Annual Report 2011/2012 - Colombo Stock Exchange

ANNUAL REPORT 2011/12

ANNUAL REPORT 2011 / 12 

VISION 

To pursue excellence for superior service with ships 

operated and maintained at the highest standards of quality 

to enhance the long term interests of all our stakeholders. 

MISSION 

To maintain the position that 'our customers are our 

partners in business'. 

To expand our fleet of multipurpose ships and develop 

new business towards sustainable growth. 

To be a reliable and competent partner in the 

international shipping community and become the 

leading ship owner in Sri Lanka.

MERCANTILE SHIPPING COMPANY PLC 

STATUTORY STATUS 

QUOTED PUBLIC COMPANY WITH LIMITED LIABILITY, 

INCORPORATED ON 17TH MARCH 1981. 

BOARD OF DIRECTORS 

A.N.U. Jayawardena (Chairman) 

Capt. K. Kriwat (Deputy Chairman) 

T. Kriwat (Managing Director) 

H.A.R.K. Wickramatileka 

T.N. Jayasinghe 

C.P.P.G. Hapudeniya 

I.A.H. Esufally 

G. M. Vikum Pradeepa 

S.Obadage 

Ms. K.A.C. Wilson 

SECRETARIES 

Managers & Secretaries (Pvt) Limited 

BANKERS 

Standard Chartered Bank 

Commercial Bank of Ceylon PLC 

AUDITORS 

Ernst & Young (Chartered Accountants) 

LAWYERS 

Dissanayake Amaratunga Associates 

(Attorneys-at-Law & Notaries Public) 

Julius & Creasy 

(Attorneys-at-Law & Notaries Public) 

REGISTERED OFFICE 

441, K. Cyril C. Perera Mawatha 

Colombo 13, Sri Lanka 

Tel: +94-11-2331792, 2331793, 2331797 

Fax: +94-11-2331799 

E-mail: info@mscl.lk 

Website: www.mscl.lk


CONTENTS 

02 

03 

05 

08 

09 

13 

14 

15 

16 

17 

18 

19 

38 

41 

43 

NOTICE OF MEETING 

CHAIRMAN’S REVIEW 

REPORT OF THE DIRECTORS 

PROFILES OF DIRECTORS 

CORPORATE GOVERNANCE 

AUDIT COMMITTEE REPORT 

AUDITOR'S REPORT 

BALANCE SHEET 

INCOME STATEMENT 

STATEMENT OF CHANGES IN EQUITY 

CASH FLOW STATEMENT 

NOTES TO THE FINANCIAL STATEMENTS 

SHARE INFORMATION 

FIVE YEAR SUMMARY 

FORM OF PROXY


ANNUAL GENERAL MEETING 

NOTICE OF MEETING 

Notice is hereby given that the 31st Annual General Meeting of 

Mercantile Shipping Company PLC will be held on 28th August 

2012 at 11.30 a.m. at BCIS (Bandaranaike Centre for 

International Studies) Auditorium, BMICH, Bauddhaloka 

Mawatha, Colombo 7, for the following purposes: 

Agenda 

1. To receive and consider the Annual Report of the Board of 

Directors and the Statement of Audited Accounts for the 

year ended 31st March 2012 and the Report of the Auditors 

thereon. 

2. Appointment of Directors in terms of Section 211 of the 

Companies Act No.07 of 2007. 

Mr. A.N.U. Jayawardena, who is 75 years of age, as a 

Director in terms of Section 211 of the Companies Act 

No.07 of 2007. Accordingly, the following resolution to be 

passed for this purpose, if thought fit. 

IT IS HEREBY RESOLVED: 

“To re-elect Mr. A.N.U. Jayawardena, who is 75 years of 

age, as a Director in terms of Section 211 of the Companies 

Act No. 7 of 2007 and it is specially declared that the age 

limit of 70 years referred to in Section 210 of the Companies 

Act No. 7 of 2007 shall not apply to the said Mr. A.N.U. 

Jayawardena. 

Captain K. Kriwat, who is 71 years of age, as a Director in 

terms of Section 211 of the Companies Act No.07 of 2007. 

Accordingly, the following resolution to be passed for this 

purpose, if thought fit. 

IT IS HEREBY RESOLVED: 

“ To re-elect Captain K. Kriwat, who is 71 years of age, as a 

Director in terms of Section 211 of the Companies Act No. 7 

of 2007 and it is specially declared that the age limit of 70 

years referred to in Section 210 of the Companies Act No. 7 

of 2007 shall not apply to the said Captain K. Kriwat. 

3. To re-elect Mr. T.N.Jayasinghe who retires by rotation in 

terms of Article 84, of the Articles of Association of the 

Company, and being eligible offers himself for re-election 

as a Director. 

4. Election of New Directors 

Mr. S. Obadage who has been appointed to the Board 

since the last Annual General Meeting in terms of Article 91 

of the Articles of Association of the Company. 

Ms. K.A.C. Wilson who has been appointed to the Board 

since the last Annual General Meeting in terms of Article 91 

of the Articles of Association of the Company. 

5. To re-appoint the Auditors Messrs. Ernst & Young and to 

authorize the Board of Directors to determine their 

remuneration. 

6. To authorize Directors to determine contribution to 

Charities. 

7. To consider any other business of which due notice has 

been given. 

By Order of the Board 

Managers & Secretaries (Pvt) Limited 

Secretaries 

Colombo 

18 th July 2012 

Note: 

A member entitled to attend and vote at the meeting is entitled 

to appoint a proxy to attend and vote in his/her stead and a 

Form of Proxy is enclosed for this purpose. The proxy need not 

be a member of the Company. 

The completed Form of Proxy must be deposited at the 

registered office No. 441, K. Cyril C. Perera Mawatha, Colombo 

13, not less than forty eight hours before the time fixed for the 

meeting. 

Any Member or Proxy holder attending the meeting is kindly 

requested to bring this Report along with his/her National 

Identity Card or Passport for identification purposes. 

02


CHAIRMAN'S REVIEW FOR THE YEAR 2011/2012 

It is with much pleasure that I welcome all of you to the 31st 

Annual General Meeting of the Company. During the year 

under review the Group made a net loss of Rs. 32.2 million 

compared to a net loss of Rs. 23.3 million last year, whilst the 

Company showed a net profit after tax of Rs. 5.5 million as 

opposed to a net loss after tax last year of Rs. 8 million. The 

Company’s main source of income is a management fee paid 

to it by its wholly owned, BOI approved subsidiary, which owns 

and operates the two new vessels, Mercs Uva and Mercs 

Uhana. The shareholders will be aware that the main and 

substantial source of income for the Group is the charter hire 

derived by its subsidiary from its aforementioned two vessels, 

which have been given out on time charter for operations in the 

international trade. 

I indicated in the Review last year that the shipping industry 

worldwide was in a depressed state, consequent to worldwide 

economic problems and that charter rates had to be reduced 

last year owing to pressures in the market. Although in Euro 

terms there was a reduction in Group Revenue consequent to 

reduction in the charter rate, in Rupee terms Revenue has 

increased from Rs. 599 million in the last financial year to Rs. 

609.5 million in the year under review owing to the devaluation 

of the Rupee. However, in Rupee terms expenditure has also 

increased resulting in increased losses. 

I regret to state that the position has become even worse 

throughout the current year. As you would be aware many 

European countries are in grave economic crisis and even 

China and India, the major Asian economies, have shown a 

significant reduction in their growth rates. The shipping 

industry, being linked to the international economy, has had to 

face even further depressed charter rates to carry the limited 

cargo available. In fact as recently as March this year we were 

compelled to accept a still further reduction in the charter rate 

that was payable to us, as the charterer was facing huge losses 

at the rates they were earlier paying to us and other ship 

owners, whose vessels they were operating. The charterer, in 

fact, offered to return the vessels to us if we could not accept 

the reduced rate, but since inquiries by Reederei Eugen 

Friederich (REF), our foreign partners, in the international 

shipping market revealed that we could not obtain a higher 

rate, it was decided that we should accept the reduced charter 

rate as the best option. 

The reduced charter hire earned by the Group is adequate to 

meet operational expenses and maintain the vessels to their 

customary high safety and technical standards, but will enable 

us only to pay the interest payable on the loans granted by the 

German lending Bank. The Bank has agreed in principle to a 

further rescheduling of our loans, as the shipping industry is in 

difficulties worldwide, and formal approval, specifying the 

details, is expected in the near future. I must in this connection 

place on record the Company’s deep appreciation of the 

assistance rendered to us in our negotiations with the foreign 

charterers and the German lending Bank by REF, and 

especially by our Managing Director, Mr. T. Kriwat. 

Your Company has been exploring opportunities in shipping or 

shipping related activities in Sri Lanka and has now identified 

an investment opportunity. International carriers transiting our 

waters have required a change of crew and security personnel 

in Galle which has resulted from the threat of pirate attacks on 

those vessels when operating in the Gulf region and in the 

Indian Ocean. This operation requires the use of crew transport 

boats, and your Company, in collaboration with Hemas 

Transportation Ltd. has formed a joint venture company on a 

50% / 50% basis to own and operate these crew transport 

boats, under the name and style of H & M Shipping Services 

(Pvt) Ltd. The Board of Directors of your Company has after 

evaluation decided to invest up to Rs. 30 million in this new 

venture. The joint venture Company has ordered two boats 

initially and operations are expected to commence in the near 

future. 

It must be mentioned however that crew transport vessels, 

such as ours, are small boats, plying for short distances, from 

shore to the big ships lying offshore and their earning too will 

be correspondingly extremely low compared to international 

charter rates for the larger vessels owned by the Company’s 

subsidiary. It is expected however, that crew boat services will 

be a growing area of business. 

03


CHAIRMAN’S REVIEW FOR THE YEAR 2011 / 2012 Contd... 

I must underscore however that the earnings from our main line 

of business, namely international carriage by sea, will be 

inextricably linked with the fortunes of international charter 

operators, whose earnings in turn will depend on when the 

world economy will recover and get to a period of steady 

growth. 

We welcome to the Board Mr. S. Obadage, from the Ceylon 

Shipping Corporation and Ms. K.A.C Wilson from the Hemas 

Group, who joined us as Directors in place of Mrs. M.K.M. De 

Silva and Dr. M.I.M. Musheen, who retired in the current 

financial year, and we are certain that their contribution will be 

of immense value to us in the challenging period we are 

facing.In conclusion may I extend my gratitude and thanks to 

my fellow Board Members and to the Management and staff of 

the Company for their unstinted support throughout this 

difficult year. 

A N U Jayawardena 

Chairman 


18th July 2012 

04


ANNUAL REPORT OF THE BOARD OF DIRECTORS 

ON THE AFFAIRS OF THE COMPANY 

The Directors are pleased to submit their Report together with 

the Audited Accounts for the Company and the Group, for the 

year ended 31st March 2012, to be presented at the Thirty First 

Annual General Meeting of the Company. 

Review of the Year 

The Chairman's Review on page 03 describes the Company's 

affairs and mentions important events that occurred during the 

year, and up to the date of this Report. This Report together 

with the Audited Financial Statements reflect the state of the 

affairs of the Company. 

Principal Activities / Core Business 

The main activity of the Company and subsidiaries is the 

business of ship owners and operators. 

Financial Statements 

The Financial Statements prepared in compliance with the 

requirements of Section 151 of the Companies Act No 7 of 

2007 are given on pages 15 to 37 in this Annual Report. 

Independent Auditor's Report 

The Auditor's Report on the Financial Statements is given on 

page 14 in this Report. 

Accounting Policies 

The Accounting Policies adopted in preparation of the 

Financial Statements is given on pages 19 to 25 There were no 

changes in Accounting Policies adopted by the Company 

during the year under review. 

Financial Results/Profit and Appropriations 

The Income Statement is set out on page 16. 

Property, Plant & Equipment 

During the year under review the Company did not invest in 

Property, Plant & Equipment. (2011 – Rs 6,090,950) 

Information relating to movement in Property, Plant & 

Equipment during the year is disclosed under Note 03 to the 

Financial Statements. 

Market Value of Freehold Land 

The property owned by the Company at 441, K.Cyril C Perera 

Mawatha, Colombo 14 was last measured for fair value during 

the Financial Year 2007/2008 by Mr. M. T. Hilmi Farook, a 

Professional Valuer, to an amount of Rs. 26,000,000. 

The property owned by the Company at 108, Aluthmawatha 

Road, Colombo 15 was last measured for fair value during the 

Financial Year 2010/2011 by Mr. B.J.B. Kariyawasam a 

Professional Valuer, to an amount of Rs. 82,547,500. 

Investments 

Details of long-term Investments held by the Company are 

given in Note 05 and 06 to the Financial Statements on 

pages 28 and 29. 

Directors' Responsibilities 

The Statement of the Directors' Responsibilities is given on 

page 09 of this Report. 

Corporate Governance 

The Company has complied with the corporate governance 

rules laid down under the listing rules of the Colombo Stock 

Exchange, and is given on pages 09 to 12. 

Dividend 

The Directors do not recommend payment of a dividend for the 

financial year ended 31st March 2012. 

Reserves 

The Reserves and Accumulated Profits as at 31st March 2012 

amount to Rs. 269,006,056 as against Rs 263,492,014 as at 

31st March 2011. The breakup and the movement are shown 

in the Statement of Changes in Equity in the Financial 

Statements on page 17. 

