ANNUAL REPORT 2010/11 - E-Channelling Annual Report.pdf(Hons) Degree from the University of Kelaniya and is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka,

A N N U A L R E P O R T

2 0 1 0 / 1 1

CONTENTS

Page

Chairman’s Review 01

CEO’s Review 02

Board of Directors 03

Performance Charts 05

Report of the Directors 07

Review on Risk Management 11

Report of the Auditors 12

Balance Sheet 13

Income Statement 14

Statement of Changes in Equity 15

Cash Flow Statement 16

Notes to the Financial Statements 17

Five Year Performance Summary 31

Shareholder Information 32

Notice of Annual General Meeting 34

Notes 35

Form of Proxy 36

CORPORATE INFORMATION

Name of the Company

e-Channelling PLC

Legal Form

Quoted Public Company incorporated in Sri Lanka in 2000.

Ordinary shares of the company are listed on the Diri Savi Board of the Colombo Stock Exchange.

Board of Directors

Mr. P. Kudabalage

Mr. A. M. M. De Alwis

Mr. W. D. J. R. Silva

Mr. W. T. L. Weeratne

Mr. D. A. V. Perera

Secretaries and Registrars

S. S. P. Corporate Services (Pvt) Limited,

No 101, Inner Flower Road,

Colombo 03.

Auditors

KPMG Ford Rhodes Thornton & Co,

Chartered Accountants,

32A, Sir Mohamed Macan Markar Mawatha,

P.O.BOx 186,

Colombo 03.

Bankers

Sampath Bank PLC

Seylan Bank PLC

Nations Trust Bank PLC

Peoples Bank

Commercial Bank of Ceylon PLC

Bank of Ceylon

Hongkong and Shanghai Banking Corporation

Registered offi ce of the Company

Suncity Towers,Mezzanine Floor,

18,St Anthony’s Mawatha,

Colombo 03.

Tel :011 7600500 Fax :011 4724114

email: [email protected]

Web: www.echannelling.com

11

CHAIRMAN’S REVIEW

This last year has been an outstanding one for our company. Throughout the year, the

company has decisively established itself as the leading software developer in the health

care sector and has embarked on its journey towards making “ECL” a global brand.

ECL succeeded in achieving two very important milestones this year with its global opera-

tions. Primarily, launching in the Maldives with our partner, Wattaniya Telecom, and sec-

ondly, entering into a marketing agreement with IFS, a leading global software develop-

ment company to internationally market the hospital management system of ECL under

the brand name “IFS HospitalNet”.

The avant-garde doctor channeling system, for which ECL is most popularly known, has

been a very successful product and has shown impressive growth year on year. Last year,

the total numbers of bookings have increased to 507,039, proving an increase of 31%, as

compared to the previous year. The overall revenue of the company, last year, has grown to LKR 61.5 Million, and the Profi t post

Tax has increased to LKR8.33 Million, corroborating an impressive 344% growth. The company is aggressively promoting its

channeling solution out of Colombo, where the company believes, there lays an enormous potential for the product. Patients

in these remote areas fi nd it problematic and tiresome to obtain access to quality healthcare. Our company is assisting such

patients by presenting a simple and straightforward solution to this setback. The company has additionally opted to provide

free channeling solutions to hospitals that presently provide free healthcare, and considers this as an important component

of its Corporate Social Responsibility. The two key shareholders, the Sri Lanka Insurance Corporation and British American

Technologies wholly support the company’s efforts to undertake such vital and necessary projects.

The healthcare sector in Sri Lanka is growing rapidly. With most of the private healthcare institutions expanding, ECL has al-

ready positioned itself to assist with the prompt growth, both as a facilitating portal and a software developer.

The eChannelling portal has been operative for over 10 years. The company has re-launched its updated web portal, along with

many new fascinating value additions, and would continue to attach interesting value added services which would enhance the

product and the company valuation considerably.

eChannelling is at present one of the top 100 brands in Sri Lanka. In the years ahead, the company is determined to make

eChannelling an internationally recognized brand.

The company formed its fi rst subsidiary, ECL Soft (Private) Limited (ECLS) in April this year (2011). It aims to structure all its

non-healthcare sector ventures under ECLS and would require capitalization of approximately LKR 1 Billion. ECL is contributing

LKR 150 Million in the next few months.

I would like to take this opportunity to thank all the stakeholders of the company, who have been through very diffi cult times

along with us in the past. This company is an example of where the public and private sectors can work effectively hand in hand,

with Sri Lanka Insurance and British American Technologies steering ECL to being one of the most dynamic listed companies

in the Colombo Stock Exchange (CSE).

The Board of Directors of ECL are committed to strengthening shareholder value. This has resulted in improved profi tability

refl ected by its share price that has increased almost 500% in the last 12-15 months. The continued value additions and strong

growth would ensure that the company continues to reward its stakeholders and strive to be the best in its class among the

technology companies in Sri Lanka.

P. KudabalageColombo24 August 2011

2

CEO’S REVIEW

It is a great pleasure to announce to you that this year we have seen the most progressive

year in the history of eChannelling. All Key Peformance Indicators (KPIs) have revealed

remarkable growth fi gures for the year. While currently dominating the western province

market, the continuous drive to be present in other major provinces has been achieved by

expanding services to the southern, central and north central provinces.

Our revenue has shown an increase of 22 % in the last year. Costs in internal operations

have marginally reduced in comparison to the preceding year. As a result, the company

has seen a rise in profi t after tax of 344%. Our cost effective marketing campaigns con-

tinues to be particularly successful in increasing awareness of our product and in growing

market share.

While succeeding in our existing product market, we have developed new and exciting

products for the pharmacy network, medical laboratories and clinics along with the small

and medium sized hospitals. These software solutions have been introduced to the customer groups and implemented suc-

cessfully.

We have expanded our hospital partner network by 53%, which has helped to facilitate an increase in our total bookings by 31%.

The continuous drive in growing our pharmacy network has supported the customers to use our services with ease. The excel-

lent working relationship developed with the private sector hospitals and the health authorities has given us the opportunity

of signing up our fi rst semi-government hospital into providing

our software solutions.

In the immediate future, our focus is on developing new prod-

ucts providing innovative value added services to our hospital

partner network and the medical profession. These pioneering

services will allow us the prospect of generating additional rev-

enue for the company.

We will leverage our experience in implementing and manag-

ing medical software solutions to other countries in the South

Asian Region. The newly re-launched products of echannel-

ling is being introduced to the Maldives; our fi rst international

partner country to implement the service. We are, at present, in

the process of negotiating with three other regional countries

as well. My sincere appreciation goes out to the Chairman and the board of directors who were instrumental in supporting the

entire team in accomplishing its goals and creating a profi table year. I would like to thank the team for their tireless effort and

dedication given throughout the year to turn around and build up the company.

Last but not least, I thank all of our shareholders for the confi dence and trust that you have placed in our team.

”Our team is enormously excited by the potential of our Company”

Asanga Karunaratne

Colombo

24 August 2011

33

BOARD OF DIRECTORS

Mr. P. Kudabalage B.Com (Hons) [University of Kelaniya], FCA,FCMA, FCPM Non Independent, Non- Executive Chairman

Mr. P. Kudabalage was appointed to the Board of e-Channelling PLC on the 29 June 2010. Mr. Piyadasa Kudabalage, a Chartered Accountant by profession and he holds a B.Com (Hons) Degree from the University of Kelaniya and is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, the Institute of Certifi ed Management Accountants of Sri Lanka and the Institute of Certifi ed Professional Managers.

