 259,632 256,126 - - - -Vishwa BPO (Pvt) Ltd. Affiliate Company 26,080 - - 12,485 - - 20,978,270 12,993,684 460,322 12,577,003 13,252,480 10,848,072



25. NON INTEREST BEARING LOANS AND BORROWINGS Group As at 2013 2012 1 April 2011 Rs. Rs. Rs.

Ministry of Tourism 1,207,000 1,207,000 1,207,000 1,207,000 1,207,000 1,207,000

26. DIVIDENDS PAYABLE Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Unclaimed Dividends 3,619,070 3,519,125 10,866,246 1,385,354 1,385,354 1,395,786 3,619,070 3,519,125 10,866,246 1,385,354 1,385,354 1,395,786

27. OTHER FINANCIAL LIABILITIES

27.1 Other Financial Liabilities - Group As At Loans Repayment As At Loans Repayment As At 01.04.2011 Obtained/ 01.04.2012 Obtained/ 31.03.2013 Int.Cap. Int.Cap. Relationship Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Loans Due to Related PartiesJada Resorts & Associate Spa (Pvt) Ltd. Company - - - - 400,000,000 - 400,000,000 - - - - 400,000,000 - 400,000,000 Repayment Term - On DemandInterest Rate - Prevailing Market Rate

28. COMMITMENTS AND CONTINGENCIESThere are no significant commitment and/or contingencies as at the reporting date.

29. EVENTS OCCURRING AFTER THE DATE OF STATEMENT OF FINANCIAL POSITIONThere have been no material events occurring after the balance sheet date that require adjustments to or disclosure in the financial statements.


30. ASSETS PLEDGEDThe following assets have been pledged as security for liabilities. Carrying Amount Pledged IncludedNature of assets Nature of Liability As at under 2013 2012 1 April 2011 Rs. Rs. Rs.

Dolphin Hotels PLC Primery Mortgage Bond No. 3120 dated 12/07/2010 for Rs. 146.3 Mn executed over Club Hotel Dolphin’s Hotel premises at Waikkala owned by the company. Property, Plant Freehold Land and Building Extent 5A-3R-2.6P 630,985,609 639,951,450 565,125,901 and Equipment (Lot 1 in plane No. 3105) to Commercial Bank of Ceylon PLC (EIB Loan of Rs. 126.6 Mn and overdraft facility of Rs. 20 Mn) A supplementary Mortgage Bond in Euro executed in connection with Property, Plant Freehold Land and Building Primary Mortgage Bond No. 3120 630,985,609 639,951,450 565,125,901 and Equipment dated 13/07/2010 linking the Rupee exposure in foreign currency.

Miami Beach Hotels Ltd Primary Mortgage Bond No. 1425 dated 13/07/2010 for Rs. 244.6 Mn executed over Miami Beach Hotels premises at Waikkala owned by the Property, Plant Freehold Land and Building Company. (Extent 7A-3R-31P) to 493,398,383 500,010,750 464,775,856 and Equipment Commercial Bank of Ceylon PLC (EIB Loan of Rs. 234.6 Mn and overdraft facility of Rs. 10 Mn)



30. ASSETS PLEDGED CONTD.The following assets have been pledged as security for liabilities. Carrying Amount Pledged IncludedNature of assets Nature of Liability As at under 2013 2012 1 April 2011 Rs. Rs. Rs.

A supplementary Mortgage Bond in GBP executed in connection with Primary Mortgage Property, Plant Freehold Land and Buildings Bond No.1425 dated 13/07/2010 493,398,383 500,010,750 464,775,856 and Equipment linking the Rupee exposure in foreign currency.

Hotel Sigiriya PLC Primary Mortgage up to the value Property, Plant Gasifire Equipments of Rs.1.75 Mn to Commercial Bank 2,457,646 2,691,708 2,925,770 and Equipment of Ceylon PLC Corporate Guarantee from Hemas Holdings PLC for EURO.1.315 Mn (Equivalent to LKR. 208.5 Mn) in favor of Hatton National Bank PLC Corporate Guarantee from Hemas Serendib Hotels PLC Holdings PLC for GBP 0.615 Mn Equivalent to LKR. 110.3 Mn) in favor of Hatton National Bank PLC

Corporate Guarantee from Hemas Holdings PLC for EURO 660,000 in favour of Hatton National Bank PLC


31. RELATED PARTY DISCLOSURESDetails of significant related party disclosures are as follows:

31.1 Transaction with the parent and related entities

Subsidiaries Affiliates Ultimate Parent Dolphin Hotel Serendib Diethelm Travels Hemtours Jada Hemas Corp. Peace Haven Vishwa BPO Hemas Holdings PLC Total Hotels PLC Sigiriya PLC Leisure Mgt. Ltd. Lanka (Pvt) Ltd. (Pvt) Ltd. Resorts & Spa Ltd. Services Ltd. Resorts Ltd. (Pvt) Ltd. YEAR ENDED 31ST MARCH 2013 Nature of Transaction 2013 2012 2013 2012 2013 2012 2,013 2,012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 1 April 2012

Trade and Other Receivable - - - - - - 751,014 97,553 97,553 734,989 - - - - 498,826 1,583,556

Amounts Due From Related Parties 927,810 584,386 776,072 2,285,263 2,561,514 14,532,162 401,273 - - 1,366,497 - - - - - 228,571 5,860,464 17,401,811