Stated Capital 

As per the terms of the Companies Act No. 7 of 2007, the stated 

capital of the Company is Rs.37,262,606 as at 31st March 2012 

The details are given in Note 11 to the Financial Statements on 

page 30. 

Post Balance Sheet Events 

There were no material events occurring after the Balance 

Sheet date that require adjustments, or disclosure in the 

Financial Statements other than those mentioned in Note 23 to 

the Financial Statements. 

Statutory Payments 

The declaration relating to Statutory Payments is made in the 

Statement of Directors' Responsibilities on page 10. 

Interests Register 

Details of the transactions with Director-related entities are 

disclosed in Note 25 to the Financial Statements on page 37 

and have been declared at the Board meeting, pursuant to 

Section 192 (2) of the Companies Act No. 7 of 2007. 

BOARD COMMITTEES 

Audit Committee 

Following are the names of the Directors comprising the Audit 

Committee of the Board. 

1. Mr. T. N. Jayasinghe (Chairman) 

2. Mr. C. P. P. G. Hapudeniya 

3. Mr. G.M. Vikum Pradeepa 

Details are given under Corporate Governance on page 10. 

05

TO BE UPDATED 



ON THE AFFAIRS OF THE COMPANY Contd... 

06 

Remuneration Committee 

Following are the names of the Directors comprising the 

Remuneration Committee of the Board. 

1. Mr. C. P. P. G. Hapudeniya (Chairman) 

2. Mr. T. N. Jayasinghe 

Details are given under Corporate Governance on page 10. 

Share Information and Substantial Shareholdings 

The distribution of shareholding, market value of shares and 

Twenty largest Shareholders are given in pages 38 to 40. 

The earnings per share, dividends per share, net assets per 

share are given in Financial Highlights on page 41 of this 

Annual Report. 

Directors 

The Directors of the Company as at 31st March 2012 and their 

brief profiles are given on page 08 in this Report. 

During the year under review the Board met on 09 occasions. 

The attendance at these meetings was 

Name of Director 

A.N.U Jayawardena 

Capt. K Kriwat 

T. Kriwat 





G.M. Vikum Pradeepa 

S. Obadage 

(Appointed on 12th Sept 2011) 


(Appointed on 9th Nov 2011 ) 

Attendance 

9/9 

5/9 

9/9 

9/9 

9/9 

6/9 

6/9 

9/9 

5/5 

3/3 

In accordance with Section 210 of the Companies Act No 7 of 

2007, Mr. A. N. U. Jayawardena who is 75 years of age retires 

and being eligible has offered himself for re-election. 

In accordance with Section 210 of the Companies Act No 7 of 

2007, Captain K Kriwat who has reached the age of 71 retires 

and being eligible has offered himself for re-election. 

In terms of Article 84 of the Articles of Association of the 

Company, Mr T.N. Jayasinghe retires by rotation and being 

eligible has offered himself for re-election. 

In terms of Article 91 of the Articles of Association of the 

Company, the following Directors who were appointed during 

the year subsequent to the last Annual General Meeting retire 

and have offered themselves for election. 

Mr. S. Obadage 


Directors' Shareholding 

The interest of the Directors in the shares of the Company as at 

31st March were as follows; 

Mr. A. N. U. Jayawardena 

Mr. H. A. R. K. Wickramatileka 

No. of Ordinary Shares as at 

31.03.2012 

01 

11,414 


01 

11,414 

Independence of Directors 

In accordance with Rule 7.10.2 of Colombo Stock Exchange 

Rules on Corporate Governance('CSECGRules'), 

A.N.U Jayawardena 

Capt. K Kriwat 






S. Obadage 

(Appointed on 12th Sept 2011) 


(Appointed on 9th Nov 2011) 

who are Non-Executive Directors of the Company, have 

submitted a signed and dated declaration to the Board of their 

Independence. 

Donations 

There were no donations made during the year . 

Auditors 

The resolution to reappoint the present Auditors, Messrs. Ernst 

& Young, Chartered Accountants, who have expressed their 

willingness to continue in office, will be proposed at the Annual 

General Meeting. 

The following payments were made to them during the year: - 

Audit Fees 

Fees for other services 

(Tax related work) 

Company 

Rs. 

275,000 

383,096 

Group 

Rs. 

756,869 

908,479 

As far as the Directors are aware, the Auditors do not have any 

relationship or interest in the Company. 

The Audit Committee reviews the appointment of the Auditors, 

its effectiveness and its relationship with the Company 

including the level of audit and non-audit fees paid to the 

Auditors. Details on the work of the Audit Committee are set out 

under Corporate Governance.



ON THE AFFAIRS OF THE COMPANY Contd... 

Notice of Meeting 

The Annual General Meeting will be held on 28th August 2012 

at 11.30 a.m. at BCIS (Bandaranaike Center for International 

Studies) Auditorium, BMICH, Bauddhaloka Mawatha, 

Colombo 07. 

The Notice of the Annual General Meeting appears on page 02. 

For and on behalf of the Board. 

………………………. 

Mr. A.N.U. Jayawardena/Chairman 

………………………… 

Mr. H.A.R.K. Wickramatileka/Director 

………………………………. 

Managers & Secretaries (Pvt) Ltd 

Secretaries 

Mercantile Shipping Company Plc 



07


08 

DIRECTORS’ PROFILES 

A N U Jayawardena 

M.A., LI.B. (Cantab) Barrister at Law of Lincolns Inn. 

Attorney at Law of the Supreme Court of Sri Lanka. 

Founder Director of Mercantile Shipping Company PLC and 

presently its Chairman, and Founder Director (Past) of Air 

Lanka. Past Director of two Commercial Banks and of two 

Leasing and Financial Services Companies. Presently Director 

of Union Chemicals PLC, International Construction 

Consortium Limited and also Director of several other 

companies. 

Capt. K. Kriwat 

Master Mariner 

Founder Director of Mercantile Shipping Company PLC. 

Presently the Deputy Chairman of the Company. His career 

extends to more than 50 years at sea and on shore with a 

wealth of experience in Shipping and Ship Management. 

T. Kriwat 

Solicitor at Law in Germany 

Appointed to the Mercantile Shipping Company PLC Board in 

October 2000. He is the Managing Director of both Mercantile 

Shipping Company PLC and Reederei Eugen Friederich, 

Germany, the main shareholder of the Company at present. 

He is also a Director of number of shipping companies in 

Germany with more than 10 years experience in Shipping and 

Ship Management. 

H A R K Wickramatileka 

Fellow Member of the Institute of Chartered Accountants of Sri Lanka 

B.Sc. (Public Administration) Diploma in Professional Shipping, 

Norwegian Shipping Academy, Oslo 


May 1991. Held the position of Director Finance for over 15 

years. He is a Director of Colombo Dockyard PLC and several 

other companies. Also he is the Chairman of Mercantile 

Emerald Shipping (Pvt) Ltd, Mercantile Marine Management 

Ltd., Royali Power (Pvt) Ltd and Royali Homes (Pvt) Ltd. 

T N Jayasinghe 

Fellow of the Chartered Institute of Management Accountants, U.K. 


November 2006. He is a Director of Union Chemicals Lanka 

PLC and Chairman of the Audit Committee of that Company. 

Managing Director of Premier Managements Ltd and Deputy 

Chairman of several companies in the Allied Investments Ltd 

Group. 

C P P G Hapudeniya 

Associate of the Chartered Institute of Management Accountants, U.K. 


November 2006 with a wealth of experience in Private Sector as 

an entrepreneur. 

He is the Founder Chairman and Managing Director of 

International Paper Products (Pvt) Ltd and counts for over 16 

years of experience in the corrugated carton industry. He is 

currently serving as the Chairman of the Remuneration 

Committee and is also a member of the Audit Committee of the 

Company. 

I A H Esufally 

Bachelor of Arts (Honours) Degree in Accounting and Economics from 

the University of Kent , U.K. 

He was appointed to the Mercantile Shipping Company PLC 

Board in January 2009. He is on the Board of Hemas Holdings 

PLC and Chairman of its Transportation Sector. He is also 

Chairman of Hemas Power PLC and counts over 25 years 

management experience . 


Bachelor of Commerce (Special) Degree, University of Sri 

Jayawardenepura Sri Lanka Masters Degree in Shipping 

Management, World Maritime University, Malmo Sweden Licentiate of 

the Institute of Chartered Accountants of Sri Lanka Diploma in Certified 

Management Accountants of Sri Lanka 


July 2010. Presently he is the Finance Manager of Ceylon 

Shipping Corporation with more than 15 years experience in 

shipping. 

Sunil Obadage 

Bachelor of Arts, University of Colombo, Sri Lanka Post Graduate 

Diploma Holder in Professional Shipping from Norwegian Shipping 

Academy of Oslo. 


September 2011.Presently he functions as the General 

Manager of Ceylon Shipping Corporation Ltd, where he has a 

carreer record of over 14 years. He has a continued carrier 

record of over 30 years in the field of shipping and logistics 

since he joined the industry as a management trainee after 

completion of his graduation from University of Colombo. 

He has worked for National Shipping Company of Saudi Arabia 

at its head office in Riyadh and in the Regional office in 

Singapore for over 12 years in Container Liner Operations and 

Logistics. He also serves as a member of the Board of Directors 

of the Sri Lanka Port Management & Consultancy Services 

(Pvt) Ltd which is a subsidiary of Sri Lanka Ports Authority. 

Kasturi Chellaraja Wilson 

Fellow of the Chartered Institute of Management Accountants of UK 

She was appointed to the Mercantile Shipping Company PLC 

Board in November 2011. She is on the Board of Management 

of Hemas Holdings PLC and is the Managing Director of the 

Hemas Transportation sector, with over 22 years experience 

in the Management, Finance, IT, and Processes.


CORPORATE GOVERNANCE 

DIRECTORS' RESPONSIBILITIES 

The Board of Directors is responsible for setting up a policy framework for Good Governance Practice to protect and enhance the 

shareholders value of the Company. 

The Company applies the Code of Best Practice issued by the Institute of Chartered Accountants of Sri Lanka and complies with the 

requirements of the Securities Exchange Commission of Sri Lanka and the Colombo Stock Exchange. 

The responsibilities of the Directors are to exercise in their best judgment what they reasonably believe to be in the best interest of 

the Company for the creation of long term value for the shareholders. 

The Board has taken necessary steps to ensure that the Management discharges its duties responsibly and efficiently to meet the 

above criteria. 

Board of Directors 

The present Board consists of ten Directors, nine of whom are non-executive Directors in compliance with Rule 7.10.1 (a) and out of 

the non-executive Directors four are Independent Directors in compliance with Rule 7.10.2 (a) of CSE's Listing Rules. 

All the Non-executive Directors have submitted a signed declaration of Independence in compliance with the Rule 7.10.2 ( b ) of 

CSE's Listing Rules. 

Director 

Position held 

on the Board 

Date of Appointment 

to the Board 

Nature of Appointment 

A.N.U. Jayawardena 

Chairman 

17th March 1981 

Non-executive Director 

Capt. K. Kriwat 

Deputy Chairman 

17th March 1981 


T. Kriwat 

Managing Director 

16th October 2000 

Executive Director 


Director 

13th May 1991 



Director 

30th November 2006 

Non-executive Independent Director 


Director 

30th November 2006 



Director 

22nd January 2009 



Director 

29th July 2010 


S Obadage 

Director 

12th September 2011 


Ms K A C Wilson 

Director 

9th November 2011 


The Board established two sub-committees namely the Audit Committee and the Remuneration Committee. 

09


CORPORATE GOVERNANCE Contd... 

AUDIT COMMITTEE 

The Audit Committee consists of three non-executive 

independent Directors in compliance to Rule 7.10.6(a) of the 

Colombo Stock Exchange. 

REMUNERATION COMMITTEE 

The Remuneration Committee consists of two non-executive 

independent Directors in compliance to Rule 7.10.5(a) of the 


Director Position held No. of 

Meetings held 

Director 

Position held 

No. of 

Meetings held 




(Appointed on 25th 

May.2011) 

Chairman 

Member 

Member 

Independence of the Members of the Committees 

Mr. T.N. Jayasinghe is a Fellow of the Chartered Institute of 

Management Accountants, U.K. with 40 years experience in 

the Private Sector locally and abroad is independent as per the 

criteria set out by the Colombo Stock Exchange. 

Mr. C.P.P.G. Hapudeniya is an Associate of the Chartered 

Institute of Management Accountants, U.K. with a wealth of 

experience in Private Sector as an entrepreneur and is 

independent as per the criteria set out by the Colombo Stock 

Exchange. 

Mr G M Vikum Pradeepa holds a Bachelor of Commerce 

(Special) Degree from University of Jayawardenapura and a 

Master Degree in Shipping Management from World Maritime 

University, Malmo, Sweden. He is the Finance Manager of 

Ceylon Shipping Corporation Ltd with more than 15 years 

experience in shipping. 

05 



Chairman 

Member 

The Remuneration Committee recommends the remuneration 

payable to the Executive Director based on relevant criteria. 

The Board makes the final determination after consideration of 

such recommendation. 

DISCLOSURE OF REMUNERATION 

The total of Directors' Remuneration is reported in Note 25 to 

the Financial Statements in accordance with Rule 6.6(b) of the 


STATUTORY PAYMENTS 

All statutory payments have been made by the Company. 

LEVEL OF COMPLIANCE WITH THE CSE'S LISTING 

RULING 

Level of compliance with the CSE's Listing Ruling section 6, 

Rules on Corporate Governance are given in the following 

table. 