Mr. Kudabalage is the Managing Director / Chief Executive Offi cer of Litro Gas Lanka Ltd and Litro Gas Terminal Lanka (Pvt) Ltd. He is an Executive Director of Sri Lanka Insurance Corporation Ltd also on the Board of Seylan Bank PLC, Ceylon Asset Management Co. Ltd and Colombo Dockyard PLC and a Senior Partner of M/s P Kudabalage & Company, Chartered Accountants. He has well over 25 years experience in the mercantile sector. He held several senior positions in Kahawatta Plantations Ltd, Janatha Estate Development Board and the Jay Cey Group of Companies. He has also served as a director at Malwatte Valley Plantation PLC.

Mr. W. D. J. R. Silva MBA,FCMA,LL.B.(lond)Non-Independent, Non-Executive Director

Mr. Ruwan Silva was appointed to the Board of e-ChannellingPLC on the 19 May 2010. He is the Chairman of British American Technologies (Private) Limited (BAT), a key shareholder of e-Channelling PLC. Mr. Silva oversees the global businesses of BAT in addition to handling the investments and the legal matters of the company. Prior to setting up British American Technologies, he was Chief Financial Offi cer at Sri Lanka Telecom PLC and Chief Financial Offi cer for Ericsson Algeria and Sri Lanka.

Mr. Silva has more than 18 years experience, cutting across varied industries, such as healthcare,electronics,telecommunications, transportation, IT and banking. Mr. Silva holds a Masters in Business Administration (University of Colombo), an L.L.B. degree with Honours (University of London, U.K) and is a Fellow Member of the Chartered Institute of Management Accountants, U.K(FCMA).

Mr. W. T. L. WeeratneNon-Independent, Non-Executive Director

Mr. Thanuja Weeratne was appointed to the Board of e-Channelling PLC on the 19 May 2010. He is the Chief Executive Offi cer of British American Technologies(Pvt) Limited (BAT), a key shareholder of e-Channelling PLC. Mr. Weeratne manages the local and overseas operations of BAT. Prior to this appointment at BAT, he held the position of Chief Operating Offi cer at Midware Technologies (pvt) Ltd where he was instrumental in setting up distribution operations for the IBM software group in Sri Lanka and South Asia.

Mr. Weeratne has over 15 years of experience in marketing, advertising, manufacturing, commercial management, and IT. He has also served as Business Development Manager for IMAS Corporate Software and as General Manager for Brandix Lanka Ltd. He is a member of the Chartered Institute of Marketing, U.K. and holds a Graduate Diploma in Material Management from the Indian Institute of Material Management. He is a certifi ed resource of the IBM Software Group in Marketing and Pre sales.

4

Mr. D. A. V. Perera IO, IA (FIDE),MBANon-Independent, Non-Executive Director

Mr. Derrick Perera was appointed to the Board of e-Channelling PLC on the 18 February 2011. He is a Director of British American Technologies (Private) Limited (BAT), a key shareholder of e-channelling PLC. Mr. Perera overlooks the management services operation of BAT. Prior to this he Headed the HR function at Ericsson, Sri Lanka and was responsible for setting up SAP based HR solutions for the Sri Lanka offi ce. During this period he was responsible for implementing a Performance Management System for Ericsson Saudi Arabia.

Mr. Perera has over 16 years experience in the fi eld of HR in both, manufacturing and service industries. Apart from his corporate life, he is an internationally rated chess player and is the fi rst Sri Lankan to be awarded dual titles of International Arbiter (IA) & International Organizer (IO). He was President of the Chess Federation of Sri Lanka from 1999-2005 and served as the Secretary General of the Asian Chess Federation from 2002-5. Mr. Perera holds a Masters in Business Administration (University of Preston, USA) and is also an Alumni of Harvard Law School (USA).

Mr. A. M. M. De Alwis B com, MBA, CMA Non-Independent, Non-Executive Director

Mr. Mohan De Alwis was appointed to the board of e-Channelling PLC on the 18 February 2011. He is the Managing Director and Chief Executive Offi cer of Sri Lanka Insurance Corporation Limited and has wide and diversifi ed Managerial experience in leading corporate institutions both in Sri Lanka and overseas including Coopers & Lybrand ,Hayleys Plc, Star Garments Limited and Smart Shirts Limited. He was the Vice Chairman of the Free Trade Zone Manufacturers’ Association, Katunayake, and has also served as a management consultant in Sri Lanka.

Mr. De Alwis is the Chairman of Ceylon Asset Management Co. (Pvt) Limited, and holds directorates at SLIC Resorts & Spas (Pvt) Limited, Management Services Rakshana Lanka (Pvt) Limited, Sri Lanka Insurance Corporation Private Limited, Lanka Hospitals Corporation Plc, Seylan Bank Limited, Ceybank Asset Management (Private) Limited and is also an Executive Director of Litro Gas Lanka Ltd and Litro Terminal Lanka (Pvt) Limited. Mr De Alwis holds A Bachelor of Commerce degree, an MBA and is a Certifi ed Management Accountant (Australia).

55

e-ChannellingAppointments

e-ChannellingRevenue

Steady and consistent increase in revenue from our primary fee based activities.

The number of appointments made through our network, i.e. internet, telephone and the pharmacy network.

Revenue generated from the fee charged from appointments.

PERFORMANCE CHARTS

e-ChannellingRevenue

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0Apr May Jun July Aug Sep Oct Nov Dec Jan Feb Mar

2 0 1 0 / 2 0 1 1

2009/2010

2008/2009

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011

600,000

500,000

400,000

300,000

200,000

100,000

0

2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011

6

e-ChannellingAppointments

Steady growth in the number of appointments year on year.

e-ChannellingProfi tability

Profi t / (Loss) from the e-Channelling operation since launch in 2000.

e-ChannellingShare Price Movements - 15 MonthsAn increase in theperformance of the company and increased investor confi dence is refl ected in the move-ment of the share price.The graph is adjusted for the 7 for 1 share split.

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00

2 0 1 0 / 2 0 1 1

2009/2010

2008/2009

60,000

50,000

40,000

30,000

20,000

10,000

0

Apr May Jun July Aug Sep Oct Nov Dec Jan Feb Mar

20,000

10,000

0

-10,000

-20,000

-30,000

-40,000

-50,000

2000/2001

2001/2002

2002/2003

2003/2004

2004/2005

2005/2006

2006/2007

2007/2008

2008/2009

2009/2010

2010/2

011

-842.439-5,325.941

835.8211,876

8,336

-23,561.523-23,488.766

-39,382.456

-5,500.943-10,733.03

-11,162.735

Rs’000

439-842

00 000 00 00300 00 00 007

00 009010

39,382.456

77

REPORT OF THE DIRECTORS ON THE STATE OF AFFAIRS OF THE COMPANY

The Board of Directors are pleased to present their Report and the Audited fi nancial statements of the company for the year ended 31 March 2011. The details set out herein provide pertinent information required by the Companies Act, No.7 of 2007, the Colombo Stock Exchange Listing rules and are guided by recommended best accounting practices.

1. Review of the YearThe Chairman’s Review describes the company’s affairs and mentions important events of the year.

2. Principal ActivityThe principal activity of the company is to operate an internet based electronic commerce (e-commerce) business with the primary objective of providing a channeling service to consult doctors and facilitate related medical services.

3. Auditor’s ReportThe Auditor’s report on the fi nancial statements is given on page 12.

4. Financial StatementsThe fi nancial statements of the company are given in pages 13 to 16.

5. Accounting PoliciesThe accounting policies adopted in preparation of fi nancial statements are given on pages 17 to 30 There were no material changes in the Accounting Policies adopted.

