Annual Report 2012/13 - Colombo Stock Exchange

22012/13 2011/12 Change 2010/11Rs.'000 Rs.'000 % Rs.'000Results for the YearGross Turnover 1,172,642 1,499,824 -22% 1,194,909Profit Before Tax 156,333 230,267 -32% 170,434Profit After Tax 130,206 149,805 -13% 103,374Investment in Property, Plant, & Equipment 30,849 178,315 -83% 65,355Revenue to Government 168,370 266,770 -37% 222,210Value Addition 538,276 618,608 -13% 503,377Position at the Year EndShareholders' Funds 3,177,039 3,060,476 4% 2,235,650Market Capitalisation 2,132,764 3,146,084 -32% 2,250,000Total Assets 3,479,399 3,342,301 4% 2,507,936Total Borrowings 132,354 16,692 693% 74,733Employment - persons 567 562 1% 475Per Share detailsEarnings per share - Rs. 3.80 4.93 -23% 5.51Market value (year end) - Rs. 62.30 91.90 -32% 90.00Net Assets (year end) - Rs. 92.80 89.40 4% 89.43RatiosGross Profit (Gross Profit/Sales) 19% 28% 32%Interest Cover (Profit before Interest/Interest)Current Ratio (Current Assets/Current Liabilities) 6.92 6.63 4.69Gearing Ratio (Borrowings/Total Assets) 3.8% 0.5% 3.0%

32,000Turnover (Rs.) Mn300Profitability (Rs.) Mn1,5002001,000100500‐08/09 09/10 10/11 11/12 12/13‐(100)08/09 09/10 10/11 11/12 12/13Profit before Tax Profit after Tax6.00Earnings per Share (Rs.)100.00Net Assets per Share (Rs.)1.00(4.00)08/09 09/10 10/11 11/12 12/1380.0060.0040.0020.00(9.00)‐08/09 09/10 10/11 11/12 12/13600Value Addition (Rs.) Mn4,000Market Capitalisation (Rs.) Mn4003,0002,0002001,000‐08/09 09/10 10/11 11/12 12/13‐08/09 09/10 10/11 11/12 12/13

42012/13 2011/12 Change 2010/11Rs.'000 Rs.'000 % Rs.'000Results for the YearGross Turnover 5,345,852 4,558,444 17% 1,206,583Profit Before Tax 125,955 131,243 -4% 175,352Profit After Tax 97,206 41,283 135% 106,939Investment in Property, Plant, & Equipment 93,198 189,255 50% 5,355Revenue to Government 171,571 267,854 -36% 223,874Value Addition 1,018,315 926,968 10% 502,684Position at the Year EndShareholders Funds 3,002,738Market Capitalisation 2,132,764 3,146,084 -32% 2,250,000Total Assets 5,508,006 5,476,883 1% 4,945,393Total Borrowings 1,358,347 1,354,401 0% 1,301,797Employment - persons 1,687 1,747 -3% 475Per Share detailsEarnings per share - Rs. 2.75 3.16 -13% 5.70Market value (year end) - Rs. 62.30 91.90 -32% 90.00Net Assets (year end) - Rs. 87.71RatiosGross Profit (Gross Profit/Sales) 15% 18% 33%Interest Cover (Profit Before Interest/Interest) 2.12 2.25 11.05Current Ratio (Current Assets/Current Liabilities) 1.39 1.26 1.05Gearing Ratio (Borrowings/Total Assets) 24.7% 24.7% 26.3%

56,000Turnover (Rs.) Mn200Profitability (Rs.) Mn5,0001504,0001003,000502,0001,000-(50)08/09 09/10 10/11 11/12 12/13-08/09 09/10 10/11 11/12 12/13(100)Profit before TaxProfit after Tax6.00Earnings per Share (Rs.)100.00Net Assets per Share (Rs.)4.0080.002.0060.00-(2.00)08/09 09/10 10/11 11/12 12/1340.0020.00(4.00)-08/09 09/10 10/11 11/12 12/131,2001,000800600400200Value Addition (Rs.) Mn3,5003,0002,5002,0001,5001,000500Market Capitalisation (Rs.) Mn-08/09 09/10 10/11 11/12 12/13-08/09 09/10 10/11 11/12 12/13

10Dear Shareholders,It is with great pleasure I present to you on behalf of the Boardof Directors the Annual Reports of Ceylon Leather ProductsPLC. On this occasion, I am also pleased to present to you theAudited Statement of Accounts of the Company for theFinancial Year ended 31 March 2013.The Board of Directors followed the strategy adopted by theERI Group in consolidating and stabilizing what we haveachieved successfully during the immediate past two years.Accordingly, as a meaningful and appropriate action to meetdomestic and global challenges our strategy was to improveproductivity by managerial guidance and good governance.Year under review, witnessed the efforts of the managementresulting in a very good industrial relations environment, afresh Collective Agreement was signed in the year 2012 foranother three years. The Collective Agreement provided tothose employees covered by this Agreement a salary increasespread over a period of three years. The management and theBoard felt that this was a well deserved increase as the turnaroundand present stability of the company was due to thecollective efforts all of Ceylon Leather people, and in this caseits valued work force.Though Company’s Performance was satisfactory during thefinancial year, it did not meet our expectations owing to anumber of reasons. The year under review recorded aturnover of LKR 1,030 million as against LKR 1,313 millionprevious year, which was mainly due to the slowdown ininstitutional sales. This year's shortfall is expected to berecovered within the first quarter of 2013. The net profitrecorded was LKR 130 million as against LKR 149 million in theprevious year due to the above mentioned revenue shortfall.Although the net profit is less, it is important to note thatprofitability increased from 11.3% to 12.6%. The performanceof Ceylon Leather Products PLC has also had the effects of thefiscal policies adopted by the State especially in the reductionof import duties on imported footwear and paving way for“DUMPING” of imported shoes in the local market.It is heartening to note that South Asia Textile IndustriesLanka (Pvt) Ltd [SAT] of which 51% owned by Ceylon LeatherProducts PLC and the Dankotuwa Porcelain PLC of which 8%owned by CLPL have performed well during the financial year.This is a remarkable achievement for not just CLPL but also forCLPL's parent company, Environmental Resources InvestmentPLC, as both of these companies were loss making and haveprevailed in their respective business.The Board of Directors are confident of Ceylon LeatherProducts PLC as well as its subsidiary holdings’ future growth.New avenues in addition to our own manufacturing of leather,safety shoes, leather shoes for both men and ladies, leatheritems, as well as other related items are being sorted out inorder to meet the market requirements.As you are aware, there had been certain internal changes inthe shareholding of our parent Company, EnvironmentalResources Investment PLC. Consequent to these changes fourmembers of the Board of Directors relinquished their duties atthe end of the Financial Year 2012/2013. I wish to place onrecord our appreciation of the valuable services rendered bythose Directors whom had been sitting Directors from theinception of the acquisition and turnarounds, namely Messrs HB Dissanayake, Gamini Munasinghe, Dr Kosala Heengama &Gregory Scott Newsome. I am especially grateful to the twoExecutive Directors of Environmental Resources InvestmentPLC., M/s Gregory Scott Newsome and Dr Kosala Heengamawho were the livewires of the Company and whose untiringefforts helped to turnaround and restore not only CeylonLeather Products PLC, but also the livelihood and positiveattitude of its people.On behalf of the Board of Directors, I wish to thank our valuedStakeholders who continued to keep their trust and confidenceon us. My heartfelt thanks go to our energetic ManagingDirector/CEO, the Management Team and all levels of staffwhose commitment and dedication made it possible for theCompany to achieve the success it has today.We always strive to uphold our motto “WE MAKE IT WORK”.(Sgd.)Lalith HeengamaChairmanDate: 08 th July 2013

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13MACRO OUTLOOKThe Sri Lankan Economy grew at a rate of 6.4 during theperiod under review, whilst the inflation was maintainedat a single digit. The Industry Sector made a rapidgrowth despite increased global and domestic adverseconditions. The main concern during the period for theEconomists was the increase of trade deficit, as a resultof non-essential imports. The Government tookimmediate steps to discourage non-essential imports andthe expenditure on imports declined from middle of theyear.adverse situation and are hopeful of Government takingadequate steps to protect the local Footwear Industry.COMPANY OUTLOOKThe substantial growth of the Company during the pastthree years was slowed down due to the competitionfrom imports, and from assembly plant manufacturers.The Company achieved a Turnover of LKR 1030 millionwhich was less than the previous year, but yet achieveda Net profit of LKR 130 million as against LKR 140 millionin the previous corresponding period.In our opinion, the solution for this problem could be todiscourage imports by domestic value creation,productivity improvement and by giving protection to thelocal industry.LEATHER FOOTWEAR & LEATHER PRODUCTSSECTORAnimals are not killed to produce natural leather. Thehides and the skins used by the Tanners are a wasteproduct. Thereby the leather industry helps to get rid ofthe environmental hassle. All waste parts of the tanningindustry and leather are bio-degradable. There is nopollution from the Leather Industry when properpurification systems are being followed. There is aserious uncertainty in the Leather Industry as theGovernment has not allocated a suitable site to locate theLeather Tanneries. At last, Ministry of Industries ishaving positive thinking and it is most likely a suitablesite in Eastern Province, will be allocated to re-locate allTanners which will result in growth in the Industry.The Footwear Manufacturers are facing a severe crisisdue to the change of duty structure in year 2011 forimported Footwear. Local manufacturers are finding itdifficult to compete with ‘dumping’, smuggling and alsoFootwear produced by the assembling plants withimported components. The Footwear Manufacturershave drawn attention of all relevant authorities about theREVIEW OF ACHIEVEMENTSTANNERY:The turnover of the Tannery during the year underreview including internal transfers was LKR 323.1 millioncompared to LKR 326.4 million in the previous financialyear. Total investment on plant and machinery duringthe period under review amounted to LKR 11.6 million.Some of the key machines installed were a throughfeedsamming machine and autospray machine, which wouldcontribute towards higher productivity. There was adecline of local supply of raw hides. The Managementhas overcome this problem by importing wet Blue [SemiProcessed Leather] to fill the gap.FOOTWEAR FACTORY:Turnover of the Footwear Factory during the periodunder review was LKR 976 million. There is a decline of41% compared to previous year due to decrease ofvolumes and order compositions. The drop was mainlydue to drop in sales in the Institution Sector.There was a significant improvement on production ofsafety shoes for the Industrial Sector. A total pairageincreased upto 81,620 as compared to 41,573 pairs inthe previous year. A sum of LKR 13.6 million wasinvested in the Shoe Factory machinery during the periodunder review.

14LEATHER GOODS FACTORY:FINANCE COST:Turnover of the LGF continued to grow as a result ofcorrective and strategic initiatives taken by themanagement. Turnover of LKR 97.5 million wasrecorded during the year under review compared to LKR81.7 million of the previous year. This Unit expanded itsproduct range whilst continued measures were taken toimprove its productivity. In addition, this unit was ableto obtain bulk orders for its products which contributedtowards the enhancement of its Turnover.MARKETING:The total turnover of the Company was LKR 1,030 millionas against LKR 1,313 million previous year. The BrandDI was further developed on the motto “Sri LankanShoes with International Standards”. This campaign wasa success. This strategy contributed towards the growthof the non-institutional market by 43%.The product, Safety Shoe was introduced to cater to themarket needs of high quality Safety Shoes. In addition,a high end ladies collection of shoes was launched duringthe financial year under review.Distribution arm of Ceylon Leather Products PLC namelyCeylon Leather Products Distributors [Pvt] Ltd., recordeda turnover of LKR 57.3 million as against LKR 37.4million previous year, thus recording a growth of 53%.MANAGEMENT INFORMATION SYSTEM:During the period under review, the Companysuccessfully completed the computerization of retail SalesStores. The management invested LKR 2.8 million in anIP surveillance Project to ensure the Security of bothshoe factory and Tannery Factory premises. TheCompany continued in implementing its productionmodular programme in the Enterprise Resource Systems[ERP].The cost of finance for the period under review was LKR15.1 million as compared to previous year which wasLKR 12.5 million. This increase was mainly due to theterms of credit offered to compete in the market.INDUSTRIAL RELATIONS:The Collective Agreement for the period of three yearsfrom April 2012 was signed with the Trade Unionsnamely Jathika Sevake Sangamaya, United Commercialand Mercantile Union & Inter Company Employees Union.The negotiations, were under the guidance of theEmployer’s Federation of Ceylon resulted in achieving a“Win-win situation” to all parties concerned. The LabourCommissioner through the Wages Board for Tanning,Footwear and Leather Goods Manufacturing Trade,increased the minimum wage of, un-skilled, semi-skilled,skilled and Apprentice categories. The salaries of theCompany workers were also revised accordingly.Perennial problem of absenteeism and late arrivalscontinued directly affecting day to day production. Inorder to arrest this situation, after much deliberation anattendance based bonus to all technical, clerical andallied grades, within the frame work of the CollectiveAgreement was introduced. The HR Departmentcontinues its counseling programmes with the personnelconcerned in order to reduce absenteeism as well aslabour turnover.CORPORATE SOCIAL RESPONSIBILITIES:As a policy the Company does not expect any return forits involvement in social activities. We firmly believe it isone of our ethical obligations to serve the communityand safeguard the society at large. In this respect, inorder to protect the environment, we have takenconcrete action to set up and operate a Recycling Plantfor Chemical [chromium] recovery and water purificationPlant at our Tannery Premises. Plans are also on the

15pipeline to establish an Incinerator to burn leather wastewithin the approved standards.The Management being conscious of the health of itsemployees, a programme was established to checkmedically the health of all employees which would berepeated annually.During the year under review, the Company sponsoredthe Army Para Games 2012, which was held in BiyagamaSports Complex with large participation. Company alsowas a co-sponsor for Defense Seminar 2012 and“Ordnance Rhythm Night 2012” organized by variousRegiments of the Sri Lanka Army and Sri Lanka PoliceDepartment.In addition to the above events, donations in the form ofrenovating the Grama Sevake’s Office ceiling and roof atBelummahara, shoes required by the “DenguePrevention Team of Gampaha Pradeshiya Sabha andschool equipment for school children organized by PoliceFamily Welfare Association were undertaken by theCompany.Internally, the Company continues its annual features ofimplementing Poson Bana Chanting and Dansela,Chistmas Carol Service, Annual Soft Ball Matches both atShoes Factory and Tannery, Annual Trip of the Workers,celebrating mass at the Tannery Premises during theAnnual Feast of St Anthony, culminating with the AnnualExecutive Get-to-gether.GOVERNMENT REVENUEThe Company’s contribution to the Government Revenueby way of Taxes for the period under review was LKR168 million as compared to LKR 266 million in theprevious year.SUBSIDIARIESSOUTH ASIA TEXTILE INDUSTRIES LANKA [PVT] LTDThe Company made a net profit of LKR 154 millionduring the financial year under review against the loss ofRs.108 million in the previous year. The marketingstrategy of the Company was changed during theprevious year and was given preference to domesticexport oriented institutions, instead of direct exports.The strategy has been successful. South Asia TextileIndustries Lanka [Pvt] Ltd management expect asubstantial growth in the profitability during the currentyear.CEYLON LEATHER PRODUCTS DISTRIBUTORS (PVT) LTDCompany’s distribution arm, Ceylon Leather ProductsDistributors (Pvt) Ltd. reflected a remarkable growthrecording a profit of Rs.18.2 million (including a reversalof deferred tax of Rs.8.6 million) during the year underreview compared to profit of Rs.5.3 million in theprevious year. The growth is expected to continue in thecurrent financial year.PALLA & CO [PVT] LTDThe performance of PALLA & CO [PVT] LTD., was belowexpectations. The loss for the financial year was Rs. 179million. This was mainly due to Economic Crisis situationin the European Union. As a result there was unutilizedcapacity throughout the year. The Management hastaken necessary steps to negotiate new buyers inEurope, Middle East, South Africa and within USA. Thenegotiations are in the process and the managementexpect to arrest the loss situation and to make theCompany profitable within next two years.AWARDSAt the National Business Excellence Awards 2012organized by the National Chamber of Commerce of SriLanka, the Company received a Silver Award forManufacture of Apparel, Textile and Leather ProductsSector. The Company Designers won 18 awardsinclusive of merit certificates at the Footwear andLeather Products Fair 2013 organized by the Sri Lanka

16Export Development Board. Our Company won theBronze award 2012 for Agriculture Bulk Sectororganized by the National Chamber of Exporters of SriLanka.FUTURE OUTLOOKIn line with the Company’s vision to be the undisputedLeader in the real leather market for Apparel and relatedaccessories, Company will spread wings in the domesticmarket. The Company has no intention to be a player inthe mass market, but to concentrate in the high qualityup market products to be marketed in the Urban andSemi Urban areas. The increased electricity, fuel andlabour costs are a major obstacle for the growth. Theseincreases could be absorbed only by moving to producehigh value products.the Company to next level and to be the undisputedleader in the Leather Sector.I acknowledge the dedication, commitment and the cooperationof the staff at all levels. They always had beena great strength to me and to the Company. I extend mysincere appreciation to all Stakeholders of the Companyfor their continued and loyal support given to us over theyears.(Sgd.)Sitendra SenaratneMANAGING DIRECTOR/CHIEF EXECUTIVEOFFICER08 th July 2013Company will concentrate in specialized products such asSafety, Chef, Surgical Theatre and Water- Proof shoes.The Designers are in the process of introducing newrange of Ladies and Gents shoes periodically to themarket. Number of DI Leather Boutiques will beincreased during the coming year extending the reach ofthe products to the customers. We will also add highervalue -added products to our product portfolio.ACKNOWLEDGEMENTThe Environmental Resources Investment PLC, PrincipalShareholder was a tower of strength to the Company. Iwill be failing in my duty if I do not mention thecontribution made by the Directors namely Mr H BDissanayake, Mr Gamini Munasinghe, Dr KosalaHeengama, Mr Scott Newsome and Mr M A K BDodangoda who have resigned from the Board.I have no doubt the new Directors, Mr A GWeerasinghe, Mr Mangala Boyagoda, and Mr NevillePeiris with their wealth of experience, knowledge andbusiness acumen they possess, will be a great strengthto the Company. Their guidance will be the key to take

17MATERIAL FORESEEABLE RISK FACTORSThe Company identifies those uncertain events, which couldhave an adverse effect on the achievement of the organization’soperational and financial objectives as risk factors. RiskManagement is the practice of managing the resources of theoperation in such way as to maintain an acceptable level of risk.The Board of Directors of the Company places special emphasison the management of business risk, providing assurance thatsound system of controls are in place in order to manage andmitigate the potential impact of such risks.Ceylon Leather Products PLC, being in the manufacturing andmarketing of Leather, Leather footwear and Leather goodsindustry is exposed to a multitude of risks.Operational RiskOperational risks are those relating to firm’s business model,product, satisfying customers, and achieving company’s quality,cost, and performance objectives. The Company has designedand implemented internal control procedures to preventoperational risks that may arise in day to day activities. Theseinclude daily, weekly, monthly, quarterly and yearly reporting.The quality and effectiveness of such systems are subject toregular review by the Management and updated withappropriate changes where necessary to suit the changingbusiness environment. Regular checks and audits are carried outby the compliance unit to ensure that these systems andprocedures are being adhered to.Credit RiskCredit risk is the potential financial loss arising from paymentdelays and non-payment from debtors. Company implementsregular monitoring and debt collection procedures. In addition,Company implements customer based specific credit policiesand payment terms.Capacity Utilization RiskInsufficient capacity hinders the Company’s ability to meetcustomer demands in time, and on the other hand excesscapacity affects achievement of competitive profit margins. Thisrisk is mitigated by effective budgeting and forecasting done onregular intervals. The Company forecasts its supply position inline with expected demand and other relevant factors. This isbeing monitored thereafter on a monthly and quarterly basisagainst actual performance and corrective measures takenwhere necessary.Liquidity RiskLiquidity refers to the ability of the Company to meet financialobligations as they become due without affecting the day to dayoperation. The Company carries out regular cash flow forecastswith projected cash inflows and expected paymentcommitments giving sufficient leverage to corrective measureswhere appropriate.Interest Rate RiskRefers to the negative impact on the profitability as a result ofinterest rate increases. The exposure to interest rate risk ismanaged successfully by negotiating better rates by offeringsound security, operating within approved credit limits andmaking repayment of loans on time. Effective working capitalmanagement and customer payment terms helped in mitigatinginterest rate risk.Legal RiskLegal risk arises from legal consequences of a transaction or anyother legal implications which may result in unexpected lossesto the Company. The Company has placed special emphasis onthis and is subjected to regular review by the managementcommittee and Board of Directors. Where necessary specificissues are being referred to outside experts’/consultants’opinion.Reputation RiskIn the macro environment, reputation has become anorganization’s most valuable asset. The Company hasrecognized the need of maintaining good reputation and in orderto protect itself ensure the compliance with all legal andstatutory requirements and maintain high standard of ethics andincreasing transparency. Company’s responsibility to allstakeholders and to the country take precedence overeverything else.Changes in Designs and Fashion RiskFootwear and leather goods market is often exposed to changesin consumer taste in relation to latest designs and fashiontrends. The Marketing department keeps a regular tab onconsumer trends reactions in order to take prompt measures. Inaddition Company’s design studio which comprises of wellexperienced design staff carries out frequent developments inthis area.Cost Inflation RiskIdentified as potential impact on profitability due to increasingcosts of inputs. Inflationary risk is mitigated by implementingeffective budgetary controls in order to assess impact on atimely manner and corrective measures taken on a promptbasis. Company focuses on increasing productivity as a measureto reduce the cost base. Also has developed multiple andalternative suppliers and service providers to reduce overdependency.

26The Board is responsible for formulating the Company's strategic goals, providing leadership to put them into effect,supervising the management of the business, and reporting to the shareholders on their stewardship. The Board iscommitted to manage its affairs by complying with generally accepted corporate governance practices as well as specificrequirements under the Listing Rules of the Colombo Stock Exchange and the Code of Best Practices issued by the Instituteof Chartered Accountants of Sri Lanka on matters relating to the financial aspect of corporate governance as a usefulguideline.Board of DirectorsThe Board consists of Five Directors, four Non-Executive Directors and one Executive Director being the ManagingDirector/Chief Executive Officer.Mr Lalith Heengama – Chairman/Non-Executive DirectorMr Sitendra Senaratne – Managing DirectorMr A G Weerasinghe – Non-Executive DirectorMr Mangala Boyagoda – Independent Non-Executive DirectorMr Neville Peiris – Independent Non-Executive DirectorThe Board has determined that two Non-Executive Directors – Mr Mangala Boyagoda and Mr Neville Peiris are“Independent” as per the criteria set out in the Listing Rules of the Colombo Stock Exchange.Each Non-Executive Director has submitted a Declaration of their independence or non-independence as required under theListing Rules of the Colombo Stock Exchange.BOARD SUB COMMITTEESAudit CommitteeThe Audit Committee is responsible for monitoring the integrity of financial statements of the Company by ensuringcompliance with relevant financial reporting regulations and requirements. The Audit Committee also oversees therelationship between the Company and the Auditor and reviews the Company’s financial reporting system.The Board has appointed an Audit Committee, which was reconstituted in July 2013. The reconstituted Audit Committeeconsists of three non-executive Directors.The members of the Audit Committee are as follows.Mr Neville Peiris (appointed on 01 July 2013) - ChairmanMr Mangala Boyagoda (appointed on 27 May 2013) - MemberMr A G Weerasinghe (appointed on 27 May 2013) - MemberThe Chairman of the Audit Committee is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka.The report of the Audit Committee appears on page 29.Remuneration CommitteeThe Board has appointed a Remuneration Committee consisting of three non-executive Directors of whom two areIndependent.

27The Remuneration Committee consists of;Mr A G Weerasinghe (appointed on 01 July 2013) - ChairmanMr Mangala Boyagoda (appointed on 01 July 2013) - MemberMr Neville Peiris (appointed on 01 July 2013) - MemberReport of the Remuneration Committee appears on Page 30.Board meetings and attendance of DirectorsBoard Meetings are held to consider among other matters, the performance and financial statements for the period and toapprove routine capital expenditure. Special Board meetings are held as and when required to discuss urgent matters. TheBoard met on four occasions during the period under review.ComplianceThe Company’s level of compliance with the CSE’s New listing rules is given below.CorporateCSE RuleComplianceCompany’s level of complianceGovernance PrinciplesReferenceStatusNon- ExecutiveDirectors7.10.1 Compliant Four out of five Directors are non-executivesIndependent DirectorsDisclosures relating toDirectorsRemunerationCommittee7.10.2 (a)7.10.2 (b)Compliant Two out of four non-executive directors are “independent”7.10.3 Compliant Given under the heading of “Board of Directors” of thisreport and also refer to page 18.7.10.5 (a) Compliant The Committee comprises of 3 non executiveDirectors, two of whom are independent.7.10.5 (b)7.10.5 (c)Compliant Please refer Remuneration Committee Report on page30.The aggregate remuneration paid to non executivedirectors is given on page 34.Audit Committee 7.10.6 (a) Compliant The Committee comprises of three non-executiveDirectors, two of whom are independent.7.10.6 (c) Compliant Please refer report of the Audit Committee on page29.Going ConcernThe Board after reviewing the financial position and cash flow of the company is confident that the company is satisfied thatthe Company has adequate resources to continue its operations in the foreseeable future and the Directors have adoptedthe going concern basis in preparing the accounts.