01 

A special feature of the Committee is that all three members are 

members of recognized professional bodies in accordance 

with Rule 7.10.6(a) of the Colombo Stock Exchange and with 

experience in not only in their relevant fields but in shipping as 

well. 

The role of the Audit Committee is to assist the Board in the 

discharge of its duties by ensuring that the Company follows 

adequate systems of internal control to minimize risk and 

errors, prepare financial statements in accordance with Sri 

Lanka Accounting Standards and comply with directions 

issued by the Regulatory Authorities and the laws of the land. 

The committee met five times during the year assisted by the 

Chief Financial Officer. 

The Committee also met with the External Auditors and 

reported their findings and recommendations to the Board 

regularly. 

10



Rule No. 

Subject 

Applicable requirement 

Compliance 

Status 

Details 

7.10.1 

Non-Executive Directors 

At least one third of the total 

number of Directors should be 

Non-Executive Directors 

Compliant 

Nine of Ten Directors 

are Non-Executive 

Directors 

7.10.2 

(a) 

Independent Directors 

Two or one third of Non- 

Executive Directors, whichever 

is higher should be 

Independent 

Compliant 

Four of the Nine Non- 

Executive Directors 

are Independent 

7.10.2 

(b) 

Independent Directors 

Each Non-Executive Director 

should submit a declaration of 

independence/nonindependence 

in the 

prescribed format 

Compliant 

Non-Executive 

Directors have 

submitted the 

declaration. 

7.10.3 

(a) 

Disclosure relating to Directors 

Names of independent 

Directors should be disclosed 

in the Annual Report 

Compliant 

Given in page 09 

under the heading 


7.10.3 

(b) 


The basis for the Board to 

determine a Director as 

independent, if specified 

criteria for independence is 

not met 

Compliant 




7.10.3 

(c) 


A brief resume of each 

Director should be included in 

the Annual Report including 

the areas of expertise 

Compliant 



Directors’ Profiles 

7.10.3 

(d) 


Forthwith provide a brief 

resume of new Directors 

appointed to the Board with 

details specified in 7.10.3(d) to 

the Exchange 

Compliant 

Colombo Stock 

Exchange informed of 

new appointments. 

7.10.5 


A listed company shall have a 


Compliant 

Remuneration 

Committee in place 

Please refer page 10 

7.10.5 

(a) 

Composition of Remuneration 

Committee 

Shall comprise of Non- 

Executive Directors a majority 

of whom will be independent 

Compliant 

Both Directors are 

independent 

7.10.5 

(b) 

Functions of Remuneration 

Committee 

The Remuneration Committee 

shall recommend the 

remuneration of Chief 

Executive Officer and 


Compliant 

As above and stated 

in this Report 

11



Rule No. 

Subject 

Applicable requirement 

Compliance 

Status 

Details 

7.10.5 

(c) 

Disclosure in the Annual Report 

relating to Remuneration 

Committee 

The Annual Report should set 

out: 

a) Names of directors 

comprising the Remuneration 

Committee 

b) Statement of Remuneration 

Policy 

c) Aggregated remuneration 

paid to Executive and Non- 


Compliant 

Compliant 

Compliant 

Please refer 

Page 10 

7.10.6 


The company shall have a 


Compliant 




7.10.6 

(a) 

Composition of Audit Committee 

Shall comprise of Non- 

Executive Directors a majority 

of whom will be independent 

Compliant 

As above 

Non-Executive Director shall 

be appointed as the Chairman 

of the Committee 

Compliant 

As above 

Chief Executive Officer and the 

Chief Financial Officer should 

attend Audit Committee 

Meetings 

Compliant 

As above 

The Chairman of the Audit 

Committee or one member 

should be a member of a 

professional accounting body 

Compliant 

As above 

7.10.6 

(b) 

Audit Committee Functions 

Should be as outlined in the 

Section 7 of the listing rules 

Compliant 

As above 

7.10.6 

(c) 

Disclosure in the Annual Report 

relating to Audit Committee 

a) Names of Directors 

comprising the Audit 

Committee 

Compliant 

As above and given 

in this Report 

b) The Audit Committee shall 

make a determination of the 

independence of the Auditors 

and disclose for such 

determination 

Compliant 

As above 

c) The Annual Report shall 

contain a Report of the Audit 

Committee setting out of the 

manner of Compliance of the 

functions 

Compliant 

As above 

12


AUDIT COMMITTEE REPORT 

Year ended 31 March 2012 

The primary role of the Audit Committee is to oversee the 

integrity of the Company’s financial accounting process and 

internal controls .It is appointed by Board of Directors and 

comprise of three Non –executive Independent Directors. 

The Audit Committee met on five occasion during the year 

ended 31st March 2012. 

The Audit Committee examines any matters relating to the 

financial reporting system, the system of internal control over 

financial reporting and the audit process. The Internal Audit 

function is outsourced and carried out by Messrs.D. H.P. 

Munaweera & Company and the Committee reviews and 

discuss the Audit Reports submitted by the Internal Auditors. 

The Audit Committee also reviews and approves the Annual 

and Interim Financial Statements prior to the approval by the 

Board. The Audit Committee is briefed by the external auditors 

Messrs. Ernst & Young on the progress and conduct of the 

statutory audit and discusses audit related issues with them. 

The Audit Committee examined the independence of the 

External Auditors having any interest in the Company and as 

per the listing requirements of Colombo Stock Exchange 

evaluated the performance and services provided. 

The Audit Committee recommends to the Board of Directors 

that Messrs. Ernst & Young be appointed as the Auditors of the 

Company for the financial year ending 31st March 2013, 

subject to the approval of the shareholders at the Annual 

General Meeting. 

T. N. Jayasinghe 

Chairman – Audit Committee. 


13


INDEPENDENT AUDITOR'S REPORT 

TO THE SHAREHOLDERS OF MERCANTILE SHIPPING COMPANY PLC 

ERNST & YOUNG 

Chartered Accountants 

201 De Saram Place 

P.O. Box 101 

Colombo 10 

Sri Lanka 

Tel : (0) 11 2463500 

Fax Gen : (0) 11 2697369 

Tax : (0) 115578180 

eysl@lk.ey.com 

Report on the Financial Statements 

We have audited the accompanying Financial Statements of 

Mercantile Shipping Company PLC (“Company”), the 

Consolidated Financial Statements of the Company and its 

subsidiaries which comprise the Balance Sheets as at 31 

March 2012, and the Income Statements, Statements of 

Changes in Equity and Cash Flow Statements for the year then 

ended, and a summary of significant accounting policies and 

other explanatory notes. 

Management’s Responsibility for the Financial Statements 

Management 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 Opinion 

Our responsibility is to express an opinion on these Financial 

Statements based on our audit. We conducted our audit in 

accordance with Sri Lanka Auditing Standards. Those 

standards require that we plan and perform the audit to obtain 

reasonable assurance whether the Financial Statements are 

free from material misstatement. 

An audit includes examining, on a test basis, evidence 

supporting the amounts and disclosures in the Financial 

Statements. An audit also includes assessing the accounting 

policies used and significant estimates made by management, 

as well as evaluating the overall Financial Statement 

presentation. 

We have obtained all the information and explanations which to 

the best of our knowledge and belief were necessary for the 

purposes of our audit. We therefore believe that our audit 

provides a reasonable basis for our opinion. 

Opinion 

In our opinion, so far as appears from our examination, the 

Company maintained proper accounting records for the year 

ended 31 March 2012 and the Financial Statements give a true 

and fair view of the Company’s state of affairs as at 31 March 

2012 and its profit 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 state of affairs as at 31 March 2012 and 

the loss 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 Requirements 

In our opinion, these Financial Statements also comply with the 

requirements of Sections 151(2) and 153(2) to 153(7) of the 

Companies Act No. 7 of 2007. 

18 July 2012 


14 

Partners: A D B Talwatte FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva ACA Ms. Y A De Silva ACA W R H Fernando FCA FCMA 

W K B S P Fernando FCA ACMA A P A Gunasekara FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond) H M A Jayesinghe FCA FCMA 

Ms. A A Ludowyke FCA FCMA Ms. G G S Manatunga ACA Ms. L C G Nanayakkara FCA FCMA Mr. N M Sulaiman ACA ACMA B E Wijesuriya ACA ACMA


BALANCE SHEET 

As at 31 March 2012 

Group 

Company 

ASSETS 

Non-Current Assets 

Note 

2012 

Rs. 


Rs. 


Rs. 


Rs. 

Property, Plant and Equipment 

Investment Property 

Investments in Subsidiaries 

Other Investments 

Trade and Other Receivables 

Deffered Tax Asset 

3 

4 

5 

6 

8 

19 

3,707,590,108 

9,335,783 

- 

1,382,630 

- 

1,990,069 

3,720,298,590 

3,550,469,860 

9,851,564 

- 

1,382,630 

- 

- 

3,561,704,054 

19,666,740 

9,335,783 

165,000,000 

1,382,630 

87,646,078 

1,990,069 

285,021,299 

22,402,948 

9,851,564 

165,000,000 

1,382,630 

87,646,078 

- 

286,283,220 

Current Assets 

Inventory 


Income Tax Recoverable 

Short term Investment 

Cash and Cash Equivalents 

Total Assets 

7 

8 

9 

10 

4,787,105 

38,864,642 

10,309,910 

42,174,408 

77,803,729 

173,939,794 

3,894,238,384 

7,289,758 

38,153,193 

10,309,910 

29,878,575 

87,391,002 

173,022,439 

3,734,726,493 

- 

31,459,641 

- 

42,174,408 

18,918,379 

92,552,428 

377,573,727 

- 

35,049,000 

- 

29,878,575 

17,302,247 

82,229,823 

368,513,042 

EQUITY AND LIABILITIES 

Stated Capital 

Exchange Reserves 

Retained Earnings 

Total Equity 

11 

37,262,606 

16,732,652 

236,788,810 

290,784,068 

37,262,606 

(517,933) 

269,005,257 

305,749,931 

37,262,606 

- 

269,006,056 

306,268,662 

37,262,606 

- 

263,492,014 

300,754,620 

Non-Current Liabilities 

Interest Bearing loans and Borrowings 

Retirement Benefit Liability 

Current Liabilities 

Trade and Other Payables 

Income Tax Payable 

Interest Bearing loans and Borrowings 

Total Equity and Liabilities 

12 

13 

14 

20 

12 

3,357,935,384 

1,015,236 

3,358,950,620 

52,584,003 

34,621,580 

157,298,113 

244,503,696 

3,894,238,384 

3,062,355,160 

882,181 

3,063,237,341 

45,145,184 

36,377,352 

284,216,685 

365,739,221 

3,734,726,493 

- 

827,621 

827,621 

37,076,212 

33,401,232 

- 

70,477,444 

377,573,727 

- 

766,746 

766,746 

32,214,223 

34,777,453 

- 

66,991,676 

368,513,042 

These Financial Statements are in compliance with the requirements of the Companies Act No. 7 of 2007. 

Mrs. C.D.A. Peiris 

Chief Financial Officer 

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

behalf of the Board by. 

A.N.U. Jayawardena 

Director 


Director 

The Accounting Policies and Notes on pages 19 through 37 form an integral part of the Financial Statements. 

18 July 2012 


15


INCOME STATEMENT 


Group 

Company 

Note 


Rs. 


Rs. 


Rs. 


Rs. 

Revenue 

15 

609,503,093 

599,081,726 

- 

- 

Cost of Sales 

(507,495,658) 

(485,727,701) 

- 

- 

Gross Profit/ (Loss) 

102,007,435 

113,354,025 

- 

- 

Other Income and Gains 

16 

19,548,359 

5,517,119 

24,491,978 

15,598,489 

Distribution Cost 

(660,009) 

(419,004) 

(621,550) 

(308,245) 

Administrative Expenses 

(52,724,248) 

(57,049,652) 

(21,838,487) 

(30,860,073) 

Finance Cost 

17.1 

(103,870,087) 

(91,075,897) 

- 

- 

Finance Income 

17.2 

2,332,385 

1,063,483 

2,332,385 

1,056,338 

Profit/ (Loss) Before Tax 

18 

(33,366,164) 

(28,609,925) 

4,364,325 

(14,513,491) 

Current Year Income Tax (Charge) /Reversal 

19 

1,149,716 

5,257,133 

1,149,716 

6,477,483 

Profit/ (Loss) for the Year 

(32,216,448) 

(23,352,793) 

5,514,042 

(8,036,008) 

Earnings/ (Loss) Per Share - Basic 

21 

(11.32) 

(8.21) 


16


STATEMENT OF CHANGES IN EQUITY 


COMPANY 

Note 

Stated 

Capital 

Rs. 

Retained 

Earnings 

Rs. 

Total 

Rs. 

As at 1 April 2010 

24,924,820 

285,236,673 

310,161,493 

Loss for the Year 

(8,036,008) 

(8,036,008) 

Scrip Dividend (Issue of Shares) 

11 

12,337,786 

(13,708,651) 

(1,370,865) 


37,262,606 

263,492,014 

300,754,620 

Profit for the Year 

- 

5,514,042 

5,514,042 


37,262,606 

269,006,056 

306,268,662 

GROUP 

Stated 

Capital 

Rs. 

Exchange 

Reserve 

Rs. 

Retained 

Earnings 

Rs. 

Total 

Rs. 