6. Directors’ InterestNone of the directors had a direct or indirect interest in any contracts or proposed contracts with the company other than as disclosed in Note 22 to the fi nancial statements (Related Party Transactions).

7. Director’s Remuneration and Other Benefi tsDirector’s remuneration in respect to the company for the fi nancial year ended 31 March 2011 is given in Note 22.2 to the fi nancial statements.

8. Corporate DonationsNo donations were made by the company during the fi nancial year for charitable or political purposes.

8

9. Directors and their ShareholdingsDirectors of the company and their respective shareholdings as at 31 March 2011 are as follows.

31.03.2011 31.03.2010 Mr. P. Kudabalage Nil Nil Mr. W. D. J. R. Silva 100 406,600 Mr. W. T. L. Weeratne Nil Nil Mr. A. M. M. De Alwis Nil Nil Mr. W. A. D. V. Perera Nil Nil

Mr. S. S. Bartlett resigned from the Board with effect from 10 November 2010.

Mr. C. C. Hemachandra resigned from the Board with effect from 13 January 2011.

The Board wishes to place on record the company’s sincere appreciation to Messrs S. S. Bartlett and C. C. Hemachandra for the valuable contribution extended to the company during their tenure on the Board.

Messrs A. M. M. De Alwis and W. A. D. V. Perera were appointed to the Board with effect from 18 February 2011.

In terms of Article 86 and 87 of the Articles of Association Mr. W. D. J. R. Silva retires by rotation and being eligible offers himself for re-election.

In terms of Article 94 of the Articles of Association of the company Messrs A. M. M. De Alwis and W. A. D. V. Perera retire and being eligible offer themselves for re-election.

10. AuditorsThe fi nancial statements for the year ended 31 March 2011 have been audited by Messrs KPMG Ford Rhodes Thornton & Com-pany, Chartered Accountants, who express their willingness to continue in offi ce. In accordance with the Companies Act No.07 of 2007, a resolution relating to their re-appointment and authorising the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

The Auditors Messrs KPMG Ford Rhodes Thornton & Company were paid Rs 190,000.00 (2010 – Rs 160,000.00) as audit fees by the company. In addition they were paid Rs Nil (2010 – Rs. Nil) by the company for non-audit related work.

As far as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor) with the company other than those disclosed above. The Auditors also do not have any interest in the company.

11. DividendsThe Directors do not recommend the payment of a dividend for the year ended 31 March 2011.

12. InvestmentsDetails of investments held by the company are disclosed in Note 8 to the fi nancial statements.

13. Intangible AssetsAn analysis of the Intangible Assets of the company, additions and impairments during the year, and amortisation charged during the year are set out in Note 6 to the fi nancial statements.

99

14. Property, Plant and EquipmentAn analysis of the property, plant and equipment of the company, additions and disposals made during the year and deprecia-tion charged during the year are set out in Note 5 to the fi nancial statements.

15. Capital CommitmentsThere are no material capital commitments that would require disclosures in the fi nancial statements. 16. Stated CapitalThe stated capital of the company is Rs 93,758,316.00 There was no change in the stated capital of the company during the year.

17. ReservesRetained losses as at 31 March 2011 amount to Rs 15,191,718.00 Movements are shown in the Statement of Changes in Equity in the fi nancial statements.

18. Events subsequent to the Balance Sheet dateNo signifi cant events have occurred since the balance sheet date other than those disclosed in Note 25 to the fi nancial statements.

19. Employment PoliciesThe company identifi es human resource as one of the most important factors contributing to the survival and growth of the company in the current competitive business environment. While appreciating and valuing the services of our employees a greater effort is made to attract and acquire the best talent from external sources to maintain and improve the high quality of service.

20. TaxationThe tax position of the Company is given in Note 20 to the fi nancial statements.

21. Disclosure as per Colombo Stock Exchange Rule No.7.6

31.03.11 31.03.10 Market price per share as at 31 March 33.00 10.25 Highest share price during the year 33.00 12.75Lowest share price during the year 10.00 7.50

22. ShareholdingThe number of registered shareholders of the company as at 31 March 2011 was 1,391.

23. Major ShareholdersA list of twenty largest shareholders of the company as at 31 March 2011 together with an analysis is given on page 33.

24. Statutory PaymentsThe Directors, to the best of their knowledge and belief are satisfi ed that all statutory payments in relation to the company and its employees have been made on time.

10

25. Environment, Health and Safety The company policy continues to ensure that all environmental health and safety regulations are strictly adhered to, in order to minimise any adverse effects.

26. Corporate GovernanceThe Directors are responsible for the formulation and implementation of overall business strategies, policies and adopting good governance in managing the affairs of the company.

27. Contingent LiabilitiesThere were no material contingent liabilities outstanding as at 31 March 2011.

28. Post Balance Sheet EventsSubsequent to the date of the Balance Sheet no circumstances have arisen which would require adjustments to the accounts. Signifi cant post balance sheet events which in the opinion of the Directors require disclosure are described in Note 25 to the fi nancial statements.

29. Annual General MeetingThe 11th Annual General Meeting of the company will be held at the Jasmine Hall, Hotel Renuka, 238, Galle Road, Colombo 03 on the 29 September 2011 at 10 a.m.

For and on behalf of the Board of Directors of E-CHANNELLING PLC

........................................ ................................. ............................... Director Director S S P Corporate Services (Private) Limited, Secretaries

Date: 24 August 2011

1111

REVIEW ON RISK MANAGEMENT

e-Channelling PLC has given consideration to its risk management process in order to progress towards achieving its goals and objectives.

The risks are identifi ed at specifi c levels throughout the organization. The process is reviewed by the board as part of the company’s operational approach to mitigate the risk.

Our risk management process ensures that there is a complete identifi cation and understanding of the risks which we are exposed to. Our process also guarantees that we create and implement an effective plan to prevent loss.

The major risks primarily affecting the organization, and the initiatives taken towards mitigating these risks are stated below.

1.Credit Risk Credit risk is the risk of fi nancial loss arising due to the unwillingness or inability of counter parties to meet their fi nancial or contractual obligations on time and in full.

Initiatives taken by the company - The company maintains a debtors age analysis for monitoring the debtor movement and follows an assessment procedure to ensure credit worthiness.

The company maintains a policy to adequately provide for doubtful debt, if it materially affects the fi nancial position.

2.Human ResourcesThe risk associated with losing talented employees and an environment of unpleasant labour relations.

Initiatives taken by the company- The company maintains an employee evaluation structure and a healthy relationship with the employees at all levels . We provide employment benefi ts such as insurance, training and development to employees when necessary.

3.Environmental RiskPotential threat of adverse effects on living organisms and environment by emissions, waste and resource depletion arising from the organization’s activities.

Initiatives taken by the company-The company complies with the standards set by the relevant authorities.

4.Legal and Regulatory RiskThe risk associated with changes in statutory regulations and related law.

Initiatives taken by the company-The company takes necessary steps to comply with statutory and regulatory authorities.

5.Information System Risk associated with computer security , hardware, software and other related systems failing and causing disruption to busi-ness operations of the organization.

Initiatives taken by the company- The company maintains adequate safeguards to protect itself againts such risks.