28Compliance ReportThe Directors confirm that to the best of their knowledge all taxes and duties payable by the company and all contributions,levies and taxes payable on behalf of and in respect of the employees of the company and all other known statutory duespayable as at the Balance Sheet date have been paid or provided for in the accounts.By order of the Board ofCeylon Leather Products PLC(Sgd.)P W Corporate Secretarial (Pvt) LtdSecretariesColombo08 th July 2013

29The Audit Committee appointed by and responsible to the Board comprises of:Mr. Neville Peiris – Chairman appointed with effect from 01 July 2013.Mr. A G Weerasinghe- appointed with effect from 27 May 2013.Mr. Mangala Boyagoda - appointed with effect from 27 May 2013.Mr. M A K B Dodamgoda– Chairman resigned with effect from 28 May 2013.Mr. H B Dissanayake - resigned with effect from 30 March 2013 andMr. G S Munasinghe - resigned with effect from 30 March 2013.The Committee comprises three Independent, Non-Executive Directors. Company Secretary acts as the Secretary to theAudit Committee. The Chairman of the Audit Committee is a Fellow Member of the Institute of Chartered accountants of SriLankaThe key objectives and functions of the Committee is to provide assistance to the Board Directors in overseeing:The Review and the integrity of the Company’s financial statements.Compliance of the legal and regulatory requirements.Review in depth periodic reports issued by the Auditors to ensure all necessary follow up action have beeninitiated.The performance of the Company’s Internal Audit function and its Independent AuditorsReview Compliance and Corporate Governance issues relating to Internal Controls of the Organization in thecontext of regulatory and statutory requirements, andMake recommendations to the Board pertaining to the appointments, re-appointments and/or removal of ExternalAuditors and approve the Remuneration and terms of engagement of the External Auditors.The Audit Committee had four meetings and several informal discussions during the period under review. The meetingswere to review all financial statements including the quarterly financial statements and the Annual Financial Statements.The Managing Director/CEO, Group Chief Financial Officer, and the Finance Manager attended all Audit Committee meetingsby invitation. The proceedings of the Audit Committee are regularly reported to the Board of Directors.The separate Compliance Unit comprising of independent staff reporting direct to the holding Company continued to peruseall financial transactions of the Company for their economy, effectiveness and efficiency to ensure the interests ofStakeholders are safeguarded.Having reviewed the scope and effectiveness of the external Audit, and the Independence and objectivity of the externalAuditors, the Audit Committee recommends the re-appointment of M/s Ernst & Young, Chartered Accountants as Auditorsfor the year 2013/14.(Sgd.)Neville PeirisChairman,AUDIT COMMITTEE08 th July 2013

30The Remuneration Committee appointed by and responsible to the Board comprise of:Mr. A G Weerasinghe - Chairman appointed with effect from 01 July 2013Mr. Mangala Boyagoda - appointed with effect from 01 July 2013Mr. Neville Peiris - appointed with effect from 01 July 2013Dr. Kosala Heengama – Chairman resigned with effect from 28 March 2013Mr. H B Dissanayake - resigned with effect from 28 March 2013Mr. M A K B Dodamgoda - resigned with effect from 28 May 2013During the period under review, the Committee continued its responsibility of formulating and recommending to the Board,Remuneration Policy which would help the Organization to attract, retain and to motivate its staff taking into considerationIndustrial norms.The Committee is responsible for determining the compensation of all the Management Staff. During the period underreview, salaries of all executive staff were revised.Managing Director under the guidance of the Committee successfully negotiated and signed the Collective Agreement withthe Trade Unions, for a three year period from 01 April 2012.(Sgd.)A G WeerasingheChairmanREMUNERATION COMMITTEE08 th July 2013

32The Directors of Ceylon Leather Products PLC have pleasure in presenting their report together with Audited FinancialStatements of the Company for the year ended 31 March 2013.PRINCIPAL ACTIVITIESThe principal activity of the Company is manufacturing and selling of leather, leather footwear and leather goods.InvestmentsCeylon Leather Products PLC has the under-mentioned investments in subsidiary and other companiesName Shareholding ActivityCeylon Leather Products Distributors (Pvt) Limited 100% Marketing arm of the parent CompanySouth Asia Textile industries Lanka (Pvt) Ltd 51.55% Manufacturing and selling of knittedfabrics for the export and local marketPalla & Company (Pvt) Ltd 60% Manufacturing of shoes for exportNedLanka (Ceylon) Ltd 7.14% Manufacturing of leather glovesDankotuwa Porcelain PLC 8.31% Manufacturing of porcelain tablewaretargeted for export and local marketInvestment details are disclosed under notes 10 to 11 of the financial statements.BUSINESS REVIEWThe Chairman’s message and Managing Director/Chief Executive Officer’s Review describes briefly the activities during theyear under review. The results for the year are set out in the Income Statement.FINANCIAL STATEMENTSThe complete Financial Statements of the Company duly signed by two Directors on behalf of the Board and the Auditorsare given on pages 38 to 87.Summarized Financial ResultsThe summarized financial results of the Company is as follows:GROUP2012-2013 2011-2012Rs’000Rs’000COMPANY2012-2013Rs’0002011-2012Rs’000Turnover 5,203,031 4,371,544 1,030,399 1,313,494Gross Profit 805,818 789,627 199,751 361,552

33Profit/(Loss)before Taxation 125,955 131,243 156,333 230,268Taxation (28,749) (89,960) (26,127) (80,463)Profit/(Loss)attributable toShareholders97,206 41,283 130,206 149,805Auditors’ ReportThe Report of the Auditors on the Financial Statements of the Company is given on page 38.Accounting PoliciesThe accounting policies adopted by the Company in the preparation of financial statements are given on pages 44 to 62.Changes in accounting policies during the accounting period are described under Note 4 to the Financial Statements.Directors’ responsibility for Financial ReportingThe Directors are responsible for the preparation of Financial Statements of the Company to reflect a true and fair view ofthe state of its affairs. A further statement in this regard is included on page 37.STATED CAPITALThe Stated Capital of the Company as at 31 March 2013 was Rs. 1,979,344,948/- representing 34,233,774 ordinary shares(Rs.1,979,344,948/- representing 34,233,774 ordinary shares as at 31 st March 2012).DIRECTORSThe names of the Directors who held office as at the end of the accounting period are given below;Mr. L. HeengamaChairmanMr. S. SenaratneManaging Director/Chief Executive OfficerMr G. S. Newsome Director (resigned on 28 March 2013)Dr K Heengama Director (resigned on 28 March 2013)Mr. D. M. K. Dodamgoda Director (resigned on 28 May 2013)Mr H. B. Dissanayake Director (resigned on 28 March 2013)Mr G. S. Munasinghe Director (resigned on 28 March 2013)Mr Mangala Boyagoda and Mr A G Weerasinghe were appointed as Directors on 27 May 2013.Mr D M K Dodamgoda resigned from the Directorate on 28 May 2013 and Mr N C Peiris was appointed as a Director on 01July 2013.The present Directors of the Company and their profiles are shown on page 18 of the Annual Report.

34In terms of Article 20 (2) of the Articles of Association of the Company, Mr. Mangala Boyagoda and Mr. Neville Peiris willretire from office at the conclusion of the forth coming Annual General Meeting. Mr. Mangala Boyagoda and Mr. Neville Peirisoffer themselves for re-election with the unanimous support of the Board.Mr. A G Weerasinghe vacates office in terms of Section 210 of the Companies Act No. 7 of 2007 and a resolution will betabled for his re-appointment as per Section 211 of the Act with the unanimous support of the Board.Mr. Lalith Heengama retires from the Board of Directors at the conclusion of the Annual General Meeting and will not offerhimself for re-election.Directors’ ShareholdingThe Directors did not hold any shares as at 31 st March 2013 or 31 st March 2012.Directors’ RemunerationThe total amount of remuneration and other benefits of Directors for the year ended 31 March 2013 was Rs.12,896,000.- ofwhich Rs.3,850,000.- paid to non-executive Directors.Interests RegisterThe Company maintains an Interests Register in terms of the Companies Act, No. 7 of 2007, which is deemed to form partand parcel of this Annual Report.Directors interests in contractsRelated party disclosures as required by the Sri Lanka Accounting Standards No.24 are detailed in note 27 to the financialstatements.The Company carried out transactions in the ordinary course of its business at commercial rates with the following directorrelated entities.Name of Related Party Relationship Names of common DirectorsCeylon Leather Products Distributors (Pvt) Ltd. Subsidiary Mr. Lalith HeengamaMr. S.S. SenaratneSouth Asia Textile Industries Lanka (Pvt) Ltd. Subsidiary Mr. S.S. SenaratneDankotuwa Porcelain PLC Affiliate Mr. A.G. WeerasingheMr. E.M.M. BoyagodaMr. S.S. SenaratneEnvironmental Resources Investment PLC Parent Mr. Lalith HeengamaMr. A. G. WeerasingheColombo Pharmacy Company PLC Affiliate Mr.A. G. WeerasingheMr. E. M. M. Boyagoda

35MAJOR SHAREHOLDERS, DISTRIBUTION SCHEDULE AND OTHER INFORMATIONInformation on the distribution of shareholding, analysis of shareholders, market values per share, earnings, dividends, netassets per share, twenty largest shareholders of the Company, percentage of shares held by the public as per the ListingRules of the Colombo Stock Exchange are given on page 88 to 91 under Shareholders’ Information.EMPLOYMENT POLICYThe Company’s employment policy is totally non-discriminatory which respects individuals and provides career opportunitiesirrespective of the gender, race or religion.As at 31 st March 2013, 567 persons were in employment against 562 persons as at 31 st March 2012).STATUTORY PAYMENTSThe Directors confirm that to the best of their knowledge, all payments in respect of statutory liabilities including EPF,ETF,and PAYE tax have been made within the stipulated periods during the financial year.RESERVESThe reserves of the Company with the movements during the year are given in Note 16 to the financial statements.CAPITAL EXPENDITURE ON PROPERTY PLANT & EQUIPMENTThe Company incurred capital expenditure of Rs. 30,848,864 during the year. The details are disclosed under Note 7 tofinancial Statements.LAND HOLDINGSExtents, locations, valuations and the number of buildings of the Company’s land holdings and investment properties as 31March 2013 as follows.Location Land Extent No of Buildings Building Extent Value-Rs.’000Mattakkuliya 4.75 Acres 15 75,010 Sq.feet 479,246Belummahara 2.96 Acres 10 76,460 Sq.feet 329,948Mattakkuliya 6 perchases 01 2,120 Sq.feet 10,180MATERIAL FORESEEABLE RISK FACTORSInformation pertaining to material foreseeable risk factors of the company are given on page 17.TAXATIONThe Company’s liability to taxation has been computed according to the provisions of the Inland Revenue Act No.10 of 2006and amendments thereto. Note 18 to the financial statements describes the method of computation of taxes of theCompanyDONATIONSNo Donations were made by the Company during the year under review.

36DIVIDENDSThe Directors have recommended a dividend of Rs. 1.00 per share for the financial year under review subject to approvalby the Shareholders.CORPORATE GOVERNANCEThe report on Corporate Governance is given on Page 26 of the Annual Report.POST BALANCE SHEET EVENTSThere were no post Balance Sheet events which would require adjustment to or disclosure in the Financial Statements.AUDITORSMessrs Ernst & Young, Chartered Accountants served as the Auditors during the year under review and also provided nonaudit/consultancy services.A total amount of Rs 1,290,760/- is payable by the Company to the Auditors for the year under review comprising Rs980,000/- as audit fees and Rs. 310,760/- for non audit services.The Auditors have expressed their willingness to continue in office. The Audit Committee at a meeting held on 08 th July2013 recommended that they be re-appointed as Auditors. A resolution to re-appoint the Auditors and to authorize theDirectors to determine their remuneration will be proposed at the Annual General Meeting.ANNUAL GENERAL MEETINGThe Annual General Meeting of the Company will be held at 1000 h on Friday, 02 August 2013 at No. 32, Sri SambuddhaJayanthie Mandiraya, Sri Sambuddha Jayanthie Mawatha, Colombo 5. The Notice of the Annual General Meeting is on page97 of this Report.This Annual Report is signed for and on behalf of the Board of Directors by(Sgd.)Sitendra SenaratneManaging Director/CEO(Sgd.)A.G. WeerasingheDirector(Sgd.)P W Corporate Secretarial (Pvt) LtdSecretaries08 th July 2013

37The responsibility of the Directors in relation to the financial statements of the Company is set out in the followingstatement. The responsibility of the Auditors, in relation to the financial statements, prepared in accordance with theprovisions of the Companies Act No. 07 of 2007, is set out in the Independent Auditors' report appearing on page 38.The Companies Act 07 of 2007 stipulates that Directors are responsible for the preparation of financial statements for eachfinancial year and place before a general meeting financial statements, comprising a Profit and Loss Account and a BalanceSheet which presents a true and fair view of the State of affairs the Company as at the end of the financial year and whichcomply with the requirements of the above Act.The financial statements have been prepared and presented in accordance with Sri Lanka Accounting Standards. Inpreparing the financial statements appropriate accounting policies have been selected and applied consistently, whilstreasonable and prudent judgments and estimates have been made.As per Section 148 of the Act, the Directors are required to maintain sufficient accounting records to disclose withreasonable accuracy the financial position of the Company and to ensure that the financial statements presented complywith the requirements of the Companies Act.The Directors are also responsible for devising proper internal controls for safeguarding the assets of the Company againstunauthorized use or disposition and prevention and detection of fraud and for reliability of financial information used withinthe business or publication.The Directors continue to adopt the going concern basis in preparing accounts and after making inquiries and following areview of the Company’s budget for the financial year 2012/2013 including cash flows and borrowing facilities, consider thatthe Company has adequate resources to continue in operation.The Board of Directors is of the opinion that Board has discharged its responsibilities as set out above.By order of the Board ofCeylon Leather Products PLC(Sgd.)P W Corporate Secretarial (Pvt) LtdSecretariesColombo08 th July 2013

38APAG/WDRT/DMINDEPENDENT AUDITOR’S REPORTTO THE SHAREHOLDERS OF CEYLON LEATHERPRODUCTS PLCReport on the financial statementsWe have audited the accompanying financial statements ofCeylon Leather Products PLC (“Company”), the consolidatedfinancial statements of the Company and its subsidiaries whichcomprise the statements of financial position as at 31 March2013, and the income statements, statements ofcomprehensive income, statements of changes in equity andstatements of cash flows for the year then ended, and asummary of significant accounting policies and otherexplanatory notes.Management’s responsibility for the financial statementsManagement is responsible for the preparation and fairpresentation of these financial statements in accordance withSri Lanka Accounting Standards. This responsibility includes:designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whetherdue to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that arereasonable in the circumstances.Scope of audit and basis of opinionOur responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with Sri Lanka Auditing Standards. Thosestandards require that we plan and perform the audit to obtainreasonable assurance whether the financial statements arefree from material misstatement.An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accountingpolicies used and significant estimates made by management,as well as evaluating the overall financial statementpresentation.We have obtained all the information and explanations whichto the best of our knowledge and belief were necessary for thepurposes of our audit. We therefore believe that our auditprovides a reasonable basis for our opinion.OpinionIn our opinion, so far as appears from our examination, theCompany maintained proper accounting records for the yearended 31 March 2013 and the financial statements give a trueand fair view of the Company’s financial position as at 31March 2013 and its financial performance and cash flows forthe year then ended in accordance with Sri Lanka AccountingStandards.In our opinion, the consolidated financial statements give atrue and fair view of the financial position as at 31 March 2013and its financial performance and cash flows for the year thenended, in accordance with Sri Lanka Accounting Standards, ofthe Company and its subsidiaries dealt with thereby, so far asconcerns the shareholders of the Company.Report on other legal and regulatory requirementsThese financial statements also comply with the requirementsof Sections 151(2) and 153(2) to 153(7) of the Companies ActNo. 07 of 2007.8 July 2013Colombo.

39GroupCompanyAs at 31 March 2013 Note 2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.ASSETSNon-Current AssetsProperty, Plant & Equipment 7 2,582,630,192 2,652,386,348 2,391,331,305 1,062,813,134 1,079,401,722 917,608,640Pre Paid Lease Rental 8 25,763,293 26,006,822 - - - -Intangible Assets 9 184,956,316 185,362,830 27,858,909 3,587,034 4,230,326 2,370,000Investment in Subsidiaries 10 - - - 705,191,132 705,091,132 550,000,000Loans & Receivables 11 108,671,612 108,543,136 - 436,767,959 415,137,308 -Available for Sale of Financial Assets 11 85,147,676 99,767,936 361,404,037 85,147,676 99,767,936 361,404,037Other Investments 11 61,778,901 29,336,282 18,526,553 - - -Deferred Tax Asset 18 8,650,920 - - - - -3,057,598,910 3,101,403,354 2,799,120,804 2,293,506,935 2,303,628,424 1,831,382,677Current AssetsInventories 12 1,213,121,869 1,030,640,281 1,021,783,096 332,686,540 199,061,281 164,398,150Trade and Other Receivables 13 610,508,361 662,697,255 802,932,571 338,095,631 243,916,989 225,053,360Advances & Prepayments 57,887,631 88,503,158 50,572,371 37,710,311 54,329,637 28,804,926Income Tax Refund Due 4,862,448 5,766,479 1,089,403 406,565 406,565 406,565Short Term Investments 11 10,580,216 12,119,364 7,973,340 10,580,216 12,119,364 7,973,340Cash and Cash Equivalents 14 553,446,619 575,753,077 261,921,333 466,412,664 528,839,107 249,916,9472,450,407,144 2,375,479,614 2,146,272,114 1,185,891,927 1,038,672,943 676,553,288Total Assets 5,508,006,054 5,476,882,968 4,945,392,918 3,479,398,862 3,342,301,367 2,507,935,965EQUITY AND LIABILITIESEquityStated Capital 15 1,979,344,948 1,979,344,948 1,037,500,000 1,979,344,948 1,979,344,948 1,037,500,000Other Components of Equity 16 703,102,380 716,535,050 948,040,244 698,138,676 711,781,716 948,040,244Retained Earnings 320,290,959 226,224,342 160,819,239 499,555,477 369,349,198 250,109,773Equity Attributable to Equity Holders 3,002,738,287 2,922,104,340 2,146,359,483 3,177,039,101 3,060,475,862 2,235,650,017Non-controlling Interest 370,163,176 366,883,686 417,570,510 - - -Total Equity 3,372,901,463 3,288,988,026 2,563,929,993 3,177,039,101 3,060,475,862 2,235,650,017Non-Current LiabilitiesInterest Bearing Loans & Borrowings 17 91,303,252 58,414,804 122,069,066 4,667,595 7,414,804 21,800,756Deferred Tax Liabilities 18 201,599,995 189,916,645 161,814,420 86,525,472 82,901,438 74,671,824Defined Benefit Liability 19 73,264,000 59,700,822 44,174,268 39,715,352 34,770,992 31,685,723366,167,247 308,032,271 328,057,754 130,908,419 125,087,234 128,158,303Current LiabilitiesTrade and Other Payables 20 487,983,154 533,122,865 830,847,962 31,367,918 97,550,568 49,375,828Income Tax Liabilities 13,909,908 50,753,682 42,829,428 12,396,851 49,910,431 41,819,997Interest Bearing Loans & Borrowings 17 1,267,044,282 1,295,986,124 1,179,727,781 127,686,573 9,277,272 52,931,8201,768,937,344 1,879,862,671 2,053,405,171 171,451,342 156,738,271 144,127,645Total Equity and Liabilities 5,508,006,054 5,476,882,968 4,945,392,918 3,479,398,862 3,342,301,367 2,507,935,965These Financial Statements are in compliance with the requirements of the Companies Act No :07 of 2007.…………………………Lalith W.K. PeligeGroup Chief Financial OfficerThe board of directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the board by:……………………………………S.S. SenaratneManaging Director/Chief Executive Officer………………………………A.G.WeerasingheDirectorThe accounting policies and notes on pages 44 through 87 form an integral part of the Financial Statements.08 July 2013Colombo-2-

40GroupCompanyYear ended 31 March 2013 Note 2013 2012 2013 2012Rs. Rs. Rs. Rs.Revenue 6 5,203,031,243 4,371,544,457 1,030,399,595 1,313,494,596Cost of Sales (4,397,213,564) (3,581,917,236) (830,648,545) (951,942,267)Gross Profit 805,817,679 789,627,221 199,751,050 361,552,329Other Income and Gains 21 40,031,283 48,987,787 14,782,647 12,030,382Selling & Distribution Cost (168,229,668) (122,296,586) (35,639,020) (80,316,811)Administrative Expenses (510,370,197) (517,595,968) (99,803,244) (95,363,759)Other Expenses (1,639,148) (5,804,167) (1,539,148) (5,804,167)Finance Cost 22.1 (112,599,795) (104,686,722) (15,115,402) (12,496,371)Finance Income 22.2 72,945,306 43,011,806 93,896,120 50,666,294Profit before Tax 23 125,955,460 131,243,371 156,333,003 230,267,897Income Tax Expense 18 (28,749,599) (89,960,239) (26,126,724) (80,463,247)Profit for the year 97,205,861 41,283,132 130,206,279 149,804,650Attributable to:Equity Holders of the Parent 94,066,617 95,965,035 130,206,279 149,804,650Non-controlling Interest 3,139,244 (54,681,903) - -97,205,861 41,283,132 130,206,279 149,804,650Basic Earnings Per Share 24 2.75 3.16Diluted Earnings Per Share 24 2.75 3.16The accounting policies and notes on pages 44 through 87 form an integral part of the Financial Statements.-3-

41Year ended 31 March 2013GroupCompany2013 2012 2013 2012Rs. Rs. Rs. Rs.Profit for the year 97,205,861 41,283,132 130,206,279 149,804,650Other Comprehensive IncomeChange in Fair Value of Available for Sale Financial Assets (13,643,040) (261,636,101) (13,643,040) (261,636,101)Revaluation of Land & Buildings 350,616 35,925,923 - 25,377,573Total Other Comprehensive Income (13,292,424) (225,710,178) (13,643,040) (236,258,528)Income Tax charge relating to components - (1,455,631) - -of other comprehensive incomeOther Comprehensive Income- Net of Tax (13,292,424) (227,165,809) (13,643,040) (236,258,528)Total Comprehensive Income - Net of Tax 83,913,437 (185,882,677) 116,563,239 (86,453,878)Attributable to:Equity Holders of the Parent 80,633,947 (135,534,866) 130,206,279 (86,453,878)Non-controlling Interest 3,279,490 (50,347,811) - -83,913,437 (185,882,677) 116,563,239 (86,453,878)The accounting policies and notes on pages 44 through 87 form an integral part of the Financial Statements.-4-

42Year ended 31 March 2013Company Note Stated Re valuationAvailable forSale Retained TotalCapital Reserve Reserve EarningsRs. Rs. Rs. Rs. Rs.As at 01 April 2011 1,037,500,000 642,598,099 305,442,145 250,109,773 2,235,650,017Net Profit for the year - - - 149,804,650 149,804,650Other Comprehensive Income - 25,377,573 (261,636,101) - (236,258,528)Total Comprehensive Income - 25,377,573 (261,636,101) 149,804,650 (86,453,878)Issue of Ordinary Shares 15 941,844,948 - - - 941,844,948Direct Cost on Share Issue - - - (5,565,225) (5,565,225)Dividend paid - - - (25,000,000) (25,000,000)As at 31 March 2012 1,979,344,948 667,975,672 43,806,044 369,349,198 3,060,475,862Net Profit for the Year - - - 130,206,279 130,206,279Other Comprehensive Income - - (13,643,040) - (13,643,040)As at 31 March 2013 1,979,344,948 667,975,672 30,163,004 499,555,477 3,177,039,101Group Note Stated Re valuation Retained Non-controlling TotalCapital Reserve Reserve Earnings Total Interest EquityRs. Rs. Rs. Rs. Rs. Rs. Rs.As at 01 April 2011 1,037,500,000 642,598,099 305,442,145 160,819,239 2,146,359,483 417,570,510 2,563,929,993Net Profit for the year - - - 95,965,035 95,965,035 (54,681,903) 41,283,132Other Comprehensive Income - 30,136,200 (261,636,101) - (231,499,901) 4,334,092 (227,165,809)Total Comprehensive Income - 30,136,200 (261,636,101) 95,965,035 (135,534,866) (50,347,811) (185,882,677)Issue of Ordinary Shares 15 941,844,948 - - - 941,844,948 - 941,844,948Transfer of Surplus on revaluation ofDerecognised Property, Plant and Equipment - (5,293) - 5,293 - - -Direct Cost on Share Issue - - - (5,565,225) (5,565,225) - (5,565,225)Dividend paid - - - (25,000,000) (25,000,000) - (25,000,000)Non-controlling Interest arisen fromBusiness acquisition - - - - - (339,013) (339,013)As at 31 March 2012 1,979,344,948 672,729,006 43,806,044 226,224,342 2,922,104,340 366,883,686 3,288,988,026Net Profit for the Year - - - 94,066,617 94,066,617 3,139,244 97,205,861Other Comprehensive Income - 210,370 (13,643,040) - (13,432,670) 140,246 (13,292,424)Total Comprehensive Income - 210,370 (13,643,040) 94,066,617 80,633,947 3,279,490 83,913,437As at 31 March 2013 1,979,344,948 672,939,376 30,163,004 320,290,959 3,002,738,287 370,163,176 3,372,901,463The accounting policies and notes on pages 44 through 87 form an integral part of the Financial Statements.-5-