As at 1 April 2010 

24,924,820 

237,619 

306,066,701 

331,229,140 


- 

- 

(23,352,793) 

(23,352,793) 

Scrip Dividend (Issue of Shares) 

11 

12,337,786 

- 

(13,708,651) 

(1,370,865) 

Effect on Revaluation of Foreign Operation 

- 

2,979,066 

- 

2,979,066 

Effect on Revaluation of Net Investment 

- 

(3,734,617) 

- 

(3,734,617) 


37,262,606 

(517,933) 

269,005,257 

305,749,931 


- 

- 

(32,216,448) 

(32,216,448) 

Effect on Revaluation of Foreign Operation 

- 

9,170,139 

- 

9,170,139 

Effect on Revaluation of Net Investment 

- 

8,080,446 

- 

8,080,446 


37,262,606 

16,732,652 

236,788,810 

290,784,068 


17


CASH FLOW STATEMENT 


Group 

Company 

Cash Flows From / (Used in) Operating Activities 

Note 


Rs. 


Rs. 


Rs. 


Rs. 

Profit/ (Loss) Before Tax 

(33,366,164) 

(28,609,925) 

4,364,325 

(14,513,491) 

Adjustments for 


Depreciation 

Profit on Disposal of Property, Plant and Equipment 

Finance Costs 

Provision for Defined Benefit Plans 

Exchange Loss/ (Gain) 

Operating Profit/(Loss) before Working Capital Changes 

17.2 

17.1 

13 

(2,332,385) 

181,315,586 

(5,376,313) 

103,870,087 

120,282 

(8,669,195) 

235,561,899 

(1,063,483) 

182,731,519 

(2,708,333) 

91,075,897 

191,874 

4,533,282 

246,150,831 

(2,332,385) 

3,251,991 

(5,376,313) 

- 

60,875 

(1,529,075) 

(1,560,581) 

(1,056,338) 

3,076,852 

(2,708,333) 

- 

78,021 

1,300,672 

(13,822,618) 

(Increase)/Decrease in Inventories 

(Increase)/Decrease in Trade and Other Receivables 

Increase/(Decrease) in Trade and Other Payables 

Cash Generated From Operations 

2,502,654 

(711,449) 

7,438,819 

244,791,922 

(1,801,208) 

(2,067,686) 

(21,154,366) 

221,127,571 

- 

3,589,359 

4,861,989 

6,890,767 

- 

107,396,245 

(30,726,834) 

62,846,793 

Finance Costs Paid 

Defined Benefit Plan Costs Paid 

Income Tax Paid 

Net Cash From/(Used in) Operating Activities 

17.1 

13 

(103,870,087) 

- 

(2,596,123) 

140,921,835 

(91,075,897) 

(230,350) 

(5,631,300) 

124,190,023 

- 

- 

(2,216,574) 

4,674,193 

- 

(230,350) 

(6,184,516) 

56,431,927 

Cash Flows From / (Used in) Investing Activities 

Acquisition of Property, Plant and Equipment 

Proceeds from Disposal of Property, Plant and Equipment 

Investment made in Subsidiaries 

Finance Income Received 

17.2 

Net Cash Flows From/(Used in) Investing Activities 

(3,231,061) 

5,376,313 

- 

2,332,385 

4,477,637 

(6,090,925) 

2,708,333 

- 

1,063,483 

(2,319,109) 

- 

5,376,313 

- 

2,332,385 

7,708,698 

(6,090,950) 

2,708,333 

(125,000,000) 

1,056,338 

(127,326,279) 

Cash Flows From / (Used in) Financing Activities 

With Holding Tax Paid on Script Dividend 

Repayment of Interest Bearing Loans and Borrowings 

Net Cash Flows From/(Used in) Financing Activities 

12 

- 

(152,728,923) 

(152,728,923) 

(1,370,865) 

(177,635,428) 

(179,006,293) 

- 

- 

- 

(1,370,865) 

- 

(1,370,865) 

Effect of Exchange Rate Changes on Cash and Cash Equivalents 

10,038,010 

(4,533,282) 

1,529,074 

(1,300,672) 

Net Increase/(Decrease) in Cash and Cash Equivalents 

2,708,560 

(61,668,661) 

12,382,891 

(73,565,889) 

Cash and Cash Equivalents at the Beginning of the Year 

Cash and Cash Equivalents at the End of the Year 

117,269,577 

119,978,137 

178,938,238 

117,269,577 

47,180,822 

61,092,787 

120,746,711 

47,180,822 

Analysis of Cash and Cash Equivalents 

Short Term Investments 

Cash and Bank Balances 

Cash and Cash Equivalents at the End for the Purpose of Cash Flow Statement 

9 

10 

42,174,408 

77,803,729 

119,978,137 

29,878,575 

87,391,002 

117,269,577 

42,174,408 

18,918,379 

61,092,787 

29,878,575 

17,302,247 

47,180,822 


18


NOTES TO THE FINANCIAL STATEMENTS 


CORPORATE INFORMATION 

1.1 General 

Mercantile Shipping Company PLC (“Company”) is a 

Public Limited Liability Company, incorporated and 

domiciled in Sri Lanka and listed on the Colombo Stock 

Exchange. The registered office and the principal place 

of business of the Company are situated at No.441, K 

Cyril C Perera Mawatha, Colombo 13. 

The Consolidated Financial Statements of Mercantile 

Shipping Company PLC for the year ended 31 March 

2012 comprises of the Company and its subsidiaries, 

Mercantile Global Shipping Limited, Mercantile Emerald 

Shipping (Private) Limited. 

1.2 Principal Activities and Nature of Operations 

During the year, the principal activities of the Group were 

as follows: 

Mercantile Shipping Company PLC 

The principal activity of the Company was hiring and 

operating of vessels for sea cargo operation. The 

Company has disposed its last sea going vessel M.V. 

Safmarine Soyo on 23 January 2010. As a result, no 

hiring and operation of vessel activity has been carried 

out by the Company during the year. 

However, the Company manages its fully owned 

subsidiary of Mercantile Emerald Shipping (Private) 

Limited which operates two vessels for international sea 

cargo. 

Mercantile Emerald Shipping (Private) Limited 

Hiring of vessels for international sea cargo operation. 

Mercantile Global Shipping Limited 

Not in operation 

MSC Trading Limited 

Not in operation. 

1.3 Date of Authorization for Issue 

The Financial Statements of Mercantile Shipping 

Company PLC and its Subsidiaries for the year ended 31 

March 2012 were authorized for issue in accordance 

with a resolution of the Board of Directors on 18 July 

2012. 

2. GENERAL POLICIES 

2.1 Basis of Preparation 

The Financial Statements of the Group have been 

prepared on a historical cost basis. The Financial 

Statements are presented in Sri Lankan Rupees except 

when otherwise indicated. The preparation and 

presentation of these Financial Statements are in 

compliance with the Companies Act No. 7 of 2007. 

The Financial Statements of Mercantile Global Shipping 

Limited has been prepared other than on a going 

concern basis and the assets and liabilities are recorded 

at their realisable amounts. 

2.1.1 Statement of Compliance 

The Financial Statements of the Company and the 

Group have been prepared in accordance with Sri Lanka 

Accounting Standards (SLAS). 

2.1.2 Comparative Information 

The Accounting Policies have been consistently applied 

by the Companies in the Group and are consistent with 

those used in the previous year. 

2.1.3 Basis of Consolidation 

The Consolidated Financial Statements comprise the 

financial statements of Mercantile Shipping Company 

PLC and its subsidiaries of Mercantile Global Shipping 

Limited and Mercantile Emerald Shipping (Private) 

Limited for the financial year ended 31 March 2012. The 

financial statements of the subsidiaries are prepared for 

same reporting year as the Parent Company, using 

consistent accounting policies. 

Mercantile Global Shipping Limited and Mercantile 

Emerald Shipping (Private) Limited are fully owned 

subsidiaries of the Company. 

MSC Trading Limited is a non operational subsidiary 

since 01.04.2009. 

All intra group transactions, balances, income and 

expenses, profit and losses resulting from intra-group 

transactions that are recognized in assets, are 

eliminated in full. 

Subsidiaries are fully consolidated from the date of 

acquisition, being the date on which the company 

obtains control, and continue to be consolidated until 

the date that such control ceases. 

2.2 Segmental Information 

A business segment is a distinguishable component of 

an enterprise that engages in providing individual 

services or group of services that is subject to risk and 

returns and is different from those of other business 

segments. 

The segments are determined based on the Group's 

geographical spread of operations. 

The qualifying segments under geographical segment 

reporting are as follows: 

-Regional (Business carried out with in Sri Lankan 

waters) 

-International (Business carried out side Sri Lankan 

waters) 

19


NOTES TO THE FINANCIAL STATEMENTS Contd... 


20 

The Group disposed its regional sea cargo vessels 

“Mercs Ruhunu” and “Mercs Yala” on 27 February 2009 

and 13 March 2009 respectively. As a result there are no 

distinguishable components to be identified as a 

segment as all operations are treated as one segment 

(International Sea Cargo Operation). 

2.3 SIGNIFICANT ACCOUNTING JUDGMENTS AND 

ESTIMATES 

Judgments: 

In the process of applying the Group's accounting 

policies, management has made the following 

judgments, apart from those involving estimations, 

which has the most significant effect on the amounts 

recognized in the Financial Statements. 

Deferred Tax Assets 

Deferred 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. 

Owner Occupied Properties and Investment 

Property 

In determining if a property qualifies as an Investment 

Property, the Group makes a judgment whether the 

property generates independent cash flows rather than 

cash flows that are attributable not only to the property 

but also other assets. Judgment is also applied in 

determining if ancillary services are significant, so that a 

property does not qualify as investment property. 

Functional Currency 

The choice of the functional currency of the Companies 

in the Group has been made based on factors such as 

the primary economic environment in which the 

Company operates, the currency that mainly influences 

sales prices for services, costs of providing goods and 

services and labor costs. 

Estimates: 

Estimation of Useful Life of Property, Plant and 

Equipments 

The charge in respect of periodic depreciation is derived 

after determining an estimate of an asset's expected 

useful life and the expected residual value at the end of 

its life. The useful lives of Group assets are determined 

by management at the time the asset is acquired and 

reviewed annually for appropriateness. The lives are 

based on historical experience with similar assets as well 

as anticipation of future events. 

Defined Benefit Plans 

The cost of defined benefit plans – gratuity is determined 

using the gratuity formula method. The gratuity formula 

method involves making assumptions about discount 

rates and future salary increases as disclosed in note 

13.1 of these financial statements. Due to the long term 

nature of these plans, such estimates are subject to 

significant uncertainty. 

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING 

POLICIES 

2.4.1 Foreign Currency Translation 

The Financial Statements are presented in Sri Lanka 

Rupees, which is the functional and presentation 

currency of the Group. Transactions in foreign 

currencies are initially recorded at the functional 

currency rate ruling at the date of the transaction. 

Monetary assets and liabilities denominated in foreign 

currencies are retranslated at the functional currency 

rate of exchange ruling at the balance sheet date. All 

differences are taken to profit or loss. 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 was determined. 

Foreign Operations: 

The balance sheet and income statement of Mercantile 

Emerald Shipping (Pvt) Limited , which is deemed to 

be a foreign operation are translated to Sri Lanka 

Rupees at the rate of exchange prevailing as at the 

balance sheet date and at the average annual rate of 

exchange for the period respectively. 

The exchange differences arising on the translation are 

taken directly to a separate component of equity. On 

disposal of a foreign entity, the deferred cumulative 

amount recognized in equity relating to that the foreign 

operation is recognized in the income statement. 

2.4.2 Taxation 

a) Current Taxes 

Current 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 taxation authorities. 

The tax rates and tax laws used to compute the amount 

are those that are enacted or substantively enacted by 

the balance sheet date. 

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 relevant tax legislations.




Pursuant to an agreement dated 09 November 2007 

entered into with Board of Investment of Sri Lanka under 

Section 17 of the Board of Investment Law, Mercantile 

Emerald Shipping (Private) Limited's income from the 

business of international sea cargo operation is 

exempted, for a period of 5 years from the year in which 

the enterprise commences to make profits or any year of 

assessment not later than 2 years reckoned from the date 

of commercial operation whichever is earlier as may be 

specified in a certificate issued by the Board. 

b) Deferred Taxation 

Deferred income tax is provided, using the liability 

method, on temporary differences at the balance sheet 

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 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. 

Deferred income tax assets are recognised for all 

deductible temporary differences, carry-forward of 

unused tax assets 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 assets and unused tax 

losses can be utilised except 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. 

The carrying amount of deferred income tax assets is 

reviewed at each balance sheet 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. 

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 at the balance sheet date. 

Deferred income tax assets and deferred income tax 

liabilities are offset if a legally enforceable right exists to 

set off current income tax assets against current income 

tax liabilities and the deferred income taxes relates to the 

same entity and same taxation authority. 

c) Sales Tax- Value Added Tax 

Revenues, expenses and assets are recognised net of 

the amount of sales tax except where the sales tax 

incurred on a purchase of assets or service is not 

recoverable from the taxation authorities in which case 

the sales tax is recognised as a part of the cost of the 

asset or part of the expense items as applicable and 

receivable and payable that are stated with the amount 

of sales tax included. The amount of sales tax 

recoverable and payable in respect of taxation 

authorities is included as a part of receivables and 

payables in the Balance Sheet. 

d) Economic Service Charge (ESC) 

ESC is payable on the liable turnover at specified rates. 