12

REPORT OF THE AUDITORS

1313

BALANCE SHEET

AS AT 31 MARCH 2011 2010 Note Rs. Rs.ASSETS

Property, Plant and Equipment 5 3,287,627 4,938,990 Intangible Assets 6 7,577,768 8,680,986 Employees’ Share Ownership Trust Fund 7 2,785,000 3,350,000 Investment Securities 8.1 11,788,024 5,743,822Total Non Current Assets 25,438,419 22,713,798 Trade and Other Receivables 9 10,833,639 10,925,380 Short Term Investments 8.2 67,454,789 58,075,737 Investment in Shares 8.3 5,998,331 - Cash and Cash Equivalents 10 7,504,226 2,677,041 Total Current Assets 91,790,985 71,678,158Total Assets 117,229,404 94,391,956

EQUITYStated Capital 11 93,758,316 187,516,633

Retained Earnings (15,191,718) (117,285,944)Total Equity 78,566,598 70,230,689

LIABILITIESEmployee Benefi ts 12 3,073,679 1,894,679

Total Non Current Liabilities 3,073,679 1,894,679

Trade and Other Payables 13 29,927,993 19,255,058 Amount Due To Related Parties 14 - 31,174 Current Tax Liabilities 1,748,999 612,995 Bank Overdraft 10 3,912,135 2,367,361 Total Current Liabilities 35,589,127 22,266,588

Total Liabilities 38,662,806 24,161,267 Total Equity & Liabilities 117,229,404 94,391,956

Notes to the fi nancial statements on pages 17 to 30 form an integral part of the fi nancial statements

These fi nancial statements are prepared in compliance with the requirements of the Company’s Act No. 07 of 2007.

Accountant W. Ravishankar

The Board of Directors are responsible for the preparation and presentation of these fi nancial statements.Signed for and on behalf of the Board by,

Chairman DirectorP. Kudabalage W. D. J. R. Silva

Date 24 August 2011 Colombo

14

INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH

Note 2011 2010

Rs. Rs.

Revenue 15 61,501,447 50,524,306

Other Income 16 1,337,728 1,663,064

Administrative Expenses (56,577,098) (56,848,889)

Selling and Distribution Expenses (1,651,625) (543,422)

Profi t from Operating Activities 17 4,610,452 (5,204,941)

Financial Income 18 6,333,462 9,478,818

Financial Cost 19 (6,583) (61,040)

Profi t Before Income Tax 10,937,331 4,212,837

Income Tax Expense 20 (2,601,422) (2,336,769)

Profi t for the Year 8,335,909 1,876,068

Earnings per Share-Basic 21 0.07 0.02

The Notes to the fi nancial statements on pages 17 to 30 form an integral part of the fi nancial statements.

1515

STATEMENT OF CHANGES IN EQUITY


Stated Retained Total

Capital Losses

Rs. Rs. Rs.

Balance as at 1 April 2009 187,516,633 (119,162,012) 68,354,621

Profi t for the year - 1,876,068 1,876,068

Balance as at 31 March 2010 187,516,633 (117,285,944) 70,230,689

50 % Stated capital reduction (93,758,317) 93,758,317 -

Profi t for the year - 8,335,909 8,335,909

Balance as at 31 March 2011 93,758,316 (15,191,718) 78,566,598

The Notes to the fi nancial statements on pages 17 to 30 form an integral part of the fi nancial statements.

16

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2011 2010Cash Flows From Operating Activities Rs. Rs.

Profi t Before Tax Expense 10,937,331 4,212,837

Adjustments for :

Depreciation & Amortization 3,064,504 3,731,969

Amortization of Government Bonds 275,583 (136,401)

Profi t on Disposal of Assets (47,990) (34,674)

Loss on Assets Written off - 110,142

Gratuity Provision 1,179,000 565,247

Bonus Provision 1,262,165 473,000

Bad Debt Provision - 555,000

Interest Income (6,333,462) (9,478,818)

Interest Expense 6,583 61,040

Unrealised Loss on Share Trading 236,308 -

10,580,022 59,341

Changes in :

-Trade & Other Receivables 91,744 (1,074,203)

-Amount Due to Related Parties (31,174) 31,174

- Trade & Other Payables 9,883,770 9,642,540

Cash Generated From Operations 20,524,362 8,658,853

Income Tax Paid (24,107) (1,473,326)

Interest Paid (6,583) (61,040)

Interest Received 4,319,240 8,004,209

Net Cash Flow from Operating Activities 24,812,912 15,128,697

Cash Flows from Investing Activities

Acquisition of Property, Plant & Equipment (309,922) (1,216,395)

Proceeds from Disposal of Property, Plant & Equipment 47,990 34,674

Acquisition of Investments (15,835,238) (8,897,971)

Acquisition of Investments-Shares (5,998,331) -

Cash Settled on ESOT 565,000 -

Net Cash Flow used in Investing Activities (21,530,501) (10,079,692)

Cash Flows from Financing Activities

Lease Installments Paid on Finance Lease - (189,126)

Net Cash Flows used in Financing Activities - (189,126)

Net Increase/(Decrease) in Cash and Cash Equivalents 3,282,411 4,859,878

Cash & Cash Equivalents at the beginning of the Year 309,680 (4,550,198)

Cash & Cash Equivalents at the end of the Year (Note 10) 3,592,091 309,680 The Notes to the fi nancial statements on pages 17 to 30 form an integral part of the fi nancial statements.

1717

1. REPORTING ENTITY

1.1. Generale - Channelling PLC is a company incorporated and domiciled in Sri Lanka. The registered offi ce of the company is located at Suncity Towers, Mezzanine Floor, No. 18, St. Anthony’s Mawatha, Colombo 3.

1.2. Principal activity and nature of the operation The principal activity of the company is to operate an internet based electronic commerce (e-commerce) business with the primary objective of providing a channeling service to consult doctors and facilitate related medical services.

2. BASIS OF PREPARATION

2.1. Statement of complianceThe fi nancial statements have been prepared in accordance with the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, which requires compliance with Sri Lanka Accounting Standards (SLASs) promulgated by the Institute of Chartered Accountants of Sri Lanka (ICASL), and with the requirements of the Companies Act No. 7 of 2007.

The fi nancial statements were authorized for issue by the Directors on 24 August 2011.

2.2. Basis of measurementThe fi nancial statements have been prepared on the historical cost basis and accounting policies have been applied consistently, with no adjustments being made for infl ationary factors affecting the fi nancial statements.

2.3. Functional and presentation currencyThe fi nancial statements are presented in Sri Lankan Rupees, which is the company’s functional currency. All fi nancial information presented is in Sri Lankan Rupees.

2.4. Use of estimates and judgements The preparation of fi nancial statements in conformity with SLAS requires the management to make judgements, estimates and assumptions that affect the application of accounting policies, and the reported amounts of assets, liabilities, income and expenses. Judgements and estimates are based on historical experiences and other factors, including expectations that are believed to be reasonable under the circumstances. Hence actual results may differ from those estimates.

Information about signifi cant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most signifi cant effect on the amounts recognized in the fi nancial statements is included in the following notes. • Note 20.1 - Utilization of tax losses • Note 20.2 - Deferred tax • Note 12 - Measurement of defi ned benefi t obligations • Note 23 - Provisions and contingencies

2.5. Going concernThe Directors have made an assessment of the company’s ability to continue as a going concern in the foreseeable future, and they do not intend either to liquidate or to cease operations.

NOTES TO THE FINANCIAL STATEMENTS

18

Notes to the Financial Statements (Contd)

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below are consistent with those used in the previous year.

The Directors have made an assessment of the company’s ability to continue as a going concern in the foreseeable future, and they do not intend to liquidate or to cease operations.

3.1 Assets and Basis of their ValuationAssets classifi ed as current assets on the balance sheet are cash and bank balances and those which are expected to be realized in cash during the normal operating cycle or within one year from the reporting date, whichever is shorter.