43Year ended 31 March 2013GroupCompanyNote 2013 2012 2013 2012Rs. Rs. Rs. Rs.Cash Flows From/(Used in) Operating ActivitiesNet Profit/(Loss) from operations 125,955,460 131,243,371 156,333,003 230,267,897Adjustments forDepreciation 7 162,953,874 146,779,929 47,437,452 39,766,862Finance Income 22.2 (72,945,306) (43,011,806) (93,896,120) (50,666,294)Profit on Sale of Property, Plant & Equipment 21 - (12,273,871) - (1,600,793)Finance Costs 22.1 112,599,795 104,686,722 15,115,402 12,496,371Allowance for Obsolete and Slow Moving Inventories 23 (2,898,815) 25,791,493 (273,317) 2,760,732Fall in value of Investment 11 1,539,148 5,804,167 1,439,148 5,804,167Tax Receivable Written off 938,556 12,106 - -Allowance for Doubtful Receivables 23 64,332,242 352,778,258 (27,310,714) (511,966)Foreign Exchange Loss (Gain) (9,684,653) 101,910,337 - -Profit on Sale of Investment (1,359,030) (305,503) (1,359,030) (305,503)Amortization of Intangible Assets 23 1,033,854 703,780 643,292 622,602Provision for Defined Benefit Plans 19.1 21,884,213 11,979,392 10,587,844 5,333,460Operating Profit/(Loss) before Working Capital Changes 404,349,338 826,098,375 108,716,960 243,967,535(Increase)/ Decrease in Inventories (179,582,773) 129,361,810 (133,351,942) (37,423,863)(Increase)/ Decrease in Trade and Other Receivables and Prepayments 18,472,179 (243,337,408) (50,248,602) (43,876,373)Increase/(Decrease) in Trade and Other Payables (62,627,254) (409,180,305) (83,670,193) 17,409,058Cash Generated From/(Used for) Operations 180,611,490 302,942,472 (158,553,777) 180,076,357Finance Costs Paid 22.1 (112,599,795) (104,686,722) (15,115,402) (12,496,371)Income Tax Paid (44,757,309) (33,101,914) (42,528,726) (31,815,574)Defined Benefit Plan Costs Paid 19 (8,321,035) (4,271,145) (5,643,484) (2,248,191)Net Cash From/(Used in) Operating Activities 14,933,351 160,882,691 (221,841,389) 133,516,221Cash Flows From/(Used in) Investing ActivitiesAcquisition of Property, Plant & Equipment 7 (93,197,718) (189,255,513) (30,848,864) (178,314,626)Acquisition of Intangible Assets 8.2 (383,811) (2,482,928) - (2,482,928)Proceeds from Sale of Property, Plant & Equipment - 13,090,745 - 2,171,103Proceeds from Sale of Investment 2,336,250 1,652,927 2,336,250 1,652,927Investment in Subsidiary Company 5 - (128,848,487) - (155,091,132)Other Investments (32,442,619) (130,107,344) - (11,297,615)Loans and Receivable - - - (406,641,313)Interest Received 22.2 72,816,830 42,468,670 72,265,469 42,170,299Net Cash Flows from/(Used in) Investing Activities (50,871,068) (393,481,930) 43,752,855 (707,833,285)Cash Flows From/(Used in) Financing ActivitiesProceeds from Right Issue 15.1 - 941,844,948 - 941,844,948Proceeds From Interest Bearing Loans & Borrowings 17.2 296,224,701 388,102,807 - -Repayment of Interest Bearing Loans & Borrowings 17.2 (506,511,424) (628,047,587) - (43,912,031)Expenses on Share Issue - (5,565,225) - (5,565,225)Dividend Paid - (25,000,000) - (25,000,000)Net Cash Proceeds from Current Interest Bearing Loans & Borrowings 261,886,601 (135,915,979) 113,903,643 (16,444,578)Principal Payment under Finance Lease Liabilities 17.1 (6,878,614) (7,136,993) (3,300,823) (3,232,789)Net Cash Flows from/(Used in) Financing Activities 44,721,264 528,281,971 110,602,820 847,690,325Net Increase/(Decrease) in Cash and Cash Equivalents 8,783,547 295,682,732 (67,485,714) 273,373,261Cash and Cash Equivalents at the beginning of the Year 14 387,446,346 91,763,614 523,290,208 249,916,947Cash and Cash Equivalents at the end of the Year 14 396,229,893 387,446,346 455,804,494 523,290,208The accounting policies and notes on pages 44 through 87 form an integral part of the Financial Statements.-6-

441. CORPORATE INFORMATION1.1 GeneralReporting EntityCeylon Leather Products PLC (The Company) is a limitedliability company incorporated and domiciled in Sri Lankawhose shares are publicly traded. The registered office ofthe Company and the principal place of business is situatedat No.64, Belummahara, Mudungoda..The Consolidated financial statements of the company forthe year ended 31 March 2013 comprises of the companyand its subsidiaries (together referred to as the “Group”).SubsidiariesCeylon Leather Products Distributors (Pvt) Limited is alimited liability company incorporated and domiciled in SriLanka. The registered office and the principal place ofbusiness are same as the parent Company.Palla and Company (Private) LimitedDuring the year the principal activities of the Company weremanufacturing Shoes for exports.1.3 Parent Entity and Ultimate Parent EntityThe Company’s parent entity is Environmental ResourcesInvestment PLC. In the opinion of the Directors, theCompany’s ultimate parent undertaking and controllingparty is Environmental Resources Investment PLC, which isincorporated in Sri Lanka.1.4 Date of Authorization for IssueThe consolidated Financial Statements of the Group for theyear ended 31 March 2013 were authorized for issue inaccordance with a resolution of the directors on 08 July2013.South Asia Textile Industries Lanka (Pvt) Limited is a limitedliability Company incorporated and domiciled in Sri Lanka.The registered office of the Company and the principal placeof business is situated at No.70, Felix Dias BandaranayakeMawatha, Pugoda, Sri Lanka.Palla and Company (Private) Limited is a limited liabilityCompany incorporated and domiciled in Sri Lanka. Theregistered office of the Company and principal place of thebusiness is located at Spur Rd. 4, Lot 25B, KatunayakeExport Promotion Zone.1.2 Principal Activities & Nature of OperationsCompanyDuring the year, the principal activities of the Company weremanufacturing and selling of Leather, Leather Footwear andLeather Goods.Subsidiaries –Ceylon Leather Products Distributors (Private) LimitedDuring the year, the principal activity of the Company wasretail selling of Leather Footwear and Leather Goods.South Asia Textile Industries Lanka (Private) LimitedDuring the year, the principal activities of the Company weremanufacturing and sale of knitted fabrics for the export andlocal markets.2.1 Basis of Preparation2.1.1 Statement of ComplianceThe consolidated financial statements of the Group havebeen prepared in accordance with Sri Lanka AccountingStandards comprising SLFRS and LKAS (hereafter "SLFRS"),as issued by Institute of Chartered Accountants of SriLanka(CA Sri Lanka) and in compliance with therequirements of the Companies Act No.07 of 2007.For all periods up to and including the year ended 31 March2012, the Group prepared its financial statements inaccordance with the Sri Lanka Accounting Standards whichwere effective prior to January 1, 2012.These financial statements for the year ended 31 March2013 are the first the Group has prepared in accordancewith SLASs (SLFRS and LKAS) effective for the periodsbeginning on or after 01 January 2012.2.1.2 Basis of measurementThe consolidated financial statements have been preparedon a historical cost basis, except for land and buildingsclassified as property, plant and equipment and availablefor-salefinancial assets that have been measured at fairvalue.

45The financial statements are presented in Sri Lankan rupees.2.1.3 Comparative Informationinitially recorded, such differences will impact the income,deferred tax amounts in the period in which thedetermination is made.The accounting policies have been consistently applied bythe Company and the Group with those of the previousfinancial year in accordance with LKAS 01 Presentation ofFinancial Statements, except those which had to be changedas a result of application of the new SLFRS. Further,comparative information is reclassified wherever necessaryto comply with the current presentation.2.1.4 Use of significant accounting judgments ,estimates and assumptionsThe preparation of financial statements requires theapplication of certain critical accounting and assumptionsrelating to the future. Further, it requires the managementof the company to make judgments, estimates andassumptions that affect the reported amounts of revenues,expenses, assets and liabilities, and the disclosure ofcontingent liabilities, at the end of the reporting period.However, uncertainty about these assumptions andestimates could result in outcomes that require a materialadjustment to the carrying amount of the asset or liability infuture periods.JudgmentsIn the process of applying the Company’s and Group’saccounting policies, management has made the followingjudgments, which have the most significant effect on theamounts recognized in the consolidated financialstatements:i. TaxationThe Group is subject to income taxes and other taxes.Significant judgment was required to determine the totalprovision for current, deferred and other taxes pending theissue of tax guideline on the treatment of the adoption ofSLFRS in the financial statements and the taxable profit forthe purpose of imposition of taxes. Uncertainties exist, withrespect to the interpretation of the applicability of tax laws,at the time of the preparation of these financial statements.The Group recognized assets and liabilities for currentdeferred and other taxes based on estimates of whetheradditional taxes will be due. Where the final tax outcome ofthese matters is different from the amounts that wereii. Owner Occupied Properties and Investment PropertyIn determining if a property qualifies as Investment Propertythe Company makes a judgment whether the propertygenerates independent cash flows rather than cash flowsthat are attributable not only to the property but also otherassets. Judgment is also applied in determining if ancillaryservices are significant, so that a property does not qualifyas investment property.Estimates and AssumptionsThe key assumptions concerning the future and other keysources of estimation at the reporting date, that have asignificant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the nextfinancial year, are described below. The Company and theGroup based these assumptions and estimates onparameters available at the time financial statements wereprepared. Existing circumstances and assumptions aboutfuture developments, these may change due to marketchanges or circumstances arising beyond the control of theCompany and the Group. Such changes are taken intoconsideration in the assumptions when they occur.i. Going ConcernThe Board has made an assessment of the Company’s abilityto continue as a going concern and are satisfied that it hasthe resources to continue in business for the foreseeablefuture. Furthermore, the Board is not aware of any materialuncertainties that may cast significant doubt upon theCompany’s ability to continue as a going concern and theydo not intend either to liquidate or to cease operations of theCompany. Therefore, the financial statements continue to beprepared on the going concern basis.ii. Impairment of available - for - sale investmentsThe company records impairment charges on available forsale equity investments when there has been a significant orprolonged decline in the fair value below their cost. Thedetermination of what is ‘significant’ or ‘prolonged’ requiresjudgment. In making this judgment, the Companyevaluates, among other factors, historical share pricemovements, duration and extent up to which the fair valueof an investment is less than its cost.

46iii. Deferred tax assetsDeferred tax assets are recognised in respect of tax losses tothe extent it is probable that future taxable profits will beavailable against which such tax losses can be set off.Judgment is required to determine the amount of deferredtax assets that can be recognised, based on the likely timingand level of future taxable profits, together with the futuretax-planning strategies.iv. Defined benefit plansThe cost of defined benefit plan and the present value of thedefined benefit obligation are determined using actuarialvaluations. An actuarial valuation involves making variousassumptions which may differ from actual developments inthe future. These include the determination of the discountrate, future salary increases and mortality rates. Due to thecomplexity of the valuation, the underlying assumptions andtheir long term nature, a defined benefit obligation is highlysensitive to changes in these assumptions. All assumptionsare reviewed at each reporting date. In determining theappropriate discount rate, the management considers theinterest rates of Sri Lanka Government Bonds withextrapolated maturities corresponding to the expectedduration of the defined benefit obligation. The mortality rateis based on publicly available mortality tables. Future salaryincreases are based on expected future inflation rates andexpected future salary increase rate of the Company.v. Fair value of Property, Plant and EquipmentThe property, plant and equipment of the group werereflected at fair value. When current market prices of similarassets are available, such evidences are considered inestimating fair values of these assets. In the absence of suchinformation the company determines within reasonable fairvalue estimates, amounts that can be attributed as fairvalues, taking in to consideration discounted cash flowprojections based on estimates, derived evidence such ascurrent market rates for similar properties and usingdiscount rates that reflect uncertainty in the amount andtiming of cash flows.2.2 Summary of significant accounting policiesThe significant accounting policies applied by the Companyand the Group in preparation of its financial statements areincluded below. The accounting policies set out below havebeen applied consistently to all periods presented in thesesfinancial statements and in preparing the opening SLFRSstatement of financial position at April 1, 2011 for thepurpose of transition to SLFRS, unless otherwise is indicated.2.2.1 Basis of ConsolidationThe consolidated financial statements comprise the financialstatements of the Company and its subsidiaries as at 31March 2013.Subsidiaries are consolidated from the date of acquisition,being the date on which the Group obtains control, andcontinue to be consolidated until the date when such controlceases. The financial statements of the subsidiaries areprepared for the same reporting period as the parentcompany, using consistent accounting policies. All intragroupbalances, transactions, unrealised gains and lossesresulting from intra-group transactions and dividends areeliminated in full.Total comprehensive income within a subsidiary is attributedto the non-controlling interest even if it results in a deficitbalance.A change in the ownership interest of a subsidiary, without aloss of control, is accounted for as an equity transaction.If the Group loses control over a subsidiary, it: Derecognises the assets (including goodwill) andliabilities of the subsidiary Derecognises the carrying amount of any non-controllinginterest Derecognises the cumulative translation differences,recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Reclassifies the parent's share of components previouslyrecognised in other comprehensive income to profit or lossor retained earnings, as appropriate.2.2.2 Business combinations and goodwillBusiness combinations are accounted for using theacquisition method. The cost of an acquisition is measuredas the aggregate of the consideration transferred, measuredat acquisition date fair value and the amount of any noncontrollinginterest in the acquiree. For each businesscombination, the Group elects whether it measures the noncontrollinginterest in the acquiree either at fair value or atthe proportionate share of the acquiree’s identifiable netassets. Acquisition costs incurred are expensed and includedin administrative expenses.

47When the Group acquires a business, it assesses thefinancial assets and liabilities assumed for appropriateclassification and designation in accordance with thecontractual terms, economic circumstances and pertinentconditions as at the acquisition date. This includes theseparation of embedded derivatives in host contracts by theacquire.If the business combination is achieved in stages, theacquisition date fair value of the acquirer’s previously heldequity interest in the acquiree is remeasured to fair value atthe acquisition date through profit or loss.Any contingent consideration to be transferred by theacquirer will be recognised at fair value at the acquisitiondate. Subsequent changes in the fair value of the contingentconsideration which is deemed to be an asset or liability willbe recognised in accordance with LKAS 39 either in profit orloss or as a change to other comprehensive income. If thecontingent consideration is classified as equity, it will not beremeasured. Subsequent settlement is accounted for withinequity. In instances where the contingent consideration doesnot fall within the scope of LKAS 39, it is measured inaccordance with the appropriate SLFRS.2.2.3 Foreign currency translationTransactions in foreign currencies are initially recorded bythe Group entities at their respective functional currencyspot rate at the date the transaction first qualifies forrecognition. Monetary assets and liabilities denominated inforeign currencies are retranslated at the functional currencyspot rate of exchange ruling at the reporting date.Differences arising on settlement or translation of monetaryitems are recognised in profit or loss.Non-monetary items that are measured in terms of historicalcost in a foreign currency are translated using the exchangerates as at the dates of the initial transactions. Nonmonetaryitems measured at fair value in a foreign currencyare translated using the exchange rates at the date whenthe fair value is determined. The gain or loss arising ontranslation of non-monetary measured at fair value istreated in line with the recognition of gain or loss on changein fair value in the item.2.2.4 Property, plant and equipmenta) Cost /RevaluationGoodwill is initially measured at cost, being the excess of theaggregate of the consideration transferred and the amountrecognised for non-controlling interest over the netidentifiable assets acquired and liabilities assumed. If thisconsideration is lower than the fair value of the net assets ofthe subsidiary acquired, the difference is recognised in profitor loss.After initial recognition, goodwill is measured at cost lessany accumulated impairment losses. For the purpose ofimpairment testing, goodwill acquired in a businesscombination is, from the acquisition date, allocated to eachof the Group’s cash-generating units that are expected tobenefit from the combination, irrespective of whether otherassets or liabilities of the acquiree are assigned to thoseunits.Where goodwill forms part of a cash-generating unit andpart of the operation within that unit is disposed of, thegoodwill associated with the operation disposed of isincluded in the carrying amount of the operation whendetermining the gain or loss on disposal of the operation.Goodwill disposed of in this circumstance is measured basedon the relative values of the operation disposed of and theportion of the cash-generating unit retained.Property & Equipment are recognised if it is probable thatfuture economic benefits associated with the asset will flowto the entity and the cost of the asset can be measuredreliably in accordance with LKAS 16 on Property, Plant &Equipment.Plant & Equipment are recorded at cost excluding the costsof day to day servicing, less accumulated depreciation &accumulated impairment in value. Such cost includes thecost of replacing part of the plant and equipment when thatcost is incurred, if the recognition criteria are met.Land and buildings are measured at fair value lessdepreciation on buildings and impairment chargedsubsequent to the date of the revaluation. Valuations areperformed every 3-5 years to ensure that the fair value of arevalued asset does not differ materially from its carryingamount.All items of Property, Plant & Equipment are initiallyrecorded at cost. Where items of Property, Plant andEquipment are subsequently revalued, the entire class ofsuch assets is revalued. Revaluations are made withsufficient regularity to ensure that their carrying amounts donot differ materially from their fair values at the reportingdate date subsequent to the initial recognition as an asset at

48cost. Revalued Property, Plant and Equipment are carried atrevalued amounts less any subsequent depreciation thereon.All other Property, Plant and Equipment are stated athistorical cost less depreciation.The depreciation charges are determined separately for eachsignificant part of an item of property, plant & equipmentand begin to depreciate when it is available for use.When an asset is revalued, any increase in the carryingamount is credited directly to a revaluation reserve includedin the equity of the Statement of Financial Position unless itreverses a previous revaluation decrease relating to thesame asset, which was previously recognised as an expense.In these circumstances the increase is recognised as incometo the extent of the previous write down. When an asset’scarrying amount is decreased as a result of a revaluation,the decrease is recognised as an expense unless it reversesa previous increment relating to that asset, in which case itis charged against any related revaluation surplus, to theextent that the decrease does not exceed the amount heldin the revaluation reserve in respect of that same asset. Anybalance remaining in the revaluation reserve in respect of anasset, is transferred directly to retained earnings onretirement or disposal of the asset.b) Restoration CostsExpenditure incurred on repairs or maintenance ofProperty, Plant and Equipment in order to restore ormaintain the future economic benefits expected fromoriginally assessed standard of performance, isrecognised as an expense when incurred.c) DepreciationThe provision for depreciation is calculated by using astraight line method on the cost or valuation of all Property,Plant and Equipment other than freehold land, in order towrite off such amounts over the estimated useful economiclives by equal instalments. Effective rates are as follows:The principal annual rates used for this purpose are:%Land Development Cost 10%Buildings on Free Hold Land 2.5%Buildings on Lease Hold Land 2% - 5%Plant & Machinery 10%Production Equipment 5.5%Electrical Installations 6.67% - 20%Office Equipment 10%Furniture and Fittings 10% - 20%Water Embankment & Purification 10%ProjectMotor Vehicle 16.67% - 25%d) De-recognitionAn item of property, plant and equipment is derecognisedupon disposal or when no future economic benefits areexpected from its use or disposal. Any gain or loss arising onderecognition of the asset (calculated as the differencebetween the net disposal proceeds and the carrying amountof the asset) is included in the statement of comprehensiveincome in the year the asset is derecognised.e) ImpairmentThe Company assesses at each reporting date whether thereis an indication that an asset may be impaired. If anyindication exists, or when annual impairment testing for anasset is required, the Company estimates the asset’srecoverable amount. An asset’s recoverable amount is thehigher of an asset’s or the fair value of the Cash Generatingunit’s (CGU) fair value less costs to sell and its value in use.Where the carrying amount of an asset or CGU exceeds itsrecoverable amount, the asset is considered impaired and iswritten down to its recoverable amount.2.2.5 Intangible AssetsIntangible assets acquired separately are measured on initialrecognition at cost. Following initial recognition, intangibleassets are carried at cost less any accumulated amortizationand any accumulated impairment losses. Internallygenerated intangible assets, excluding capitalizeddevelopment costs, are not capitalized and expenditure isreflected in the statement of comprehensive income in theyear in which the expenditure is incurred.Intangible assets with finite lives are amortized over theuseful economic life and assessed for impairment wheneverthere is an indication that the intangible assets may beimpaired. The amortization period and the amortizationmethod for intangible assets with finite useful life is receivedat least at each financial year end. Changes in the expecteduseful life or the expected pattern of consumption of futureeconomic benefits embodied in the assets is accounted for bychanging the amortization period or method, as appropriate,and treated as changes in accounting estimates. Theamortization expenses on intangible assets with finite livesare recognized in the statement of comprehensive income in

49the expense category consistent with the function of theintangible assets.Intangible assets with indefinite useful lives are notamortised, but are tested for impairment annually, eitherindividually or at the cash-generating unit level. Theassessment of indefinite life is reviewed annually todetermine whether the indefinite life continues to besupportable. If not, the change in useful life from indefiniteto finite is made on a prospective basis.Gains or losses arising from derecognition of an intangibleasset are measured as the difference between the netdisposal proceeds and the carrying amount of the asset andare recognised in the statement of comprehensive incomewhen the asset is derecognised.2.2.6 Accounting for leases - where the Company isthe lesseeFinance leases, which transfer to the Group substantially allthe risks and benefits incidental to ownership of the leaseditem, are capitalised at the inception of the lease at the fairvalue of the leased property or, if lower, at the presentvalue of the minimum lease payments. Lease payments areapportioned between the finance charges and reduction ofthe lease liability so as to achieve a constant rate of intereston the remaining balance of the liability. Finance charges arereflected in the statement of comprehensive income.Capitalised leased assets are depreciated over the shorter ofthe estimated useful life of the asset and the lease term, ifthere is no reasonable certainty that the Group will obtainownership by the end of the lease term. The depreciationpolicy for depreciable leased assets is consistent with thatfor depreciable asset that are owned as described in 2.2.4.Operating lease payments are recognised as an expense inthe statement of comprehensive income on a straight linebasis over the lease term.2.2.7 Financial Assets2.2.7.1 Initial recognition and measurementFinancial assets within the scope of LKAS 39 are classified asfinancial assets at fair value through profit or loss, loans andreceivables, held-to-maturity investments or available-forsalefinancial assets, as appropriate. The Group determinesthe classification of its financial assets at initial recognition.All financial assets are recognised initially at fair value plustransaction costs, in the case of assets not at fair valuethrough profit or loss. Purchases or sales of financial assetsthat require delivery of assets within a time frameestablished by regulation or convention in the marketplace(regular way trades) are recognised on the trade date, i.e.,the date that the Group commits to purchase or sell theasset.The Group recognised non-derivative financial assets by thefollowing three categories: financial assets at fair valuethrough profit or loss, loans and receivables and availablefor-salefinancial assets.2.2.7.2 Subsequent measurementThe subsequent measurement of financial assetsdepends on their classification as follows:i. Financial assets at fair value through profit or lossA financial asset is classified as fair value through profit orloss if it is held for trading or is designated at fair valuethrough profit of loss.a. Financial assets held for tradingFinancial assets held for trading are recorded in thestatement of financial position at fair value. Changes in fairvalue are recognized in ‘Net trading income’. Dividendincome or expense is recorded in ‘Net trading income’according to the terms of the contract, or when the right tothe payment has been established.b. Financial assets designated at fair value throughprofit or loss (FVTPL)Financial assets may be designated by management uponinitial recognition, if: such designation eliminates or significantly reduces theinconsistent treatment that would otherwise arise frommeasuring the assets or recognizing gains or losses onthem on a different basis. the assets are part of a group of financial assets,financial liabilities or both, which are managed and theirperformance evaluated on a fair value basis, in accordancewith a documented risk management or investmentstrategy. it contains one or more embedded derivatives, whichsignificantly modify the cash flows that would otherwise berequired by the contract.