Amounts Due To Related Parties (3,987,630) (2,970,194) (67,840) (2,147,408) (7,386,842) (5,354,891) - - (33,973) - - - (396,195) (297,172) - - (1,380,000) (78,407) (13,252,480) (10,848,072)

Interest Bearing Loans and Borrowings (62,287,450) - (2,500,000) - - - - - - - - - - - - (53,510,304) (64,787,450) (53,510,304)

Finance Charges Payable - - - - - - - - - - - - - - - - (201,950) - (201,950)

(65,347,270) (2,385,808) (1,791,768) 137,855 (4,825,328) 9,177,271 401,273 751,014 97,553 97,553 1,332,524 734,989 - - (396,195) (297,172) - - (1,151,429) (53,790,661) (71,680,640) (45,574,959)

-

Sale of Goods / Services - - - - - - - 4,088,956 - - - - - - - - - - - - - 4,088,956

Purchase of Goods / Services (93,022) - - - - - - - - - - - - - - - (12,485) - - - (105,507) -

Sale of property and other assets - 317,831 - - - 85,486 - - - - - 265,143 - - - - - - 228,571 - 897,031

Management Fees Payable - - - - - (10,645,315) - - - - - - - - - - - - - - - (10,645,315)

Finance Charges Payable (4,492,447) - (445,933) - - - - - - - (47,342) (168,580) - - - - - - - (4,730,576) (4,985,722) (4,899,156)

Interest income receivable - (648,772) - (98,308) - (310,227) - - - - - - - - - - - - - - - (1,057,307)

Accounting Fee Payable - - - - - - - - - - - - - (232,704) - - - - - - - (232,704)

Expenses Incurred on Behalf of the Company 2,647,998 (643,760) 1,429,968 (32,435) 1,881,692 (8,629,762) 9,475,251 - - - 7,154,342 - - - 208,750 365,975 - - 115,674,101 (1,380,000) 138,472,102 (10,319,982)

Income Received on Behalf of the Company - - - - - - - - - - - - - - (40,000) (464,998) - - - - (40,000) (464,998)

Settlement of Dues from Related Parties (1,670,279) (2,179,545) (1,971,725) (2,306,494) (3,186,059) (13,920,054) (9,065,283) (4,438,697) (97,553) - (5,594,242) (811,676) - - - - - - (119,271,002) - (140,856,143) (23,656,466)

Settlements of Dues to Related Parties 5,892,914 - 2,272,307 2,128,990 39,976,727 10,839,246 - - - - (15,405,705) 134,606 410,235 - - - - - 78,407 33,146,480 13,181,249

Finance income received - - - - - - - - - - - - - - - - - - - 4,932,526 - 4,932,526

Management fees paid - - - - - 6,714,108 - - - - - - - - - - - - - - - 6,714,108

Expenses Incurred on Behalf of Others (6,718,858) 2,205,138 (2,221,454) 797,301 (35,893,789) 1,863,919 - - - - 16,720,815 1,178,042 (3,216,731) - - - - - - - (31,330,016) 6,044,400

Accounting Fee paid - - - - - - - - - - - - - 232,704 - - - - - - - 232,704

Finance charged paid 4,866,124 275,096 462,919 81,323 - - - - - - 81,315 - - - - - - - - - 5,410,358 356,419

Loan Capital Paid/Granted 62,287,450 (62,287,450) 2,500,000 (2,500,000) - - - - - - - - - - - - - - - (11,796,250) 64,787,450 (76,583,700)

Loans Settlements - - - - - - - - - - - - - - - - - - - 65,306,554 - 65,306,554

62,719,879 (62,961,462) 2,026,083 (1,929,623) 2,778,571 (14,002,599) 409,968 (349,741) (97,553) - 2,909,184 597,535 (2,806,495) - 168,750 (99,023) (12,485) - (3,596,901) 52,639,232 64,499,000 (26,105,681)

Balance as at 31 March 2013 (2,627,391) (65,347,270) 234,315 (1,791,768) (2,046,757) (4,825,328) 811,241 401,273 - 97,553 4,241,708 1,332,524 (2,806,495) - (227,445) (396,195) (12,485) - (4,748,330) (1,151,429) (7,181,640) (71,680,640)

Included In as at 31 March 2013

Trade and Other Receivable - - - - 108,100 - 811,241 401,273 - 97,553 463,893 - - - - - - - - - 1,383,234 498,826

Amounts Due From Related Parties - 927,810 234,315 776,072 - 2,561,514 - - - - 3,777,815 1,366,497 - - - - - - - 228,571 4,012,130 5,860,464

Amounts Due To Related Parties (2,627,391) (3,987,630) - (67,840) (2,154,857) (7,386,842) - - - - - (33,973) (2,806,495) - (227,445) (396,195) (12,485) - (4,748,330) (1,380,000) (12,577,003) (13,252,480)

Interest Bearing Loans and Borrowings - (62,287,450) - (2,500,000) - - - - - - - - - - - - - - - - (64,787,450)

Total (2,627,391) (65,347,270) 234,315 (1,791,768) (2,046,757) (4,825,328) 811,241 401,273 - 97,553 4,241,708 1,332,524 (2,806,495) - (227,445) (396,195) (12,485) - (4,748,330) (1,151,429) (7,181,639) (71,680,640)

Terms and Conditions:Sales and purchase of goods and/or services to related parties were made at on the basis of the price lists in force with non related parties, but subject to approved discounts. Property, plant and equipment purchases and sales are made at Net book values.