As per the provision of the Economic Service Charge Act 

No. 13 of 2006 and subsequent amendments thereto, 

ESC is deductible from the income tax liability. Any 

unclaimed liability can be carried forward and set off 

against the income tax payable as per the relevant 

provision in the Act. 

2.4.3 Borrowing Costs 

Borrowing costs are recognized as an expense in the 

period in which they are incurred, except to the extent 

where borrowing costs that are directly attributable to 

the acquisition, construction, or production of an asset 

that takes a substantial period of time to get ready for its 

intended use or sale, are capitalized as part of that asset. 

2.4.4 Inventories 

Inventories are valued at the lower of cost and net 

realizable value, after making due allowances for 

obsolete and slow moving items. Net realizable value is 

the price at which inventories can be sold in the ordinary 

course of business less the estimated cost of completion 

and the estimated cost necessary to make the sale. 

21




22 

The cost incurred in bringing inventories to its present 

location and conditions are accounted using the 

following cost formulae:- 

Consumables and Spares - At purchase cost on 

First in First out basis (FIFO) 

2.4.5 Trade and Other Receivables 

Trade receivables are stated at the amounts they are 

estimated to realize net of allowances for bad and 

doubtful receivables. 

Other receivables and dues from Related Parties are 

recognized at cost less allowances for bad and doubtful 

receivables. 

2.4.6 Cash and Cash Equivalents 

Cash and cash equivalents are cash in hand, demand 

deposits and short-term highly liquid investments, 

readily convertible to known amounts of cash and 

subject to insignificant risk of changes in value. 

For the purpose of cash flow statement, cash and cash 

equivalents consist of cash in hand and deposits in 

banks net of outstanding bank overdrafts. Investments 

with short maturities i.e. three months or less from the 

date of acquisition are also treated as cash equivalents. 

2.4.7 Property, Plant and Equipment 

Property, Plant and Equipment is stated at cost, 

excluding the costs of day to day servicing, less 

accumulated depreciation and accumulated 

impairment in value. Such cost includes the cost of 

replacing Property, part of the plant and equipment 

when that cost is incurred, if the recognition criteria are 

met. 

An item of property, plant and equipment is 

derecognized 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 in the year 

the asset is derecognized. 

The asset's residual values, useful lives and method of 

depreciation are reviewed, and adjusted if appropriate 

at each financial year end. 

2.4.8 Investment Properties 

Investment property is measured initially at cost, 

including transaction costs. The carrying amount 

includes the cost of replacing part of an existing 

investment property at the time that cost is incurred if 

the recognition criteria are met and excludes the costs 

of day to day servicing of an investment property. 

After initial recognition, the Group measures all of its 

investment property in accordance with requirements 

in SLAS 18 (Revised 2005) Property, Plant and 

Equipment other than those that meet the criteria are to 

be classified as held for sale. 

Investment properties are derecognized when either 

they have been disposed or when the investment 

property is permanently withdrawn from the use and no 

future economic benefit is expected from its disposal. 

Any gains or losses on retirement or disposal of an 

investment property are recognized in the income 

statement in the year of retirement or disposal. 

Transfers are made to investment property when, and 

only when, there is a change in use, evidenced by the 

end of owner occupation, commencement of an 

operating lease to another party or completion of 

construction or development. Transfers are made from 

investment property when, and only when, there is a 

change in use, evidenced by commencement of owner 

occupation or commencement of development with a 

view to sale. 

The provision for depreciation is calculated by using a 

straight line method on the cost of the building 

recognized as investment properties in order to write off 

such amounts over the estimated useful life of twenty 

years by equal installments. 

2.4.9 Leases 

a) Finance Leases 

Finance leases, which transfer to the Group 

substantially all the risks and benefits incidental to 

ownership of the leased item, are capitalized at the 

inception of the lease at the fair value of the leased 

property or, if lower, at the present value of the minimum 

lease payments. Lease payments are apportioned 

between the finance charges and reduction of the lease 

liability so as to achieve a constant rate of interest on the 

remaining balance of the liability. Finance charges are 

reflected in the Income Statement. 

Capitalized leased assets are depreciated over the 

shorter of the estimated useful life of the asset and the 

lease term, if there is no reasonable certainty that the 

Group will obtain ownership by the end of the lease 

term. The depreciation policy for depreciable leased 

assets is consistent with that for depreciable asset that 

are owned. 

2.4.10 Investments 

a) Current Investments 

Current investments are carried at the lower of cost and 

market value, determined on the basis of aggregate 

portfolio.




Unrealized gains and losses on current investments 

carried at market value are recognized as income or 

expense. 

b) Long Term Investments 

Long term investments are stated at cost. Carrying 

amounts are reduced to recognize a decline other than 

temporary, determined for each investment individually. 

These reductions for other than temporary declines in 

carrying amounts are charged to Income Statement. 

c) Investments in Subsidiaries 

Investments in subsidiaries are stated at cost in the 

Company's Financial Statements in accordance with 

Sri Lanka Accounting Standards No. 26 on 

Consolidated Financial Statements and Accounting for 

Investments in Subsidiaries. 

2.4.11 Impairment of Assets 

The Group assesses at each reporting date whether 

there is an indication that an asset may be impaired. If 

any such indication exists, or when annual impairment 

testing for an asset is required, the Group makes an 

estimate of the asset's recoverable amount. An asset's 

recoverable amount is the higher of an asset's or cashgenerating 

unit's fair value less costs to sell and its value 

in use and is determined for an individual asset, unless 

the asset does not generate cash inflows that are 

largely independent of those from other assets or 

groups of assets. Where the carrying amount of an 

asset exceeds its recoverable amount, the asset is 

considered impaired and is written down to its 

recoverable amount. In assessing value in use, the 

estimated future cash flows are discounted to their 

present value using a pre-tax discount rate that reflects 

current market assessments of the time value of money 

and the risks specific to the asset. In determining fair 

value less costs to sell, 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 are 

recognised in the income statement in those expense 

categories consistent with the function of the impaired 

asset. 

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 

company makes an estimate of recoverable amount. A 

previously recognised impairment loss is reversed only 

if there has been a change in the estimates used to 

determine the asset's recoverable amount since the last 

impairment loss was recognised. If that is the case the 

carrying amount of the asset is increased to its 

recoverable amount. That increased amount cannot 

''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. 

2.4.12 Provisions 

Provisions are recognized when present obligation 

(legal or constructive) as a result of a past event, where 

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. When the group expects 

some or all of a provision to be reimbursed, the 

reimbursement is recognized 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. 

2.4.13 Retirement Benefit Obligations 

a) Defined Benefit Plan – Gratuity 

Gratuity is a Defined Benefit Plan. The Company is 

liable to pay gratuity in term of relevant statute. In order 

to meet this liability, a provision is carried forward in the 

balance sheet in a manner computed using the 

prescribed formula in Appendix E of SLAS 16 (Revised) 

– Employee Benefits. 

The resulting difference between brought forward 

provision at the beginning of the year, net of any 

payment made, and the carried forward provision at the 

end of the year, is dealt with the Income Statement. 

The gratuity liability is not externally funded. 

b) Defined Contribution Plans – Employees' 

Provident Fund and Employees Trust Fund 

Employees of Mercantile Shipping Company PLC are 

eligible for Vavasseur Provident Fund Contributions 

and Employees' Trust Fund Contributions in line with 

respective Statutes and Regulations. The Company 

contributes 12% and 3% of gross emoluments of 

employees to Vavasseur Provident Fund and 

Employees' Trust Fund respectively. 

Employees of subsidiary companies are eligible for 

Employee Provident Fund Contributions and 

Employees' Trust Fund Contributions in line with 

respective Statutes and Regulations. The Companies 

contribute 12% and 3% of gross emoluments of 

employees to Employee Provident Fund and 

Employees' Trust Fund respectively. 

23


24 



2.4.14 Revenue Recognition 

Revenue is recognized to the extent that it is probable 

that the economic benefits will flow to the Company and 

the revenue and associated costs incurred or to be 

incurred can be reliably measured. Revenue is 

measured at the fair value of the consideration received 

or receivable net of trade discounts and sales taxes. 

Group turnover represents the amounts derived from 

the provision of services to customers outside the 

Group, which fall within the Group's ordinary activities 

net of Value Added Taxes and trade discounts. 

The following specific criteria are used for the purpose 

of recognition of revenue. 

a) Freight Income 

Income from voyage charter is recognized when a 

voyage is completed based on the complete discharge 

of cargos at the last port of call whilst income from time 

charter is recognized over the period of the time charter 

agreement on an accrual basis. Any losses arising from 

voyage or time charters are provided for in full as soon 

as they are anticipated. 

b) Rental Income 

Rental income arising on investment property is 

accounted for on a straight-line basis over the lease 

terms. 

c) Interest 

Revenue is recognised on a time proportion basis that 

takes in to account the effective interest rate on the 

asset. 

d) Others 

Net Gains and losses of a revenue nature on the 

disposal of property, plant and equipment and other 

noncurrent assets including investments have been 

accounted for in the income statement, having 

deducted from proceeds on disposal, the carrying 

amount of the assets and related selling expenses. 

2.5 SRI LANKA ACCOUNTING STANDARDS ISSUED 

BUT NOT YET EFFECTIVE 

The Group will be adopting the new Sri Lanka 

Accounting Standards (new SLAS) comprising LKAS 

and SLFRS applicable for financial periods 

commencing from 01 January 2012 as issued by the 

Institute of Chartered Accountants of Sri Lanka. The 

Group has commenced reviewing its accounting 

policies and financial reporting in readiness for the 

transition. As the Group has a 31 March year end, 

priority has been given to considering the preparation 

of an opening balance sheet in accordance with the 

new SLASs as at 01 April 2011. This will form the basis of 

accounting for the new SLASs in the future, and is 

required when the Group prepares its first new SLAS 

compliant financial statements for the year ending 31 

March 2013. Set out below are the key areas where 

accounting policies will change and may have an 

impact on the financial statements of the Group. The 

Group is in the process of quantifying the impact on the 

financial statements arising from such changes in 

accounting policies. 

(a) SLFRS 1 – First Time Adoption of Sri Lanka 

Accounting Standards requires the Group to prepare 

and present opening new SLFRS financial statements 

at the date of transition to new SLAS. The Group shall 

use the same accounting policies in its opening new 

SLAS financial statements and throughout all 

comparable periods presented in its first new SLAS 

financial statements. 

(b) LKAS 1 – Presentation of Financial Statements 

requires an entity to present, in a statement of changes 

in equity, all owner changes in equity. All non owner 

changes in equity are required to be presented in one 

statement of comprehensive income or in two 

statements (a separate income statement and a 

statement of comprehensive income). Components of 

comprehensive income are not permitted to be 

presented in the statement of changes in equity. This 

standard also requires the Group to disclose 

information that enables users of its financial 

statements to evaluate the entity's objectives, policies 

and processes for managing capital. 

(c) LKAS 16 – Property Plant and Equipment requires a 

company to initially measure an item of property plant 

and equipment at cost, using the cash price equivalent 

at the recognition date. If payment is deferred beyond 

normal credit terms, the difference between the cash 

price equivalent and the total payment is recognized as 

interest over the period, unless such interest is 

capitalized in accordance with LKAS 23 Borrowing 

Costs. 

All site restoration costs including other environmental 

restoration and similar costs must be estimated and 

capitalised at initial recognition, in order that such costs 

can be depreciated over the useful life of the asset. 

This standard requires depreciation of assets over their 

useful lives, where the residual value of assets is 

deducted to arrive at the depreciable value. It also 

requires that significant components of an asset be 

evaluated separately for depreciation. 

(d) LKAS 32 – Financial Instruments: Presentation, 

LKAS 39 – Financial Instruments: Recognition and 

Measurement and SLFRS 7 – Disclosures will result in 

changes to the current method of recognizing financial




assets, financial liabilities and equity instruments. 

These standards will require measurement of financial 

assets and financial liabilities at fair value at initial 

measurement. The subsequent measurement of 

financial assets classified as fair value through profit 

and loss and available for sale will be at fair value, with 

the gains and losses routed through the statements of 

comprehensive income and other comprehensive 

income respectively. 

Financial assets classified as held to maturity and loans 

and receivables will be measured subsequently at 

amortized cost. These assets will need to be assessed 

for any objective evidence of impairment as a result of 

one or more events that occurred after the initial 

recognition of the asset (a 'loss event') coupled with a 

reliable estimate of the loss event (or events) impact on 

the estimated future cash flows of the financial asset or 

group of financial assets . As such the current method of 

assessing for impairment will have to be changed to 

meet the requirements of these new standards. 

Financial liabilities will be either classified as fair value 

through profit or loss or at amortized cost. 

(e) LKAS 12 – Income Tax requires deferred tax to be 

provided in respect of temporary differences which will 

arise as a result of adjustments made to comply with the 

new SLAS. 

(f) LKAS 18 – Revenue requires the Group to measure 

revenue at fair value of the consideration received or 

receivable. It also specifies recognition criteria for 

revenue, and the company/group needs to apply such 

recognition criteria to the separately identifiable 

components of a single transaction in order to reflect 

the substance of the transaction. 

The Institute of Chartered Accountants of Sri Lanka has 

resolved an amendment to Sri Lanka Accounting 

Standard 10, whereby the provision contained in 

paragraphs 30 and 31 of SLAS 10 – Accounting Policies, 

Changes in Accounting Estimates and Errors, would not 

be applicable for financial statements prepared in 

respect of financial periods commencing before 1 

January 2012. 