50Financial assets at fair value through profit or loss arerecorded in the statement of Financial Position at FairValue. Changes in fair value are recorded in ‘Net gain orloss on financial instrument designated at fair valuethrough profit or loss. Interest earned or incurred isaccrued in ‘Interest income’ or ‘Interest expense,respectively, using the effective interest rate (EIR), whiledividend income is recorded in ‘Other operating income’when the right to the payment has been established.Included in this classification are loans and advances tocustomers which are economically hedged by creditderivatives and do not qualify for hedge accounting, as wellas notes issued which are managed on a fair value basis.ii. Loans and receivablesLoans and receivables are non-derivative financial assetswith fixed or determinable payments that are not quoted inan active market. After initial measurement, such financialassets are subsequently measured at amortised cost usingthe effective interest rate method (EIR), less impairment.Amortised cost is calculated by taking into account anydiscount or premium on acquisition and fees or costs thatare an integral part of the EIR. The EIR amortisation isincluded in finance income in the statement ofcomprehensive income. The losses arising from impairmentare recognised in the statement of comprehensive incomein finance costs.iii. Available-for-sale financial investmentsAvailable-for-sale investments include equity and debtsecurities. Equity investments classified as available for saleare those which are neither classified as held for trading nordesignated at fair value through profit or loss. Debtsecurities in this category are intended to be held for anindefinite period of time and may be sold in response toneeds for liquidity or in response to changes in the marketconditions. The Company has not designated any loans orreceivables as available-for-sale. After initial measurement,available-for-sale financial investments are subsequentlymeasured at fair value. Unrealised gains and losses arerecognised directly in equity (Other comprehensive income)in the ‘Available-for-sale reserve. When the investment isdisposed of, the cumulative gain or loss previouslyrecognised in equity is recognised in the statement ofcomprehensive income in ‘Other operating income. Wherethe Company and the Group hold more than one investmentin the same security, they are deemed to be disposed of ona first–in first–out basis. Interest earned whilst holdingavailable-for-sale financial investments is reported asinterest income using the EIR. Dividend earned whilstholding available for sale financial investments arerecognised in the statement of comprehensive income as‘Other operating income when the right of the payment hasbeen established. The losses arising from impairment ofsuch investments are recognised in the statement ofcomprehensive income in ‘Impairment losses on financialinvestments’ and removed from the ‘Available-for-salereserve.2.2.7.3 De-recognition of financial assetsA financial asset (or, where applicable a part of afinancial asset or part of a group of similar financialassets) is derecognised when:• The rights to receive cash flows from the asset haveexpired• The Group has transferred its rights to receive cash flowsfrom the asset or has assumed an obligation to pay thereceived cash flows in full without material delay to a thirdparty under a ‘pass- through’ arrangement; and either(a) the Group has transferred substantially all the risks andrewards of the asset, or(b) the Group has neither transferred nor retainedsubstantially all the risks and rewards of the asset, but hastransferred control of the asset.When the Group has transferred its rights to receive cashflows from an asset or has entered into a pass-througharrangement, and has neither transferred nor retainedsubstantially all of the risks and rewards of the asset nortransferred control of it, the asset is recognised to theextent of the Group's continuing involvement in it.In such case, the Group also recognises an associatedliability. The transferred asset and the associated liability aremeasured on a basis that reflects the rights and obligationsthat the Group has retained. Continuing involvement thattakes the form of a guarantee over the transferred asset ismeasured at the lower of the original carrying amount of theasset and the maximum amount of consideration that theGroup could be required to repay.2.2.7.4 Impairment of Financial AssetsThe Group assesses at each reporting date whether there isany objective evidence that a financial asset or a group offinancial assets is impaired. A financial asset or a group offinancial assets is deemed to be impaired if, there is

51objective evidence of impairment as a result of one or moreevents that has occurred after the initial recognition of theasset (an incurred' loss event') and that loss event has animpact on the estimated future cash flows of the financialasset or the group of financial assets that can be reliablyestimated. Evidence of impairment may include indicationsthat the debtors or a group of debtors is experiencingsignificant financial difficulty, default or delinquency ininterest or principal payments, the probability that they willenter bankruptcy or other financial reorganisation and whereobservable data indicate that there is a measurable decreasein the estimated future cash flows, such as changes inarrears or economic conditions that correlate with defaults.Financial assets carried at amortised costFor financial assets carried at amortised cost, the Group firstassesses whether objective evidence of impairment existsindividually for financial assets that are individuallysignificant, or collectively for financial assets that are notindividually significant. If the Group determines that noobjective evidence of impairment exists for an individuallyassessed financial asset, whether significant or not, itincludes the asset in a group of financial assets with similarcredit risk characteristics and collectively assesses them forimpairment. Assets that are individually assessed forimpairment and for which an impairment loss is, orcontinues to be, recognised are not included in a collectiveassessment of impairment.If there is objective evidence that an impairment loss hasbeen incurred, the amount of the loss is measured as thedifference between the asset's carrying amount and thepresent value of estimated future cash flows (excludingfuture expected credit losses that have not yet beenincurred). The present value of the estimated future cashflows is discounted at the financial asset's original effectiveinterest rate. If a loan has a variable interest rate, thediscount rate for measuring any impairment loss is thecurrent effective interest rate.The carrying amount of the asset is reduced through the useof an allowance account and the amount of the loss isrecognised in the statement of comprehensive income.Interest income continues to be accrued on the reducedcarrying amount and is accrued using the rate of interestused to discount the future cash flows for the purpose ofmeasuring the impairment loss. The interest income isrecorded as part of finance income in the statement ofcomprehensive income. Loans together with the associatedallowance are written off when there is no realistic prospectof future recovery and all collateral has been realised or hasbeen transferred to the Group. If, in a subsequent year, theamount of the estimated impairment loss increases ordecreases because of an event occurring after theimpairment was recognised, the previously recognisedimpairment loss is increased or reduced by adjusting theallowance account. If a write-off is later recovered, therecovery is credited to finance costs in the statement ofcomprehensive income.Available-for-sale financial investmentsFor available-for-sale financial investments, the Groupassesses at each reporting date whether there is objectiveevidence that an investment or a group of investments isimpaired.In the case of equity investments classified as available-forsale,objective evidence would include a significant orprolonged decline in the fair value of the investment belowits cost. ‘Significant’ is evaluated against the original cost ofthe investment and ‘prolonged’ against the period in whichthe fair values has been below its original cost.Where there is evidence of impairment, the cumulative lossmeasuredas the difference between the acquisition cost andthe current fair value, less any impairment loss on thatinvestment previously recognised in the income statement-isremoved from other comprehensive income and recognisedin the statement of comprehensive income. Impairmentlosses on equity investments are not reversed through thestatement of comprehensive income; increases in their fairvalue after impairments are recognised directly in othercomprehensive income.In the case of debt instruments classified as available-forsale,impairment is assessed based on the same criteria asfinancial assets carried at amortised cost. However, theamount recorded for impairment is the cumulative lossmeasured as the difference between the amortised cost andthe current fair value, less any impairment loss on thatinvestment previously recognised in the statement ofcomprehensive income.Future interest income continues to be accrued based on thereduced carrying amount of the asset, using the rate ofinterest used to discount the future cash flows for thepurpose of measuring the impairment loss. The interestincome is recorded as part of finance income. If, in a

52subsequent year, the fair value of a debt instrumentincreases and the increase can be objectively related to anevent occurring after the impairment loss was recognised inthe statement of comprehensive income, the impairmentloss is reversed through the statement of comprehensiveincome.2.2.8 Financial liabilitiesInitial recognition and measurementFinancial liabilities within the scope of LKAS 39 are classifiedas financial liabilities at fair value through profit or loss,loans and borrowings, or as derivatives designated ashedging instruments in an effective hedge, as appropriate.The Group determines the classification of its financialliabilities at initial recognition.All financial liabilities are recognised initially at fair valueand, in the case of loans and borrowings, carried atamortised cost. This includes directly attributable transactioncosts.The Group's financial liabilities include trade and otherpayables, bank overdrafts, loans and borrowings andfinancial guarantees contracts.Subsequent measurementThe measurement of financial liabilities depends on theirclassification as follows:Loans and borrowingsAfter initial recognition, interest bearing loans andborrowings are subsequently measured at amortised costusing the effective interest rate method. Gains and lossesare recognised in the statement of comprehensive incomewhen the liabilities are derecognised as well as through theeffective interest rate method (EIR) amortisation process.Amortised cost is calculated by taking into account anydiscount or premium on acquisition and fees or costs thatare an integral part of the EIR. The EIR amortisation isincluded in finance costs in the statement of comprehensiveincome.Financial guarantee contractsFinancial guarantee contracts issued by the Group/Companyare those contracts that require a payment to be made toreimburse the holder for a loss it incurs because thespecified debtor fails to make a payment in accordance withthe terms of a debt instrument. Financial guaranteecontracts are recognised initially as a liability at fair value,adjusted for transaction costs that are directly attributable tothe issuance of the guarantee.Subsequently, the liability is measured at the higher of thebest estimate of the expenditure required to settle thepresent obligation at the reporting date and the amountrecognised less cumulative amortisation.Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss includefinancial liabilities held-for-trading and financial liabilitiesdesignated upon initial recognition as at fair value throughprofit or loss.Financial liabilities are classified as held-for-trading if theyare acquired for the purpose of selling in the near term. Thiscategory includes derivative financial instruments enteredinto by the Group that are not designated as hedginginstruments in hedge relationships as defined by LKAS 39.Separated embedded derivatives are also classified as heldfor-tradingunless they are designated as effective hedginginstruments.DerecognitionA financial liability is derecognised when the obligation underthe liability is discharged or cancelled or expires.When an existing financial liability is replaced by anotherfrom the same lender on substantially different terms, or theterms of an existing liability are substantially modified, suchan exchange or modification is treated as a derecognition ofthe original liability and the recognition of a new liability. Thedifference in the respective carrying amounts is recognisedin the statement of comprehensive income.Offsetting of financial instrumentsGains or losses on liabilities held-for-trading are recognisedin the statement of comprehensive income.Financial assets and financial liabilities are offset with the netamount reported in the consolidated statement of financialposition only if there is a current enforceable legal right tooffset the recognised amounts and an intent to settle on a

53net basis, or to realise the assets and settle the liabilitiessimultaneously.Fair value of financial instrumentsThe fair value of financial instruments that are traded inactive markets at each reporting date is determined byreference to quoted market prices or dealer price quotations(bid price for long positions and ask price for shortpositions), without any deduction for transaction costs.For financial instruments not traded in an active market, thefair value is determined using appropriate valuationtechniques. Such techniques may include: Using recent arm's length market transactions; Reference to the current fair value of another instrumentthat is substantially the same; A discounted cash flow analysis or other valuationAn analysis of fair values of financial instruments and furtherdetails as to how they are measured are provided in Note28.2.2.9 InventoriesInventories are valued at the lower of cost and net realisablevalue, after making due allowances for obsolete and slowmoving items. Net realisable value is the price at whichinventories can be sold in the ordinary course of businessless the estimated cost of completion and the estimated costnecessary to make the sale.The cost incurred in bringing inventories to its presentlocation and condition are accounted using the following costformulae:-Raw Materials- At purchase cost onweighted average basis.Finished Goods & - At the cost of directWork-in-Progress materials, direct labourand an appropriateproportion of fixedproduction overheadsbased on normaloperating capacity, butexcluding borrowingCosts.2.2.10 Impairment of non-financial assetsThe Group assesses at each reporting date whether there isan indication that an asset may be impaired. If anyindication exists, or when annual impairment testing for anasset is required, the Group estimates the asset'srecoverable amount. An asset's recoverable amount ishigher of asset's or cash generating unit's (CGU) fair valueless costs to sell and its value in use. It is determined for anindividual asset, unless the asset does not generate cashinflows that are largely independent of those from otherassets or groups of assets. Where the carrying amount of anasset or CGU exceeds its recoverable amount, the asset isconsidered impaired and is written down to its recoverableamount. In assessing value in use, the estimated futurecash flows are discounted to their present value using a pretaxdiscount rate that reflects current market assessmentsof the time value of money and the risks specific to theasset. In determining fair value less costs to sell, recentmarket transactions are taken into account, if available. Ifno such transactions can be identified, an appropriatevaluation model is used. These calculations are corroboratedby valuation multiples, quoted share prices for publiclytraded subsidiaries or other available fair value indicators.The Group bases its impairment calculation on detailedbudgets and forecasts which are prepared separately foreach of the Group's CGU to which the individual assets areallocated. These budgets and forecast calculations aregenerally covering a period of five years. For longer periods,a long-term growth rate is calculated and applied to projectfuture cash flows after the fifth year.Impairment losses of continuing operations, includingimpairment on inventories, are recognised in the statementof comprehensive income in those expense categoriesconsistent with the function of the impaired asset, except fora property previously revalued where the revaluation wastaken to other comprehensive income. In this case, theimpairment is also recognised in other comprehensiveincome up to the amount of any previous revaluation.For assets excluding goodwill, an assessment is made ateach reporting date as to whether there is any indicationthat previously recognised impairment losses may no longerexist or may have decreased. If such indication exists, theGroup estimates the asset's or CGU's recoverable amount. Apreviously recognised impairment loss is reversed only ifthere has been a change in the assumptions used todetermine the asset's recoverable amount since the lastimpairment loss was recognised. The reversal is limited sothat the carrying amount of the asset does not exceed itsrecoverable amount, nor exceed the carrying amount thatwould have been determined, net of depreciation, had no

54impairment loss been recognised for the asset in prior years.Such reversal is recognised in the statement ofcomprehensive income unless the asset is carried at arevalued amount, in which case the reversal is treated as arevaluation increase.amount of the liability and the carrying amount of the assetsdistributed is recognised in income as a separate line instatement of comprehensive income.2.2.13 Provisions (General)The following criteria are also applied in assessingimpairment of specific assets:GoodwillGoodwill is tested for impairment annually and whencircumstances indicate that the carrying value may beimpaired.Impairment is determined for goodwill by assessing therecoverable amount of each CGU (or group of CGUs) towhich the goodwill relates. Where the recoverable amountof the cash-generating unit is less than their carryingamount, an impairment loss is recognised. Impairmentlosses relating to goodwill cannot be reversed in futureperiods.Intangible assetsIntangible assets with indefinite useful lives are tested forimpairment annually either individually or at the CGU level,as appropriate and when circumstances indicate that thecarrying value may be impaired.2.2.11 Cash and short-term depositssCash and short-term deposits in the statement of financialposition comprise cash at banks and on hand and short-termdeposits with a maturity of three months or less.For the purpose of the consolidated statement cash flows,cash and cash equivalents consist of cash and short-termdeposits as defined above, net of outstanding bankoverdrafts.2.2.12 Dividend DistributionsThe Company recognises a liability to make cash or noncashdistributions to owners of equity when the distributionis authorised and is no longer at the discretion of theCompany. A corresponding amount is recognised directly inequity.Non-cash distributions are measured at the fair value of theassets to be distributed. Upon settlement of the distributionof non-cash assets, any difference between the carryingProvisions are recognised when the Group has a presentobligation (legal or constructive) as a result of a past event,it is probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligationand a reliable estimate can be made of the amount of theobligation. Where the Group expects some or all of aprovision to be reimbursed, for example under an insurancecontract, the reimbursement is recognised as a separateasset but only when the reimbursement is virtually certain.The expense relating to a provision is presented in thestatement of comprehensive income net of anyreimbursement.If the effect of the time value of money is material,provisions are discounted using a current pre-tax rate thatreflects, when appropriate, the risks specific to the liability.When discounting is used, the increase in the provision dueto the passage of time is recognised as a finance cost.2.2.14 Post employment benefits(a) Defined contribution plansEmployees are eligible for Employees' Provident Fund andEmployees' Trust Fund contributions, in line with respectivestatute and regulations. The Group contributes 12% and 3%of gross emoluments of employees to Employees’ ProvidentFund and Employee' Trust Fund respectively.(b) Defined benefit obligation - GratuityGratuity is a defined benefit plan. The Group is liable to paygratuity in terms of the Gratuity Act, No. 12 of 1983.The cost of providing benefits under gratuity is determinedusing the projected unit credit method. Actuarial gains andlosses are recognised in full in the period in which they occurin statement of comprehensive income. The defined benefitliability comprises the present value of the defined benefitobligation using a discount rate based on market yeilds atthe end of reporting period on government bonds of asimilar tenure as the estimated term of the gratuityobligation. The gratuity benefit of the Group is unfunded.

552.2.15 TaxesCurrent income taxCurrent income tax assets and liabilities for the currentperiod are measured at the amount expected to berecovered from or paid to the taxation authorities. The taxrates and tax laws used to compute the amount are thosethat are enacted or substantively enacted, at the reportingdate.Current income tax relating to items recognised directly inequity is recognised in equity and not in the statement ofcomprehensive income. Management periodically evaluatespositions taken in the tax returns with respect to situationsin which applicable tax regulations are subject tointerpretation and establishes provisions where appropriate.Deferred taxDeferred tax is provided using the liability method ontemporary differences between the tax bases of assets andliabilities and their carrying amounts for financial reportingpurposes at the reporting date.combination and, at the time of the transaction, affectsneither the accounting profit nor taxable profit or loss In respect of deductible temporary differences associatedwith investments in subsidiaries, associates and interests injoint ventures, deferred tax assets are recognised only tothe extent that it is probable that the temporary differenceswill reverse in the foreseeable future and taxable profit willbe available against which the temporary differences can beutilised.The carrying amount of deferred tax assets is reviewed ateach reporting date and reduced to the extent that it is nolonger probable that sufficient taxable profit will be availableto allow all or part of the deferred tax asset to be utilised.Unrecognised deferred tax assets are reassessed at eachreporting date and are recognised to the extent that it hasbecome probable that future taxable profits will allow thedeferred tax asset to be recovered.Deferred tax assets and liabilities are measured at the taxrates that are expected to apply in the year when the assetis realised or the liability is settled, based on tax rates (andtax laws) that have been enacted or substantively enactedat the reporting date.Deferred tax liabilities are recognised for all taxabletemporary differences, except: When the deferred tax liability arises from the initialrecognition of goodwill or an asset or liability in a transactionthat is not a business combination and, at the time of thetransaction, affects neither the accounting profit nor taxableprofit or loss In respect of taxable temporary differences associatedwith investments in subsidiaries, associates and interests injoint ventures, when the timing of the reversal of thetemporary differences can be controlled and it is probablethat the temporary differences will not reverse in theforeseeable futureDeferred tax assets are recognised for all deductibletemporary differences, carry forward of unused tax creditsand unused tax losses, to the extent that it is probable thattaxable profit will be available against which the deductibletemporary differences, and the carry forward of unused taxcredits and unused tax losses can be utilised, except: When the deferred tax asset relating to the deductibletemporary difference arises from the initial recognition of anasset or liability in a transaction that is not a businessDeferred tax relating to items recognised outside profit orloss is recognised outside profit or loss. Deferred tax itemsare recognised in correlation to the underlying transactioneither in other comprehensive income or directly in equity.Deferred tax assets and deferred tax liabilities are offset if alegally enforceable right exists to set off current tax assetsagainst current income tax liabilities and the deferred taxesrelate to the same taxable entity and the same taxationauthority.2.2.16 Revenue recognitionRevenue comprises the fair value of the considerationreceived or receivable for the sale of goods and services inthe ordinary course of the Company’s activities. Revenue isshown net of value-added tax, returns, rebates anddiscounts.The Company recognises revenue when the amount ofrevenue can be reliably measured, it is probable that futureeconomic benefits will flow to the entity and specific criteriahave been met for each of the Company’s activities asdescribed below. The amount of revenue is not considered

56to be reliably measurable until all contingencies relating tothe sale have been resolved.(i) SLFRS 9 -Financial Instruments: Classification andMeasurement(a) Sale of goodsSales of goods are recognised on delivery of products to thecustomer, the customer has accepted the products andcollectability of the related receivables is reasonablyassured.(b) Interest incomeFor all financial instruments measured at amortised cost andinterest bearing financial assets classified as available-forsale,interest income or expense is recorded using theeffective interest rate (EIR), which is the rate that exactlydiscounts the estimated future cash payments or receiptsthrough the expected life of the financial instrument or ashorter period, where appropriate, to the net carryingamount of the financial asset or liability. Interest income isincluded in finance income in the statement ofcomprehensive income.2.2.17 Government grantsGovernment grants are recognised where there isreasonable assurance that the grant will be received and allattached conditions will be complied with. When the grantrelates to an expense item, it is recognised as income on asystematic basis over the periods that the costs, which it isintended to compensate, are expensed. Where the grantrelates to an asset, it is recognised as income in equalamounts over the expected useful life of the related asset.When the Group receives non-monetary grants, the assetand the grant are recorded gross at nominal amounts andreleased to profit or loss over the expected useful life in apattern of consumption of the benefit of the underlying assetby equal annual instalments.When loans or similar assistance are provided bygovernments or related institutions with an interest ratebelow the current applicable market rate, the effect of thisfavourable interest is regarded as a government grant.3. STANDARDS ISSUED BUT NOT YET EFFECTIVEStandards issued but not yet effective up to the date ofissuance of the financial statements are set out below. TheGroup will adopt these standards when they becomeeffective. Pending a detailed review the financial impact isnot reasonably estimable as at the date of publication ofthese financial statements.SLFRS 9, as issued reflects the first phase of work onreplacement of LKAS 39 and applies to classification andmeasurement of financial assets and liabilities.(ii) SLFRS 13 -Fair Value MeasurementSLFRS 13 establishes a single source of guidance underSLFRS for all fair value measurements. SLFRS 13 providesguidance on all fair value measurements under SLFRS.SLFRS 9 will be effective for financial periods beginning on orafter 01 January 2015 whilst SLFRS 13 will be effective forfinancial periods beginning on or after 01 January 2014.In addition to the above, following standards have also beenissued and will be effective from 01 January 2014.SLFRS 10 - Consolidated Financial StatementsSLFRS 11 - Joint ArrangementsSLFRS 12 - Disclosure of Interests in Other Entities4. FIRST-TIME ADOPTION OF SLFRSThese financial statements, for the year ended 31 March2013, are the first the Group has prepared in accordancewith Sri Lanka Accounting Standards comprising LKAS andSLFRS effective from 1 January 2012 (collectivly referredhereafter as "SLFRS"). For periods up to and including theyear ended 31 March 2012, the Group prepared its financialstatements in accordance with Sri Lanka AccountingStandards effective prior to 1 January 2012, (hereafterreferred to as "SLAS")Accordingly the Group has prepare of financial statementswhich complying with SLFRS applicable for periods ending onor after 31 March 2013, together with comparative perioddate as at and for the year ended 31 March 2012 asdescribed in summary of significant accounting policiesapplied (Note 2.2). In preparing these financial statements,the Group's openning statement of financial position wasprepared as at 1 April 2011, that being Group's date oftransition to SLFRS. This Note explains the principaladjustments made by the Group in restating its SLASfinancial statements.