3.1.1 Property, Plant and Equipment

3.1.1.1 Recognition and MeasurementItems of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

3.1.1.2 Owned assets The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located.

Purchased software that is integral to the functionality of the related equipment is capitalized as a part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment (major components).

3.1.1.3 Leased AssetsLeases, in terms of which the company assumes substantially all the risks and rewards of ownership are classifi ed as fi nance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to the initial recognition, the asset is accounted for, in accordance with the accounting policy applicable to that asset.

3.1.1.4 Subsequent costs The cost of replacing a part of an item of property, plant and equipment is recognized in carrying amount of the item if it is probable that the future economic benefi ts embodied within the part will fl ow to the company and its cost can be measured reliably. The carrying amount of the replaced part is de-recognized in accordance with the de-recognition policy given below.

The cost of the day-to-day servicing of property, plant & equipment are recognized in the income statement as incurred.

3.1.1.5 De-recognitionThe carrying amount of an item of property, plant and equipment is de-recognized on disposal, or when no future economic benefi ts are expected from its use or disposal. Gains and losses on de-recognition are recognized in the income statement and gains are not classifi ed as revenue.

1919


3.1.1.6 Depreciation Depreciation is recognized in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Assets held under fi nance leases are depreciated over the shorter of the lease term or their useful life unless it is reasonably certain that the company will have ownership by the end of the lease term.The estimated useful lives for the current and comparative periods are as follows. Computer Equipment 2 years Computer Servers 5 years Furniture & Fittings 4 years Offi ce Equipment 2 years Motor Vehicles 3 years Leased Assets 2 years

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classifi ed as held for sale or the date that the asset is de-recognized.

Depreciation methods, useful lives and residual values are reassessed at the reporting date.

3.2 Intangible AssetsAn intangible asset is recognized if it is probable that future economic benefi ts that are attributable to the asset will fl ow to the entity and the cost of the asset can be measured reliably. Accordingly, these assets are stated in the balance sheet at cost less accumulated amortization and accumulated impairment losses.

3.2.1 Research and DevelopmentExpenditure on research activities, undertaken with the prospect of gaining new scientifi c or technical knowledge and understanding, is recognized in the income statement when incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if,

1. The development costs can be measured reliably. 2. The product or process is technically and commercially feasible. 3. Future economic benefi ts are probable. 4. The company intends to and has suffi cient resources to complete development and to use or sell the asset.

The expenditure capitalized includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognized in the income statement as incurred.

Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment loss.

3.2.2 License FeesLicenses acquired by the company are measured at cost less accumulated amortization and accumulated impairment loss.

3.2.3 Subsequent ExpenditureSubsequent expenditure is capitalized only when it increases the future economic benefi ts embodied in the specifi c asset to which it relates. All other expenditure is recognized in the income statement when incurred.

20

3.2.4 AmortizationAmortization is recognized in the income statement on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows.

License Fee 03 years “Hospital Net” Software 10 years

3.3 Investments

3.3.1 Investment Securities

Investment securities are acquired and held for capital gain and yield in the medium / long term. Such securities are recorded at cost. Changes in market value of these securities are not taken into account unless considered to be a permanent diminution in value.

3.3.2 Short term investments These are marketable securities acquired and held with the intention of resale over a short period of time. Such securities are recorded at market value, adjustments for changes in market values are accounted for in the income statement.

Treasury bills and fi xed deposits are measured and recorded at cost.

3.3.3 Trade and Other ReceivablesTrade and other receivables are stated at their estimated realizable amount.

3.3.4 Cash & Cash EquivalentsCash and cash equivalents comprise cash balances and cash deposits. Bank overdrafts that are repayable on demand and form an integral part of the company’s cash management are included as a component of cash and cash equivalents for the purpose of the cash fl ow statement. In the balance sheet, bank overdrafts are included under current liabilities.

The cash fl ow statement is prepared under the “indirect” method as per Sri Lanka Accounting Standard 09 - Cash Flow Statements. Interest paid is classifi ed as an operating cash fl ow. Interest income is classifi ed as cash fl ows from investing activities.

3.3.5 ImpairmentThe carrying amount of the company’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset is the greater of its value in use or its fair value less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

An impairment loss is recognized if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in the income statement.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.


2121

3.4 Stated CapitalOrdinary shares and share premiums are classifi ed as stated capital.

3.5 Liabilities and ProvisionsLiabilities classifi ed as current liabilities on the balance sheet are those which fall due for payment on demand or within one year from the reporting date. non-current liabilities are those balances that fall due for payment later than one year from the reporting date.

All known liabilities have been accounted for in preparing the fi nancial statements.

3.5.1 Employee Benefi ts

3.5.1.1 Defi ned Benefi t PlansA defi ned benefi t plan is a post-employment benefi t plan other than a defi ned contribution plan. The defi ned benefi t is calculated using a gratuity formula method as allowed by Sri Lanka Accounting Standard 16 (Revised 2006) - Employee Benefi ts.

Provision has been made for retirement gratuities from the fi rst year of service for all employees, in conformity with SLAS 16(Revised 2006) on employee benefi ts. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.

The liability is not externally funded nor actuarially valued.

3.5.1.2 Defi ned Contribution PlansA defi ned contribution plan is a post-employment plan under which an entity pays fi xed contributions into a separate entity and will have no further legal or constructive obligation to pay further amounts. Obligations for contributions to Provident and Trust Funds covering all employees are recognized as an expense in the income statement when incurred.

The company contributes 15% and 3% of gross emoluments to employees as Provident Fund and Trust Fund contribution respectively.

3.5.1.3 Short-term benefi tsShort-term employees benefi t obligations are measured on an undiscounted basis and are expensed as the related service is provided.

3.5.2 ProvisionsA provision is recognized if, as a result of a past event, the company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation.

3.5.3 Trade and other Payables

Trade and other payables are stated at their cost.

3.6 Income StatementFor the purpose of presentation of the income statement, the function of expenses method is adopted, as it represents fairly the elements of company performance.


22

3.6.1 Revenue

Revenue is recognized when, 1. The signifi cant risk and rewards of ownership have been transferred to the buyer. 2. Recovery of the consideration is probable. 3. The associated costs can be reliably estimated. 4. The amount of revenue can be reliably measured.

Revenue is measured at the fair value of the consideration received or receivable net of trade discounts or sales taxes.

Revenue from rendering of services is recognized in the accounting period in which the services are rendered.

Gains and losses on the disposal of investments held by the Company are recognized in the income statement.

Gains and losses on disposal of an item of property, plant & equipment are determined by comparing the net sales proceeds with the carrying amounts of property, plant & equipment and are recognized net within “other income” in the income statement.

3.6.2 ExpensesAll expenditure incurred in the running of the business is charged to income in arriving at the profi t for the year.

Repairs and renewals are charged to the income statement in the year in which the expenditure is incurred.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

3.6.2.1 Borrowing costsBorrowing costs are recognized as an expense in the period in which they are incurred, except to the extent that they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalized as part of the cost of that asset.

3.6.2.2 Finance income and expenses

Finance income comprises of interest income on funds invested. Interest income is recognized as the interest accrued based on the agreed rates. Finance expenses comprise of interest on bank overdrafts.

3.6.2.3 Income tax expenseIncome tax expense comprises of current tax. Income tax expense is recognized in the income statement except to the extent that it relates to items recognized directly in equity.

Current taxCurrent tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date and any adjustments to tax payable in respect of previous years.