25




3. PROPERTY, PLANT AND EQUIPMENT 

3.1 Company 

3.1.1 Gross Carrying Amounts 

At Cost 

Freehold Land 

Buildings on Freehold Land 

Furniture and Fittings 

Office Equipment 

Motor Vehicles 

Air-conditioning Equipment 

Computers 

Generator 

Total Gross Carrying Amount 

Balance 

As at 


Rs. 

6,775,000 

20,202,562 

2,854,071 

6,364,053 

17,289,892 

798,138 

1,678,530 

925,000 

56,887,246 

Additions 

Rs. 

- 

- 

- 

- 

- 

- 

- 

Disposals/ 

Transfers 

during the 

year 

Rs. 

- 

- 

- 

- 

(6,295,000) 

- 

- 

- 

(6,295,000) 

Balance 

As at 


Rs. 

6,775,000 

20,202,562 

2,854,071 

6,364,053 

10,994,892 

798,138 

1,678,530 

925,000 

50,592,246 

3.1.2 Depreciation 

At Cost 

Balance 

As at 


Rs. 

Charge for 

the Year 

Rs. 

Disposals/ 

Transfers 

during the 

year 

Rs. 

Balance 

As at 


Rs. 






Computers 

Generator 

Total Depreciation 

9,925,694 

2,854,071 

6,364,053 

12,137,451 

798,138 

1,595,519 

809,372 

34,484,298 

1,010,128 

- 

- 

1,527,441 

- 

83,011 

115,628 

2,736,208 

- 

- 

- 

(6,295,000) 

- 

- 

- 

(6,295,000) 

10,935,822 

2,854,071 

6,364,053 

7,369,892 

798,138 

1,678,530 

925,000 

30,925,506 

3.1.3 Net Book Values 


Rs. 


Rs. 

At Cost 

Freehold Land 



Computers 

Generator 

Total Carrying Amount of Property, Plant and Equipment 

6,775,000 

9,266,740 

3,625,000 

19,666,740 

6,775,000 

10,276,868 

5,152,441 

83,011 

115,628 

22,402,948 

3.1.4 During the financial year, the Company has not acquired Property, Plant and Equipment (2011- Rs. 6,090,950/-). 

3.1.5 Property, Plant and Equipment include fully depreciated assets having a gross carrying amounts of Rs. 14,777,103/- ( 2011 - Rs13,461,234/). 

26




3. PROPERTY, PLANT AND EQUIPMENT Contd... 

3.2 Group 

3.2.1 Gross Carrying Amounts 

At Cost 

Freehold Land 


Vessels 





Computers 

Generator 

Assets on Finance Leases 


Total Gross Carrying Amount 

Balance 

As at 


Rs. 

6,775,000 

20,202,562 

3,814,937,582 

2,854,071 

6,364,053 

17,289,892 

798,138 

1,678,890 

925,000 

3,871,825,188 

- 

3,871,825,188 

Additions 

Rs. 

- 

- 

- 

- 

- 

- 

310,182 

- 

310,182 

5,637,366 

5,947,547 

Disposals/ 

Transfers 

Rs. 

- 

- 

- 

- 

- 

(6,295,000) 

- 

- 

- 

(6,295,000) 

- 

(6,295,000) 


Gain 

Rs. 

- 

- 

367,820,906 

- 

- 

- 

- 

- 

- 

367,820,906 

- 

367,820,906 

Balance 

As at 


Rs. 

6,775,000 

20,202,562 

4,182,758,488 

2,854,071 

6,364,053 

10,994,892 

798,138 

1,989,072 

925,000 

4,233,661,276 

5,637,366 

4,239,298,642 

3.2.2 Depreciation 

At Cost 

Balance 

As at 


Rs. 

Charge 

for 

the year 

Rs. 

Disposals/ 

Transfers 

Rs. 


Gain 

Rs. 

Balance 

As at 


Rs. 


Vessels 





Computers 

Generator 

9,925,694 

286,871,030 

2,854,071 

6,364,053 

12,137,451 

798,138 

1,595,519 

809,372 

321,355,328 

1,010,128 

177,020,264 

- 

- 

1,527,441 

- 

113,480 

115,628 

179,786,941 

- 

- 

- 

- 

(6,295,000) 

- 

- 

- 

(6,295,000) 

- 

35,800,262 

- 

- 

- 

- 

1,557 

- 

35,801,819 

10,935,822 

499,691,556 

2,854,071 

6,364,053 

7,369,892 

798,138 

1,710,556 

925,000 

530,649,088 



Total Depreciation 

- 

321,355,328 

1,012,863 

180,799,804 

- 

(6,295,000) 

46,582 

35,848,401 

1,059,445 

531,708,534 

3.2.3 Net Book Values 


Rs. 


Rs. 

At Cost 

Freehold Land 


Vessels 


Computers 

Generator 

6,775,000 

9,266,740 

3,683,066,932 

3,625,000 

278,516 

- 

3,703,012,188 

6,775,000 

10,276,868 

3,528,066,552 

5,152,441 

83,371 

115,628 

3,550,469,860 



4,577,921 

- 

Total Carrying Amount of Property, Plant and Equipment 

3,707,590,108 

3,550,469,860 

27




3. PROPERTY, PLANT AND EQUIPMENT Contd... 

3.2.4 During the financial year, the Group acquired a Motor Vehicles & Computers to the aggregate value of Rs. 5,947,547 (2011- 

Rs. 6,090,950/- ). Cash payments amounting to Rs.3,231,061/- (2011 -Rs.6,090,950/- ) were made during the year for purchase of 

Property, Plant and Equipment. 

3.2.5 Property, Plant and Equipment include fully depreciated assets having a gross carrying amounts of Rs. 14,777,103/- (2011 - 

Rs13,461,234/-). 

3.3 The useful lives of the assets are estimated as follows 

Buildings on Freehold and Leasehold Lands 

Vessels 




Air Conditioning Equipment 

Computer Equipment 

3.4 Information on the Freehold Land, Freehold Buildings of the Group 


20 Years 

15 Years 

8 Years 

4 Years 

4 Years 

4 Years 

4 Years 


20 Years 

15 Years 

8 Years 

4 Years 

4 Years 

4 Years 

4 Years 

Company 

Address 

Ownership 

Extent 

No. of Buildings 

Included In 

Mercantile Shipping 

Company PLC 

No.441, K Cyril C Perera 

Mawatha, Colombo 13. 

Freehold 

10.79 Perches 

1 

Property, Plant 

and Equipment 

No.108, Aluthmawatha 

Road, Colombo 15. 

Freehold 

25.20 Perches 

1 

Investment 

Property 

4. INVESTMENT PROPERTY - COMPANY/GROUP 

Cost 

Group / Company 


Rs. 


Rs. 

Balance as at the Beginning of the Year 

Additions made during the year 

Less : Disposals made during the year 

Balance as at the End of the Year 

Depreciation 


Charge for the Year 


Net Book Values 

4.1 Useful life of the Investment Property is estimated as 20 Years. 

19,135,649 

- 

- 

19,135,649 

9,284,084 

515,782 

9,799,866 

9,335,783 

19,135,649 

- 

- 

19,135,649 

8,768,302 

515,782 

9,284,084 

9,851,564 

4.2 On 22 June, 2011 a revaluation was carried out by an Independent Professional Valuer Mr. B.J.P Kariyawasam in order to determine 

the fair value of the Investment Property and such fair value has been estimated as Rs. 82,547,500/-. 

5. INVESTMENTS IN SUBSIDIARIES 

a)Non-Quoted 

Country 

of 

Incorporation 

Holding 

Carrying 

Value 


Rs. 

Directors' 

Valuation 


Rs. 

Carrying 

Value 


Rs. 

Directors' 

Valuation 


Rs. 

28 

26 


Sri Lanka 


Sri Lanka 

Mercantile Emerald Shipping (Private) Limited Sri Lanka 

Less : Provision for Fall in Value - MSC Trading Limited 

Total Net Carrying Value of Investments in Subsidiaries 

100% 

100% 

100% 

1,000,000 

15,000,000 

150,000,000 

(1,000,000) 

165,000,000 

- 

15,000,000 

150,000,000 

- 

165,000,000 

1,000,000 

15,000,000 

150,000,000 

(1,000,000) 

165,000,000 

- 

15,000,000 

150,000,000 

- 

165,000,000




Group/ Company 

6. OTHER INVESTMENTS 

Summary 

Non Current 

Investments in Equity Securities (Note 6.1) 

Total Carrying Value of Other Investments 


Rs. 

1,382,630 

1,382,630 


Rs. 

1,382,630 

1,382,630 

6.1 Investments in Equity Securities 

a) Quoted 

No. of Shares 



Carrying 

Value 


Rs. 

Market 

Value 


Rs. 

Carrying 

Value 


Rs. 

Market 

Value 


Rs. 

Lanka Walltile PLC 

3,876 

Total Investments in Quoted Equity Securities 

3,876 

85,000 

85,000 

271,320 

271,320 

85,000 

85,000 

658,920 

658,920 

b) Non-Quoted 

No. of Shares 



Carrying 

Value 


Rs. 

Directors' 

Valuation 


Rs. 

Carrying 

Value 


Rs. 

Directors' 

Valuation 


Rs. 

Mercantile Shipping Agencies Limited 11,000 

Total Investments in Non-Quoted Equity Securities 

11,000 

1,297,630 

1,297,630 

1,297,630 

1,297,630 

1,297,630 

1,297,630 

1,297,630 

1,297,630 



Total Gross Carrying Value of Investments in Equity Securities 

Total Net Carrying Value of Other Investments 

1,382,630 

1,382,630 

1,382,630 

1,382,630 

Group 

Company 

7. INVENTORIES 


Rs. 


Rs. 


Rs. 


Consumables and Spares 

4,787,105 

4,787,105 

7,289,758 

7,289,758 

- 

- 

- 

- 

8. TRADE AND OTHER RECEIVABLES 

8.1 Current 

Group 


Rs. 


Rs. 

Company 


Rs. 


Rs. 

Trade Debtors 

Other Debtors 

Advances, Prepayments and Deposits 

Loans to Company Officers (Note 8.2) 

Amounts Due from Related Parties (Note 8.3 ) 

- 

29,531,317 

9,333,325 

- 

- 

38,864,642 

1,241,991 

29,026,496 

3,800,388 

64,673 

4,019,645 

38,153,193 

- 

29,487,973 

702,500 

- 

1,269,168 

31,459,641 

1,241,992 

29,020,190 

702,500 

64,673 

4,019,645 

35,049,000 

Non-Current 

Amounts Due from Related Parties (Note 8.3 ) 

- 

- 

87,646,078 

87,646,078 

8.2 Loans to Company Officers: 

Summary 


Loans Granted during the Year 

Less: Repayments 


64,673 

- 

(64,673) 

- 

245,032 

- 

(180,359) 

64,673 

64,673 

- 

(64,673) 

- 

245,032 

- 

(180,359) 

64,673 

29




8.3 Amounts Due from Related Parties 

Current 



Mercantile Shipping Agencies Limited 

Mercantile Marine Management Limited 

Provision for Doubtful Debts 

Non-Current 

Relationship 

Subsidiary 

Affiliate 

Subsidiary 

Affiliate 


Rs. 

1,833,600 

- 

3,673,968 

- 

(5,507,568) 

- 

Group 


Rs. 

1,833,600 

- 

3,673,968 

345,677 

(1,833,600) 

4,019,645 


Rs. 

1,833,600 

1,269,168 

3,673,968 

- 

(5,507,568) 

1,269,168 

Company 


Rs. 

1,833,600 

- 

3,673,968 

345,677 

(1,833,600) 

4,019,645 


Subsidiary 

- 

- 

87,646,078 

87,646,078 

9. Short Term Investments 

Group 


Rs. 


Rs. 

Company 


Rs. 


Rs. 

Investment in Treasury Bills 

42,174,408 

42,174,408 

29,878,575 

29,878,575 

42,174,408 

42,174,408 

29,878,575 

29,878,575 

10. CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT 

Components of Cash and Cash Equivalents 

Favourable Cash and Cash Equivalents Balance 

Group 


Rs. 


Rs. 

Company 


Rs. 


Rs. 

Cash and Bank Balances 

Total Cash and Cash Equivalents for the Purpose of 

Cash Flow Statements 

77,803,729 

77,803,729 

87,391,002 

87,391,002 

18,918,379 

18,918,379 

17,302,247 

17,302,247 

11. STATED CAPITAL 

Number 

Group 

Rs. 

Number 

Company 

Rs. 

Fully Paid Ordinary Shares (11.1) 

2,844,990 

2,844,990 

37,262,606 

37,262,606 

2,844,990 

2,844,990 

37,262,606 

37,262,606 

Group 

Company 

Number 

Rs. 

Number 

Rs. 

11.1 Balance at Beginning of the Year 

Issue of Shares for Non Cash Consideration 

Balance at End of the Year 

2,844,990 

- 

2,844,990 

37,262,606 

- 

37,262,606 

2,492,482 

352,508 

2,844,990 

24,924,820 

12,337,786 

37,262,606 

12. INTEREST BEARING LOANS AND BORROWINGS 

12.1 Group 



Amount Amount 

Repayable Repayable 

Within 1 Year After 1 Year 

Rs. 

Rs. 


Total 

Rs. 


Amount 

Repayable 

Within 1 Year 

Rs. 