57For the year ended 31 March 20134. FIRST-TIME ADOPTION OF SLFRS (Contd.)4.1 SLFRS transition reconciliations4.1.1 Reconciliation of equity as at 1 April 2011, showing the effect on equity at the date of transitionGroupCompanyRe- SLFRS as at Re- SLFRS as atSLAS measurements 1 April 2011 SLAS measurements 1 April 2011Notes Rs. Rs. Rs. Rs. Rs. Rs.ASSETSNon-Current AssetsProperty, Plant & Equipment A 2,239,861,655 151,469,650 2,391,331,305 902,719,361 14,889,280 917,608,641Pre Paid Lease Rental - - - - - -Intangible Assets 27,858,909 - 27,858,909 2,370,000 - 2,370,000Investment in Subsidiaries - - - 550,000,000 - 550,000,000Loans & Receivables - - - - - -Available for Sale of Financial Assets B - 361,404,037 361,404,037 - 361,404,037 361,404,037Other Investments B 74,488,445 (55,961,892) 18,526,553 55,961,892 (55,961,892) -Deferred Tax Asset C 7,982,879 (7,982,879) - - - -2,350,191,888 448,928,916 2,799,120,804 1,511,051,253 320,331,425 1,831,382,678Current AssetsInventories 1,021,783,096 1,021,783,096 164,398,150 - 164,398,150Trade and Other Receivables D 1,112,440,024 (309,507,452) 802,932,572 255,019,900 (29,966,540) 225,053,360Advances & Prepayments D - 50,572,371 50,572,371 - 28,804,926 28,804,926Income Tax Refund Due E 682,838 406,565 1,089,403 - 406,565 406,565Short Term Investments 7,973,340 - 7,973,340 7,973,340 - 7,973,340Cash and Cash Equivalents 261,921,333 - 261,921,333 249,916,947 - 249,916,9472,404,800,631 (258,528,516) 2,146,272,115 677,308,337 (755,049) 676,553,288Total Assets 4,754,992,519 190,400,400 4,945,392,919 2,188,359,590 319,576,376 2,507,935,966EQUITY AND LIABILITIESEquityStated Capital 1,037,500,000 - 1,037,500,000 1,037,500,000 - 1,037,500,000Revaluation Reserve F 642,598,099 (642,598,099) - 642,598,099 (642,598,099) -Other Component of Equity F - 948,040,244 948,040,244 - 948,040,244 948,040,244Retained Earnings G 226,907,991 (66,088,752) 160,819,239 235,975,542 14,134,231 250,109,773Equity Attributable to Equity Holders 1,907,006,090 239,353,393 2,146,359,483 1,916,073,641 319,576,376 2,235,650,017Non-controlling interests 492,969,204 (75,398,694) 417,570,510 - - -Total Equity 2,399,975,294 163,954,699 2,563,929,993 1,916,073,641 319,576,376 2,235,650,017Non-Current LiabilitiesInterest Bearing Loans & Borrowings 122,069,066 - 122,069,066 21,800,756 - 21,800,756Deferred Tax Liabilities C 135,368,720 26,445,700 161,814,420 74,671,824 - 74,671,824Defined Benefit Liability 44,174,268 - 44,174,268 31,685,723 - 31,685,723301,612,054 26,445,700 328,057,754 128,158,303 - 128,158,303Current LiabilitiesTrade and Other Payables 830,847,962 - 830,847,962 49,375,828 - 49,375,828Income Tax Liabilities 42,829,428 - 42,829,428 41,819,998 - 41,819,998Interest Bearing Loans & Borrowings 1,179,727,781 - 1,179,727,781 52,931,820 - 52,931,8202,053,405,171 - 2,053,405,171 144,127,646 - 144,127,646Total Equity and Liabilities 4,754,992,519 190,400,399 4,945,392,918 2,188,359,590 319,576,376 2,507,935,966-23-

58For the year ended 31 March 20134. FIRST-TIME ADOPTION OF SLFRS (Contd.)4.1.2 Reconciliation of equity as at 31 March 2012, showing the effect on equity as at the last year endGroupCompanySLAS Re- SLFRS as at SLAS Re- SLFRS as at31 March 2012 measurements 31 March 2012 31 March 2012 measurements 31 March 2012Notes Rs. Rs. Rs. Rs. Rs. Rs.ASSETSNon-Current AssetsProperty, Plant & Equipment A 2,463,193,901 189,192,447 2,652,386,348 1,059,897,203 19,504,519 1,079,401,722Pre Paid Lease Rental 26,006,822.00 - 26,006,822 - - -Intangible Assets H 185,318,886 43,944 185,362,830 4,230,326 - 4,230,326Investment in Subsidiaries I - - - 1,003,732,445 (298,641,313) 705,091,132Loans & Receivables I - 108,543,136 108,543,136 - 415,137,308 415,137,308Available for Sale of Financial Assets B - 99,767,936 99,767,936 - 99,767,936 99,767,936Other Investments B 193,298,174 (163,961,892) 29,336,282 163,961,892 (163,961,892) -Deferred Tax Asset C 10,447,470 (10,447,470) - - - -2,878,265,253 223,138,101 3,101,403,354 2,231,821,866 71,806,558 2,303,628,424Current AssetsInventories 1,030,640,281 - 1,030,640,281 199,061,281 199,061,281Trade and Other Receivables D 1,046,250,394 (383,553,139) 662,697,255 299,870,519 (55,953,530) 243,916,989Advances & Prepayments D - 88,503,158 88,503,158 - 54,329,637 54,329,637Income Tax Refund Due E 670,732 5,095,747 5,766,479 - 406,565 406,565Short Term Investments 12,119,364 - 12,119,364 12,119,364 - 12,119,364Cash and Cash Equivalents 575,753,077 - 575,753,077 528,839,107 - 528,839,1072,665,433,848 (289,954,234) 2,375,479,614 1,039,890,271 (1,217,328) 1,038,672,943Total Assets 5,543,699,102 (66,816,133) 5,476,882,968 3,271,712,137 70,589,230 3,342,301,367EQUITY AND LIABILITIESEquityStated Capital 1,979,344,948 - 1,979,344,948 1,979,344,948 - 1,979,344,948Revaluation Reserve F 673,066,654 (673,066,654) - 667,975,672 (667,975,672) -Other Component of Equity F - 716,535,050 716,535,050 711,781,716 711,781,716Retained Earnings G 288,216,073 (61,991,731) 226,224,342 342,588,652 26,760,546 369,349,198Equity Attributable to Equity Holders 2,940,627,675 (18,523,335) 2,922,104,340 2,989,909,272 70,566,590 3,060,475,862Non-controlling interests 448,512,622 (81,628,936) 366,883,686 - - -Total Equity 3,389,140,297 (100,152,271) 3,288,988,026 2,989,909,272 70,566,590 3,060,475,862Non-Current LiabilitiesInterest Bearing Loans & Borrowings 58,414,804 - 58,414,804 7,414,804 - 7,414,804Deferred Tax Liabilities C 156,951,748 32,964,897 189,916,645 82,901,438 - 82,901,438Defined Benefit Liability 59,700,822 - 59,700,822 34,770,992 - 34,770,992275,067,374 32,964,897 308,032,271 125,087,234 - 125,087,234Current LiabilitiesTrade and Other Payables J 532,239,214 883,651 533,122,865 97,550,568 - 97,550,568Income Tax Liabilities K 51,266,093 (512,411) 50,753,682 49,887,791 22,640 49,910,431Interest Bearing Loans & Borrowings 1,295,986,124 - 1,295,986,124 9,277,272 - 9,277,2721,879,491,431 371,241 1,879,862,672 156,715,631 22,640 156,738,271Total Equity and Liabilities 5,543,699,102 (66,816,133) 5,476,882,969 3,271,712,137 70,589,230 3,342,301,367-24-

59For the year ended 31 March 20134. FIRST-TIME ADOPTION OF SLFRS (Contd.)4.1.3 Reconciliation of total comprehensive income for the year ended 31 March 2012, showing the effect on profit of the previous yearGroupCompanySLFRS for theSLFRS for theRe- year ended 31 Re- year ended 31Income Statement SLAS measurements March 2012 SLAS measurements March 2012Notes Rs. Rs. Rs. Rs. Rs. Rs.Revenue 4,371,544,457 - 4,371,544,457 1,313,494,596 - 1,313,494,596Cost of Sales L (3,609,281,821) 27,364,585 (3,581,917,236) (955,091,994) 3,149,727 (951,942,267)Gross Profit 762,262,636 27,364,585 789,627,221 358,402,602 3,149,727 361,552,329Other Income and Gains 48,987,787 - 48,987,787 12,030,382 - 12,030,382Selling & Distribution Cost M (121,980,858) (315,728) (122,296,586) (80,001,083) (315,728) (80,316,811)Administrative Expenses N (497,423,163) (20,172,805) (517,595,968) (96,682,720) 1,318,961 (95,363,759)Other Expenses (5,804,167) - (5,804,167) (5,804,167) - (5,804,167)Finance Cost O (103,803,071) (883,651) (104,686,722) (12,496,371) - (12,496,371)Finance Income P 42,468,670 543,136 43,011,806 42,170,299 8,495,995 50,666,294Profit before Tax 124,707,834 6,535,537 131,243,371 217,618,942 12,648,955 230,267,897Income Tax (Expense)/ Reversal Q (80,953,814) (9,006,425) (89,960,239) (80,440,607) (22,640) (80,463,247)Profit for the year 43,754,020 (2,470,888) 41,283,132 137,178,335 12,626,315 149,804,650Other Comprehensive IncomeChange in Fair Value -AFS- Investments - (261,636,101) (261,636,101) - (261,636,101) (261,636,101)Revaluation of Land & Buildings R - 35,925,923 35,925,923 - 25,377,573 25,377,573Total Other Comprehensive Income - (225,710,178) (225,710,178) - (236,258,528) (236,258,528)Income Tax (charge) / credit relating to - (1,455,631) (1,455,631) - - -components of other comprehensive incomeOther Comprehensive Income- Net of Tax - (227,165,809) (227,165,809) - (236,258,528) (236,258,528)Total Comprehensive Income- Net of Tax - (185,882,677) (185,882,677) - (86,453,878) (86,453,878)-25-

60For the year ended 31 March 20134. FIRST-TIME ADOPTION OF SLFRS (Contd.)4.1.4 Notes to the reconciliation of equity as at 1 April 2011 and 31 March 2012 and total comprehensive income for the year ended 31 March 2012A) Property, Plant & EquipmentThe Group elected to reassesses certain items of Property, Plant &equipment as at the date of transaction. As a result carrying value has increased assetthe date of transition and impact on depreciation accordingly.Balance as at Balance as at31st March 201201st April 2011RsRsGroupRe-assessment of useful life of Property, Plant & Equipment 189,192,447 151,469,650CompanyRe-assessment of useful life of Property, Plant & Equipment 19,504,519 14,889,280B) Available for sale of Financial Assets /Other InvestmentsInvestments valued at the fair value as per SLFRS & Other Investments transferred to Available for sale of Financial AssetsGroupEffect on Investments value at Fair value as per SLFRS (64,193,956) 305,442,145Transfer balances from other Investments to Available for sale of Financial Assets 55,418,756 55,961,892Company investment on Debentures transferred from Other Investments to Loan & other receivables 108,543,136 -CompanyEffect on Investments value at Fair value as per SLFRS (64,193,956) 305,442,145Transferred balances from other Investments to Available for sale of Financial Assets 55,418,756 55,961,892Company investment on Debentures transferred from Other Investments to Loan & other receivables 108,543,136 -C) Deferred Tax Assets/LiabilityTransitional adjustments relating to SLFRS/LKAS adjustments led to temporary differences. Such temporary differences resulted in deferred taxadjustments which are recognised in correlation to underlying transaction either in retained earnings or as a separate component of equity. The deferredtax effect arises due to the increase of the taxable temporary difference as a result of reassessment of useful life time of property, plant & equipment.GroupDeferred Tax AssetsRe-assessment of useful life time of property, Plant & Equipment (10,447,470) (7,982,879)Deferred Tax LiabilityRe-assessment of useful life time of property, Plant & Equipment 32,964,897 26,445,700D) Trade and other ReceivablesImpairment of trade receivables relating to SLFRS Transitional & Advances & Pre-payments Classified as a separate item & Long outstanding Specificdebtors provision & receivable provision written offGroupImpairment of trade & other receivables (295,049,981) (258,935,082)Transferred to Pre-payments as a separate item (88,503,158) (50,572,371)CompanyImpairment of trade & other receivables (1,444,873) (1,161,614)Transferred to Prepayments as a separate item (54,329,637) (28,804,926)E) Income Tax Refunds dueFinancial statements re arranged to comply the SLFRS & Income tax impact due to SLFRS adjustmentsGroupIncome Tax Impact on SLFRS adjustments to Financial Statements prepared on LKAS 406,565 406,565CompanyIncome Tax Impact on SLFRS adjustments to Financial Statements prepared on LKAS 5,095,747 406,565F) Revaluation Reserve /Other Component of EquityTransitional adjustments relating to SLFRS/LKAS ,Revaluation reserve transferred to other component of Equity & other component of Equity included theeffect of Investments shown as fair valueOther component of EquityGroupRevaluation reserve transferred to Other Component of Equity 672,728,996 642,598,099Effect of Investments shown as fair value 43,806,054 305,442,145CompanyRevaluation reserve transferred to Other Component of Equity 667,975,672 642,598,099Effect of Investments shown as fair value 43,806,044 305,442,145-26-

61For the year ended 31 March 20134. FIRST-TIME ADOPTION OF SLFRS (Contd.)4.1.4 Notes to the reconciliation of equity as at 1 April 2011 and 31 March 2012 and totalBalance as at Balance as atcomprehensive income for the year ended 31 March 201231st March 201201st April 2011RsRsG) Retained EarningsThe Group elected to re-assesses certain items of Property, Plant & equipment as at the date of transaction. As a result carrying value hasincreased & impact on depreciation adjusted to retained Earnings and the effect of impairment on receivable.GroupEffect to the Subsidiaries (88,752,277) (80,222,983)Effect to the Company 26,760,546 14,134,231CompanyEffect to the Company 26,760,546 14,134,231H) Intangible AssetsComputer software of Subsidiary transferred from office equipment to Intangible Assets as per SLFRS transitionGroupEffect of the Adjustment 43,944 -I) Investment in subsidiaries /Loans & ReceivablesClassification changes in order to comply SLFRS. Preference shares of Subsidiary (Palla & co (Pvt) Ltd)& Investment on Debentures transferredto Loans & receivablesLoans & ReceivablesGroupCompany investment on Debentures transferred from Other Investments 108,543,136 -CompanyTransferred from Preference share Investment in Subsidiary 298,641,313 -Company investment on Debentures transferred from Other Investments 108,543,136 -Interest Receivable on Preference Shares 7,952,859 -J) Trade & other PayablesTransitional adjustments relating to SLFRS/LKAS for Trade & other payablesGroupEffect of transitional adjustments relating to SLFRS/LKAS for Trade & other payables 883,651 -K) Income Tax LiabilitiesFinancial statements re-arranged to comply the SLFRS & Income tax impact due to SLFRS adjustmentsGroupIncome Tax Impact on SLFRS adjustments to Financial Statements LKAS (512,411) -CompanyIncome Tax Impact on SLFRS adjustments to Financial Statements LKAS 22,640 -L) Cost of SalesThe Group has elected to reassess useful life of certain items of Property, Plant and equipment as at the date of transition. The impact on depreciation dueto review of useful lives of assets in manufacturing was recognised in cost of sales from the date to the transition.For the year ende31-Mar-12RsGroupEffect of depreciation of Plant and Machinery by re-assessment of useful life 27,364,585CompanyEffect of depreciation of Plant and Machinery by re-assessment of useful life 3,149,727M) Selling & Distribution CostAllowance for bad & doubtful debts made under previous standards consisted of both a specific amount for incurred losses and a general amount forexpected future losses. SLFRS does not permit recognition of impairment for expected future losses and instead required on a collective as well asindividual basis assessment based on objective evidence that there has been an impairment.The Group has elected to reassess useful life of Motor Vehicles (Lorries & Vans) as at the date of transition. The impact on depreciation due to review ofuseful lives of Motor vehicles in Selling & Distribution was recognised from the date to the transition.For the year ende31 March 2012Group & the CompanyRsImpairment of Trade Debtors (462,279)Effect of depreciation of Motor vehicles by re-assessment of useful life 146,551-27-

62For the year ended 31 March 20134. FIRST-TIME ADOPTION OF SLFRS (Contd.)4.1.4 Notes to the reconciliation of equity as at 1 April 2011 and 31 March 2012 and total comprehensive income for the year ended 31 March 2012For the year endeN) Administrative Expenses 31 March 2012RsThe Group has elected to reassess useful life of Motor Vehicles as at the date of transition and a provisioning of Other receivables was carried out in linewith SLFRS. The impact on depreciation due to review of useful lives of Motor vehicles in Administrative Expenses was recognised from the date to thetransition. and provision for doubtful receivable by Subsidiary.GroupImpairment of other receivables (20,966,562)Effect of depreciation of Motor vehicles by re-assessment of useful life - Subsidiary (525,204)Effect of depreciation of Motor vehicles by re-assessment of useful life - Company 1,318,961CompanyEffect of depreciation of Motor vehicles by re-assessment of useful life 1,318,961O) Finance CostTransitional adjustments relating to SLFRS/LKAS for Finance CostGroupEffect of Interest payable for Preference shares -WHT (883,651)P) Finance IncomeTransitional adjustments relating to SLFRS/LKAS for Finance IncomeGroupEffect of Interest receivable for Debenture 543,136CompanyEffect of Interest receivable for Debenture 543,136Effect of Interest receivable from Subsidiary Company on Preference shares 7,952,859Q) Income Tax (Expenses) /ReversalFinancial statements re arranged to comply the SLFRS & Income tax impact due to SLFRS adjustmentsGroupIncome Tax Impact on SLFRS adjustments to Financial Statements prepared on LKAS-Subsidiaries (8,983,785)Income Tax Impact on SLFRS adjustments to Financial Statements prepared on LKAS-Company (22,640)CompanyIncome Tax Impact on SLFRS adjustments to Financial Statements prepared on LKAS (22,640)R) Revaluation of Land & BuildingsRevaluation Surplus on Land and Buildings in year 2012 has been recognised under the other Comprehensive IncomeGroupEffect to the Subsidiaries 10,548,350Effect to the Company 25,377,573CompanyEffect to the Company 25,377,573-28-

63For the year ended 31 March 20135 BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTERESTSAcquisitions in 2011On 02 December 2011, the Group acquired 60% of the voting shares of Palla & Company, a company based in Sri Lanka,specialising manufacturing shoes for exports. The Group acquired this business to use operational synergies and to expand into export business.The Group elected to measure the non-controlling interest in the acquiree at the proportionate share of its interest in theacquireeThe fair value of the identifiable assets and liabilities of Palla & Company as at the date of acquisition were:Fair valuerecognised onacquisitionRs.Property, Plant and Equipment 185,876,523Value of Lease Hold Right on Land 26,088,000Investments -Deferred Tax Asset -Inventories 164,010,488Trade and Other Receivables 13,227,254Income Tax ReceivableCash & Cash Equivalents 26,242,645Interest Bearing Loans and Borrowings (315,542,484)Retirement Benefit Liability (7,818,307)Trade and Other Payables (80,689,525)Interest Bearing Loans and Borrowings - Current -Bank Overdraft -Deferred Tax Liability (12,242,126)Total Identifiable Assets (847,532)Net Assets Acquired (508,519)Goodwill on Acquisition 155,599,651Cash consideration paid on the acquisition of Subsidiary 155,091,132Net Cash Outflow from the acquisition (128,848,487)The fair value of the trade receivables amounts to Rs.13,227,254.-, which approximates their gross carrying amount. None ofthe trade receivables were impaired and the full contractual amounts were expected to be collected. The goodwill ofRs.155,599,651.- comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to thefootwear and leather segment. None of the goodwill recognised is deductible for income tax purposes.Palla & Company contributed Rs.268,594,824.- of revenue and Rs.4,614,269.- to the net loss before tax from the date ofacquisition (2 December 2011) to 31 March 2012 to the profit for the year from continuing operations of the Group. If thecombination had taken place at the beginning of that year, revenue from continuing operations would have been Rs.576,954,964.- and the loss for the year from continuing operations for the Group for 2012 would have been Rs. 4,595,988.--29.-

64Year ended 31 March 2013GroupCompany6. REVENUE 2013 2012 2013 2012Rs. Rs. Rs Rs.6.1 SummaryGross Sales 5,345,852,471 4,558,444,131 1,172,641,947 1,499,824,084Less: Sales Taxes:Turnover Tax - - - -Nation Building Tax (19,830,784) (26,604,118) (19,830,784) (26,033,932)Value Added Tax (122,990,444) (160,295,556) (122,411,568) (160,295,556)Revenue 5,203,031,243 4,371,544,457 1,030,399,595 1,313,494,5966.2 Segment Information - RevenueProduct Segment: Leather, Leather Footwear, & Leather GoodsAs at 31 March 2013 the group is organised in to two main business segments geographically:- Revenue from local sales- Revenue from export salesGroupCompany2013 2012 2013 2012Rs. Rs. Rs Rs.Local Sales 1,283,714,837 1,545,607,099 1,149,289,390 1,490,900,346Less: Sales Taxes: (142,821,228) (186,899,674) (142,242,352) (186,329,488)Net Revenue from Local Sales 1,140,893,609 1,358,707,425 1,007,047,038 1,304,570,858Export Sales - Direct/ Indirect 4,062,137,634 3,012,837,032 23,352,557 8,923,7385,203,031,243 4,371,544,457 1,030,399,595 1,313,494,5966.3 Segment Information - ProductYear Ended 31 March 2013GroupLeather &Footwear Textile TotalRs. Rs. Rs.Revenue - Local Net of Taxes 1,026,818,880 114,074,729 1,140,893,609Revenue - Export Direct / Indirect 374,704,200 3,687,433,434 4,062,137,6341,401,523,080 3,801,508,163 5,203,031,243Operating Profit Segment Results (before finance cost) (86,793,039) 252,402,988 165,609,949Finance Cost (22,288,510) (90,311,285) (112,599,795)Finance Income 72,394,048 551,258 72,945,306Finance Cost - Net 50,105,538 (89,760,027) (39,654,489)Share of Profit / ( Loss ) of Associate -Profit/ (Loss) before Tax (36,687,501) 162,642,961 125,955,460Income Tax (Expense)/ Reversal (21,001,680) (7,747,919) (28,749,599)Net Profit/(Loss) For the Year (57,689,181) 154,895,042 97,205,861-30-

65Year ended 31 March 20136.3 Segment Information - Product (Contd.)Year ended 31 March 2012GroupLeather &Footwear Textile TotalRs. Rs. Rs.Revenue - Local Net of Taxes 1,318,118,652 40,588,773 1,358,707,425Revenue - Export Direct / Indirect 273,971,778 2,738,865,254 3,012,837,0321,592,090,430 2,779,454,027 4,371,544,457Operating Profit Segment Results (before finance cost) 197,469,307 (4,551,020) 192,918,287Finance Cost (8,125,861) (96,560,861) (104,686,722)Finance Income 42,756,616 255,190 43,011,806Finance Cost - Net 34,630,755 (96,305,671) (61,674,916)Share of Profit / ( Loss ) of Associate -Profit/ (Loss) before Tax 266,730,817 (197,162,362) 131,243,371Income Tax (Expense)/ Reversal (82,618,267) (7,341,972) (89,960,239)Net Profit/(Loss) For the Year 184,112,550 (204,504,334) 41,283,1326.4 Segmental Assets- GroupGroupLeather &Footwear Textile TotalRs. Rs. Rs.As at 31 March 2013Non Current Assets 1,637,325,923 1,420,272,987 3,057,598,910Current Assets 1,188,225,390 1,262,181,754 2,450,407,144Total Assets 2,825,551,313 2,682,454,741 5,508,006,054As at 31 March 2012Non Current Assets 1,679,974,403 1,421,428,951 3,101,403,354Current Assets 1,195,169,479 1,180,310,135 2,375,479,614Total Assets 2,875,143,882 2,601,739,086 5,476,882,9686.5 Segmental Liabilities - GroupAs at 31 March 2013Non Current Liabilities 155,902,843 210,264,404 366,167,247Current Liabilities 245,718,552 1,523,218,792 1,768,937,344Total Liabilities 401,621,395 1,733,483,196 2,135,104,591As at 31 March 2012Non Current Liabilities 147,417,342 160,614,929 308,032,271Current Liabilities 200,647,044 1,679,215,627 1,879,862,671Total Liabilities 348,064,386 1,839,830,556 2,187,894,9426.6 Segmental Capital Expenditure - GroupYear ended 31 March 2013 33,941,978 59,255,740 93,197,718Year ended 31 March 2012 181,232,923 8,022,590 189,255,5136.7 Segmental depreciation & amortization - GroupYear ended 31 March 2013 71,133,405 92,854,323 163,987,728Year ended 31 March 2012 48,166,676 99,317,033 147,483,709-31-