2323

Deferred tax

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profi ts will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realized.

3.7 General

3.7.1 Events occurring after the Balance Sheet dateAll material post balance sheet events have been considered and where appropriate adjustments or disclosures have been made in the respective notes to the fi nancial statements.

3.7.2 Earnings Per ShareThe company presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period.

3.8 Capital Commitments and ContingenciesCapital commitments and contingent liabilities of the company are disclosed in the respective notes to the fi nancial statements.

3.9 Segment ReportingA segment is a distinguishable component of the company that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

Management believes that it is not practical to provide segment costs and expenses and consequently segment profi ts and losses, since a realistic allocation cannot be made. The fi xed assets used in the company’s business are not identifi able to any particular reportable segment and can be used interchangeably among segments. Consequently management believes that it is not practical to provide segmental disclosures relating to total assets, since a realistic analysis among the various operating segments is not possible.

4. EFFECT OF ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE:

The Institute of Chartered Accountants of Sri Lanka (ICASL) has issued a new volume of Sri Lanka Accounting Standards – 2011, applicable for fi nancial periods beginning on or after 1 January 2012. These Standards have many changes and consequential changes from the adaption of SLAS 44 and 45. These new Accounting Standards are prefi xed both SLFRS and LKAS which correspond to the relevant IFRS and IAS. Disclosure requirement under SLAS 10.30 and 10.31 have been exempted by the ICASL and therefore all differences and impacts arising from the new standards are not presented in these fi nancial statements.

The impact of the above requirements has not been quantifi ed as exempted by the ICASL.

The above standards are effective for annual periods beginning on or after 1 January 2012.


24


5. Property, Plant & Equipment Freehold Assets Computer Computer Furniture Offi ce Motor Equipment Servers & Fittings Equipment Vehicles Total Cost Rs. Rs. Rs. Rs. Rs. Rs. As at the beginning of the year 8,910,785 27,831,793 915,359 1,751,977 84,500 39,494,414 Additions 203,554 - 46,368 60,000 - 309,922 Transfers 140,000 - - - - 140,000 Disposals - - (170,000) (991,428) (84,500) (1,245,928) As at the end of the year 9,254,339 27,831,793 791,727 820,549 - 38,698,408

Accumulated Depreciation As at the beginning of the year 8,858,979 23,515,798 640,202 1,455,944 84,500 34,555,423 Charge for the year 138,252 1,388,677 169,000 265,357 - 1,961,286 Transfers 140,000 - - - - 140,000 Disposals - - (170,000) (991,428) (84,500) (1,245,928) As at the end of the year 9,137,231 24,904,475 639,202 729,873 - 35,410,781 Carrying Amount As at 31 March 2011 117,108 2,927,318 152,525 90,676 - 3,287,627

As at 31 March 2010 51,804 4,315,996 275,157 296,033 - 4,938,990

Leasehold Assets Laptop Total Cost Rs. Rs. As at the beginning of the year 140,000 140,000 Transfers to freehold assets (140,000) (140,000) As at the end of the year - - Accumulated Depreciation As at the beginning of the year 140,000 140,000 Transfers to freehold assets (140,000) (140,000) As at the end of the year - -

Carrying Amount As at 31 March 2011 -

As at 31 March 2010

Property, plant & equipment include fully depreciated assets, the cost of which as at 31 March 2011 amounted to Rs. 31,614,492 (2009 / 2010 - Rs. 30,554,443)

6. Intangible Assets

License Fee Hospital Net 31.03.2011 31.03.2010 Cost Rs. Rs. Rs. Rs. As at the beginning of the year 169,550 10,804,943 10,974,493 10,974,493 Additions - - - - As at the end of the year 169,550 10,804,943 10,974,493 10,974,493 Accumulated Amortization As at the beginning of the year 132,519 2,160,988 2,293,507 1,156,496 Amortization for the year 22,724 1,080,494 1,103,218 1,137,011 As at the end of the year 155,243 3,241,482 3,396,725 2,293,507

Carrying Amount 14,307 7,563,461 7,577,768 8,680,986

2525


FOR THE YEAR ENDED 31 MARCH 2011 2010 Rs. Rs. 7 Employees’ Share Ownership Trust (ESOT Fund) Balance as at the beginning of the year 3,350,000 3,350,000 Loan settled during the year (565,000) - Balance as at the end of the year 2,785,000 3,350,000 During the year ended March 31, 2002 the company set up an Employee Share Ownership Trust to issue ordinary shares of the company to it’s employees. The Trust loan was created by the allocation of 350,000 ordinary shares issued at the par value (Rs.10.00) and 15,000 shares amounting to Rs. 150,000 has been settled during the year ended March 31, 2006. 56,500 Shares amounting to Rs 565,000 has been settled during the current fi nancial year.

The scheme was set up for the employees of the company including any director or offi cer holding a salaried employment. Shares shall be allotted to participants only at the end of the probation period unless the Board of Directors shall otherwise determine.

Dividend and other income on these shares would be paid to the company by the Trust in order to settle the loan. No shares were allotted to employees during the fi nancial year 2010/2011 8 Investments 2011 2010 Rs. Rs. 8.1 Investment Securities Investment in Treasury Bond (Interest Rate 14.5%) (05.02.2010-15.06.2011) - 5,743,822 Investment in Treasury Bond (Interest Rate 13.5%) (03.08.2010-01.07.2012) 2,988,012 Investment in Treasury Bond (Interest Rate 10.5%) (02.08.2010-01.04.2013) 8,800,012 11,788,024 5,743,822 8.2 Short Term Investment Investment in Treasury Bond (Interest Rate 14.5%) (05.02.2010-15.06.2011) 5,408,940 - Investment in Treasury Bond (Interest Rate 15.5%) (20.01.2009-01.08.2010) - 9,261,259 Treasury Bills 21,371,475 - Fixed Deposits 40,674,374 44,781,023 Commercial Papers - 4,033,455 67,454,789 58,075,737 8.3 Investment in Shares

No. of Cost Market value Name of the company Ordinary (Rs.) (Rs.) shares Amana Takaful PLC (ATL) 2,000 7,083 4,200 Seylan Developments PLC (CSD) 100 1,572 1,460 Nation Lanka Finance PLC (CSF) 3,000 69,933 33,300 Environment Resources PLC - Warrants (GREG.W) 100 7,143 7,730 Lankem Developments PLC (LDEV) 100 5,960 7,230 Seylan Bank PLC (SEYB) 100 7,537 7,520 Seylan Bank PLC - Non Voting (SEYB.X) 200 8,093 7,860 Nations Trust Bank PLC- Warrants (NTB.W) 100 8,155 7,631 The Finance PLC- Non Voting (TFC.X) 54,200 1,084,000 921,400 998,331 Application for Additional Shares - Nation Lanka Finance PLC 5,000,000 As at 31 March 2011 5,998,331 As at 31 March 2010 -

26


FOR THE YEAR ENDED 31 MARCH 2011 2010 Rs. Rs. 9 Trade & Other Receivables Trade Receivables 2,767,160 1,729,355 Advance & Prepayments 3,240,205 2,781,670 WHT & Tax Receivables 982,996 1,302,360 Interest Receivable (Note 9.1) 2,417,978 3,302,635 Refundable Deposits 1,425,300 1,809,360 10,833,639 10,925,380 9.1 Interest Receivable Interest receivable (gross) 2,972,978 3,857,635 Provision for doubtful receivables (555,000) (555,000) 2,417,978 3,302,635 10 Cash and Cash Equivalents Cash at bank 7,466,920 2,667,586 Cash in hand 37,306 9,455 Cash and cash equivalents 7,504,226 2,677,041 Bank Overdraft (3,912,135) (2,367,361) Cash and cash equivalents in the cash fl ow statement 3,592,091 309,680 11 Stated Capital Balance at the beginning of the year 187,516,633 187,516,633 50% capital reduction (93,758,317) - Balance at the end of the year 93,758,316 187,516,633

The company has made a capital reduction based on the EGM held on 12 January 2011, whereby it was resolved that stated capital amounting to Rs. 187,516,633 comprising of 17,447,345 fully paid ordinary shares be reduced to Rs. 93,758, 317 represented by 17,447,345 fully paid ordinary shares. On 07 April 2011 the company decided to subdivide these shares to 122,131,415 ordinary shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per individual present at meetings of the shareholders or one vote per share in case of a poll. All shares are ranked equally with regard to the company’s residual assets.