Amount 

Repayable 

After 1 Year 

Rs. 


Total 

Rs. 

Bank Loans (Note 12.1.1) 

Finance Lease (Note12.1.2) 

155,809,856 

1,488,256 

157,298,113 

3,357,615,103 

320,282 

3,357,935,384 

3,513,424,959 

1,808,538 

3,513,424,959 

284,216,685 

- 

284,216,685 

3,062,355,160 

- 

3,062,355,160 

3,346,571,846 

- 

3,346,571,846 

30




12.1.1Bank Loans 

As at 


Rs. 

Loans 

Obtained 

Rs. 

Repayment 

Rs. 


Loss 

Rs. 

As at 


Rs. 

Bremer LandesBank - Germany 

3,346,571,846 

3,346,571,846 

- 

- 

(151,816,180) 

(151,816,180) 

318,669,293 

318,669,293 

3,513,424,959 

3,513,424,959 

Security: 

A first statutory mortgage in account current form of Vessels together (if applicable) with a pertaining deed of covenants covering the 

loan, interest and cost; and assignment of insurances contracted in respect of Vessels and its operation together with notices of 

assignment to and acknowledgement by the insurers together with the usual letter of undertaking of brokers and assignment of all 

freights, charter hires, demurrage, detention and requisition compensation and all other monies earned or to be earned by the Vessels 

during the term of loan and letter of Support issued by the Corporate Guarantor Mercantile Shipping Company PLC, covering all the 

obligations of borrower under the loan agreement. 

Tranche A (Euro 20,300,000) shall be repaid by 56 equal consecutive quarter annual installments of Euro 362,500 each is paid from six 

months after the delivery date. 

Tranche B (Euro 2,500,000) shall be repaid by 26 equal consecutive quarter annual installments of Euro 92,600 each and a final 

installment of Euro 92,400. 

The first tranche B installment shall is paid from six months after the delivery date and the final installment being due and payable at the 

end of the term of the tranche B. 

Bremer LandesBank has granted a revised repayment scheme for the capital repayments of the above loans which were due for the 

year ended March 31, 2012. According to the revised repayment scheme, a part of the capital due from tranche A and tranche B for the 

period ended March 31 2012 amounting to Euro 1,592,850 could be repaid in whole or in parts by February 2024. 

Bremer LandesBank has agreed in principle to further reschedule the capital repayment of the above loans which were due for the year 

ended 31st March 2012. The formal approval specifying the rescheduling of the capital repayments has not yet been received by 

Mercantile Emerald Shipping (Pvt) Ltd. 

Interest: 

Euro Inter Bank Offered Rate (EURIBOR) plus 0.5% . 

12.1.2 Finance Lease 

As at 


Rs. 

Obtained 

Rs. 

Repayments 

Rs. 


Loss 

Rs. 

As at 


Rs. 

LB Finance PLC 

Gross Liability 

Finance Charges Allocated to Future Periods 

Net Liability 

- 

- 

- 

3,224,042 

3,224,042 

(507,555) 

2,716,487 

(1,208,887) 

(1,208,887) 

296,145 

(912,742) 

4,793 

4,793 

- 

4,793 

2,019,948 

2,019,948 

(211,410) 

1,808,538 

31




Group 

Company 

13. RETIREMENTS BENEFIT OBLIGATION - GRATUITY 


Rs. 


Rs. 


Rs. 


Rs. 

Balance as at Beginning of the Year 

Provision Made During the Year 

Payments Made During the Year 

Exchange Loss 

Balance as at End of the Year 

882,181 

120,282 

- 

12,774 

1,015,236 

919,075 

191,874 

(230,350) 

1,582 

882,181 

766,746 

60,875 

- 

- 

827,621 

919,075 

78,021 

(230,350) 

- 

766,746 

13.1 The Retirement Benefit Obligation (Gratuity) is calculated in accordance with the formula method as described in Appendix E of 

Revised SLAS 16 for the year ended 31 March 2012. Appropriate and compatible assumptions were used in determining the cost of 

retirement benefits. 

Group / Company 

The principal assumptions used were as follows; 

Discount Rate 

Future Salary Increment Rate 

Retirement Age 


10% 

9% 

55 Years 


10% 

9% 

55 Years 

14. TRADE AND OTHER PAYABLES 

Group 


Rs. 


Rs. 

Company 


Rs. 


Rs. 

Trade Payable 

Sundry Creditors Including Accrued Expenses 

Amounts due to Related Parties (Note14.1) 

13,522,864 

38,921,625 

139,513 

52,584,003 

16,537,160 

28,513,410 

94,614 

45,145,184 

- 

8,552,128 

28,524,084 

37,076,212 

- 

3,315,673 

28,898,550 

32,214,223 

Group 

Company 

14.1 Amounts due to Related Parties 

Relationship 


Rs. 


Rs. 


Rs. 


Rs. 



Affiliate 

Subsidiary 

139,513 

- 

139,513 

94,614 

- 

94,614 

- 

28,524,084 

28,524,084 

- 

28,898,550 

28,898,550 

32




15. REVENUE 

15.1 Summary 

Revenue 

609,503,093 

609,503,093 

Group 

599,081,726 

599,081,726 

Company 

- 

- 

- 

- 

15.2 Goods and Services Analysis 

Rendering of Services - International 

609,503,093 

609,503,093 

599,081,726 

599,081,726 

- 

- 

- 

- 

Group 

Company 

16. OTHER INCOME AND GAINS 

Profit on Sale of Property, Plant and Equipment 

Sundry Income 

Rent Income 

Dividend Income 

Exchange Gain 

Management Fees 

Other Vessel Income 


Rs. 

5,376,313 

1,339,497 

4,158,000 

5,355 

8,669,195 

- 

- 

19,548,359 


Rs. 

2,708,333 

566,060 

834,240 

5,950 

- 

- 

1,402,536 

5,517,119 


Rs. 

5,376,313 

1,224,060 

4,158,000 

5,355 

1,214,166 

12,514,084 

- 

24,491,978 


Rs. 

2,708,333 

566,060 

834,240 

5,950 

- 

10,081,370 

1,402,536 

15,598,489 

17. FINANCE COST AND INCOME 

17.1 FINANCE COST 

Interest - Overdraft 

- Bank Loan 

17.2 FINANCE INCOME 

Interest Income 


Rs. 

- 

103,870,087 

103,870,087 

2,332,385 

2,332,385 

Group 


Rs. 

- 

91,075,897 

91,075,897 

1,063,483 

1,063,483 


Rs. 

- 

- 

- 

2,332,385 

2,332,385 

Company 


Rs. 

- 

- 

- 

1,056,338 

1,056,338 

18. PROFIT / (LOSS) BEFORE TAX 

Stated after Charging /(Crediting) 

Included in Cost of Sales 

Employee Benefits including the following ; 

- Defined Contribution Plan Cost - (VPF, EPF and ETF) 

- Crew Wages 

Depreciation 

Vessel Repair Cost 


Rs. 

132,824,155 

5,028,474 

118,006,600 

177,020,264 

78,837,680 

Group 


Rs. 

125,991,160 

5,372,283 

107,835,530 

179,654,667 

54,410,639 

Company 


Rs. 

- 

- 

- 

- 

- 


Rs. 

- 

- 

- 

- 

- 

Included in Administrative Expenses 

Employee Benefits including the following ; 

- Defined Benefit Plan Costs - Gratuity 

- Defined Contribution Plan Costs - (VPF, EPF and ETF) 

- Other Staff Cost 

Directors' Emoluments 

Depreciation 

Audit Fees 

Donation 

Exchange Loss 

- Property, Plant and Equipment 

- Investment Property 

4,200,463 

157,595 

492,745 

3,550,123 

1,218,731 

3,779,511 

515,782 

756,869 

- 

- 

3,885,904 

191,874 

289,756 

3,404,274 

1,381,585 

1,145,137 

515,782 

700,000 

250,000 

4,533,282 

324,875 

60,875 

- 

264,000 

840,000 

2,736,208 

515,782 

275,000 

- 

- 

664,641 

78,021 

1,794 

584,826 

1,069,500 

2,736,208 

515,782 

250,000 

250,000 

1,300,672 

33




19. INCOME TAX 

Current Income Tax 

Current Tax Expense on Ordinary Activities for the Year (Note 19.1) 

Under/(Over) Provision of Current Taxes in respect of Prior Years 

Deferred Income Tax 

Deferred Taxation (Reversal)/Charge (Note 19.3) 

Income Tax (Reversal)/Charge 


Rs. 

840,352 

- 

(1,990,069) 

(1,149,716) 

Group 


Rs. 

155,109 

(3,899,829) 

(1,512,413) 

(5,257,133) 


Rs. 

840,352 

- 

(1,990,069) 

(1,149,716) 

Company 


Rs. 

155,109 

(5,120,179) 

(1,512,413) 

(6,477,483) 

19.1 Reconciliation between Current Tax Expense/ (Income) and the product of Accounting Profit. 

Group 

Company 


Rs. 


Rs. 


Rs. 


Rs. 

Accounting Profit/(Loss) Before Tax 

Aggregate Disallowed Items 

Aggregate Allowable Expenses 

(Income) /Loss Not Subject to Tax 

(33,366,164) 

7,265,847 

(9,345,237) 

37,730,490 

2,284,935 

(28,609,925) 

5,389,935 

(7,007,633) 

16,398,089 

(13,829,535) 

4,364,325 

7,265,847 

(9,345,237) 

- 

2,284,935 

(14,513,491) 

5,389,935 

(7,007,633) 

- 

(16,131,189) 

Other Sources of Income Liable to Tax 


Total Other Sources of Income Liable for Tax 

2,332,385 

2,332,385 

1,056,338 

1,056,338 

2,332,385 

2,332,385 

1,056,338 

1,056,338 

Total Assessable Income 

Tax Losses Brought Forward and utilized (Note 19.2) 

Less : Qualifying Payments 

Taxable Income 

4,617,321 

(1,616,062) 

- 

3,001,258 

1,056,338 

(369,718) 

(250,000) 

436,620 

4,617,320 

(1,616,062) 

- 

3,001,258 

1,056,338 

(369,718) 

(250,000) 

436,620 

Statutory Tax Rate 

28% 

35% 

28% 

35% 

Current Income Tax Expense 

Social Responsibility Levy - 1.5% 

840,352 

- 

840,352 

152,817 

2,292 

155,109 

840,352 

- 

840,352 

152,817 

2,292 

155,109 

Group 

Company 

19.2 Tax Losses 


Rs. 


Rs. 


Rs. 


Rs. 

Tax Loss Brought Forward 

Tax Loss Incurred During the Year 

Tax Loss Utilized During the Year 

Tax Losses Carried Forward 

20,904,751 

- 

(1,616,062) 

19,288,689 

5,709,602 

15,564,867 

(369,718) 

20,904,751 

13,762,186 

- 

(1,616,062) 

12,146,124 

- 

14,131,904 

(369,718) 

13,762,186 

34




19. INCOME TAX EXPENSE Contd... 

19.3 Deferred Tax Assets, Liabilities and Income Tax Relates to the Following - Group / Company 

Balance Sheet 

Income Statement 


Rs. 


Rs. 


Rs. 


Rs. 

Deferred Tax Liability 

Capital Allowances for Tax Purposes 

Deferred Tax Assets 

Retirement Benefit Obligation 

Brought Forward Losses 

1,642,580 

1,642,580 

231,734 

3,400,915 

3,632,649 

1,318,342 

1,318,342 

214,689 

1,103,653 

1,318,342 

324,238 

324,238 

(17,045) 

(2,297,262) 

(2,314,307) 

(515,748) 

(515,748) 

106,988 

(1,103,653) 

(996,665) 

Deferred Income Tax Income 

Net Deferred Tax (Asset)/ Liability 

(1,990,069) 

- 

(1,990,069) 

(1,512,413) 

20. INCOME TAX PAYABLE 

The Income Tax payable balance consist of income tax provisions made in previous years. However, due to the different 

interpretation of the tax clauses, this liability has not been crystallized as at 31 March 2012 and if the Department of Inland 

Revenue rules in favour of the Company, the liability would be adjusted at the point of such ruling is obtained and the 

negotiations in this regard are in progress. 

21. EARNINGS/(LOSS) PER SHARE 

21.1 Basic Earnings/(Loss) Per Share is calculated by dividing the net profit/(Loss) for the year attributable to ordinary 

shareholders by the weighted average number of ordinary shares outstanding during the year. 

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

Amounts used as the Numerators: 

Group 


Rs. 


Rs. 

Profit/(Loss) attributable to Ordinary Shareholders 

(32,216,448) 

(23,352,793) 

Number of Ordinary Shares used as Denominator 

Weighted average number of Ordinary Shares in issue 

applicable to Basic Earnings Per Share 

Earnings/(Loss) Per Share 


Number 

2,844,990 

(11.32) 

Group 


Number 

2,844,990 

(8.21) 

35




22. COMMITMENTS AND CONTINGENCIES 

22.1 Commitments 

During the year the Group did not have any commitments that require adjustments or disclosure in the Financial 

Statements. 

22.2 Contingencies 

During the year the Group did not have any contingencies that require adjustments or disclosure in the Financial 

Statements. 

23. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE 

Mercantile shipping Company PLC has entered into a joint venture agreement with Hemas Transportation Limited forming 

a new company namely H & M Shipping Services (Private) Limited subsequent to the balance sheet date. 