31. RELATED PARTY DISCLOSURESDetails of significant related party disclosures are as follows:

31.1 Transaction with the parent and related entities

Subsidiaries Affiliates Ultimate Parent Dolphin Hotel Serendib Diethelm Travels Hemtours Jada Hemas Corp. Peace Haven Vishwa BPO Hemas Holdings PLC Total Hotels PLC Sigiriya PLC Leisure Mgt. Ltd. Lanka (Pvt) Ltd. (Pvt) Ltd. Resorts & Spa Ltd. Services Ltd. Resorts Ltd. (Pvt) Ltd. YEAR ENDED 31ST MARCH 2013 Nature of Transaction 2013 2012 2013 2012 2013 2012 2,013 2,012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 1 April 2012

Trade and Other Receivable - - - - - - 751,014 97,553 97,553 734,989 - - - - 498,826 1,583,556

Amounts Due From Related Parties 927,810 584,386 776,072 2,285,263 2,561,514 14,532,162 401,273 - - 1,366,497 - - - - - 228,571 5,860,464 17,401,811

Amounts Due To Related Parties (3,987,630) (2,970,194) (67,840) (2,147,408) (7,386,842) (5,354,891) - - (33,973) - - - (396,195) (297,172) - - (1,380,000) (78,407) (13,252,480) (10,848,072)

Interest Bearing Loans and Borrowings (62,287,450) - (2,500,000) - - - - - - - - - - - - (53,510,304) (64,787,450) (53,510,304)

Finance Charges Payable - - - - - - - - - - - - - - - - (201,950) - (201,950)

(65,347,270) (2,385,808) (1,791,768) 137,855 (4,825,328) 9,177,271 401,273 751,014 97,553 97,553 1,332,524 734,989 - - (396,195) (297,172) - - (1,151,429) (53,790,661) (71,680,640) (45,574,959)

-

Sale of Goods / Services - - - - - - - 4,088,956 - - - - - - - - - - - - - 4,088,956

Purchase of Goods / Services (93,022) - - - - - - - - - - - - - - - (12,485) - - - (105,507) -

Sale of property and other assets - 317,831 - - - 85,486 - - - - - 265,143 - - - - - - 228,571 - 897,031

Management Fees Payable - - - - - (10,645,315) - - - - - - - - - - - - - - - (10,645,315)

Finance Charges Payable (4,492,447) - (445,933) - - - - - - - (47,342) (168,580) - - - - - - - (4,730,576) (4,985,722) (4,899,156)

Interest income receivable - (648,772) - (98,308) - (310,227) - - - - - - - - - - - - - - - (1,057,307)

Accounting Fee Payable - - - - - - - - - - - - - (232,704) - - - - - - - (232,704)

Expenses Incurred on Behalf of the Company 2,647,998 (643,760) 1,429,968 (32,435) 1,881,692 (8,629,762) 9,475,251 - - - 7,154,342 - - - 208,750 365,975 - - 115,674,101 (1,380,000) 138,472,102 (10,319,982)

Income Received on Behalf of the Company - - - - - - - - - - - - - - (40,000) (464,998) - - - - (40,000) (464,998)

Settlement of Dues from Related Parties (1,670,279) (2,179,545) (1,971,725) (2,306,494) (3,186,059) (13,920,054) (9,065,283) (4,438,697) (97,553) - (5,594,242) (811,676) - - - - - - (119,271,002) - (140,856,143) (23,656,466)

Settlements of Dues to Related Parties 5,892,914 - 2,272,307 2,128,990 39,976,727 10,839,246 - - - - (15,405,705) 134,606 410,235 - - - - - 78,407 33,146,480 13,181,249

Finance income received - - - - - - - - - - - - - - - - - - - 4,932,526 - 4,932,526

Management fees paid - - - - - 6,714,108 - - - - - - - - - - - - - - - 6,714,108

Expenses Incurred on Behalf of Others (6,718,858) 2,205,138 (2,221,454) 797,301 (35,893,789) 1,863,919 - - - - 16,720,815 1,178,042 (3,216,731) - - - - - - - (31,330,016) 6,044,400

Accounting Fee paid - - - - - - - - - - - - - 232,704 - - - - - - - 232,704

Finance charged paid 4,866,124 275,096 462,919 81,323 - - - - - - 81,315 - - - - - - - - - 5,410,358 356,419

Loan Capital Paid/Granted 62,287,450 (62,287,450) 2,500,000 (2,500,000) - - - - - - - - - - - - - - - (11,796,250) 64,787,450 (76,583,700)

Loans Settlements - - - - - - - - - - - - - - - - - - - 65,306,554 - 65,306,554

62,719,879 (62,961,462) 2,026,083 (1,929,623) 2,778,571 (14,002,599) 409,968 (349,741) (97,553) - 2,909,184 597,535 (2,806,495) - 168,750 (99,023) (12,485) - (3,596,901) 52,639,232 64,499,000 (26,105,681)

Balance as at 31 March 2013 (2,627,391) (65,347,270) 234,315 (1,791,768) (2,046,757) (4,825,328) 811,241 401,273 - 97,553 4,241,708 1,332,524 (2,806,495) - (227,445) (396,195) (12,485) - (4,748,330) (1,151,429) (7,181,640) (71,680,640)

Included In as at 31 March 2013

Trade and Other Receivable - - - - 108,100 - 811,241 401,273 - 97,553 463,893 - - - - - - - - - 1,383,234 498,826

Amounts Due From Related Parties - 927,810 234,315 776,072 - 2,561,514 - - - - 3,777,815 1,366,497 - - - - - - - 228,571 4,012,130 5,860,464

Amounts Due To Related Parties (2,627,391) (3,987,630) - (67,840) (2,154,857) (7,386,842) - - - - - (33,973) (2,806,495) - (227,445) (396,195) (12,485) - (4,748,330) (1,380,000) (12,577,003) (13,252,480)

Interest Bearing Loans and Borrowings - (62,287,450) - (2,500,000) - - - - - - - - - - - - - - - - (64,787,450)

Total (2,627,391) (65,347,270) 234,315 (1,791,768) (2,046,757) (4,825,328) 811,241 401,273 - 97,553 4,241,708 1,332,524 (2,806,495) - (227,445) (396,195) (12,485) - (4,748,330) (1,151,429) (7,181,639) (71,680,640)

Terms and Conditions:Sales and purchase of goods and/or services to related parties were made at on the basis of the price lists in force with non related parties, but subject to approved discounts. Property, plant and equipment purchases and sales are made at Net book values.


31. RELATED PARTY DISCLOSURES CONTD.

31.2 Transactions With Key Management Personnel of the Company or its Parent

The key management personnel of the Company are the members of its Board of Directors and that of its parent.

Key Management Personnel Compensation - Group 2013 2012 2011 Rs. Rs. Rs.

Short Term Employee Benefits 28,407,014 22,220,667 19,155,896Non Cash Benefits 233,273 180,630 - 28,640,287 22,401,297 19,155,896

No other significant transactions had taken place involving key management personnel and their close family members.

32. FAIR VALUESet out below is a comparison by class of the carrying amounts and fair values of the Company’s financial instruments that are carried in the financial statements. Carrying amount Fair value 1 April 1 AprilGroup 2013 2012 2011 2013 2012 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Financial assetsTrade and Other Receivables 207,387,262 271,047,278 277,992,166 207,387,262 271,047,278 277,992,166Other Financial Assets 747,663,420 - - 747,663,420 - -Available for Sale Investments 12,000,010 10,000,000 10,000,000 12,000,010 10,000,000 10,000,000Cash and Short Term Deposits 219,173,998 138,058,042 89,730,615 219,173,998 138,058,042 89,730,615Total 1,186,224,690 419,105,320 377,722,781 1,186,224,690 419,105,320 377,722,781

Financial liabilitiesInterest Bearing Loans and BorrowingsOther Current Financial Liabilities 400,000,000 - - 400,000,000 - -Bank Loans 753,973,469 742,979,105 560,231,885 753,973,469 742,979,105 560,231,885Trade and other Payables 281,879,633 309,552,897 212,633,467 281,879,633 309,552,897 212,633,467Loans Due to Related Party - 5,000,000 53,510,304 - 5,000,000 53,510,304Bank Overdraft 57,929,368 53,209,945 162,545,128 57,929,368 53,209,945 162,545,128Total 1,493,782,470 1,110,741,947 988,920,784 1,493,782,470 1,110,741,947 988,920,784



32. FAIR VALUE CONTD.

Carrying amount Fair value 1 April 1 AprilCompany 2013 2012 2011 2013 2012 2011 Rs. Rs. Rs. Rs. Rs. Rs.

Financial assetsTrade and Other Receivables 65,419,910 94,283,938 91,957,533 65,419,910 94,283,938 91,957,533Available for Sale Investments 4,000,010 3,333,340 3,333,340 4,000,010 3,333,340 3,333,340Cash and Short Term Deposits 74,899,965 35,073,194 26,278,166 74,899,965 35,073,194 26,278,166Total 144,319,885 132,690,472 121,569,039 144,319,885 132,690,472 121,569,039

Financial liabilitiesBank Loans 402,841,890 342,437,450 188,661,711 402,841,890 342,437,450 188,661,711Trade and Other Payables 97,915,530 150,249,706 59,279,562 97,915,530 150,249,706 59,279,562Loans Due to Related Party - 69,787,450 53,510,304 - 69,787,450 53,510,304Bank Overdraft 17,062,997 22,787,420 30,682,731 17,062,997 22,787,420 30,682,731Total 517,820,418 585,262,026 332,134,308 517,820,418 585,262,026 332,134,308

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Cash and short-term deposits, trade receivables and trade payables approximate their carrying amounts largely due to the short-term maturities of these instruments.

Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group/Company based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken to account for the expected losses of these receivables. As at 31 March 2013, the carrying amounts of such receivables, net of allowances, are not materially different from their calculated fair values.

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe company’s principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the company’s operations and to provide guarantees to support its operations. The company has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations.

The company is exposed to market risk, credit risk and liquidity risk.


33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTD.The Group's/Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group's/Company’s operations and to provide guarantees to support its operations. The Group/Company have loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. The Group/Company are exposed to market risk, credit risk and liquidity risk. The Group's/Company’s senior management oversees the management of these risks. The Group's/Company’s senior management is supported by the Board of Directors (BOD) that advises on financial risks and the appropriate financial risk governance framework for the Company. BOD provides assurance to the Group's/Company’s senior management that the Group's/Company’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite. It is the Group’s policy that all derivative activities for risk management purposes are required to be approved by Board of Directors of Hemas Holdings PLC. MARKET RISKMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings and deposits.

The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the entity’s financial performance.

INTEREST RATE RISKInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

FOREIGN CURRENCY RISKForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group's/Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group's/Company’s operating activities (when revenue or expense is denominated in a different currency from the Group's/Company’s functional currency).

EqUITY PRICE RISKThe Group's/Company’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group's/Company’s Board of Directors reviews and approves all equity investment decisions.

Credit RiskCredit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group/Company is exposed to credit risk from its operating activities (primarily for trade receivables).



33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTD.

TRADE RECEIVABLESCustomer credit risk is managed by each company subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on the credit risk evaluation model and individual credit limits are defined in accordance with this assessment.

Outstanding customer receivables are regularly monitored and contracts are signed and agreed with all credit customers.Additionally, a large number of minor receivables are grouped into homogenous groups and assessed for Impairment collectively. The calculation is based on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 13. The company does not hold collateral as security.

FINANCIAL INSTRUMENTS AND CASH DEPOSITSCredit risk from balances with banks is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties as per the Treasury Policy and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors on an annual basis, and may be updated throughout the year subject to approval of the Group’s Treasury Committee. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty’s failure. The company’s maximum exposure to credit risk for the components of the statement of financial position is the carrying amounts as illustrated in Note 21 except for financial guarantees and derivative financial instruments.

LIqUIDITY RISKThe Group/Company monitors its risk to a shortage of funds by setting up a minimum liquidity level. The Group's/Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The Group/Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.



The table below summarizes the maturity profile of the Group's financial liabilities based on contractual undiscounted payments.

GroupAs at 31 March 2013 On Demand Less Than 3 to 12 1 to 5 3 Months Months Years > 5 Years Total Rs. Rs. Rs. Rs. Rs. Rs.

Interest-Bearing Loans and Borrowings 457,929,368 37,221,269 111,313,835 605,438,365 - 1,211,902,837Trade and Other Payable - 281,879,633 - - - 281,879,633 457,929,368 319,100,902 111,313,835 605,438,365 - 1,493,782,470

As at 31 March 2012 On Demand Less Than 3 to 12 1 to 5 3 Months Months Years > 5 Years Total Rs. Rs. Rs. Rs. Rs. Rs.

Interest-Bearing Loans and Borrowings 53,209,945 13,749,935 67,241,650 666,987,520 - 801,189,050Trade and Other Payable - 309,552,897 - - - 309,552,897 53,209,945 323,302,832 67,241,650 666,987,520 - 1,110,741,947

As at 01 April 2011 On Demand Less Than 3 3 to 12 1 to 5 Months Months Years > 5 Years Total Rs. Rs. Rs. Rs. Rs. Rs.

Interest-Bearing Loans and Borrowings 162,545,128 78,052,817 73,627,544 462,061,828 - 776,287,317Trade and Other Payable - 212,633,467 - - - 212,633,467 162,545,128 290,686,284 73,627,544 462,061,828 - 988,920,784




The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

CompanyAs at 31 March 2013 On Demand Less than 3 to 12 1 to 5 3 Months Months Years > 5 Years Total Rs. Rs. Rs. Rs. Rs. Rs.


As at 31 March 2012 On Demand Less than 3 to 12 1 to 5 3 Months Months Years > 5 Years Total Rs. Rs. Rs. Rs. Rs. Rs.


As at 01 April 2011 On Demand Less than 3 to 12 1 to 5 3 Months Months Years > 5 Years Total Rs. Rs. Rs. Rs. Rs. Rs.


CAPITAL MANAGEMENTCapital includes ordinary shares. The primary objective of the Group's/Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group/Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group/Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes managing capital during the years ended 31 March 2013 and 31 March 2012. The Group/Company monitors capital using a gearing ratio, which is debt divided by total capital plus debt. The Group’s policy is to keep the gearing ratio below 40%.


investOR inFORMAtiOn

ANALYSIS OF SHAREHOLDERS

ORDINARY VOTING SHARES

2013 2012 No. of Total % No. of Total % Shareholders Holding Shareholders Holding

1 - 1,000 819 234,063 0.31 763 236,442 0.31 1,001 - 10,000 343 1,383,365 1.83 367 1,461,922 1.94 10,001 - 100,000 162 5,658,269 7.49 167 5,682,058 7.52 100,001 - 1,000,000 35 9,274,811 12.28 33 7,609,949 10.08Over 1,000,000 5 58,964,230 78.09 6 60,524,367 80.15 1,364 75,514,738 100.00 1,336 75,514,738 100.00

Institutions 79 57,670,101 76.37 77 62,735,013 83.07Individuals 1,285 17,844,637 23.63 1,259 12,779,725 16.93 1,364 75,514,738 100.00 1,336 75,514,738 100.00

ORDINARY NON-VOTING SHARES 2013 2012 No. of Total % No. of Total % Shareholders Holding Shareholders Holding 1 - 1,000 509 155,046 0.43 550 182,557 0.51 1,001 - 10,000 227 818,737 2.27 262 922,220 2.56 10,001 - 100,000 91 2,552,245 7.09 96 2,726,518 7.57 100,001 - 1,000,000 13 3,472,313 9.64 12 3,177,724 8.82Over 1,000,000 4 29,012,715 80.57 4 29,002,037 80.54 844 36,011,056 100.00 924 36,011,056 100.00

Institutions 67 31,643,455 87.87 64 31,318,535 86.97Individuals 777 4,367,601 12.13 860 4,692,521 13.03 844 36,011,056 100.00 924 36,011,056 100.00


SHARE TRADING INFORMATION

ORDINARY VOTING SHARES

2013 2012

Highest Market Price (Rs.) 26.90 (09.10.12) 37.90 (12.10.11)Lowest Market Price (Rs.) 18.10 (29.05.12) 18.00 (14.02.12)Last Traded Price (Rs.) 23.70 (28.03.13) 24.80 (30.03.12)No. of Shares Traded 12,048,020 24,865,686No. of Trades 3,351 9,573Turnover (Rs.) 287,714,609 822,316,841

ORDINARY NON-VOTING SHARES 2013 2012

Highest Market Price (Rs.) 21.90 (01.10.12) 26.80 (27.04.11)Lowest Market Price (Rs.) 11.80 (07.06.12) 13.50 (15.02.12)Last Traded Price (Rs.) 17.30 (28.03.13) 15.70 (30.03.12)No. of Shares Traded 2,231,064 6,696,371No. of Trades 1,456 3,665Turnover (Rs.) 38,789,711 154,614,096

PUBLIC HOLDING 2013 2012

Ordinary Voting Shares 28.67% 28.67%Ordinary Non-Voting Shares 26.64% 26.64%


MAJOR SHAREHOLDINGS

20 MAJOR SHAREHOLDERS - VOTING ORDINARY SHARES 31.03.2013 31.03.2012 No. of % No. of % Shares Shares Leisure Asia Investments Ltd. 21,251,037 28.14 21,251,037 28.14Hemas Holdings PLC 16,521,918 21.88 16,521,918 21.88Lodging Investment (Labuan) Ltd. 14,972,006 19.83 14,972,006 19.83Mr. F.G.N. Mendis 4,924,717 6.52 - -Seylan Bank / B.S.M. De Silva 1,294,552 1.71 1,294,552 1.71Mr. D.P. Pieris 862,901 1.14 - -Mr. E.J. De Soysa 800,000 1.06 800,000 1.06Employees Trust Fund Board 723,455 0.96 - -Mr. J.C.L. De Mel 661,925 0.88 661,925 0.88Ms. B.C.R. Wickramaratne 512,305 0.68 510,000 0.68Acuity Partners (Pvt) Ltd./B.S.M. De Silva 490,000 0.65 490,000 0.65Ms. M.V. Fernando 375,000 0.50 375,000 0.50Deutsche Bank AG – Comtrust Equity Fund 330,000 0.44 - -Dr. B.G.S. De Silva 319,912 0.42 319,912 0.42Ms. C.A. Wenceslaus 286,337 0.38 285,870 0.38Ms. A.R. Gamage 248,838 0.33 248,838 0.33Ms. H.L. Ratnayake 239,715 0.32 239,715 0.32Dr. R.S. Deraniyagala 225,662 0.30 225,662 0.30Ms. H.G.S. Ansell 216,825 0.29 216,825 0.29Ms. J.C. Wickramaratne 203,145 0.27 203,145 0.26 65,460,250 86.69 Shares held by the balance shareholders 10,054,488 13.31 75,514,738 100.00

investOR inFORMAtiOn cOntD.


20 MAJOR SHAREHOLDERS -NON -VOTING ORDINARY SHARES

31.03.2013 31.03.2012 No. of % No. of % Shares Shares Leisure Asia Investments Ltd 10,165,975 28.24 10,165,975 28.24Hemas Holdings PLC 9,094,512 25.25 9,094,512 25.25Lodging Investment (Labuan) Ltd. 7,156,750 19.87 7,156,750 19.87Rosewood (Pvt) Ltd. – Account No.1 2,595,478 7.21 2,584,800 7.18Mr. J.R. De Silva 869,999 2.42 864,799 2.40Waldock Mackenzie/ Mrs. G. Soysa 356,856 0.99 356,856 0.99Shalsri Investments Ltd. 341,825 0.95 341,825 0.95Intercom Ltd. 320,000 0.89 320,000 0.89Acuity Partners (Pvt) Ltd./B.S.M. De Silva 309,570 0.86 309,570 0.86Waldock Mackenzie Ltd./L. Hapangama 278,889 0.77 - -Seylan Bank PLC/ R.K.E.P. De Silva 187,000 0.52 187,000 0.52Mr. H.W.M. Woodward 184,723 0.51 184,723 0.51Ms. H.G.S. Ansell 136,300 0.38 136,300 0.38Mr. D.M.P. Disanayake 135,000 0.37 60,000 0.16Mr. M.K. Katubdeen 134,000 0.37 134,000 0.37Dr. H.S.D. Soysa 112,781 0.31 112,781 0.31Ms. B.Y. La Brooy 105,370 0.29 105,370 0.29Northstar Holdings (Pvt) Ltd. 87,500 0.24 87,500 0.24Mr. N.A. Jayawickrama 85,420 0.24 85,420 0.24Mr. M.R.M. Harees 75,000 0.21 75,000 0.21 32,732,948 90.89 Shares held by the balance shareholders 3,278,108 9.11 36,011,056 100.00


Year ended 31 March 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

Restated Restated

(Figures in Rs.’000 Unless Otherwise Stated)

Trading Results Revenue 1,447,478 1,047,460 895,775 675,422 583,661 483,742 478,898 393,570 334,099 335,179 Profit / (Loss) Before Tax 431,422 111,846 153,496 81,789 8,844 14,165 28,744 6,803 (4,914) 62,312 Income Tax Expense (65,614) (20,585) (24,217) (16,904) (9,374) 796 (9,947) (1,550) (5,932) (9,541)Profit / (Loss) for the year 365,809 91,261 129,278 64,885 (530) 14,961 18,797 5,253 (10,846) 52,771 Minority Interest 95,686 50,388 12,781 20,917 (12,422) (19,963) (12,365) (4,649) 1,182 (16,780)Profit / (Loss) Attributable to Equity Holders of the Parent 270,123 40,874 116,497 43,968 (12,952) (5,002) 6,432 604 (9,664) 35,991 Earnings / (Loss) per Share* (Rs.) 2.4 0.4 1.3 0.5 (0.1) (0.1) 0.1 0.0 (0.2) 0.7 Interest Cover (Times) 11.5 3.3 5.1 5.9 1.3 1.5 2.2 1.2 0.6 9.9 Return on Equity (%) 16.1 4.7 10.7 6.1 (0.1) 1.4 2.1 0.6 (1.3) 8.1

Hotel Operations Annual Sales Growth (%) 38.2 16.9 32.6 15.7 20.7 1.0 21.7 17.8 (0.3) 36.8 Room Occupancy (%) 77 80 79 65 55 27 59 58 73 71 Current Ratio (Times) 1.3 1.0 0.7 1.4 1.6 1.4 0.9 0.9 1.1 1.1Net assets per Share* (Rs.) 20.3 17.3 10.3 8.9 8.4 8.7 9.1 8.9 1.0 8.4Debt / Total Equity Ratio (%) 53.5 41.4 64.3 7.2 12.6 16.8 18.3 33.6 32.3 16.6

Market / Shareholder Information Market value per share (Rs.) 23.7 24.8 32.0 19.0 5.7 4.8 7.4 9.3 7.8 6.9Price Earnings Ratio (Times) 9.8 65.3 24.5 38.5 N/A N/A 80.4 972.1 N/A 10.5 Hotel Serendib was closed from May to Aug ’03 for refurbishment & was closed from Mar ’07 to Sep ‘07. Hotel Sigiriya was closed during May & Jun ‘05 for refurbishment. Hotel Dolphin was closed from May to Aug 2004 for refurbishment of existing rooms and construction of new rooms. Hotel Dolphin was partially closed from May to Sep ‘10 for refurbishment Hotel Serendib was closed for refurbishment from Apr to Nov ‘11, and was launched in Dec ‘11 as Avani Bentota Resort & Spa * Earnings / (Loss) Per Share and Net Assets Per Share: Comparative figures adjusted for rights issue and sub-division of ordinary shares in the proportion of 5:1

ten YeAR FinAnciAL Review (gROUP)


NOTICE IS HEREBY GIVEN that the FORTY FIFTH (45TH) ANNUAL GENERAL MEETING of SERENDIB HOTELS PLC will be held at the Auditorium of the Sri Lanka Foundation, No. 100, Independence Square, Colombo 07 on Tuesday, 9 July 2013 at 3.00 p.m. for the following purpose:

AGENDA

1. To receive and consider the Statement of Accounts of the Company and Group for the year ended 31 March 2013 together with the Report of the Directors and Auditors thereon.

2. To re-elect as a Director Mr. A.N. Esufally who retires by rotation in terms of Article 85 of the Articles of Association of the Company.

3. To re-elect as a Director Prof. L.D.K.B. Gamage, who retires by rotation in terms of Article 85 of the Articles of Association of the Company.

4. To pass the ordinary resolution set out below to re-appoint as a Director Mr. J.C.L. De Mel who has reached the age of 76 years on 6 May 2013 and vacates office as a Director of the Company in terms of Section 210 (2) (b) of the Companies Act No. 7 of 2007.

RESOLVED that Mr. J.C.L. De Mel who has reached the age of 76 years on 6 May 2013 be and is hereby re-appointed a Director of the Company and it is hereby declared that as provided for in Section 211 (1) of the Companies Act No. 7 of 2007 that the age limit of 70 years referred to in Section 210 of the said Companies Act shall not apply to Mr. J.C.L. De Mel.

5. To re-appoint Messrs Ernst & Young, Chartered Accountants as the Auditors of the Company for the ensuing year and authorise the Directors to determine their remuneration.

6. To authorise Directors to determine and make contributions to charity.7. To consider any other business of which due notice has been given.

By Order of the Board ofSERENDIB HOTELS PLC

HEMAS CORPORATE SERVICES (PVT) LTD.Secretaries

Colombo14 June 2013

Notes:(i) A member unable to attend is entitled to appoint a Proxy to attend and vote on his/her behalf.(ii) A Proxy need not be a member of the Company.(iii) A Form of Proxy accompanies this Notice.

nOtice OF Meeting


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nOtes


I/We …………………………………………………………………………………………………………………………………………...... of…………………………………………………………………………………………………………………………………………..…….........

being a Member/s of SERENDIB HOTELS PLC do hereby appoint …………………….…………………….…………….......................

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

of………………………………………………………………….……………………………………………………or failing him/her

Mr. A.N. Esufally or failing himMr. D.T.R. De Silva or failing himMr. J.C.L. De Mel or failing himMr. H.N. Esufally or failing himMr. W.M. De F. Arsakularatne or failing himProf. L.D.K.B. Gamage or failing himMr. E.J.D. Rajakarier or failing himMr. M.A. Jafferjee or failing himMr. R.N.A. Athukorala

as*my/our Proxy to represent *me/us and to vote on *my/our behalf at the Forty Fifth (45th) Annual General Meeting of the Company to be held on Tuesday, 9 July 2013 at 3.00 p.m. at the Auditorium of the Sri Lanka Foundation, No. 100, Independence Square, Colombo 07 and any adjournment thereof and at every poll which may be taken in consequence thereof.

For Against

FORM OF PROXY

1. To receive and consider the Statement of Accounts of the Company and Group for the year ended 31st March 2013 together with the Report of the Directors and Auditors thereon.

2. To re-elect Mr. A.N. Esufally who retires by rotation in terms of the Articles of Association of the Company.

3. To re-elect Prof. L.D.K.B. Gamage, who retires by rotation in terms of the Articles of Association of the Company.

4. To re-appoint Mr. J.C.L. De Mel, as Director, in terms of Section 211 (1) of the Companies Act No. 7 of 2007.

5. To re-appoint Messrs Ernst & Young as Auditors and authorise the Directors to determine their remuneration.

6. To authorise Directors to determine and make Contributions to charity.

Signature of Shareholder/s …………………….…………………................. NIC/Passport No……………………………................ Dated this ……………… day of ………………………. 2013.

(i) *Please delete the inappropriate words.(ii) Instructions regarding completion appear on the reverse hereof.


INSTRUCTIONS FOR COMPLETION

1. Kindly perfect the Form of Proxy after filling in legibly your name in full and address and by signing in the space provided. Please fill in the date of signature.

2. Please indicate with an “X” in the space provided how your Proxy is to vote on each resolution. If no indication is given, the Proxy in his/her discretion will vote as he/she thinks fit.

3. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by the Articles of Association.

4 If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

5. In case of joint holders the Form of Proxy must be signed by the first holder.

6. The completed Form of Proxy should be deposited at the office of the Secretaries, Hemas Corporate Services (Pvt) Ltd. at Level 9, Hemas House, 75, Braybrooke Place, Colombo 02 not less than forty eight (48) hours before the appointed time for the meeting.

NAME OF THE COMPANYSerendib Hotels PLC

LEGAL FORM A Public Quoted Company with Limited Liability incorporated on 9 September 1966 under the Companies Ordinance No. 51 of 1938 (Cap 145) and re-registered under the Companies Act No. 7 of 2007.

COMPANY REGISTRATION NOPQ 223

BOARD OF DIRECTORSA.N. Esufally – Chairman (Alt V.H.A. Perera)D.T.R. De Silva – Managing DirectorJ.C.L. De Mel H.N. Esufally - (Alt. Ms. K.A.C. Wilson)W.M. De F. ArsakularatneProf. L.D.K.B. GamageE.J.D. RajakariarM.A. JafferjeeR.N. Athukorala

REGISTERED OFFICELevel 5, Hemas House, 75, Braybrooke Place, Colombo 02.Tel : +94 (11) 4790500-6Fax : +94 (11) 2438933E-mail: [email protected]: www.serendibleisure.com SECRETARIES & REGISTRARSHemas Corporate Services (Pvt) Ltd.Level 9, Hemas House, 75, Braybrooke Place, Colombo 02 Tel : + 94 (11) 4731731Fax : +94 (11) 4731777

MANAGING AGENTSerendib Leisure Management Ltd.

AUDITORSErnst & YoungChartered Accountants201, De Saram Place,Colombo 10. BANKERSCommercial Bank of Ceylon PLCHatton National Bank PLC HOTELAvani Bentota Resort & SpaBentotaTel : + 94 (34) 2275353Fax : + 94 (34) 2275313

Produced by Copyline (Pvt) Ltd Printed by Printel (Pvt) Ltd

cORPORAte inFORMAtiOn

CONTENTS

3 Our Vision, Mission and Core Values

4 Financial Highlights (Group)

6 Serendib Leisure Properties

10 Chairman’s Message

12 Managing Director’s Review

15 Board of Directors

20 Senior Management

24 Management Discussion and Analysis

30 Hotel Management

36 Sustainability Report

41 Risk Management

46 Corporate Governance

57 Report of the Remuneration Committee

58 Annual Report of the Board of Directors

62 Directors’ Interest in Contracts with the Company

65 Report of the Audit Committee

Financial Reports68 Statement of Directors’ Responsibility in Relation to

Preparing Financial Statements

69 Independent Auditor’s Report

70 Statement of Financial Position

71 Income Statement

72 Statement of Comprehensive Income

73 Statement of Changes in Equity (Group)

74 Statement of Changes in Equity (Company)

75 Cash Flow Statement

76 Notes to the Financial Statements

Supplementary Information128 Investor Information

132 Ten Year Financial Review (Group)

133 Notice of Meeting

135 Form of Proxy IBC Corporate Information


SERENDIB HOTELS PLCANNUAL REPORT 2012/13

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Documents

Achieving new heights · Geoffrey Bawa in the style of an 18th Century Dutch village, and experience true Sri Lankan hospitality. 10 Serendib Hotels PLC I Annual Report 2012/13 In