66Year ended 31 March 20137. PROPERTY, PLANT & EQUIPMENT7.1 CompanyGross Carrying Amounts Balance Additions Transfers BalanceAs atAs at01.04.2012 31.03.2013At Cost or Valuation Rs. Rs. Rs. Rs.Freehold Land 552,303,750 - - 552,303,750Buildings on Freehold Land 274,050,500 2,509,853 1,477,780 278,038,133Plant & Machinery 178,107,890 11,546,196 - 189,654,086Production Equipment 46,599,288 9,992,923 - 56,592,211Office Equipment 14,816,356 2,789,806 - 17,606,162Furniture & Fittings 7,977,808 1,118,343 - 9,096,151Motor Vehicle 78,573,543 2,891,743 - 81,465,2861,152,429,135 30,848,864 1,477,780 1,184,755,779Assets on Finance LeasesOffice Equipment 2,250,470 - - 2,250,470Motor Vehicle 16,355,090 - - 16,355,09018,605,560 - - 18,605,560Total Value of Depreciable Assets 1,171,034,695 30,848,864 1,477,780 1,203,361,339In the Course of ConstructionCapital Work in Progress 1,477,780 - (1,477,780) -Total Gross Carrying Amount 1,172,512,475 30,848,864 - 1,203,361,339Depreciation and Impairment Balance Additions Transfers Balance01.04.2012 31.03.2013At Cost or Valuation Rs. Rs. Rs. Rs.Buildings on Freehold Land 25,102 10,942,232 - 10,967,334Plant & Machinery 54,953,858 20,262,603 - 75,216,461Production Equipment 18,880,548 4,363,202 - 23,243,750Office Equipment 7,934,420 1,275,045 - 9,209,465Furniture & Fittings 2,912,017 692,606 - 3,604,623Motor Vehicle 4,493,188 8,041,208 - 12,534,39689,199,133 45,576,896 - 134,776,029Assets on Finance LeasesOffice Equipment 1,345,569 225,047 - 1,570,616Motor Vehicle 2,566,051 1,635,509 - 4,201,5603,911,620 1,860,556 - 5,772,176Total Depreciation 93,110,753 47,437,452 - 140,548,205As atAs at31.03.2013 31.03.2012Net Carrying Amount of Property, Plant & Equipment 1,062,813,134 1,079,401,722-32.-

67Year Ended 31 March 20137.PROPERTY, PLANT & EQUIPMENT (Contd.)7.2 CompanyGross Carrying AmountsBalance Additions Re valuation Transfers Disposals BalanceAs atAs at01.04.2011 31.03.2012At Cost or Valuation Rs. Rs. Rs. Rs. Rs. Rs.Freehold Land 516,909,750 6,000,000 546,303,750 (516,909,750) - 552,303,750Buildings on Freehold Land 286,810,870 26,583,366 270,034,250 (309,377,986) - 274,050,500Plant & Machinery 110,716,902 58,600,949 - 8,790,039 - 178,107,890Production Equipment 39,527,868 7,071,420 - - - 46,599,288Office Equipment 12,647,153 2,169,203 - - - 14,816,356Furniture & Fittings 6,136,202 1,983,136 - - 141,530 7,977,808Motor Vehicle 4,975,858 74,428,772 - 2,550,000 3,381,087 78,573,543977,724,603 176,836,846 816,338,000 (814,947,697) 3,522,617 1,152,429,135Assets on Finance LeasesOffice Equipment 2,250,470 - - - - 2,250,470Motor Vehicle 18,905,090 - - (2,550,000) - 16,355,09021,155,560 - (2,550,000) - 18,605,560Total Value of Depreciable Assets 998,880,163 176,836,846 816,338,000 (817,497,697) 3,522,617 1,171,034,695In the Course of ConstructionCapital Work in Progress 8,790,039 1,477,780 - (8,790,039) - 1,477,780Total Gross Carrying Amount 1,007,670,202 178,314,626 816,338,000 (826,287,736) 3,522,617 1,172,512,475Depreciation and ImpairmentBalance Additions Re valuation Transfers Disposals BalanceAs atAs At01.04.2011 31.03.2012At Cost or Valuation Rs. Rs. Rs. Rs. Rs. Rs.Buildings on Freehold Land 24,360,948 9,429,518 - (33,765,364) - 25,102Plant & Machinery 39,081,028 15,872,830 - - - 54,953,858Production Equipment 14,851,636 4,028,912 - - - 18,880,548Office Equipment 6,918,104 1,016,316 - - - 7,934,420Furniture & Fittings 2,489,602 563,905 - - 141,490 2,912,017Motor Vehicle 309,180 5,011,095 - 1,983,730 2,810,817 4,493,18888,010,498 35,922,576 - (31,781,634) 2,952,307 89,199,133Assets on Finance LeasesOffice Equipment 1,120,522 225,047 - - 1,345,569Motor Vehicle 930,542 3,619,239 - (1,983,730) - 2,566,0512,051,064 3,844,286 - (1,983,730) - 3,911,620Total Depreciation 90,061,562 39,766,862 - (33,765,364) 2,952,307 93,110,753As atAs at31.03.2012 31.03.2011Net Carrying Amount of Property, Plant & Equipment 1,079,401,722 917,608,640-33.-

68Year Ended 31 March 20137. PROPERTY, PLANT & EQUIPMENT (Contd.)7.3 GroupGross Carrying Amounts Balance Additions Transfers BalanceAs atAs at01.04.2012 31.03.2013RestatedAt Cost or Valuation Rs. Rs. Rs. Rs.Freehold Land 552,303,750 - - 552,303,750Land Development Cost 20,361,232 - - 20,361,232Buildings on Freehold Land 274,050,500 2,862,902 1,477,780 278,391,182Plant & Machinery 1,142,069,961 66,444,870 1,901,800 1,210,416,631Production Equipment 105,240,126 15,226,403 - 120,466,529Electrical Installation 100,151,538 - - 100,151,538Office Equipment 76,357,036 4,471,307 - 80,828,343Furniture & Fittings 21,711,793 1,300,493 - 23,012,286Water Embankment & Purification Project 111,097,129 - - 111,097,129Motor Vehicles 100,542,759 2,891,743 - 103,434,5022,503,885,824 93,197,718 3,379,580 2,600,463,122Assets on Finance LeasesBuildings on Lease Hold Land 746,199,260 - - 746,199,260Office Equipment 2,250,470 - - 2,250,470Motor Vehicles 16,355,090 - - 16,355,090764,804,820 - 764,804,820Total Value of Depreciable Assets 3,268,690,644 93,197,718 3,379,580 3,365,267,942In the Course of Construction -Plant & Machinery 68,083,899 - (1,901,800) 66,182,099Electricity Installation 1,477,780 - (1,477,780) -Total Gross Carrying Amount 3,338,252,323 93,197,718 - 3,431,450,041Depreciation and Impairment Balance Additions Transfers BalanceAs atAs at01.04.2012 31.03.2013At Cost or Valuation Rs. Rs. Rs. Rs.Land Development Cost 12,098,540 2,036,119 - 14,134,659Buildings on Freehold Land 25,102 10,942,232 - 10,967,334Plant & Machinery 357,757,203 92,211,971 - 449,969,174Production Equipment 61,588,077 11,294,373 - 72,882,450Electrical Installation 96,969,561 2,292,853 - 99,262,414Office Equipment 64,521,971 3,794,625 - 68,316,596Furniture & Fittings 15,601,896 1,307,983 - 16,909,879Water Embankment & Purification Project 40,616,042 7,384,037 - 48,000,079Motor Vehicles 24,073,571 8,999,258 - 33,072,829673,251,964 140,263,451 - 813,515,415Assets on Finance LeasesLeasehold Buildings 8,702,391 20,829,867 - 29,532,258Office Equipment 1,345,569 225,047 - 1,570,616Motor Vehicles 2,566,051 1,635,509 - 4,201,56012,614,011 22,690,423 - 35,304,434Total Depreciation 685,865,975 162,953,874 - 848,819,849As atAs at31.03.2013 31.03.2012Rs.Rs.Net Carrying Amount of Property, Plant & Equipment 2,582,630,192 2,652,386,348-34.-

69Year Ended 31 March 20137. PROPERTY, PLANT & EQUIPMENT (Contd.)7.4 GroupGross Carrying Amounts Balance Business Additions Re valuation Transfers Disposals BalanceAs at Acquisitions As at01.04.2011 31.03.2012RestatedAt Cost or Valuation Rs. Rs. Rs. Rs. Rs. Rs. Rs.Freehold Land 516,909,750 - 6,000,000 546,303,750 (516,909,750) - 552,303,750Land Development Cost 20,361,232 - - - - - 20,361,232Buildings on Freehold Land 286,810,870 - 26,583,366 270,034,250 (309,377,986) - 274,050,500Plant & Machinery 998,186,602 75,234,434 60,065,886 - 8,790,039 207,000 1,142,069,961Production Equipment 74,263,258 23,329,275 7,707,093 - - 59,500 105,240,126Electrical Installation 99,897,983 - 253,555 - - - 100,151,538Office Equipment 64,078,619 5,503,844 6,875,323 - - 100,750 76,357,036Furniture & Fittings 19,006,800 596,117 2,250,406 - - 141,530 21,711,793Water Embankment & PurificationProject 110,760,567 - 336,562 - - - 111,097,129Motor Vehicles 28,063,531 3,572,978 74,567,772 - 2,550,000 8,211,522 100,542,7592,218,339,212 108,236,648 184,639,963 816,338,000 (814,947,697) 8,720,302 2,503,885,824Assets on Finance LeasesBuildings on Lease Hold Land 633,682,622 116,313,290 1,235,970 628,650,000 (633,682,622) - 746,199,260Office Equipment 2,250,470 - - - - - 2,250,470Motor Vehicles 18,905,090 - - - (2,550,000) - 16,355,090654,838,182 116,313,290 1,235,970 628,650,000 (636,232,622) - 764,804,820Total Value of Depreciable Assets 2,873,177,394 224,549,938 185,875,933 1,444,988,000 (1,451,180,319) 8,720,302 3,268,690,644In the Course of ConstructionPlant & Machinery 74,972,138 - 1,901,800 - (8,790,039) - 68,083,899Electricity Installation - - 1,477,780 - 1,477,780Total Gross Carrying Amount 2,948,149,532 224,549,938 189,255,513 1,444,988,000 (1,459,970,358) 8,720,302 3,338,252,323Depreciation and Impairment Balance Business Additions Transfers Disposals BalanceAs at Acquisitions As at01.04.2011 31.03.2012At Cost or Valuation Rs. Rs. Rs. Rs. Rs. Rs.Land Development Cost 10,062,421 - 2,036,119 - - 12,098,540Buildings on Freehold Land 24,360,948 - 9,429,518 (33,765,364) - 25,102Plant & Machinery 270,628,775 8,278,585 78,850,035 - 192 357,757,203Production Equipment 35,545,893 17,818,945 8,253,603 - 30,364 61,588,077Electrical Installation 88,960,996 - 8,008,565 - - 96,969,561Office Equipment 55,341,480 4,276,722 4,993,898 - 90,129 64,521,971Furniture & Fittings 13,471,643 419,792 1,851,951 - 141,490 15,601,896Water Embankment & Purification Project 33,232,006 - 7,384,036 - - 40,616,042Motor Vehicles 23,163,001 1,115,538 5,452,554 1,983,730 7,641,252 24,073,571554,767,163 31,909,583 126,260,279 (31,781,634) 7,903,427 673,251,964Assets on Finance LeasesLeasehold Buildings - 6,763,832 16,675,364 (14,736,805) - 8,702,391Office Equipment 1,120,522 - 225,047 - - 1,345,569Motor Vehicles 930,542 - 3,619,239 (1,983,730) - 2,566,0512,051,064 6,763,832 20,519,650 (16,720,535) - 12,614,011Total Depreciation 556,818,227 38,673,415 146,779,929 (48,502,169) 7,903,427 685,865,975As atAs at31.03.2012 31.03.2011Rs.Rs.Total Carrying Amount of Property, Plant & Equipment 2,652,386,348 2,391,331,305-35.-

70Year ended 31 March 20137. PROPERTY, PLANT & EQUIPMENT (Contd.)7.5The fair value of Land & Buildings of No 64, Belummahara, Mudungoda & 115/1, Kelani Ganga Mill Road, Mattakkuliyadetermined by means of revaluation during the financial year 2011/ 2012 by Mr.Chulananda Wellappili incorporated Valuer, inreference to open market value for existing use basis. The results of such revaluation were incorporated in these FinancialStatements from its effective date which is 30 March 2012 .The surplus arising from the revaluation was transferred to arevaluation reserve.The carrying amount of revalued assets that would have been included in the financial statements had been carried atcost less depreciation is as follows:Class of Asset Depreciation Net Carrying Net CarryingIf assets were Amount AmountCost carried at cost 2013 2012Rs. Rs. Rs. Rs.Freehold Land 32,046,453 - 32,046,453 32,046,453Buildings on Freehold Land 114,276,885 26,132,942 88,143,943 92,200,162Plant & Machinery 124,077,738 121,824,455 2,253,283 5,133,861Production Equipment 21,377,692 16,884,099 4,493,593 5,441,722Shoe Last 13,128,885 10,176,366 2,952,519 3,436,293304,907,653 175,017,862 129,889,791 138,258,4917.6During the financial year, the Companywhich No finance leases.acquired Property, Plant & Equipment to the aggregate value of Rs. 30,848,864/- of7.77.8Property, Plant & Equipment includes fully depreciated assets having a gross carrying amounts of Rs.8,285,967/- (2012-Rs.7,779,109/- in respect of the Company and Rs.183,285,806/- (2012-131,100,105/-) in respect of the Group.Land, Buildings and Plant & Machinery with a carrying amount of Rs. 967,160,635/- (2012 Rs. 959,428,145/-) are subject toprimary mortgage of Rs. 342,000,000/- (2012 - Rs.342,000,000/-) to secure the overdraft and other banking facilities obtainedfrom Peoples Bank and Hatton National Bank PLC.8. PRE PAID LEASE RENTAL (GROUP)]Amortization/As at Business Revaluation As at As at01.04.2012 Acquisitions for the period 31.03.2013 01.04.2011Rs. Rs. Rs. Rs. Rs.Cost/ Revaluation 26,088,000 - - 26,088,000 -Amortization (81,178) - (243,529) (324,707) -Total Carrying Amount of PrePaid Lease Rental26,006,822 - (243,529) 25,763,293 -Pre-paid Lease rentals paid to acquire Land use rights have been classified as pre-paid Lease Rental and are amortised over theLease term in accordance with the pattern of benefits provided-36.-

71Year ended 31 March 20139. INTANGIBLE ASSETSGroupCompany2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.SummaryComputer Software - (Note 9.1) 1,580,000 1,975,000 2,370,000 1,580,000 1,975,000 2,370,000Computer Software - License - (Note 9.2) 2,287,756 2,299,270 - 2,007,034 2,255,326 -Goodwill on Consolidation - ( Note 9.3) 181,088,560 181,088,560 25,488,909 - - -184,956,316 185,362,830 27,858,909 3,587,034 4,230,326 2,370,0009.1 Computer SoftwareGroupCompany2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.CostAs at 01 April 3,950,000 3,950,000 3,950,000 3,950,000 3,950,000 3,950,000Acquired during the Year - - - -Disposed during the Year - - - -As at 31 March 3,950,000 3,950,000 3,950,000 3,950,000 3,950,000 3,950,000AmortizationAs at 01 April 1,975,000 1,580,000 1,185,000 1,975,000 1,580,000 1,185,000Amortization for the Year 395,000 395,000 395,000 395,000 395,000 395,000As at 31 March 2,370,000 1,975,000 1,580,000 2,370,000 1,975,000 1,580,000Net Book Value 1,580,000 1,975,000 2,370,000 1,580,000 1,975,000 2,370,000Company purchased a locally developed Software, which is capitalized to the company's intangible assets during financial year 2007/08. It is estimatedthat the benefits of this asset would accrue to the company over period of 10 years, and being amortized over a period of 10 years. The remaining usefullife of intangible asset is 05 years as at 31 March 20129.2 Computer Software - License 2013 2012 2013 2012Rs. Rs. Rs. Rs.CostAs at 01 April 2,526,872 43,944 2,482,928 -Acquired during the Year 383,811 2,482,928 - 2,482,928As at 31 March 2,910,683 2,526,872 2,482,928 2,482,928AmortizationAs at 01 April 227,602 227,602 227,602 -Amortization for the Year 395,325 - 248,292As at 31 March 622,927 227,602 475,894 227,602Net Book Value 2,287,756 2,299,270 2,007,034 2,255,3269.3 Goodwill on ConsolidationGroup2013 2012Rs.Rs.As at 01 April 181,088,560 25,488,909Arising from acquisition of subsidiaries (Note 5) - 155,599,651As at 31 March 181,088,560 181,088,56010. INVESTMENT IN SUBSIDIARY - COMPANY Directors DirectorsCost Valuation Cost Valuation CostHolding 2013 2013 2012 2012 2011Non-Quoted % Rs. Rs. Rs. Rs. Rs.Ceylon Leather Products Distributors (Pvt)Limited100% 100,000 100,000 100,000 - 100,000- No of Ordinary Shares -Allowance for fall in value of Investment - - (100,000) - (100,000)South Asia Textile Industries Lanka (Pvt) Ltd 51.55% 550,000,000 550,000,000 550,000,000 550,000,000 550,000,000- No of Ordinary Shares - 383,060,660Palla & Company Pvt LtdNo of Ordinary Shares - 54,000 60% 155,091,132 155,091,132 155,091,132 155,091,132 -Total Non- Quoted Investment in Subsidiary 705,191,132 705,191,132 705,091,132 705,091,132 550,000,000-37-

72Year ended 31 March 201311. OTHER FINANCIAL ASSETS11.1 Loans and ReceivablesGroupCompany2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.108,000 Debentures of Rs 1,000/= each at Pan Asia Bank 108,671,612 108,543,136 - 108,671,612 108,543,136 -Interest @ 06 month Gross Treasury Bill rate + 2.95 %.Maturity date -18th March 2018Preference shares in Palla & Company Pvt LtdNo of Preference Shares - 298,641 - - - 328,096,347 306,594,172 -Total Loans and Receivables 108,671,612 108,543,136 - 436,767,959 415,137,308 -11.2 Available for Sale of Financial Assets - Group/Company2013 2012 2011 2013 2012 2011No of SharesRs. Rs. Rs.Un Quoted shares - Ned Lanka (Ceylon) Ltd 66,750 133,500 133,500 2,336,250 1,954,440 1,954,440Quoted Shares - Dankotuwa Porcelain PLC 6,000,828 6,000,828 6,000,828 82,811,426 97,813,496 359,449,597Total Available for Sale of Financial Assets 85,147,676 99,767,936 361,404,03711.3 Other Investments - Group 2013 2012 2011Rs. Rs. Rs.Investments in Fixed Deposits 38,067,000 6,485,943 6,093,213Investments in Call Deposits 23,711,901 22,850,339 12,433,340Total Other Investments 61,778,901 29,336,282 18,526,55311.4 Short Term Investments - Group/CompanyNo of SharesCost Market Cost Market Cost Market2013 2012 2011 Value Value Value2013 2013 2012 2012 2011 2011Rs. Rs. Rs. Rs. Rs. Rs.Brown & Company PLC - - 5,000 - - - - 1,347,424 1,449,000Distilleries Company of Sri lanka PLC 6,000 6,000 6,000 1,045,581 1,002,000 1,045,581 870,000 1,045,581 1,080,000Colombo Dockyard PLC 2,100 2,100 2,000 546,048 449,400 546,048 483,000 546,048 510,200Eden Hotels Lanka PLC 7,700 7,700 7,700 429,022 269,500 429,022 237,160 429,022 394,240Piramal Glass Company PLC 100,000 100,000 100,000 1,051,648 610,000 1,051,648 610,000 1,051,648 1,110,000Laugfs Gas PLC 10,000 10,000 10,000 525,824 250,000 525,824 258,000 525,824 444,000Sampath Bank PLC 10,230 10,230 3,000 2,923,758 2,364,496 2,923,758 1,839,354 873,980 864,900United Motors Lanka PLC 5,000 5,000 5,000 834,240 486,500 834,240 540,000 834,240 761,000Richard Pieris & Company PLC 100,000 100,000 100,000 1,415,680 660,000 1,415,680 750,000 1,415,680 1,360,000Textured Jersey Lanka PLC 118,000 118,000 - 1,770,000 1,168,200 1,770,000 849,600 - -Colombo Land & Development PLC 20,000 20,000 - 1,314,580 604,000 1,314,580 780,000 - -Merchant Bank of Sri Lanka PLC 150,000 150,000 - 5,344,758 2,415,000 5,344,758 4,395,000 - -Kalpitioya Beach Resort PLC 26,700 26,700 - 467,250 152,190 467,250 240,300 - -Waskaduwa Beach Resort PLC 28,100 28,100 - 351,250 148,930 351,250 266,950 - -18,019,638 10,580,216 18,019,638 12,119,364 8,069,447 7,973,340Provision for fall in value of investments (7,439,422) - (5,900,274) - (96,107) -10,580,216 10,580,216 12,119,364 12,119,364 7,973,340 7,973,34012. INVENTORIESGroupCompany2013 2012 2011 2013 2012 2011Rs Rs Rs. Rs Rs. Rs.Raw Material 668,956,809 592,511,497 565,410,110 161,662,894 110,339,384 68,831,548Work in Progress 170,667,388 157,320,980 164,664,444 67,822,884 46,246,704 34,440,109Finished Goods 286,531,060 246,294,461 247,904,962 81,309,366 32,076,410 45,614,978Less : Allowance for Obsolete & Slow Moving Inventories (87,864,744) (90,763,559) (64,972,066) (12,802,508) (13,075,825) (10,315,093)1,038,290,513 905,363,379 913,007,450 297,992,636 175,586,673 138,571,542Consumables and Spares 90,263,774 75,220,684 67,458,153 40,057,213 33,793,776 35,121,081Goods in Transit 97,605,980 60,375,386 50,611,966 7,675,089 - -1,226,160,267 1,040,959,449 1,031,077,569 345,724,938 209,380,449 173,692,623Unrealized Profit (13,038,398) (10,319,168) (9,294,473) (13,038,398) (10,319,168) (9,294,473)Total Inventories at the lower of Cost and Net Realizable Value 1,213,121,869 1,030,640,281 1,021,783,096 332,686,540 199,061,281 164,398,150Inventories valued at Rs.778,230,000/- is pledged as securities (Group) for loan facilities obtained from People's Bank.-38.-

73Year ended 31 March 2013GroupCompany13. TRADE AND OTHER RECEIVABLES 2013 2012 2011 2013 2012 2011Rs Rs. Rs. Rs Rs. Rs.Trade Debtors 1,217,168,770 1,195,216,840 946,343,616 265,391,922 228,623,524 187,016,038Trade Dues Receivable from Related Parties (13.1) 36,610 - - 35,400,740 29,072,101 33,999,161Less: Allowances for Doubtful Debts (728,550,300) (654,535,176) (276,146,978) (8,544,400) (34,360,085) (34,409,772)488,655,080 540,681,664 670,196,638 292,248,262 223,335,540 186,605,427Other Debtors 345,932,040 327,516,182 332,242,126 15,606,983 27,753,565 47,537,549Other Dues Receivable from Related Parties (13.2) 9,397,176 853,600 850,000 40,976,755 4,959,281 3,041,781Less: Allowances for Doubtful Receivables (233,475,935) (206,354,191) (200,356,193) (10,736,369) (12,131,397) (12,131,397)121,853,281 122,015,591 132,735,933 45,847,369 20,581,449 38,447,933610,508,361 662,697,255 802,932,571 338,095,631 243,916,989 225,053,36013.1 Trade Dues Receivables from Related PartiesRelationshipCeylon Leather Products Distributors (Pvt) Limited. Subsidiary - - - 19,149,242 28,572,302 33,857,961Palla & Company (Pvt) Ltd. Subsidiary - 15,659,494 -Dankotuwa Porcelain PLC Affiliate 33,000 - - - - -Colombo Pharmacy Co. PLC Affiliate 3,610 - - 3,610 - -South Asia Textile Industries Lanka (Pvt) Ltd. Subsidiary - - - 588,394 499,799 141,20036,610 - - 35,400,740 29,072,101 33,999,16113.2 Other Dues Receivables from Related PartiesRelationshipEnvironmental Resources Investment PLC Parent 477,659 - - 477,659 - -Dankotuwa Porcelain PLC Affiliate - 850,000 850,000 - 850,000 850,000Enterprise Technology (Pvt) Ltd. Affiliate 7,227,689 - - 7,227,689 - -Olancom Pvt Limited Affiliate 556,213 - - 556,213 - -Colombo Pharmacy Co. PLC Affiliate 1,135,615 3,600 - 1,135,615 3,600 -South Asia Textile Industries Lanka (Pvt) Ltd. Subsidiary - - - 31,579,579 4,105,681 2,191,7819,397,176 853,600 850,000 40,976,755 4,959,281 3,041,78114. CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENTComponents of Cash and Cash EquivalentsGroupCompany2013 2012 2011 2013 2012 201114.1 Favourable Cash & Cash Equivalents balance Rs Rs. Rs. Rs Rs. Rs.Cash & Bank Balances 95,946,619 55,753,077 32,121,333 8,912,664 8,839,107 20,116,947Fixed Deposits 457,500,000 520,000,000 229,800,000 457,500,000 520,000,000 229,800,000553,446,619 575,753,077 261,921,333 466,412,664 528,839,107 249,916,94714.2 Un-favourable Cash & Cash Equivalents balanceBank Overdrafts (157,216,726) (188,306,731) (170,157,719) (10,608,170) (5,548,899) -Total Cash and Cash Equivalents for the Purpose of CashFlow Statements396,229,893 387,446,346 91,763,614 455,804,494 523,290,208 249,916,947-1-

74NOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 201315. STATED CAPITAL15.1 Summary2013 2012 2011Number Rs. Number Rs. Number Rs.Fully Paid Ordinary Shares (15.1.1) 34,233,774 1,979,344,948 34,233,774 1,979,344,948 25,000,000 1,037,500,00034,233,774 1,979,344,948 34,233,774 1,979,344,948 25,000,000 1,037,500,00015.1.1 Fully Paid Ordinary SharesBalance at the beginning of the Year 34,233,774 1,979,344,948 25,000,000 1,037,500,000 12,500,000 125,000,000Issue of Ordinary Shares - - 9,233,774 941,844,948 12,500,000 912,500,000Balance at the end of the Year 34,233,774 1,979,344,948 34,233,774 1,979,344,948 25,000,000 1,037,500,00015.2The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to have one vote per individual present at meetings of the shareholders or one vote per share in case of a poll. They are entitledto participate in any surplus assets of the Company in winding up. There are no preferences or restrictions on Ordinary Shares.15.3The company has issued warrants along with rights issue during the year 2010/ 2011 and outstanding position as at 31 March 2013 as follows:Warrants:- 2014 Warrants: Two (02) Warrants for One (01) Right, at an issue price of Rs. 118.00 (Expiry on 25 August 2014)- 2015 Warrants: Two (02) Warrants for One (01) Right, at an issue price of Rs.142.00 (Expiry on 25 August 2015)16. OTHER COMPONENTS OF EQUITY 2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.SummaryRevaluation Reserve (16.1) 672,939,376 672,729,006 642,598,099 667,975,672 667,975,672 642,598,099AFS Reserve (16.2) 30,163,004 43,806,044 305,442,145 30,163,004 43,806,044 305,442,145703,102,380 716,535,050 948,040,244 698,138,676 711,781,716 948,040,244GroupCompany16.1 Revaluation ReserveGroup Company2013 2012 2013 2012Rs. Rs. Rs. Rs.As at 1 April - 672,729,006 642,598,099 667,975,672 642,598,099Surplus on Re valuation of Land & Buildings - 30,374,798 - 25,377,573Deferred Tax Liability on Revaluation Surplus - (750,378) - -Reversal of Deferred Tax effect on Re valuation 210,370 506,487 - -As at 31 March 672,939,376 672,729,006 667,975,672 667,975,67216.2 Available for Sale ReserveAs at 1 April - 43,806,044 305,442,145 43,806,044 305,442,145Change in Fair Value -Available for Sale Financial Assets (13,643,040) (261,636,101) (13,643,040) (261,636,101)As at 31 March 30,163,004 43,806,044 30,163,004 43,806,044-40-

75NOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 201317. INTEREST BEARING LOANS AND BORROWINGSAmount Amount Amount Amount Amount AmountRepayable Repayable 2013 Repayable Repayable 2012 Repayable Repayable 2011Within 1 Year After 1 Year Total Within 1 Year After 1 Year Total Within 1 Year After 1 Year TotalSummary - Company Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.Interest RateFinance Leases (17.1) 12% - 16% 3,174,760 4,667,595 7,842,355 3,728,374 7,414,804 11,143,178 3,232,878 11,143,089 14,375,967Bank Loans (17.2) LIBOR+3%, 6%-12% - - - - - - 33,254,364 10,657,667 43,912,031Trust Receipt Loans (17.3) 16%-16.5% 113,903,643 - 113,903,643 - - - 16,444,578 - 16,444,578Bank Overdraft 16%-17.5% 10,608,170 - 10,608,170 5,548,898 - 5,548,898 - - -127,686,573 4,667,595 132,354,168 9,277,272 7,414,804 16,692,076 52,931,820 21,800,756 74,732,576Summary - GroupFinance Leases (17.1) 16% - 18% 6,574,760 52,120,889 58,695,649 7,159,459 58,414,804 65,574,263 6,922,005 65,789,251 72,711,256Bank Loans (17.2) 11% - 12% 37,119,506 39,182,363 76,301,869 289,593,916 - 289,593,916 150,689,444 56,279,815 206,969,259Trust Receipt Loans (17.3) 11% - 12% 1,066,133,290 - 1,066,133,290 810,926,018 - 810,926,018 851,958,613 - 851,958,613Bank Overdraft 15% - 17.5% 157,216,726 - 157,216,726 188,306,731 - 188,306,731 170,157,719 - 170,157,7191,267,044,282 91,303,252 1,358,347,534 1,295,986,124 58,414,804 1,354,400,928 1,179,727,781 122,069,066 1,301,796,84717.1 Finance Leases As At Business New Leases Repayment As At As At New Leases Repayment As At31.03.2012 Acquisition Obtained 31.03.2013 31.03.2011 Obtained 31.03.2012Rs. Rs Rs. Rs. Rs. Rs. Rs. Rs. Rs.Lanka Orix Leasing PLC 14% - 17% - - - - - 374,592 - (374,592) -Hatton National Bank PLC 14% - 17% 11,143,178 - - (3,300,823) 7,842,355 14,001,375 - (2,858,197) 11,143,178Finance Leases - Company 11,143,178 - - (3,300,823) 7,842,355 14,375,967 - (3,232,789) 11,143,178Orient Financial Services Corporation Ltd 14% - 17% 105,396 - - (105,396) - 609,600 - (504,204) 105,396Board Of Investment Sri Lanka 54,325,689 - - (3,472,395) 50,853,294 57,725,689 - (3,400,000) 54,325,689Finance Leases - Group 65,574,263 - - (6,878,614) 58,695,649 72,711,256 - (7,136,993) 65,574,263As At As At As At31.03.2013 31.03.2012 31.03.2011Rs. Rs. Rs.Gross Liability 59,762,174 67,805,821 76,476,160Finance Charges allocated to future periods (1,066,525) (2,231,558) (3,764,904)Net liability 58,695,649 65,574,263 72,711,256Security: Absolute ownership of the assets under lease will be with the lessor till the expiration of the lease period.-41-

76Year ended 31 March 201317. INTEREST BEARING LOANS AND BORROWINGS (Contd.)17.2 Bank Loan As At As At Loans Repayment Exchange As AtInterest Rate 01.04.2011 01.04.2012 Obtained (Gain) / Loss 31.03.2013Rs. Rs. Rs. Rs. Rs. Rs.Hatton National Bank PLC 12.00% 43,912,031 - - - -Bank Loans - Company 43,912,031 - - - -Pan Asia Bank- Block Loan 10.50% - 237,500,000 - (237,500,000) - -People's Bank -(Block Loan VIII) LIBOR + 3% 33,850,734 - - - - -People's Bank -(Block Loan IX) LIBOR + 3% 111,675,060 42,829,750 - (43,784,462) 954,712 -National Development Bank - E-Friends Loa 6.50% 17,531,434 7,513,448 - (7,513,448) - -National Development Bank 6.5% - 1,750,718 250,962,201 (217,713,514) (3,743,486) 31,255,919Term Loan (FCBU) LIBOR + 3% - - 45,262,500 - (216,550) 45,045,950Bank Loans - Group 206,969,259 289,593,916 296,224,701 (506,511,424) (3,005,324) 76,301,869Security:- Primary floating mortgage bond for Rs.191 Mn over land and building depicted in lots 1 & 2 in plan no. 3560 dated 22 January 2008 made by L.Goonesekera situated in Belummahara has been kept as security in order to acquire the loan.- Machineries, Lease hold buildings, and inventory were pledged against Peoples Bank and National Development Bank FacilitiesLoan Repayment Terms:Hatton National Bank PLC In monthly instalments of Rs. 3,017,617/-People's Bank -(Block Loan VIII) In monthly instalments of USD 28,500/-People's Bank -(Block Loan IX) In monthly instalments of USD 55,500/-National Development Bank In monthly instalments of Rs. 834,832/-Pan Asia Bank PLC In monthly instalments of Rs 47,500,000 /-17.3 Trust Receipt/ Short Term Loans As At As At Loans Repayment Exchange As AtInterest Rate 01.04.2011 01.04.2012 Obtained (Gain) / Loss 31.03.2013Rs. Rs. Rs. Rs. Rs. Rs.Peoples Bank 11% - 16% 11,670,700 - 146,821,179 (82,012,887) 64,808,292Hatton National Bank PLC 12% - 16.8% 4,773,878 - 228,674,969 (179,579,618) 49,095,351Trust Receipt Loans - Company 16,444,578 - 375,496,148 (261,592,505) 113,903,643Peoples Bank 6.5% 366,561,613 588,080,523 1,590,781,907 (1,664,561,011) (2,456,067) 511,845,352PABC Bank 6.0% 395,318,000 137,618,618 919,617,101 (685,356,375) (3,583,310) 368,296,034Standard Chartered Bank 8.62%- 9% 73,634,422 85,226,877 (12,498,664) (639,952) 72,088,261Trust Receipt Loans - Group 851,958,613 810,926,018 2,885,895,156 (2,624,008,555) (6,679,329) 1,066,133,290Security:Ceylon Leather Products PLCa) Mortgage over Land, building and Immovable Machinery at Kelani Ganga Mills Road, Mattakkuliya.b) Deposit of Confirmed Orders from Government Forces, Departments and Other Reputed Institutions.South Asia Textile Industries Lanka Pvt Limiteda) Machinery, Lease hold Buildings, and Inventory were pledged as security.Loan Repayment Terms:Each short term loans under the limit should be repaid within a period of 150 days-42.-

77Year ended 31 March 201318. TAXATION18.1 Income Tax ExpenseThe major components of Income Tax Expense for the Year ended 31 March are as follows :Income StatementGroupCompany2013 2012 2013 2012Current Income Tax Rs. Rs. Rs. Rs.Current Income Tax Charge 25,106,581 57,347,904 22,208,191 55,635,746Deemed Dividend Tax - - - -Under/(Over) provision of current taxes in respect of prioryears259,972 15,802,003 294,498 15,035,94225,366,553 73,149,907 22,502,689 70,671,688Deferred Income TaxDeferred Taxation Charge/(Reversal) 3,383,046 16,810,558 3,624,035 9,791,559Income Tax Expense reported in the IncomeStatementStatement of Changes in EquityDeferred Income Tax Related to Item Charged orCredited Directly to Equity28,749,599 89,960,465 26,126,724 80,463,247Net Gain on Revaluation of Property, Plant & Equipment- - 1,561,945Income Tax Expense/ (Reversal) Reported in Equity- - - 1,561,94518.2 Reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rateGroupCompany2013 2012 2013 2012Rs. Rs. Rs. Rs.Accounting Profit/(Loss) before Tax from operations 125,955,460 131,243,371 156,333,003 230,267,897Non-deductible expenses 237,822,131 294,044,210 65,883,395 61,555,518Tax Deductible expense (145,999,336) (277,603,769) (119,305,083) (77,916,124)Income Exempt from Tax (43,181)Taxable Credits (94,945,216) (42,170,299) (94,945,216) (42,170,299)Income/(Loss) not subject to Tax (105,012,345) 68,022,472 - -Tax Loss brought forward (33,867,953) (37,256,178) - -Tax Loss Carried forward /Tax loss claimed during theyear30,845,771 33,867,953 - (1,131,973)Taxable Profit on Business Income 14,798,512 170,104,579 7,966,099 170,605,019Taxable Profit on Other Income 72,986,775 42,190,229 72,936,019 42,170,299Net Taxable Profit 87,785,287 212,294,808 80,902,118 212,775,318Current Tax ExpenseIncome Tax @ 28% 24,994,153 57,048,177 22,095,763 55,336,019Income Tax @ 12% 112,428 299,727 112,428 299,727Under/(Over) provision of current taxes in respect of prioryears259,972 15,802,003 294,498 15,035,942Current Income Tax Charge 25,366,553 73,149,907 22,502,689 70,671,688-43-

78Year ended 31 March 201318. TAXATION (Contd.)18.3 Deferred Tax Liability / (Asset)GroupCompany2013 2012 2013 2012Rs. Rs. Rs. Rs.Balance as at 1 April - Restated 189,916,645 174,056,546 82,901,438 74,671,824Transferred from/ (to) Revaluation Reserve (350,616) (950,459) - (1,561,945)Provision/(Reversal) for the Year 3,383,046 16,810,558 3,624,034 9,791,559As at 31 March 192,949,075 189,916,645 86,525,472 82,901,438Deferred Tax Arising from:Group/ CompanyDeferred Tax LiabilityAccelerated Depreciation for Tax Purposes 69,153,625 54,492,261 22,731,455 17,723,000Revaluation of Property, Plant & Equipment 147,592,578 147,943,194 74,914,315 74,914,315216,746,203 202,435,455 97,645,770 92,637,315Deferred Tax AssetsDefined Benefit Plans (15,146,136) (12,518,810) (11,120,298) (9,735,877)Tax Losses Carried Forward (8,650,920) -(23,797,056) (12,518,810) (11,120,298) (9,735,877)Net Deferred Tax Liability 192,949,147 189,916,645 86,525,472 82,901,438Deferred Tax Liability 201,599,995 189,916,645 86,525,472 82,901,438Deferred Tax Asset 8,650,920 - - --44-

79Year ended 31 March 201319. DEFINED BENEFIT LIABILITYGroupCompanyRetirement benefit obligation- Gratuity 2013 2012 2013 2012Rs. Rs. Rs. Rs.Changes in the Present Value of the Defined Benefit Obligationare as follows:Defined benefit obligation at 01 April 59,700,822 44,174,268 34,770,992 31,685,723Interest Cost on benefit liability 6,393,235 4,252,735 3,650,954 3,327,001Current Service Cost 10,022,995 9,113,291 2,647,187 2,101,072Actuarial Gain/(Loss) 5,467,983 (1,386,634) 4,289,703 (94,613)Benefits paid during the year (8,321,035) (4,271,145) (5,643,484) (2,248,191)Business Acquisition - 7,818,307 - -Defined Benefit Obligation at 31 March 73,264,000 59,700,822 39,715,352 34,770,99219.1 Net benefit expense recognisedCurrent Service Cost 10,022,995 9,113,291 2,647,187 2,101,072Actuarial Gain/(Loss) 5,467,983 (1,386,634) 4,289,703 (94,613)Interest Cost on benefit liability 6,393,235 4,252,735 3,650,954 3,327,001Net benefit expense 21,884,213 11,979,392 10,587,844 5,333,46019.2 This obligation which is not externally funded, is based on an actuarial valuation of the defined benefit plan based on the projected unit credit method, which isthe bench mark method specified in Sri Lanka Accounting Standards (LKAS) No.19, carried out by Messrs Actuarial & Management Consultants (Private)Limited, Professional Actuary, for the Year ended 31 March 2013.The principal assumptions used for this purpose are as follows:Discount Rate 11.0 %Salary Increase 9.0 %Retirement Age55 yearsStaff TurnoverAge 20 25 30 35 40 45 50 >50Turnover Rate 60% 50% 30% 30% 25% 15% 7% 4%20. TRADE AND OTHER PAYABLESGroupCompany2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.Trade Payables 404,802,976 392,268,680 728,483,421 10,689,329 16,355,891 9,138,730Trade Dues Payable to Related Parties (20.1) 8,095,688 27,103,023 10,139,644 5,339,453 25,338,086 9,467,719Sundry Creditors Including Accrued Expenses 75,084,490 113,751,162 92,224,897 15,339,136 55,856,591 30,769,379487,983,154 533,122,865 830,847,962 31,367,918 97,550,568 49,375,82820.1 Trade & Other Dues Payable to Related PartiesRelationshipEnvironmental Resources Investment PLCParent Company 2,500,000 26,015,841 9,000,000 - 19,987,681 9,000,000DNH Financials (Pvt) Ltd Affiliate Company - 421,861 467,719 - 421,861 467,719Enterprise Technology (Pvt) Ltd. Affiliate Company 5,404,042 459,429 671,925 5,147,807 - -The Colombo Pharmacy PLC Affiliate Company 191,646 176,428 - 191,646 176,428 -Palla & Co (Pvt) Ltd. Subsidiary Company - - - - 4,752,116 -Dankotuwa Porcelain PLC Affiliate Company - 29,464 - - - -8,095,688 27,103,023 10,139,644 5,339,453 25,338,086 9,467,71921. OTHER INCOME AND GAINSGroupCompany2013 2012 2013 2012Rs. Rs. Rs.Rental Income 4,837,719 8,531,400 11,287,719 8,531,400Sundry Income 33,834,534 27,877,012 2,135,898 1,592,685Profit on sale of Investment 1,359,030 305,504 1,359,030 305,504Profit on Sale of Property, Plant & Equipment - 12,273,871 - 1,600,79340,031,283 48,987,787 14,782,647 12,030,382-45-

80Year ended 31 March 201322. FINANCE COST AND INCOMEGroupCompany2013 2012 2013 2012Rs. Rs. Rs. Rs.22.1 Finance CostInterest Expense on Overdrafts 31,024,871 14,709,664 1,396,213 1,355,338Interest Expense on Interest Bearing Loans & Borrowings- Long Term Loans - 81,024,105 - 3,071,731- Short Term Loans 80,484,202 7,419,607 12,628,467 6,535,956Finance Charges on Lease Liabilities 1,090,722 1,533,346 1,090,722 1,533,346112,599,795 104,686,722 15,115,402 12,496,37122.2 Finance IncomeIncome from Investments :- Interest Received from Related Parties - - - -- Interest on Deposits held with Banks 55,778,454 42,468,670 55,227,093 42,170,299Interest from Preference Shares - - 21,502,175 7,952,859Interest on Debentures 17,166,852 543,136 17,166,852 543,13672,945,306 43,011,806 93,896,120 50,666,29423. PROFIT/(LOSS) FROM OPERATIONSGroupCompanyStated after Charging /(Crediting) 2013 2012 2013 2012Rs. Rs. Rs. Rs.Included in Cost of SalesDepreciation 138,898,149 125,777,020 35,785,697 28,278,022Employees Benefits including the following- Salaries & Bonus 274,744,995 205,571,794 104,455,615 88,669,593- Defined Contribution Plan Costs - EPF&ETF 34,451,327 24,170,890 10,849,876 9,532,824- Defined Benefit Plan Costs - Gratuity 8,692,350 6,535,176 3,470,183 1,868,184- Other Staff Cost 105,972,873 79,886,210 23,766,985 23,208,407Allowance for Obsolete & Slow Moving Inventories (Net) (2,898,815) 25,791,493 (273,317) 2,760,732Included in Administrative ExpensesAllowances on Doubtful Receivables 91,642,956 353,290,224 - -Depreciation 22,897,048 19,388,214 10,493,077 9,874,145Amortization of Intangible Asset 1,033,854 703,780 643,292 622,602Audit Fee 2,564,622 2,025,000 975,000 900,000Directors Remuneration 12,896,000 17,349,915 12,896,000 11,801,801Employees Benefits including the following- Salaries & Bonus 89,524,476 61,462,395 23,874,269 19,931,008- Defined Contribution Plan Costs - EPF&ETF 10,202,488 7,789,343 2,817,594 2,362,853- Defined Benefit Plan Costs - Gratuity 13,543,497 5,195,759 6,656,299 3,216,900- Other Staff Cost 9,798,758 9,661,836 1,257,045 959,841Included in Selling and Distribution CostsDepreciation 1,158,677 1,614,695 1,158,677 1,614,695Allowance on Doubtful Receivables (27,310,714) (511,966) (27,310,714) (511,966)Advertising Cost 4,896,356 2,122,378 4,495,395 1,667,029-46.-

81Year ended 31 March 201324. EARNINGS PER SHAREBasic Earnings Per Share is calculated by dividing the net profit for the year attributable to ordinary shareholders by theweighted average number of ordinary shares outstanding during the year.The following reflects the income and share data used in the basic Earnings Per Share Computations.GroupCompany2013 20122013 2012Rs.Rs.Net Profit 94,066,617 95,965,035 130,206,279 149,804,650Net Profit attributable to share holders for basic EPS 94,066,617 95,965,035 130,206,279 149,804,650Number of Ordinary Shares Used as Denominator: 2013 2012Number NumberNumber of Ordinary Shares at the beginning of the year 34,233,774 25,000,000Number of Ordinary Shares in Issue during the Year - 9,233,774Weighted Average Number of Ordinary Shares applicable to Basic Earnings Per Share 34,233,774 30,386,368Weighted Average Number of Ordinary Shares applicable to Diluted Earnings Per Share 34,233,774 30,386,36825. COMMITMENTS AND CONTINGENCIES25.1 Capital Expenditure CommitmentsThere were no material commitments which require disclosure as at the date of the balance sheet.25.2 Contingencies25.2.1 Letters of Credit and Bank GuaranteesCompany, in its normal course of business opens letters of credit with banks favouring suppliers in respect of materialprocurement and gives guarantees issued by banks on company's behalf favouring customers. Respective balancesoutstanding as at the Balance Sheet date are given below:2013 2012 2011Rs Rs Rs.Letters of Credit Opened with Banks favouring suppliers 19,383,563 4,389,375 19,498,949Guarantees Issued by Banks on behalf of the Company 45,594,248 45,631,798 57,652,094Guarantees given to banks on behalf of subsidiaries (USD 5,000,000) 634,450,000 - -25.2.2 Operating Lease CommitmentsThe subsidiary, South Asia Textiles Industries Lanka (Pvt) Ltd. Has an operating lease for land. This lease has a term ofrenewal but no purchase option and escalation clause. Renewals are at the option of the specific entity that holds the lease.Future, lease payments under operating lease contract are as follows;2013 2012 2011Rs. Rs. Rs.Within one year 3,000,000 3,000,000 3,000,000After one year but not more than five years 15,000,000 15,000,000 15,000,000More than five years 30,000,000 33,000,000 36,000,000Present value of minimum lease payments 48,000,000 51,000,000 54,000,000-47-

82Year ended 31 March 201326. ASSETS PLEDGEDThe following assets have been pledged as security for liabilities.Nature of AssetsCompanyNature of LiabilityCarrying Amount Pledged2013 2012 2011Rs. Rs. Rs.Included undeImmovable Properties Floating Mortgage Property, Plantfor Loans and Borrowings 819,374,549 826,329,148 779,359,672 & EquipmentLeased Assets Charge over Leased Assets Property, Planton Finance Lease Liabilities 12,833,384 12,931,215 16,838,586 & EquipmentPlant & MachineryFloating MortgageOther than leased for Loans and Borrowings 147,786,086 133,098,997 84,730,567 Property, Plant& EquipmentFixed Deposits with Banks Charge over banking facilities 440,000,000 440,000,000 - Cash & Cashobtained by subsidiaryEquivalentsGroupImmovable Properties Floating Mortgage 819,374,549 826,329,148 779,359,672 Property, Plantfor Loans and Borrowingsand EquipmentPrimary Mortgage 613,680,000 223,760,000 229,000,000 Property, Plantfor Loans and Borrowingsand EquipmentLeased Assets Charge over Leased Assets Property, Planton Finance Lease Liabilities 12,833,384 12,931,215 16,838,586 & EquipmentPlant & MachineryFloating MortgageOther than leased for Loans and Borrowings 147,786,086 133,098,997 84,730,567 Property, Plant& EquipmentMachineries Primary Mortgage 583,510,000 432,840,000 519,341,582 Property, Plantfor Loans and Borrowingsand EquipmentRaw Materials, Finished Goods Primary/Concurrent Mortgage 810,210,000 778,230,000 829,092,881 Inventoriesand Work in Progressfor Loans and BorrowingsTrade Debtors Primary/Concurrent Mortgage 951,690,000 879,070,000 740,774,179 Trade and OtherReceivablesFixed Deposits with Banks Charge over banking facilities 440,000,000 440,000,000 - Cash & Cashobtained by subsidiaryEquivalents-48-

83Year ended 31 March 201327. RELATED PARTY DISCLOSUREDetails of significant related party disclosures are as follows:27.1 Transactions with Key Management Persons of the CompanyKey Management Personnel (KMPs) are defined as those persons having authority and responsibility for planning,directing and controlling the activities of the group (Company and it's Subsidiary). Such KMPs include the Board ofDirectors of the Company; key employees of the Company holding directorships in Subsidiary Company. IndependentTransactions with Key Management Personnel and transactions with the Close Family Members (CFMs) of the KMPs,ifany, also been have taken into consideration in the following disclosure:27.1.1 Key Management Personnel Compensation 2013 2012Rs.Rs.CompanyShort-Term employee benefits 12,896,000 11,801,800GroupShort-Term employee benefits 22,411,343 17,349,91427.2 Transactions with Subsidiary CompaniesThe following table provides the total amount of transactions, which have been entered into with related parties for therelevant financial year.(for information regarding outstanding balances at 31 March 2012 and 2011, refer to Notes 13.1& 20.1):27.2.1 Transactions with SubsidiaryCeylon Leather Products Distributors (Pvt) Ltd , South Asia Textile Industries Lanka (Pvt) Ltd and Palla & Company(Pvt) Ltd are the Subsidiary Companies of Ceylon Leather Products PLC, and following are the major transactions thatthe Company entered into with its Subsidiary Companies.2013 2012Rs.Rs.Opening Balance 28,425,667 36,190,942Sale of Goods 34,736,859 23,899,574Purchases (17,521,029) (4,800,503)Settlement of Dues (10,498,642) (30,910,022)Rendering of Services 7,333,854 4,045,676Loan Granted 15,617,869 -Loan Settlement (117,869) -Recovery of Administrative Expenses 9,000,000 -Closing Balance 66,976,709 28,425,667-49-

84Year ended 31 March 201327. RELATED PARTY DISCLOSURES (Contd..)27.2.3 Transactions with Parent CompanyFollowings are the major transactions entered in to by the Company with its Major Share Holders:2013 2012Rs.Rs.Opening Balance (19,987,681) (9,000,000)Sale of Goods -Loan Granted -Expenses Recovered (266,660) 42,748Purchases of Assets (168,000) (71,456,000)Expenses Payable (24,933,629)Settlement of Dues 20,900,000 95,000,000Settlement of Net BalancesRe imbursement of Administrative Expenses (9,640,800)Closing Balance 477,659 (19,987,681)27.2.4 Transactions with the Other Related PartiesTransaction, arrangements and agreements involving Key Management Personnel (KMPs) and their Close FamilyMembers (CFMs), and Entities which are controlled or jointly controlled by the KMP's and their CFMs or shareholderswho have either control or jointly control over the entity. Dankotuwa Porcelain PLC,DNH Financial (Pvt) Ltd,EnterpriseTechnology & The Colombo Pharmacy Company PLC are the other related parties of Ceylon Leather Products PLC.Followings are the major transactions entered into by the Company with other Related Parties.2013 2012Rs.Rs.Opening Balance 255,310 382,281Rental Deposit & Advance 2,107,890 -Purchases (1,058,819) (800,565)Sale of Goods 110,491 -Rendering of Services (20,571,429) -Intangible Asset Purchases - (2,837,632)Expenses Payable (1,005,212) (169,035)Settlement of Dues 15,961,540 3,630,804Loan Granted 25,792,543 -Loan Settlement (18,008,640) -Expenses Recovered - 49,457Closing Balance 3,583,674 255,31027.2.5 Transactions with related parties were carries out on the same terms and conditions applicable to non-related parties.i.e. on an arms length basis.-50-

85For the year ended 31 March 201328. FAIR VALUES28.1 Set out below is a comparison by class of the carrying amounts and fair values of the Company that are carried in the financial statements.CompanyCarrying amountFair valueAs at 1 As at 1AprilApril2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.Financial assetsLoans and Receivables 436,767,959 415,137,308 - 436,767,959 415,137,308 -Available for Sale of Financial Assets 85,147,676 99,767,936 361,404,037 85,147,676 99,767,936 361,404,037Other Investments - - - - - -Trade and Other Receivables 338,095,631 243,916,989 225,053,360 338,095,631 243,916,989 225,053,360Short Term Investments 10,580,216 54,329,637 28,804,926 10,580,216 54,329,637 28,804,926Cash and Cash Equivalents 466,412,664 406,565 406,565 466,412,664 406,565 406,565Total 1,337,004,146 813,558,435 615,668,888 1,337,004,146 813,558,435 615,668,888Financial liabilitiesTrade and Other Payables 31,367,918 97,550,568 49,375,828 31,367,918 97,550,568 49,375,828Interest Bearing Loans & Borrowings 132,354,168 16,692,076 74,732,576 132,354,168 16,692,076 74,732,576Total 163,722,086 114,242,644 124,108,404 163,722,086 114,242,644 124,108,404Set out below is a comparison by class of the carrying amounts and fair values of the Group that are carried in the financial statements.GroupCarrying amountFair valueAs at 1 As at 1AprilApril2013 2012 2011 2013 2012 2011Rs. Rs. Rs. Rs. Rs. Rs.Financial assetsLoans and Receivables 108,671,612 108,543,136 - 108,671,612 108,543,136 -Available for Sale of Financial Assets 85,147,676 99,767,936 361,404,037 85,147,676 99,767,936 361,404,037Other Investments 61,778,901 29,336,282 18,526,553 61,778,901 29,336,282 18,526,553Trade and Other Receivables 610,508,361 662,697,255 802,932,571 610,508,361 662,697,255 802,932,571Short Term Investments 10,580,216 88,503,158 50,572,371 10,580,216 88,503,158 50,572,371Cash and Cash Equivalents 553,446,619 5,766,479 1,089,403 553,446,619 5,766,479 1,089,403Total 1,430,133,385 994,614,246 1,234,524,935 1,430,133,385 994,614,246 1,234,524,935Financial liabilitiesTrade and Other Payables 487,983,154 533,122,865 830,847,962 487,983,154 533,122,865 830,847,962Interest Bearing Loans & Borrowings 1,358,347,534 1,354,400,928 1,301,796,847 1,358,347,534 1,354,400,928 1,301,796,847Total 1,846,330,688 1,887,523,793 2,132,644,809 1,846,330,688 1,887,523,793 2,132,644,809The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transactionbetween willing parties, other than in a forced or liquidation sale.The following methods and assumptions were used to estimate the fair values:u Cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due tothe short-term maturities of these instruments.u Fair value of available-for-sale financial assets is derived from quoted market prices in active markets, if available.u Fair value of unquoted available-for-sale financial assets is estimated using appropriate valuation techniques.-51-

86For the year ended 31 March 201328. FAIR VALUES (Contd.)28.2 Fair value hierarchyThe Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:Level 1:Level 2:Level 3:Quoted (unadjusted) prices in active markets for identical assets or liabilitiesOther techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectlyTechniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market dataAs at 31 March 2013, the Company and Group held the following financial instruments carried at fair value on the statement of financial position:Assets measured at fair valueCompany/ Group31 March 2013 31 March 2012Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.Available for Sale of Financial Assets 85,147,676 82,811,426 - 2,336,250 99,767,936 97,813,496 - 1,954,440During the reporting period ending 31 March 2012 and 31 March 2013, there were no transfers between Level 1 and Level 2 fair value measurements.28.3 Reconciliation of fair value measurements of Level 3 financial instrumentsThe Group carries unquoted equity shares as available-for-sale instruments classified as Level 3 within the fair value hierarchy.A reconciliation of the beginning to the closing balances disclosing movements separately is disclosed hereafter:Ned Lanka (Pvt) LtdTotalRs.Rs.0001 April 2011 1,954,440 1,954,440Total gains and losses recognised in Other Comprehensive Income - -31 March 2012 1,954,440 1,954,4401 April 2012 1,954,440 1,954,440Sales (977,220) (977,220)Purchases - -Total gains and losses recognised in Other Comprehensive Income 1,359,030 1,359,03031 March 2013 2,336,250 2,336,250-52-

87For the year ended 31 March 201329. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Group’s principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of thesefinancial liabilities is to finance the Group’s operations.The Group has loan & receivables, trade and other receivables, and cash and short-term deposits that are derived directly from itsoperations.The Group’s senior management oversees the management of the financial risks. The Board of Directors reviews and agrees policiesfor managing each of these risks which are summarized below.Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket interest rates. The Group’s exposure to the risk of changes in market interest rates arise due to the borrowings with floatinginterest rates. The movement of rates are closely monitored and refinancing options are available to manage this risk.Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to afinancial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financingactivities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.Liquidity riskThe table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.CompanyLess than 3months3 to 12months 1 to 5 years > 5 years TotalAs at 31 March 2013Interest Bearing Loans & Borrowings 124,511,813 3,174,760 4,667,595 - 132,354,168Trade and Other Payables 31,367,918 - - - 31,367,918As at 31 March 2012Interest Bearing Loans & Borrowings 5,548,898 3,728,374 7,414,804 16,692,076Trade and Other Payables 97,550,568 97,550,568GroupAs at 31 March 2013Interest Bearing Loans & Borrowings 747,023,657 495,385,658 115,938,219 1,358,347,534Trade and Other Payables 402,058,945 38,324,209 20,000,000 27,600,000 487,983,154As at 31 March 2012Interest Bearing Loans & Borrowings 312,680,532 956,493,519 85,226,877 1,354,400,928Trade and Other Payables 374,508,494 107,614,371 20,000,000 31,000,000 533,122,865Capital managementCapital includes equity attributable to the equity holders of the parent.The primary objective of the Group’s capital management is to ensure shareholder value is maximized.The Group manages its capital structure and makes adjustments to it in light of changes in economic conditionsTo maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital toshareholders or issue new shares.No changes were made in the objectives, policies or processes for managing capital during the year ended 31 March 2013 .30. EVENTS OCCURRING AFTER THE REPORTING PERIODThere have been no material events occurring after the reporting period that require adjustments to or disclosure in the financialstatements.-53-

Ten Years Financial SummaryYear ended 31 March (Audited) 2013 2012 * 2011 * 2010 2009 2008 2007 2006 2005 2004(Rs. '000)SUMMARY OF OPERATING RESULTSTurnover - Net 5,203,031 4,371,544 1,051,122 564,034 368,327 438,813 530,227 563,895 539,825 524,412Gross Profit 805,817 789,627 345,487 215,240 78,340 78,238 77,147 95,322 84,789 102,654Net Profit before Finance Cost 238,555 235,930 200,684 98,072 140 76,657 (21,898) 35,369 (7,173) 48,825Profit/ (Loss) before Taxation 125,955 131,243 175,352 62,651 (39,841) 32,037 (59,237) 4,068 (31,286) 23,349Taxation (28,749) (89,960) (68,412) (26,753) 15,690 9,182 11,409 (1,057) 2,191 (11,450)Profit for the Year 97,206 41,283 106,940 35,898 (24,151) 41,219 (47,828) 3,011 (29,095) 11,899SUMMARY OF FINANCIAL POSITIONStated / Issued Capital 1,979,345 1,979,345 1,037,500 125,000 125,000 125,000 125,000 125,000 125,000 125,000Reserves/ Other components of Equity 703,102 716,535 948,040 623,479 623,479 478,687 333,210 333,210 333,210 102,043Retained Earnings 320,291 226,224 160,820 126,330 90,432 109,217 (119,373) (63,965) (63,221) (26,000)Minority Interest 370,163 366,884 417,570 - - - - - - -Total Equity 3,372,901 3,288,988 2,563,930 874,809 838,911 712,904 338,837 394,245 394,989 201,043ASSETS & LIABILITIESCurrent Assets 2,450,407 2,375,480 2,146,272 362,643 336,873 383,304 271,108 301,187 340,543 283,026Current Liabilities (1,768,937) (1,879,863) (2,053,405) (217,603) (248,232) (278,383) (240,428) (217,024) (245,734) (115,714)Net Current Assets 681,470 495,617 92,867 145,040 88,641 104,921 30,680 84,163 94,809 167,312Non Current Assets 3,057,599 3,101,403 2,799,121 879,820 901,567 641,704 447,274 457,448 461,213 234,540Non Current Liabilities (366,168) (308,032) (328,058) (150,051) (151,297) (33,721) (139,117) (147,366) (161,033) (200,809)Net Assets 3,372,901 3,288,988 2,563,930 874,809 838,911 712,904 338,837 394,245 394,989 201,043KEY RATIOSEarnings per Share (Rs) 2.75 3.16 5.70 2.87 (1.93) 3.30 (3.83) 0.24 (2.33) 1.04Net Assets per Share (Rs) 87.71 85.36 85.85 69.98 67.11 57.03 27.11 31.54 31.60 16.08Dividend per Share (Rs) - 1.00 - - - - - - - 0.65Annual Sales Growth (%) 19% 316% 86% 53% -16% -17% -6% 4% 3% 28%Current Ratio (Times) 1.39 1.26 1.05 1.67 1.36 1.38 1.13 1.39 1.39 2.45Share prices at the end (Rs.) 62.30 91.90 90.00 87.75 50.00 68.00 21.25 22.75 15.25 7.25* Restated in line with SLFRS/ LKASThe above summerised financial information is extracted from audited financial statements.

89For The Year Ended 31 March20132012Value Generated: Rs.' 000 Rs.' 000Gross Turnover 5,345,852 4,558,444Other Income 40,031 48,988Less: Cost of Materials and Services bought in (4,294,623) (3,637,452)Value Generated 1,091,260 969,980Distributed as Follows: Share % Rs. Share % Rs.To Employees as Remuneration 50% 546,929 41% 400,370To Government as Taxes 16% 171,571 29% 276,860- Sales Taxes 142,821 186,900- Income & Deferred Tax 28,750 89,960To Lenders as Interest - net 10% 112,600 11% 104,687Retained in the Business 24% 260,160 19% 188,063- Depreciation 162,954 146,780- Profit Retained 97,206 41,283100% 1,091,260 100% 969,980Value Distributed as follows:24%To Employees as Remuneration10%2012/1350%To Government as TaxesTo Lenders as Interest ‐ net16%Retained in the BusinessNote: Results for 2011/12 includes consolidation of South Asia Textiles Industries Lanka (Pvt) Ltd. effective 01 April 2011and Palla & Company (Pvt) Ltd. effective 01 December 2011.

90COMPOSITION OF THE SHAREHOLDERS AS AT 31ST MARCH 2013RESIDENTNON RESIDENTTOTALShare HoldingsNumber ofShareholdersNumber ofShares%HoldingNumber ofShareholdersNumber ofShares%HoldingNumber ofShareholdersNumber ofShares%Holding1 to 1,000 1,816 412,667 1.21 3 1,100 - 1,819 413,767 1.211001 to 10,000 330 988,987 2.89 9 37,638 0.11 339 1,026,625 3.0010,001 to 100,000 39 994,487 2.90 2 75,600 0.22 41 1,070,087 3.12100,001 to 1,000,000 3 438,706 1.28 - - - 3 438,706 1.28Over 1,000,000 1 31,284,589 91.39 - - - 1 31,284,589 91.392,189 34,119,436 99.67 14 114,338 0.33 2,203 34,233,774 100.00Categories of ShareholdersNo of Share holders% Number ofHoldingsNo of SharesTotalHolding %Individual Shareholders 2,113 95.9% 2,398,4087.0%Institutional 904.1% 31,835,36693.0%TOTAL 2,203 100% 34,233,774100%TWENTY LARGEST SHAREHOLDERS AS AT 31 ST MARCH 2013Name of the ShareholderNo ofshares held%1 Environmental Resources Investment PLC 31,284,589 91.39%2 Mrs. F.M.Jazeel 203,800 0.60%3 Mr. N.A.A. Karunarathna 131,903 0.39%4 Mrs. D.S.K. Athukorala 103,003 0.30%5 Harsha International (Pvt) Ltd 100,000 0.29%6 Mr. E.P.I. Fernando 77,530 0.23%7 Waldock Mackenzie Ltd/Mr. L.P.Hapangama 64,900 0.19%8 Mr. K.V.P. Fernando 57,500 0.17%9 Dr. Sena Yaddehige 54,100 0.16%10 Mrs. U.C.P. Abeysekera 54,020 0.16%11 Pan Asia Banking Corporation PLC/Mrs. M.B.F. Farzana 34,668 0.10%12 Entrust Limited 31,000 0.09%13 Mr.G. Rajendren 30,052 0.09%14 Mrs.K.N.L. Pieris 29,248 0.09%15 Miss. N.H.Maurani 27,375 0.08%16 Sampath Bank PLC/Mr. A.M.N.A.Abeykoon 26,524 0.08%17 Ceylon Buscuits Ltd 25,000 0.07%18 Acuity Partners (Pvt) Ltd /Mr. C.V. Kunanandham 25,000 0.07%19 Mr.W.A.D.U.C.Perera 22,000 0.06%20 Mr. K.A.S.Perera & Mrs. W.C Perera 21,700 0.06%Percentage of Public Holding 8.61%MARKET VALUE OF SHARESFor the Year Ended 31 March 2013 2012RsRsHighest 93.80 114.00Lowest 60.00 85.50Year End 62.30 91.90

91Name of the ShareholderTwenty Major Warrant holders as at 31 st March 2013 - Warrant 2014 (WR2014)No ofshares held1 Environmental Resources Investment PLC 18,411,702 73.65%2 Mr.A.W. Mohottala 373,711 1.49%3 Mrs. F.M.Jazeel 289,836 1.16%4 Mr.D.A.Dasantha Primal 267,225 1.07%5 Mr. P.S.K. Jeewantha 205,000 0.82%6 Mr. J.P. Wijeweera 195,000 0.78%7 Mr.S.P.J. De Silva 181,300 0.73%8 Mr. N.Vandabona 135,428 0.54%9 Mrs. G.L.S. Chandrika 123,121 0.49%10 Mr. P.G. Gamini 118,477 0.47%11 Mr.G. Rajendren 115,465 0.46%12 Mr. H.M. Keerthiratne 113,551 0.45%13 Mr.S.A. Cooray 110,000 0.44%14 Dr. N.Kasim 101,183 0.40%15 Mr. K.G.Lokuketagoda 100,000 0.40%16 Mrs.A.D.S.Damayanthi 100,000 0.40%17 Pan Asia Banking Corporation PLC/Mr. M.N.Ranasinghe 99,966 0.40%18 Mrs. D.S.K. Athukorala 92,629 0.37%19 A.T. Cooray (Pvt) Ltd 90,400 0.36%20 Mr. M.I. Abdul Karim 87,700 0.35%Percentage of Public Holding 26.35%Warrant Prices (WR2014) for the Year ended 31.03.2013 31.03.2012%Higest Rs.13.50 Rs.21.70Lowest Rs.1.90 Rs.10.50Last Traded Price Rs.2.20 Rs.12.60Twenty Major Warrant holders as at 31 st March 2013 - Warrant 2015 (WR2015)Name of the ShareholderNo ofshares held%1 Environmental Resources Investment PLC 18,411,702 73.65%2 Mrs. F.M.Jazeel 646,387 2.59%3 Mr. W.P.A.S. Perera 304,115 1.22%4 Mr. N.Vandabona 270,499 1.08%5 Mr. A.W. Mohottala 231,304 0.93%6 Mrs.D.S.K. Athukorala 194,791 0.78%7 Miss. G.N.R.L.Dias 193,898 0.78%8 Miss. A.S.Halpern Weber 185,500 0.74%9 Mr. R.S. Gunawardena 176,900 0.71%10 Mr. D.A. Dasantha Primal 162,471 0.65%11 Richard Pieris Financial Services(Pvt) Ltd/W.P.A.S.Perera 150,700 0.60%12 Mr.S.A.Cooray 130,000 0.52%13 Mr. J.P. Wijeweera 108,000 0.43%14 A.T. Cooray (Pvt) Ltd 100,000 0.40%15 Pan Asia Banking Corporation PLC/Mr. K.H.K.H. Perera 99,000 0.40%16 Waldock Mackenzie Limited/Mr.L.P. Hapangama 97,600 0.39%17 Mr. S.P.J.De Silva 88,695 0.35%18 Sampath Bank PLC/Mr.A.W. Mohottala 85,691 0.34%19 Mr.H.M.Keerthiratne 72,503 0.29%20 Mrs. G.L.S. Chandrika 71,993 0.29%Percentage of Public Holding 26.35%Warrant Prices (WR2015) for the Year ended 31.03.2013 31.03.2012Higest Rs. 13.20 Rs. 21.70Lowest Rs.2.10 Rs.9.30Last Traded Price Rs.2.40 Rs.12.20

97NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Shareholders of Ceylon Leather Products PLC will be heldat 1000 h on Friday, 02 August 2013 at No. 32, Sri Sambuddha Jayanthie Mandiraya, Sri Sambuddha Jayanthie Mawatha,Colombo 5 for the purpose of considering and if thought fit to pass the following resolutions;1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company with the FinancialStatements for the year ended 31 March 2013.2. To re-elect Mr. Mangala Boyagoda, Director who retires in terms of Article 20 (2) of the Articles of Association of theCompany.3. To re-elect Mr. Neville Peiris, Director who retires in terms of Article 20 (2) of the Articles of Association of the Company.4. To re-appoint Mr. A G Weerasinghe, Director who retires from office in terms of Section 210 of the Companies Act No. 7 of2007 and for this purpose to pass the following resolution as an Ordinary Resolution:-“RESOLVED that the age limit stipulated in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. A GWeerasinghe, who is more than 70 years of age and that he be re-appointed a Director of the Company in terms ofSection 211 of the Companies Act No. 7 of 2007”.5. To approve a dividend as recommended by the Directors.6. To re-appoint M/s Ernst & Young, Chartered Accountants, as Auditors of the Company and to authorize the Directors todetermine their remuneration.7. To authorize the Directors to determine and make payments for charitable and other purposes for the year 2013/2014 asset out in the Companies Donation Act (CAP147) and up to the date of next Annual General Meeting.By order of the Board ofCeylon Leather Products PLCP W Corporate Secretarial (Pvt) LtdSecretariesColombo08 July 2013Notes:(i)A shareholder entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and voteinstead of him/her. A Proxy need not be a shareholder of the Company.A form of proxy accompanies this notice(ii)The completed form of proxy should be deposited at the office of the Registrars at No. 101, Inner Flower Road,Colombo 3 by 1000 h on 31 July 2013

Notes………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

I/We…………………………………………………………… of ……………………………………………………………………Shareholder/shareholders of the above named Company, hereby appoint ……………………………………………………… of………………………………………………………………………………………………………………… or failing him/herMr. L. Heengamaof Colombo or failing himMr. S. Senaratneof Colombo or failing himMr. E. M. M. Boyagodaof Colombo or failing himMr. A. G. Weerasingheof Colombo or failing himMr. N. C. Peirisof Colomboas my /our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on the 02August 2013 at 1000 h at No. 32, Sri Sambuddha Jayanthie Mandiraya, Sri Sambuddha Jayanthie Mawatha, Colombo 5 andat any adjournment thereof and at every poll which may be taken in consequence thereof.FOR AGAINSTi. To receive and consider the Report of the Board of Directors on the affairs of the Companywith the financial statements for the year ended 31 March 2013 together with the Reportof the Auditors thereon.ii. To re-elect Mr. Mangala Boyagoda, Director who retires by rotation in terms of Article 20(2) of the Articles of Association of the Company.iii. To re-elect Mr. Neville Peiris, Director who retires by rotation in terms ofArticle 20 (2) of the Articles of Association of the Company.iv. To re-appoint Mr A G Weerasinghe, Director who retires from office in terms of Section 210 ofthe Companies Act No. 7 of 2007 and for this purpose to pass the following resolution as anOrdinary Resolution:-“RESOLVED that the age limit stipulated in Section 210 of the Companies Act No. 7 of 2007shall not apply to Mr A G Weerasinghe, who is more than 70 years of age and that he ne reappointeda Director of the Company in terms of Section 211 of the Companies Act No. 7 of2007.v. To approve a dividend as recommended by the Directors.vi. To re-appoint M/s Ernst & Young, Chartered Accountants, as Auditors of the Company andto authorize the Directors to determine their remuneration.vii. To authorize the Directors to determine and make payments for charitable and otherpurposes for the year 2013/2014 as set out in the Companies Donation Act (CAP 147) andup to the date of next Annual General Meeting.Signed on this …………………… Day of …………… 2013.…………………………Signature

Please furnish following information:Share certificate No …………………………… CDS A/c No. ……………………………NIC No. ……………………………… No of Shares ……………………………Note:i. A Shareholder entitled to attend, speak and vote at the Meeting is entitled to appoint a proxy or proxies to attend andvote instead of him/her. A Proxy need not be a shareholder of the company.ii.A form of proxy accompanies this notice.iii.The instrument appointing a Proxy shall be in writing under the hand of the appointer or of his/her Attorney dulyauthorized in wiring or if such appointer is a company/corporation, either under its Common Seal, or under the hand ofan Officer/s or Attorney duly authorized in terms of the Articles of Association /Statute.iv.In the case of a proxy signed by an Attorney, the original Power of Attorney must be deposited at the office of theRegistrars (i.e. SSP Corporate Services (Pvt) Ltd, No.101, Inner Flower Road, Colombo 3 Telephone : 011 2573894)for registration.v. The completed form of proxy should be deposited at the office of the Registrars at No. 101, Inner Flower Road,Colombo 3 (not less than 48 hours before the time appointed for the holding of the Meeting).Shareholders/Proxies attending the meeting are requested to bring their National Identity Card or Passport.