31.03.2011 31.03.2010 Rs. Rs. 12 Employee Benefi ts Balance at the beginning of the year 1,894,679 1,329,432 Provision for the year 1,179,000 565,247 Paid during the year - - Balance at the end of the year 3,073,679 1,894,679 The retirement benefi t plan entitles an employee to receive payment equal to 1/2 of the fi nal monthly salary multiplied by the number of completed years of service on resignation. The retirement benefi t plan valuation is carried out based on a gratuity formula method in accordance with SLAS 16. Principal assumptions as at the balance sheet date are as follows; Discount rate at 31 March 2011 9.3% Future salary increase 15%

2727


FOR THE YEAR ENDED 31 MARCH 2011 2010 Rs. Rs. 13 Trade & Other Payables Trade Payables 21,086,147 14,829,168 Other Creditors & Accrued Expenses 8,841,846 4,425,890 29,927,993 19,255,058 14 Amounts due to Related Parties MIT Limited - 31,174 15 Revenue Revenue from Portals 49,294,747 38,911,618 Software Income 8,098,629 8,547,981 Call Charges Income 4,108,071 3,064,707 61,501,447 50,524,306 16 Other Operating Income Sale of Fixed Assets 47,990 34,674 Software Development 1,226,617 1,121,877 Others 63,121 506,513 1,337,728 1,663,064 17 The Profi t from operations was arrived after charging the following. Depreciation & Amortization 3,064,504 3,731,969 Salary Related Expenses 19,340,394 20,038,330 EPF 2,086,150 2,138,397 ETF 417,092 427,679 Auditor’s Remuneration 190,000 160,000 Gratuity Provision 1,179,000 565,247 Legal Expenses 425,020 109,966 Assets Written Off - 110,142 Directors’ Fees 777,778 1,333,333 Penalties & Surcharges 38,901 - Unrealised Loss on Investments 233,313 - 18 Financial Income Interest Income from Government Securities 2,772,769 1,681,857 Interest Income from Fixed Deposits 3,560,693 7,796,961 6,333,462 9,478,818 19 Financial Cost Over draft Interest 6,583 46,977 Lease Interest - 14,063 6,583 61,040 Net Financial Income 6,326,879 9,417,778

28


FOR THE YEAR ENDED 31 MARCH 2011 2010 Rs. Rs. 20 Income Tax Expenses Current taxation 2,892,352 2,229,785 (Over) / Under provision in respect of previous year (290,930) 106,984 2,601,422 2,336,769

The corporate income tax rate of e Channelling PLC is 35%. The full benefi t of capital allowances arising in terms of section 25 of the Inland Revenue Act No. 10 of 2006 and amendments there to have been taken into account to determine taxation for the year. The provision has been made in these fi nancial statements on the taxable income arising from the interest income of the company. The carried forward tax losses of the company up to 2010/2011 amounts to Rs.127,492,118 (2009/2010 -Rs. 133,070,367)

20.1 Reconciliation between the accounting loss and tax expenses Profi t before tax 10,937,331 4,212,837 Deductible expenses (12,151,623) (15,687,748) Non deductible expenses 7,180,993 6,611,041 Statutory income / (loss) 5,966,701 (4,863,870) Income from other sources 6,559,049 9,656,408 Loss claimed (35% of statutory Income) (4,384,013) (3,379,743) Taxable Income 8,141,737 6,276,665 Applicable tax rate 35% 35% Tax on taxable income 2,849,608 2,196,833 SRL at 1.5% 42,744 32,952 (Over) / Under provided in prior periods (290,930) 106,984 Current tax expense 2,601,422 2,336,769 20.2 Deferred Tax Deferred tax assets as follows: Tax Losses carried corward 127,492,118 133,070,367 Retirement benefi t provision 3,073,679 1,894,679 130,565,797 134,965,046 Taxable temporary differences Property plant & equipment (9,604,328) (6,836,262) Total deductible temporary differences 120,961,469 128,128,784 28% 35% Unrecognized deferred tax asset 33,869,211 44,845,075

No provision has been made in respect of deferred taxation. It is not probable that future taxable profi t will be available against which the company can utilize the benefi ts there from, in the near future.

2929



21 Earnings Per Share

The Earnings Per Share is calculated based on the earnings attributable to ordinary shareholders divided by weighted average number of ordinary shares as at the balance sheet date. Number of ordinary shares for the year 2010 has been adjusted to refl ect the increase in number of shares consequent to the subdivision on 07 April 2011. Accordingly Earnings per share has been adjusted retrospectively as per SLAS 34 Earnings per Share (Revised 2005).

2011 2010 Rs. Rs. (Re-stated) Profi t for the year (Rs.) 8,335,909 1,876,068 Weighted average No of ordinary shares 122,131,415 122,131,415 Earnings Per Share (Rs.) 0.07 0.02 22 Transactions with Related Parties

22.1 Transactions with Related Entities Name of the related party Name of Director Relationship Nature/ Rationale of Transaction British American Technologies W.D.J.R.Silva Director Purchase of (Pvt) Ltd W.T.L.Weeratne Director computer equipment D.V.Perera Director - Rs 47,554 22.2 Transactions with Key Management Personnel

Key management personnel comprises the Directors of the Company & the CEO having authority and responsibility for planning, directing, and controlling the activities of the Company.

2011 2010 Rs. Rs. Short term employee benefi ts 5,252,778 6,693,191 Post employment benefi ts Nil Nil 23 Commitments & Contingencies

There are no material contingent liabilities & capital expenditure commitments as at the balance sheet date.

24 Number of Employees

The number of employees of the company as at 31 March 2011 amounted to 34, (2009/10-34)

30



25 Events Occurring After The Balance Sheet Date

The company has decided to implement a share split on the ratio of 1 : 7 for the shareholders. The extra - ordinary general meeting was held on 7 April 2011 to obtain the shareholders’ approval for this purpose. The total revised number of shares were 122,131,415

On 8 June 2011 the company made arrangements to purchase 13,672,100 ordinary shares of Blue Diamond Jewellery Worldwide PLC amounting to Rs 74,237,643 which comprised a 13.24 % holding in that entity. The company disposed the entire shares of Blue Diamond Jewellery Worldwide PLC which resulted in a capital gain of approximately Rs. 62.8 million for the company subsequently.

26 Comparative Information

The accounting policies have been consistently applied by the company. comparative information has not been restated to conform the current year’s presentation.

27 Directors’ Responsibility Statement

The Board of Directors of the company are responsible for the preparation and presentation of these fi nancial statements.