The new company will be involved in providing crew transport services for international carriers who travel via Sri Lanka’s 

Southern seas. The Company expects to invest Rs. 30 Million in this project. 

24. ASSETS PLEDGED 

The following assets have been pledged as at the Balance Sheet Date. 

Company 

Nature of 

Assets 

Pledged 

Nature of Liabilities and 

Pledged to 

Carrying Amount Pledged 



Rs. 

Rs. 

Included 

Under 

Mercantile Emerald 

Shipping (Private) 

Limited 

Vessels 

Interest Bearing Loans and 

Borrowings from Bremer 

Landesbank - Germany 

3,683,066,932 

3,528,066,553 

Property, 

Plant and 

Equipment 

36




25. RELATED PARTY DISCLOSURES 

a) Transaction with the 

related entities 

Name of the Company and Relationship 

Significant Investor 

Reederi Eugen 

Freiderich GmbH 


Rs. 


Rs. 

Mercantile Global 

Shipping Ltd 


Rs. 

Fully Owned Subsidiaries 


Rs. 

Mercantile Emerald 

Shipping (Pvt) Ltd 


Rs. 


Rs. 

Affiliates 


Rs. 


Rs. 


Rs. 

Total 


Rs. 

Nature of Transaction 

As at 1 April 

Rendering of Services 

Funds Capitalized 

Management Fees Charged 

Management Fees Paid 

Settlement of Liabilities by the Company 

Settlement of Liabilities by the Company on behalf 

the Company 

Provision for Doubtful Receivables 

As at 31 March 

- 

- 

- 

- 

- 

- 

- 

- 

(27,636,918) 

- 

- 

- 

27,636,918 

- 

- 

- 

(28,898,550) 

- 

- 

- 

- 

374,466 

- 

- 

(28,524,084) 

(30,416,870) 

- 

- 

- 

- 

1,518,320 

- 

- 

(28,898,550) 

87,646,078 

- 

- 

14,017,750 

(14,017,750) 

1,926,152 

(655,984) 

- 

88,915,246 

197,436,624 

- 

(125,000,000) 

12,067,481 

- 

3,141,973 

- 

- 

- 

87,646,078 

4,019,645 

948,000 

- 

- 

- 

368,674 

(1,662,351) 

- 

(3,673,968) 

- 

4,196,096 

948,000 

- 

- 

- 

(1,124,451) 

- 

4,019,645 

62,767,173 

948,000 

- 

14,017,750 

(14,017,750) 

2,669,292 

(2,319,335) 

- 

(3,673,968) 

60,391,162 

143,578,932 

948,000 

(125,000,000) 

12,067,481 

- 

32,297,211 

(1,124,451) 

- 

- 

62,767,173 

Included in 


Trade and Other Payables 

- 

- 

- 

- 

- 

(28,524,084) 

(28,524,084) 

- 

(28,898,550) 

(28,898,550) 

88,915,24 

- 

88,915,246 

- 

87,646,078 

- 

87,646,078 

- 

- 

- 

4,019,645 

- 

4,019,645 

88,915,246 

(28,524,084) 

60,391,162 

91,665,723 

(28,898,550) 

62,767,173 

Affiliates Include Mercantile Shipping Agencies Limited and Mercantile Marine Management Limited. 

Transactions of Mercantile Emerald Shipping (Pvt) Limited with Reederi Eugan Freiderich GmbH 

Technical Management Services Fee 

Business Procument Fee 

Settlement of Technical Management and Business Procument Fee 


Rs. 

20,541,840 

13,557,614 

(34,099,454) 


Rs. 

18,735,444 

14,376,643 

(33,112,087) 

b) Transactions with Key Management Personnel of the Company 

The key management personnel of the Company are the members of its Board of Directors. 

Key Management Personnel Compensation 

Short-term Employment Benefits 


Rs. 

3,180,000 

3,180,000 


Rs. 

3,169,500 

3,169,500 

In addition to above compensation, the Company also provides non cash benefits to Key Management Personnel in terms of 

employment contracts with them. 

37


SHARE INFORMATION 

DIRECTORS SHAREHOLDING AS AT 31ST MARCH 2012 



ORDINARY SHARES 

ORDINARY SHARES 

Ainsley Nimal Ubesinghe Jayawardena 

Captain Klaus Kriwat 

Thomas Kriwat 

Hettiarachchige Ranjith Kumara Wickramatileka 

Tissa Nihal Jayasinghe 

Chinthaka Parakrama Punyajith Gamalath Hapudeniya 

Imtiaz Abidhusein Hassanally Esufally 

Galappaththi Mesthrige Vikum Pradeepa 

Sunil Obadage 

Kasturi Angela Chellaraja Wilson 

1 

Nil 

Nil 

11,414 

Nil 

Nil 

Nil 

Nil 

Nil 

Nil 

1 

Nil 

Nil 

11,414 

Nil 

Nil 

Nil 

Nil 

Nil 

Nil 

Issued Shares (Ordinary Shares) 

Directors of the entity, their spouses and children under 18 

years of age 

Mr. A N U Jayawardena 

Mr. H.A.R.K Wickrematileka 

Single shareholders holding 10% or more of shares 

Reederei Eugen Friederich 

Hemas Holdings PLC 

Mercantile Marine Management Ltd 

Jacey Trust Services (Pvt) Ltd 

Parent, subsidiary or associate companies or any 

subsidiary or associates of its Parent Company 

1 

11,414 

(1,155,352) 

(484,334) 

(308,282) 

(285,357) 

2,844,990 

(11,415) 

(2,233,325) 

- 

Chief Executive Officer, his spouse and children under 18 

years of age 

Public Holding 

Public Holding % 

- 

600,250 

21.10% 

38


ANALYSIS OF ORDINARY SHAREHOLDERS 

ANALYSIS OF ORDINARY SHAREHOLDERS ACCORDING TO THE NO.OF SHARES AS AT 31ST MARCH 2012 

NO. OF 

SHAREHOLDERS 

TOTAL 

HOLDINGS 

PERCENTAGE 

DESCRIPTION 

1 To 1,000 Shares 

1001 To 10000 Shares 

10001 To 100000 Shares 

100001 To 1000000 Shares 

OVER 1000001 Shares 

LOCAL FOREIGN 

597 

22 

2 

4 

0 

3 

0 

0 

1 

1 

LOCAL 

50,804 

61,952 

21,801 

1,316,479 

- 

FOREIGN 

343 

- 

- 

238,259 

1,155,352 

LOCAL 

% 

1.79 

2.18 

0.77 

46.28 

0.00 

FOREIGN 

% 

0.00 

0.00 

0.00 

8.37 

40.61 

625 

5 

1,451,036 

1,393,954 

51.02 

48.98 

TRADING PRICES AT THE COLOMBO STOCK EXCHANGE 



Closing Price for the year ended 31st March 

Rs. 

171.00 

Rs. 

190.00 

Highest Price during the year ended 31st March 

Date 



Rs. 

511.00 


Rs. 

319.75 

Lowest Price during the year ended 31st March 


163.50 

125.00 

39


TOP 20 SHAREHOLDERS AS AT 31ST MARCH 2012 

31st March 2012 31st March 2011 

Name 

No. of 

Shares 

% 

No. of 

Shares 

% 

Reederei Eugen Friederich 

Hemas Holdings PLC 


Jacey Trust Services (Private) Ltd 

Ceylon Shipping Corporation 

HSBC Intl Nominees Ltd -DEG-Deutsche Investitions -UND 

Entwicklungsgesellschaft MBH 

Mr. H.A.R.K. Wickramatileka 

Mr. V. Satyendra 

Waldock Mackenzie Limited/Mr.L.P. Hapangama 

Mr. K.D.D. Perera 

ABC Capital Corporation Limited 

Mrs. R. E. De Silva 

Miss A.S. Ranasinghe 

Mr. G.C.W. De Silva 

Mr. G. C. Goonetilleke 

Mr. R. E. G. Codipilly 

Mr S Gobinath 

Mr K T Gunaratne 

Dr. M. Ramasubbu 

Mr T N Salim 

1,155,352 

484,334 

308,282 

285,357 

238,506 

238,259 

11,414 

10,387 

8,900 

6,546 

5,000 

3,805 

3,804 

3,424 

3,210 

2,853 

2,800 

2,700 

2,625 

2,300 

2,779,858 

40.61 

17.02 

10.84 

10.03 

8.38 

8.37 

0.40 

0.37 

0.31 

0.23 

0.18 

0.13 

0.13 

0.12 

0.11 

0.10 

0.10 

0.09 

0.09 

0.08 

97.71 

1,155,352 

484,334 

308,282 

285,357 

238,506 

238,259 

11,414 

10,387 

6,546 

5,100 

3,805 

3,804 

3,424 

3,210 

2,853 

2,625 

3,400 

40.61 

17.02 

10.84 

10.03 

8.38 

8.37 

0.40 

0.37 

0.23 

0.18 

0.13 

0.13 

0.12 

0.11 

0.10 

0.09 

0.12 

Other Shareholders 

Total Issued Capital 

65,132 

2,844,990 

2.29 

100.00 

40


FIVE YEAR SUMMARY - GROUP 

2011/2012 

2010/2011 

2009/2010 

2008/2009 

2007/2008 

Turnover 

Rs. 

609,503,093 

599,081,726 

481,488,862 

590,894,633 

670,760,858 

Profit 

Rs. 

(32,216,448) 

(23,352,793) 

28,266,567 

(73,798,169) 

106,480,938 

Reserves 

Rs. 

236,788,810 

269,005,257 

306,066,702 

277,800,135 

357,829,509 

Net Assets 

Rs. 

290,784,068 

305,749,931 

331,229,141 

302,724,955 

382,754,329 

R.O.C.E 

% 

(11.07) 

(7.63) 

8.53 

(24.37) 

27.82 

E.P.S. 

Rs. 

(11.32) 

(8.21) 

9.94 

(29.61) 

42.72 

P/E Ratio 

Rs. 

(15.11) 

(23.17) 

10.14 

(3.35) 

2.36 

Dividend per Share 

Rs. 

- 

- 

5.50 

- 

2.50 

Net Assets per Share 

Rs. 

102.21 

107.48 

132.89 

121.45 

153.56 

41


NOTES 

42


FORM OF PROXY 

I/we ...................................................................................................................................................................................................... 

of .......................................................................................................................................................................................................... 

being a member / members of The Mercantile Shipping Company PLC, hereby appoint 

.............................................................................................................................................................................................................. 

of .......................................................................................................................................................................................................... 

...................................................................................................................................................................................... or failing him, 

Ainsley Nimal Ubesinghe Jayawardena 

or failing him 

Captain Klaus Kriwat or failing him 

Thomas Kriwat 


Hettiarachchige Ranjith Kumara Wickramatileka 


Tissa Nihal Jayasinghe 


Chinthaka Parakrama Punyajith Gamalath Hapudeniya 


Imtiaz Abidhusein Hassanally Esufally 


Galappaththi Mesthrige Vikum Pradeepa 


Sunil Obadage 


Kasturi Angela Chellarajah Wilson 

as my/our proxy to represent me/us and *vote for me/us on my/our behalf as indicated below at the 31st Annual General Meeting of 

the Company to be held on 28th August 2012 and at any adjournment thereof, and at every poll which may be taken in 

consequence, thereof. 

1. To receive and consider the Annual Report of the Board of Directors and the Statement of 

Audited Accounts for the year ended 31st March 2012 and the Report of the Auditors thereon. 

2. Appointment of Directors in terms of Section 211 of the Companies Act No.07 of 2007. 

! Mr. A.N.U. Jayawardena who has reached the age of 75 as a Director 

! Captain K. Kriwat, who has reached the age of 71 as a Director 

3. To re-elect Mr. T.N. Jayasinghe who retires by rotation in terms of Article 84, of the Articles of 

Association of the Company. 

4. To re-elect New Directors in terms of Article 91 of the Articles of the Company 

! Mr. S. Obadage who has been appointed to the Board since the last AGM 

! Ms. K.A.C. Wilson who has been appointed to the Board since the last AGM 

5. To re-appoint the Auditors Messrs. Ernst & Young and to authorize the Board of Directors to 

determine their remuneration. 

7. To authorise Directors to determine contribution to Charities. 

FOR 

AGAINST 

Signed this ........................... day of .............................. 2012. 

*Speak 

Note: Instructions to complete are noted on the following page. 

..................................................... 

Signature of Shareholder 

43


INSTRUCTIONS AS TO COMPLETION 

Instructions as to completion 

! Kindly perfect, the Form of Proxy, by filling in legibly your full 

name and address, signing in space provided, and filling in 

the signature. 

! If the form of proxy is signed by an Attorney, the relative 

Power of Attorney should also accompany the Form of 

Proxy for registration, if such Power of Attorney has not 

already been registered with the Company. 

! In case of a Company / Corporation, the Proxy must be 

under its common seal which should be affixed and attested 

in the manner prescribed by its Articles of Association. 

! The completed Form of Proxy should be deposited at the 

registered office of the Company No. 441, K. Cyril C. Perera 

Mawatha, Colombo 13, not less than forty eight (48) hours 

before the time appointed for the holding of the meeting.

# 441, K. Cyril C. Perera Mawatha, Colombo 13, Sri Lanka. 

Tel : +94 11 2331792, 2331793, 2331797 

Fax : +94 11 2331799 E-mail : info@mscl.lk

Annual Report 2011/2012 - Colombo Stock Exchange

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