3131

FIVE YEAR SUMMARY

2007 2008 2009 2010 2011

Revenue 17,290,123 28,330,762 38,484,507 50,524,306 61,501,447

Administrative Expenses (26,182,379) (43,846,779) (58,265,491) (56,848,889) (56,577,098)

Profi t from Operating Activities (14,226,899) (21,271,943) (20,664,405) (5,204,941) 4,610,452

Profi t Before Taxation (2,814,625) (7,489,128) (8,391,496) 4,212,837 10,937,331

Profi t / (Loss) for the Year (5,500,943) (10,733,030) (11,162,735) 1,876,068 8,335,909

Total Assets 101,304,001 100,564,507 87,102,220 94,391,956 117,229,404

101,304,001 100,564,507 87,102,220 94,391,956 117,229,404

Equity 90,250,386 79,517,356 68,354,621 70,230,689 78,566,598

Total Liabilities 11,053,615 21,047,151 18,747,599 24,161,267 38,662,806

101,304,001 100,564,507 87,102,220 94,391,956 117,229,404

Ratios and Other Information

Earning / (Loss) per Share (Rs.) (0.05) (0.09) (0.09) 0.02 0.07

Market Price per Share (Rs.) 13.00 15.50 7.75 10.25 33.00

Net Assets per Share (Rs.) 0.74 0.65 0.71 0.58 0.65

Current Ratio (Times) 8.01 3.95 3.36 3.22 2.56

32

01 - 1000 916 355,994 2.04 17 8,149 0.05 933 364,143 2.09

1001 - 10000 351 1,319,987 7.57 12 30,946 0.18 363 1,350,933 7.75

10001 - 100000 75 2,446,987 14.02 4 152,333 0.87 79 2,599,320 14.89

100001 - 1000000 11 2,439,700 13.98 1 672,400 3.85 12 3,112,100 17.83

Over 1,000,000 4 10,020,849 57.44 0 0 0.00 4 10,020,849 57.44

1,357 16,583,517 95.05 34 863,828 4.95 1,391 17,447,345 100.00

SHAREHOLDER INFORMATION

Analysis of shareholders according to the number of shares as at 31 march 2011

Num

ber o

fSh

areh

olde

rs

Num

ber o

fSh

ares

Per

cent

age

(%)

Num

ber o

fSh

areh

olde

rs

Num

ber o

fSh

ares

Per

cent

age

(%)

Num

ber o

fSh

areh

olde

rs

Num

ber o

fSh

ares

Per

cent

age

(%)

Categories of Shareholders Number of Shareholders Number of Shares Individual 1,346 8,263,363 Institutional 45 9,183,982

1,391 17,447,345

Issued share capital as at 31 March 2011 17,447,345 Less- Parent Company - Over 10% Holding 8,775,149 Directors Shareholding 100 Spouses of Directors & CEO & Children -

Public holding 8,672,096

Public holding as a percentage of Issued Share Capital 49.70%

Shareholding Resident Non Resident Total

3333

THE 20 MAJOR SHAREHOLDERS OF E - CHANNELLING PLC BASED ON THEIR SHAREHOLDING

Number of Percentage Shares (%)

1 Pan Asia Banking Corporation PLC/British American Technologies Pvt Ltd 3,908,883 22.40

2 Sri Lanka Insurance Corporation Ltd - General Fund 2,866,666 16.43

3 Mr. D. A. De Zoysa 1,999,600 11.46

4 Sri Lanka Insurance Corporation Ltd - Life Fund 1,245,700 7.14

5 Seylan Bank PLC / Mr. M. I. Samsudeen 717,000 4.11

6 Dr. M. B. Nizar 672,400 3.85

7 Mr. F. N. Goonewardena / Dr. J. B. Peiris 278,500 1.60

8 Dr. M. M. Rinoza 240,900 1.38

9 Mr. L. S. I. Perera 207,400 1.19

10 Mr. R. Maha 200,000 1.15

11 S. C. Haputhanthree 150,000 0.86

12 Mr. G. C. Goonetilleke 137,000 0.79

13 Mr. S. Gurusinghe 134,700 0.77

14 Mr. B. T. Thilakananda 131,200 0.75

15 Bank of Ceylon -No.1 Account 123,000 0.70

16 Mr. P. Rathnayaka 120,000 0.69

17 Mr. I. K. N. Chandrasiri 100,000 0.57

18 Mr. A. H. Munasinghe 94,633 0.54

19 Mr. K. Kularatnam 85,000 0.49

20 Mr. C. Weerakody 79,300 0.45

34

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 11th Annual General Meeting of the e-Channelling PLC will be held at the Jasmine Hall, Hotel Renuka on the 29 September 2011 at 10 a.m.

AGENDA

1. To receive and consider the Report of the Directors on the State of Affairs of the Company and the Statement of Accounts for the year ended 31st March 2011, with the Report of the Auditors thereon.

2. To re-elect Mr. W. D. J. R. Silva, a Director who retires by rotation at the Annual General Meeting in terms of Article 86 and 87 of the Articles of Association of the Company.

3. To re-elect Mr. A. M. M. De Alwis, a Director who retires at the Annual General Meeting in terms of Article 94 of the Articles of Association of the Company.

4. To re-elect Mr. W. A. D. V. Perera, a Director who retires at the Annual General Meeting in terms of Article 94 of the Articles of Association of the Company.

5. To re-appoint Messrs KPMG Ford Rhodes, Thornton and Company, Chartered Accountants as Auditors of the Company and to authorise the Directors to determine their remuneration.

6. To authorise the Directors to determine contributions to charities for 2011.

BY ORDER OF THE BOARD OF DIRECTORS OF E-CHANNELLING PLCS S P CORPORATE SERVICES (PRIVATE) LIMITEDSECRETARIES

Date: 24 August 2011

Note:

(a) A member who is unable to attend and vote at the above mentioned meeting is entitled to appoint a Proxy to attend and vote in his or her place. A proxy need not be a member of the company. A Form of Proxy accompanies this Notice.

(b) The completed Form of Proxy should be deposited at the Registered Offi ce of the Company, Suncity Towers, Mezannie Floor, No.18, St. Anthony’s Mawatha, Colombo 03 not later than 48 hours before the time appointed for the holding of the meeting.

3535

NOTES

36

3737

Instructions to complete the form of proxy

1. Kindly perfect the Form of Proxy by fi lling in legibly your full name and address, your instructions as to voting, by sign-ing in the space provided and fi lling in the date of signature.

2. Please indicate with a ‘X’ in the cages provided how your proxy is to vote on the Resolutions. If no indication is given the Proxy in his/her discretion may vote as he/she thinks fi t.

3. The completed Form of Proxy should be deposited at the Registered Offi ce of the Company at Suncity Towers, Me-zannie Floor, No.18, St. Anthony’s Mawatha, Colombo 03, at least 48 hours before the time appointed for holding of the Meeting.

4. If the form of proxy is signed by an attorney, the relative power of attorney should accompany the completed form of proxy for registration, if such power of attorney has not already been registered with the Company.

Note:

If the shareholder of e - Channelling PLC is a company or body corporate, Section 138 of the Companies Act No. 07 of 2007 applies. Section 138 provides for representation of companies at meetings of other companies. A corporation, whether a company within the meaning of this act or not, may where it is a member of another corporation, being a company within the meaning of this Act, by resolution of its Directors or other governing body authorise such person as it thinks fi t to act as its representative at any meeting of the company. A person authorised as aforesaid shall be entitled to exercise the same power on behalf of the corporation which it represents as that corporation could exercise if it were an individual shareholder.

Documents

ANNUAL REPORT 2010/11 - E-Channelling Annual Report.pdf(Hons) Degree from the University of Kelaniya and is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka,