Distilleries Company of sri lanka plC · Distilleries Company of sri lanka plC annual report...

Distilleries Company of sri lanka plC

annual report 2008/09

nature’s nectar : arrack,the world’s only naturallyfermented liquor

2 About Us

4 Story of Arrack

5 Accolades

6 Our Brands

8 Chairman’s Message

12 Board of Directors

16 DCSL Management Team

19 Group Management Team

20 Corporate Governance

23 Board Committee Reports

25 Enterprise Risk Management

27 Financial Highlights

28 Management Discussion and Analysis

32 Annual Report of the Board of Directors

Financial Reports

38 Statement of Director’s Responsibility

39 Report of the Auditors

40 Income Statements

41 Balance Sheets

42 Statements of Changes in Equity

43 Cash Flow Statements

44 Accounting Policies

50 Notes to the Financial Statements

General Information

81 Statements of Value Added

82 Shareholder Information

84 Value of Real Estate

85 Ten Year Summary

86 Group Directory

88 Glossary

89 Notice of Meeting

90 Attendance Slip

91 Form of Proxy

Contents

Standing on a glorious past, breathing a vibrant

present and pledging a resplendent future

The ‘past’ is the favoured territory of a historian. Things past are rarely assumed to be alive,capable of transformation and growth - and yet, who we are and what we have become is linked to what we were.

The Distilleries Company of Sri Lanka PLC (DCSL) is a company that can referencea history that is close to a century. What this inscribes on our corporate DNA is experi-ence, maturity, innovation, fortitude and the will to succeed.

Our origin can be traced as far back as the year 1923, when the Excise Department ofCeylon which was initially created as the enforcement authority and to distribute and sellliquor products in Sri Lanka, branched out into the distillation and manufacture of liquorproducts. Later, in 1974 the State Distilleries Corporation was incorporated by statuteto take over this venture while the Excise Department was re-introduced to operate as a monitoring authority. We are thus the inheritors of an institution that has the distinctionof being the pioneer distillery in the country. We have over the course of close to a centurygrown to become Sri Lanka’s largest distiller who has consistently received accolades fromall quarters for the enduring quality of our products. We are justifiably proud, but one ofour distinguishing characteristics is the determined refusal to rest on our laurels. This is whywe prefer to think of history as a living thing.

In 1989 the State Distilleries Corporation was converted to a limited company, as per thethen government’s policy to privatise state-owned enterprises. The majority stake ofDCSL was sold to the highest bidder on the Colombo Stock Exchange (CSE) in 1992,the then largest transaction in the history of the CSE.

At the time of privatisation, the plant and machinery and the operating systems atDCSL were in a very neglected state and hardly conducive to the smooth running of theenterprise.

The current Management has upgraded the plant and machinery to modern intranational standards and introduced new technologies developed by world renownedexperts from France. Our people are regularly trained in best International Practices formanufacturing liquor at diverse locations synonymous with the Alcohol Industry such asFrance, Scotland and Ireland.

Large investments have also been made in Research and Development (R&D) and in upgrading our laboratories which has enabled us to scientifically compare the standard of ourproducts with International Brands. Storage facilities and product distribution systemshave been upgraded to modern standards. A brand new fleet of vehicles now enablesDCSL to deliver its products island wide efficiently and effectively.

Our next target is to establish our product range in the international market and our R&DDivision is working tirelessly to achieve this aim in the near future.

It would be a cliché to say we’ve grown from strength to strength, but that is exactly whatDCSL has done. The Company has grown beyond recognition since 1992. It has invested heavily and judiciously in several key sectors of the economy which are far removedfrom that of distillation, manufacturing and distribution of liquor.

We are literally present in all parts of the country, in harmony with the ethos of our people and the firm belief that we must provide our citizens with the means to develop theirfull potential.

As such we can say with all humility that we have gone far beyond leaving the proverbialfootprint on the social, economic and commercial landscape of this country; we have a presence - a living, vibrant and enthusiastic presence, that seeks to stretch the horizons ofour company and our people ever outward.

Our past, our present and our future, therefore, are not only linked, but indelibly stamped with the landmarks that inevitably follow successful enterprises. DCSL has now been recognised as one of Sri Lanka’s blue chip corporate entities, a far cry from what it was in 1992.

Arrack, the world’s only naturally fermented alcoholic beverage, is not merely a drink for king andcommoner, connoisseur and your regular tippler, it is a liquid that contains a history that goesback several millennia and encompasses a long and delicate process from coconut palm to theglass.

The journey of a single drop of liquid from the flower of a coconut palm (Cocos Nucifera), to anambrosial beverage is a fascinating tale. At dawn, ‘tappers’ from Sri Lanka’s coconut-rich coastline move precariously from tree to tree along connecting ropes to extract the sap of the yetunopened coconut flower. A deft slice with a sharp knife draws the nectar out of the flower. It iscollected in a clay pot placed under the flower. A tree on average yields approximately two litresof toddy per day. The liquid ferments quickly into a mildly alcoholic drink locally called ‘raa’ or‘toddy’.

The liquid from thousands of trees are transported in wooden barrels to collection centres, tested for quality, and taken to the distillery and poured into wash backs made of teak orhalmilla; all this within 3-4 hours of the sap being drawn from the flower. Then begins the delicate process of distillation.

There are essentially two processes of distilling; continuous distillation and the batch process, alsocalled ‘pot distillation’. The distillation process is completed within 24 hours. The raw spirit thusdrawn is thereafter mellowed by a process of maturation at the warehouse and flavored withselected herbs. This process can take upto 12 years or more, depending on flavor, texture, alcoholic strength and fragrance requirements. The blending is carried out by master blenderswho draw from the know-how passed down from generation to generation in accordance withancient traditions and modern technologies to craft an entire range of products designed to caterto the palate of connoisseurs.

Coconut Arrack is a pure spirit in that it contains not a trace of methanol. Therefore, it is as safeas any comparable international beverage. In fact for those who have grown to swear by it, it hasno substitute.

We at DCSL, are the inheritors of an institution that has the distinction of being the pioneer distillery in the country. We have, over the course of a century grown to become thelargest distiller in Sri Lanka (and perhaps the world over) for distillation of coconut spirits and onewhich has consistently been recognised for the enduring quality of our products.

nature’s nectar : arrack,the world’s only naturallyfermented liquor

Distilleries Company of Sri Lanka PLC

Annual Report 2008/094

accolades

- DCSL was named to Forbes Asia’s ‘200 Best Under a Billion’ for the third year in 2008

- DCSL was placed 3rd among the Business Today Top 10 in 2008

- DCSL was ranked 4th among the LMD 50 in 2008

- DCSL was awarded Super Brands status in 2007

Doing our customers

and our country proud

Our forte is undoubtedly our stringent focus on quality and this, coupled with the

experience gained over almost a century has benefited us in many ways. Added to this,

our unerring sense of taste has created a vast and diverse portfolio of top local and

international alcoholic beverages; brands of true international repute.

We are particularly honoured by the esteem in which our brands are held by the public

and the value they place in our brands. Their faith in us has led to our ascension to the

status of market leader for Arrack, the most popular of all liquors amongst locals and

locally-made Brandies.



Local Brands

Locally Manufactured Foreign Liquor

Our brands, O ur experience; O ur source of strength


Annual Report 2008/09 7

Imported BrandsWe are the Sole Distributor of the undernoted Brands belonging to Group Pernod Ricard

“When the winds change, we must adjust our sails”

2008/09 was undoubtedly a turbulent year for the entire

corporate world due to the financial meltdown and the

resultant global recession. In contrast to the general

consensus at that time, Sri Lanka was not immune to the

effects of this crisis as evident from the results published

by most leading corporates in the country. However, your

Company weathered the storm and despite

difficult market conditions recorded steady progress

during the year under review. For DCSL, the most

significant change in our business environment transpired

from the recent highly publicised Supreme Court

judgement regarding the reversal of the sale of Sri Lanka

Insurance Corporation Limited.

supreme Court order regarding sliC

On 4th June 2009, in response to a fundamental rights

application made by two petitioners, the Supreme Court

of Sri Lanka declared the privatisation of the Sri Lanka

Insurance Corporation Limited as null and void ab-initio.

Accordingly, the Group which successfully managed SLIC

since April 2003, relinquished its control and management

of the Company to the State as of the judgement date.

It is important to note that the Court did not find any

wrongdoing on the part of your Company as evident from

the judgement and the ensuing Order. Although the

Supreme Court directed to revert SLIC to the Secretary

to the Treasury, the Order stipulated that the purchase

consideration should be returned to DCSL subsidiary;

Milford Holdings (Private) Limited along with profits

earned during the period managed by the Company. The

Court also directed that this amount be paid by way of

Treasury Bonds redeemable in five years at the interest

rates which prevailed during the time of the order.

We are at present vigorously following up with the

Secretary to the Treasury to obtain these Bonds as

directed by the Court.

financial performance

The Board sought direction from several leading

accounting professionals including the Institute of

Chartered Accountants of Sri Lanka and have presented

the Financial Statements to reflect the relevant changes

required in accordance with the Sri Lanka Accounting

Standards which is explained in detail under the

‘Management Discussion & Analysis’ section of this report.

The gross turnover of the Group for the year under

review sans SLIC and related investments was Rs. 40.8 Bn

which is a growth of 5% over the previous financial year

despite the adverse macro economic and business

environment which prevailed during the year. The Group

profit after tax including the share of profit from SLIC for

the year was Rs. 3.4 Bn compared to Rs. 4.1 Bn in 2007/08,

mainly due to the poor performance of the Group’s

Telecommunications sector even though these results

were in line with the results of the Telecom sector as a

whole.

macro economic environment

Despite the unprecedented global recession, the

Sri Lankan economy displayed its usual resilience in 2008

to record a GDP growth of 6%. The inflation rate which

peaked at 28% in June 2008 has now stabilised to single

digits since February 2009. The recent approval of the

USD 2.6 Bn loan by the International Monetary Fund will

help the country to rebuild its external reserves and

maintain monetary stability. The expected growth rate of

the Sri Lankan economy for 2009 is around 4% even

though it is anticipated that the global economy will

remain in recession.

I strongly believe that our businesses are particularly well

placed with a strong resource base to take advantage of

the opportunities amidst the challenging economic and

business environment.

Business review

The Group has contracted to four main business sectors

with the return of the SLIC to the State due to the

aforementioned judgement. The Financial Statements have

been prepared and presented making the required

amendments to effect this decision in line with the Court

ruling.

The Beverage Sector the flag bearer of the DCSL Group

performed creditably despite the overwhelming

prevalence of illegal and illicit liquor in the local market

place. The legal alcohol market share continues to erode

year on year depriving the government of much needed

revenue of around Rs. 50 Bn per annum in terms of taxes

and excise duties. We estimate that the illegal and

counterfeit alcohol market is at least twice the legal

market and is growing unabated and unregulated. As

evinced by several recent press articles, there are certain

unscrupulous licensees producing illegal alcohol from

spirits imported surreptitiously for manufacturing



Chairman’s message

eau-de-cologne. It is well known that such manufacturers

are acquiring retail licenses in contravention of the Excise

Ordinance and monopolising the trade in certain areas

such as the North and East. Despite numerous

representations made by the legal alcohol industry, the

Law enforcing Authorities continue to turn a Nelsonian

eye on these activities.

The latest threat to the reputation of the industry is the

manufacture of Arrack by some distillers using artificial

coconut spirits. Coconut spirit is probably the only

naturally fermented alcohol in the world; and we at DCSL

intend to keep it that way. As such, we are proud to

inform our shareholders, that we are the only Company

that has invested in the most modern, sophisticated testing

equipment to ensure that our products retain its true

quality.

I am also happy to announce that a new fully automated

bottling plant and state-of-the-art pot and patent distilling

equipment was commissioned in our Seeduwa Distillery

during the year. This will undoubtedly improve our

capability to serve the new growth areas of the North and

East.

The Plantations Sector saw continued improvements in

the first three quarters of the year due to the internal

crisis in Kenya and increased demand for leafy teas from oil

producing countries. However, this sector was severely

affected by the drastic drop in tea and rubber prices in the

last quarter of 2008 which could be attributed to the

decrease in oil prices and the global recession. The

unfavourable weather along with labour problems and the

ever increasing cost of inorganic fer tilizer fur ther

compounded the burden on this sector.

In the current year, we decided to account for Madulsima

Plantations PLC as an associate company in conformity

with the Sri Lanka Accounting Standards.

With the advent of a fifth operator, the

Telecommunications Industry has become fiercely

competitive as it is highly exposed to changes in customer

behavior due to price. The entire industry has reacted to

the price war and suffered the consequences as evident

from the results published by several leading companies in

the industry. Unless, the Telecommunication Regulatory

Authority implements the CPP (Calling Party Pays) regime

which will require the networks to pay for calls that are

terminated to other networks, the future profitability and

availability of funds for further technological advancement

would be significantly affected. During the year, Lanka Bell

surpassed one million subscribers, a landmark

achievement. The investment in the FLAG (Fiber-optic Link

Around the Globe) submarine cable network has opened

up new markets and opportunities for businesses in

Sri Lanka and has led to significant changes in the industry

such as reduced rates on overseas calls benefiting the

entire nation.

It is also noteworthy, that our company has once again

proven its exemplary corporate conduct by being

awarded the prestigious “Forbes Asia’s Annual – Best

under a Billion $” for the second consecutive year. I am

also proud to announce that DCSL has been listed in the

“Business Today Top 10” since the inception of the award

and was ranked third in 2008 as well.

future strategies

The new financial year has started well, with the

Government declaring the end of the war in the North

and East of the country opening up a new window of

opportunity to expand our businesses. The potential

cannot be understated as the government is committed to

the building of infrastructure and social development in

these areas attracting tremendous interest both locally and

internationally.

Already steps have been taken by the Group to expand its

distributor network in these new markets and also to

enhance its telecommunication network.

Dividends

I am pleased to report that the Board proposes a first and

final dividend of Rs. 2.25 per share, an increase of 28%

from last year, reflecting the Group’s strong performance

and the Board’s continued confidence in the future of the

business. The Group is strongly committed to enhancing

shareholder value and we believe that this has been

possible due to our consistently strong cash flows, robust

balance sheet and recurring revenue streams which

provide a basis for a progressive dividend policy. The

Board also will ensure to do their utmost to maintain

appropriate levels of sustainable investment in the future.

Board Changes

Mr. L. U. D. Fernando, an Executive Director stepped down

as a Director during the year in order to maintain the

Board balance as required by the Corporate Governance




Code issued by the Securities and Exchange Commission

and the Institute of Chartered Accountants of Sri Lanka.

I would like to take this opportunity to thank him for his

outstanding vision and contribution to the Company

during his tenure as a Director.

I welcome two new Non-Executive Directors to the

Board, Mr. C. F. Fernando and Dr. Naomal Balasuriya, both

of whom bring a wide range of skills and experience with

them. Mr. Fernando, a Chartered Accountant by

profession, served previously as Managing Director and

CEO of DCSL. Dr. Naomal Balasuriya, a medical doctor

turned entrepreneur is a renowned corporate trainer and

motivational speaker. He is also a Chartered Marketer and

holds a MBA from the University of Sri Jayewardenepura.

I am confident that both of them will make substantial

contributions to the development of the Company in the

future.

appreciations

On behalf of the Board, I would like to express my

gratitude to the management and all our employees for

their dedication and hard work, often in very demanding

conditions, which delivered the results covered in this

report. I also thank my fellow Board Members for their

advice and guidance during this turbulent and challenging

period.

In conclusion, I take this opportunity to thank all our

stakeholders for the trust and confidence placed in myself

and the Board of Directors to deliver another year of

successful performance and last but by no means least, our

loyal customers in all sectors without whom these results

would not have been possible.

D. H. S Jayawardena

Chairman / Managing Director

20 August 2009




Board of Directors



D. H. S. JayawardenaChairman /Managing Director

R. K. Obeyesekere

Capt. K. J. Kahanda (Retd.) C. F. Fernando



C. R. Jansz N. de S. Deva Aditya

Dr. Naomal Balasuriya Ms. V. J. SenaratneAlternate Director to N. de S. Deva Aditya / Company Secretary

Board of Directors

14 Distilleries Company of Sri Lanka PLC


D. H. s. JayawardenaChairman / Managing Director

Clearly one of Sri Lanka’s most successful businessmen who

heads many successful enterprises in very diverse fields of

activities, Mr. Jayawardena has functioned as the Managing

Director of the Group since 1992 and was elected as

Chairman in 2006. He is a Founder Director and the

present Chairman / Managing Director of the Stassen

Group of Companies, a widely diversified conglomerate

that engages mainly in the export and import trade.

He is the Chairman of Aitken Spence PLC, Aitken Spence

Hotel Holdings PLC, Lanka Milk Foods (CWE) PLC,

Balangoda Plantations PLC, Madulsima Plantations PLC,

Browns Beach Hotels PLC, Lanka Bell Ltd., Periceyl (Pvt)

Ltd., Texpro Industries Ltd., Milford Holdings (Pvt) Ltd.,

Danish Dairy Products Lanka (Pvt) Ltd., Lanka Diaries (Pvt)

Ltd., Milford Exports (Ceylon) (Pvt) Ltd., Ceylon Garden

Coir (Pvt) Ltd., Ambewela Products (Pvt) Ltd., Ambewela

Livestock Co. Ltd. and a Director of Hatton National Bank

PLC among many other companies in Sri Lanka.

He is also the Consul General for Denmark in Sri Lanka.

r. k. obeyesekereNon-Independent Non-Executive Director

A Director of the Group since 1992, counting over 30 years

of experience in the export trade. He is a Founder

Director of Stassen Group of Companies and the Managing

Director of CBD Exports Ltd. He is also a Director of

Lanka Milk Foods (CWE) PLC, Balangoda Plantations PLC,

Madulsima Plantations PLC, Hatton National Bank PLC,

Periceyl (Pvt) Ltd., Beruwala Distillery (Pvt) Ltd., Milford

Holdings (Pvt) Ltd., Zahara Exports (Pvt) Ltd., Lanka Power

Projects (Pvt) Ltd., Milford Exports (Ceylon) (Pvt) Ltd.,

Lanka Dairies (Pvt) Ltd., Danish Dairy Products Lanka (Pvt)

Ltd., Ceylon Garden Coir (Pvt) Ltd., Milford Developers

(Pvt) Ltd., Ambewela Livestock Co., Ltd. and Pattipola

Livestock Co. Ltd.

C. r. JanszExecutive Director

Mr. C. R. Jansz, who has been a Director since 1993, counts

over 30 years of experience in logistics pertaining to the

import / export trade and in documentation, insurance,

banking and finance relating to international trade. He is the

former Chairman of Sri Lanka Shippers Council and a

former member of the National Trade Facilitation

Committee of Sri Lanka. Mr. Jansz is a Chevening Scholar

and a UN-ESCAP Certified Training Manager on Maritime

Transport for Shippers. He is the Chairman of Collision

Repair Centre (Pvt) Ltd., and a Director of Balangoda

Plantations PLC, Lanka Milk Foods (CWE) PLC, Periceyl

(Pvt) Ltd., Beruwala Distillery (Pvt) Ltd., Lanka Bell Ltd.,

Lanka Bell Services (Pvt) Ltd., Bell Solutions (Pvt) Ltd.,

Bellvantage (Pvt) Ltd., Timpex (Pvt) Ltd., Texpro Industries

Ltd., Milford Holdings (Pvt) Ltd., Ambewela Products (Pvt)

Ltd., Pattipola Livestock Co. Ltd., Ambewela Livestock Co.,

Ltd., Danish Dairy Products Lanka (Pvt) Ltd., Lanka Power

Projects (Pvt) Ltd. and Lanka Dairies (Pvt) Ltd.

n. de s. Deva aditya DL, FRSA, MEP

Independent Non-Executive Director

An Aeronautical Engineer and a Scientist by training,

Mr. Deva Aditya has been a Director since 2004 and also

serves on the Audit and Remuneration Committees. He is

a member of Royal Society of Arts and Manufacture and

has extensive local and international experience in

governance and trade. He holds the honour of functioning

as an Ambassador at Large for Sri Lanka. He is a member

of the European Parliament for the South East England

constituency and the Coordinator of the Parliament

Committee on International Development and a member

of the Committee for Foreign Affairs. Mr. Aditya has the

distinctive honour of been the first person in history to be

born in one continent (Asia) and to be elected to

parliament in another (UK) and then represent that

country as a member of the European Parliament (EP).

He also serves as Her Majesty, Queen Elizabeth’s Deputy

Lord Lieutenant.

Board of Directors

15Distilleries Company of Sri Lanka PLC


Capt. k. J. kahanda (Retd.)

Executive Director

Mr. Kahanda who joined the Company in 1993 as

Regional Manager – Central Region was appointed a

Director in December 2006. Being a former officer of the

Sri Lanka Army he spearheaded the reorganisation of the

operations of the Central Region since privatisation.

Mr. Kahanda who specialises in logistics, distribution and

security matters is also a director of G4S Security Services

(Pvt) Ltd.

C. f. fernando FCA (SL), FCA (Eng & Wales)


Qualified as a Chartered Accountant from the Institute of

Chartered Accountants in England and Wales, he is

presently a Fellow of the Institute of Chartered

Accountants in Sri Lanka. He served as the Managing

Director followed by a period as Chief Executive Officer of

the Distilleries Company of Sri Lanka PLC and rejoined the

Company as an Independent Non-Executive Director in

2008. He is the Chairman of the Audit Committee and also

serves on the Remuneration Committee. He counts over

18 years of experience in financial and general management

areas as Senior Accountant at Carson Cumberbatch & Co

Ltd., and is presently Director of Selinsing PLC and Equity

Three (Pvt) Ltd. in the Carson Group. He was also the

Financial Director of the National Lotteries Board, a

Director of the Coconut Cultivation Board and the former

Chairman of Low Country Products Association (LCPA).

Dr. naomal BalasuriyaMBBS [SL], MBA [Sri J], CIM [UK], MCGP [SL], MSLIM


A Director since December 2008, Dr. Balasuriya is a

renowned motivational speaker and corporate trainer in

Sri Lanka and the Maldives. A medical doctor turned

entrepreneur, he holds the unique distinction of being the

first doctor of medicine in Sri Lanka to hold the degree of

Master of Business Administration [MBA] and the CIM

qualification from the Chartered Institute of Marketing

[UK]. Dr. Balasuriya has served in the public as well as the

private sectors and was a medical doctor in the Sri Lanka

Air Force. He currently heads Success Factory, his own

entrepreneurial venture.

ms. V. J. senaratne Attorney-at-Law, Notary Public., Solicitor (Eng. & Wales)

Alternate Director to N. de S. Deva Aditya /Company Secretary and Chief Legal Officer

Ms. Senaratne who was appointed as the Company

Secretary in 1993 was admitted to the Bar in the year 1977

and was enrolled as a Solicitor (England & Wales) in June

1990. She also holds the position of Company Secretary of

Periceyl (Pvt) Ltd.



DCsl management team

Company Secretary & Chief Legal Officer - ms. V. J. senaratne

Head of Finance - nimal nagahawatte

Regional Manager - Uva Region - Capt. ranjith Wettewa SLN (Retd.)

Chief Executive Officer - maximus r. peries

Regional Manager - Northern Region - sqn. ldr. Wimal karunaratne (Retd.)

Regional Manager - Southern Region - maj. Gen. siri peiris (Retd.)

Regional Manager - Central Region - rear admiral Wasantha tennekoon SLN (Retd.)



Company Secretary & Chief Legal Officer - ms. V. J. senaratne

Head of Finance - nimal nagahawatte

Regional Manager - Uva Region - Capt. ranjith Wettewa SLN (Retd.)

Chief Executive Officer - maximus r. peries

Regional Manager - Northern Region - sqn. ldr. Wimal karunaratne (Retd.)

Regional Manager - Southern Region - maj. Gen. siri peiris (Retd.)

Regional Manager - Central Region - rear admiral Wasantha tennekoon SLN (Retd.)

Manager - Stock Control - lalith rathnayake

Chief Internal Auditor - l. p. liyanaarachchi

Group Financial Controller - Cleetus mallawaarachchi

Supplies Manager - s. rajanathan

Transport Manager - roshanth kumar perera

Group Head of Audit & Compliance - manohara s. tillakawardana

Human Resources Manager - ms. G. Chakravarthy

DCsl management team

HEAD OFFICE

Chief Executive Officer Maximus R. Peries

B.Sc (Eng), MBA (Merit), LLB (Hons) London, C. Eng, MIEE (London)

FINANCE DIVISION

Head of Finance Nimal Nagahawatte B.Sc.

Asst. Finance Manager Suranjan Lakmanarachchi

Accountant Justin Algama B.Sc., Dip. Acc

Asst. Mgr. (IT) Ms. P. Gamagedara Dip (NIBM), AACS

Asst. Accountants Ms. S. Samarasinghe MAAT

Sampath Pinto Dip. Acc, MAAT

V. D. Celestinpillai

SUPPLIES DIVISION

Supplies Manager S. Rajanathan

INTERNAL AUDIT DIVISION

Chief Internal Auditor L. P. Liyanaarachchi FCA, FCMA, Dip. Acc.

Asst. Internal Auditors Senaka de Silva

Ms. Menaka Peiris

INVESTIGATION UNIT

Director Alfred Wijewardene SSP (Retd.)

Dy. Director A. X. Clarence Motha ASP (Retd.)

COMPANY SECRETARIAL & LEGAL DIVISION

Company Secretary Ms. V. J. Senaratne Attorney-at-Law

& Chief Legal Officer N.P., Solicitor (Eng. & Wales)

Asst. Legal Officer P. P. N. M. Weliwita Attorney-at-Law

HUMAN RESOURCES DIVISION

Human Resources Manager Ms. G. Chakravarthy LLB, Attorney-at-Law

Asst. Personnel Manager R. D. U. Jayasekara B.Sc. (Mgt)

CONSULTANTS J. R. de Crusz Retd. Dy. Commissioner of Excise

K. Sivarajah B.Sc. (Cey), M.Sc. (UK),

F.I. Chem.c, Chartered Chemist, Retd. Govt. Analyst

TRANSPORT DIVISION

Transport Manager Roshanth Kumar Perera

STOCK CONTROL DIVISION

Manager - Stock Control Lalith Rathnayake B.Sc.

NORTHERN REGION – Seeduwa

Regional Manager Sqn. Ldr. Wimal Karunaratne (Retd.)

Dy. Regional Manager Major R. M. Cabraal (Retd.)

Production Manager D. C. F. Abeysekere B.Sc.

Chief Chemist T. D. Ekmon B.Sc.

Chief Engineer M. N. Perera

Accountant K. N. N. V. Fernando B.Com

Distillery Seeduwa

Warehouse Seeduwa

Outlets Peliyagoda, Rajakadaluwa, Negombo, Anuradhapura, Kurunegala

SOUTHERN REGION – Kalutara

Regional Manager Maj. Gen. Siri Peiris (Retd.)

Dy. Regional Manager Colonel D. J. R. Rupasingha (Retd.) RSP

Production Manager A. D. Amaradeva

Asst. Accountant Ms. Amali Bandara

Distillery Beruwala

Warehouse Kalutara

Outlets Kalutara, Ratmalana, Ambalantota, Galle

CENTRAL REGION – Kandy

Regional Manager Rear Admiral Wasantha Tennekoon SLN (Retd.)RSP, VSV, USP, ndc, psn, M.Sc. (Dass), DISS (USA), MRIN (Lond)

Dy. Regional Manager D. V. R. Mallawarachchi BBA (US), BA (DS)

Snr. Production Manager V. Jeiyachandiran B.Sc.

Production Manager N. Thiranagama B.Sc.

Chief Chemist W. W. M. S. U. Wijayarathna B.Sc.

Accounts Executive Ms. M. Perera

Warehouse Nawayalatenna

Outlets Katugastota, Gampola, Vavuniya, Batticaloa, Minneriya, Dickoya, Trincomalee, Dehiowita

UVA REGION – Badulla

Regional Manager Capt. Ranjith Wettewa SLN (Retd.) RSP, P.S.N

Warehouse Badulla

Outlet Badulla

Group CEO Ranil de Silva ACA, FCMA, Dip M (UK)

Group Financial Controller Cleetus Mallawaarachchi ACA

Group Head of Audit Manohara S. Tillakawardana& Compliance FCMA, ACIM, MSLIM, DipM, PDipM, MBA, MA (Fin. Econ)

REGIONAL OFFICES

GROUP MANAGEMENT DIVISION



Group management team



L-R

Senaka AmarathungaDirector/General Manager - Periceyl (Pvt) Ltd.

Dinal PeirisManaging Director - Texpro Industries Ltd.

Timpex (Pvt) Ltd.

Lalith ObeyesekereDirector/CEO - Balangoda Plantations PLC

Madulsima Plantations PLC

Ranil de SilvaGroup CEO - DCSL Group

Maximus R. PeriesCEO - Distilleries Company of Sri Lanka PLC

Prasad SamarasingheManaging Director - Lanka Bell Ltd.

Lanka Bell Services (Pvt) Ltd.Bell Solutions (Pvt) Ltd.Bellvantage (Pvt) Ltd.

Suren GalagodaManaging Director - Collision Repair Centre (Pvt) Ltd.

S. JeyavarmanCEO - National Asset Management Ltd.

Ms. Gayathri ChakravarthyDirector - Splendor Media (Pvt) Ltd.



Corporate Governance

Your Company is committed to the highest standards of Corporate Governance and has complied with the Corporate

Governance practices recommended by the Colombo Stock Exchange, Securities and Exchange Commission of Sri Lanka

and The Institute of Chartered Accountants of Sri Lanka.

the Board of Directors role of the Board of DirectorsThe Board of Directors is responsible to the Company’s shareholders to ensure at all times that the activities of the

Company are conducted with the highest ethical standards and in the best interest of all stakeholders.

The key responsibilities of the Board are;

u To enhance shareholder value

u Provide direction and guidance in formulating corporate strategies

u Monitoring systems and procedures especially with regard to internal controls and risk management

u Approving major investments

Composition of the Board and independenceThe Board of Directors of Distilleries Company of Sri Lanka PLC consists of the Chairman / Managing Director, two

Executive Directors, one Non-Independent Non-Executive Director and three Independent Non-Executive Directors as

given in the table below. Brief profiles of the Directors are given on pages 14 to 15.

The Board considers that 3 of the 4 Non-Executive Directors are independent in accordance with the criteria given in the

Listing Rules of the Colombo Stock Exchange and have submitted signed confirmations in this regard. The Board believes

that the independence of Mr. N. de S. Deva Aditya is not compromised by virtue of being a director of Aitken Spence PLC,

an associate of the Company.

meetings and attendanceThe attendance of the meetings of the Board and its Sub-Committees are given below,

Board Remuneration Name of Director Status Meetings Audit Committee Committee

% Meetings % Meetings %

D. H. S. Jayawardena Chairman / Managing Director 100%

R. K. Obeyesekere Non-Independent Non-Executive Director 100%

C. R. Jansz Executive Director 100%

N. de S. Deva Aditya Independent Non-Executive Director 100% *** ***

L. U. D. Fernando* Executive Director*Resigned w.e.f. 15.12.2008 100%

K. J. Kahanda Executive Director 100%

C. F. Fernando** Independent Non-Executive Director**Appointed w.e.f. 15.12.2008 100% 100%

A. N. Balasuriya** Independent Non-Executive Director**Appointed w.e.f. 15.12.2008 100% 100%

*** Even though Mr. N. de S. Deva Aditya was unable to attend any of the Board Sub-Committee meetings he was consulted and

informed regarding the proceedings of all the meetings through his Alternate on the Board, who was present at all of the meetings.

Board CommitteesCertain responsibilities of the Board have been delegated to the following sub-committees.

audit CommitteeThe Audit Committee was reconstituted during the year due to changes in the Board. The Committee consists of 3

Independent Non-Executive Directors as named below.

C. F. Fernando – Chairman

N. de S. Deva Aditya

Dr. A. N. Balasuriya

The detailed report of the Audit Committee is given on page 23.

remuneration CommitteeThe Remuneration Committee comprises of 3 Independent Non-Executive Directors as given below.

Dr. A. N. Balasuriya– Chairman

N. de S. Deva Aditya

C. F. Fernando

The detailed report of the Remuneration Committee is given on page 24.

investor relationsThe Directors believe that it is their paramount obligation to maintain an active dialogue with all relevant stakeholders.

The Group CEO regularly meets shareholders, fund managers and other stakeholders who visit the Company to provide

information and answer any queries.

The quarterly financial statements and the Annual Report which provide a comprehensive picture of the Group’s

performance are the principal means of communication with the shareholders. The Company also disseminates

information to stakeholders through the media and the Company’s web-site.

internal ControlsThe Board is responsible for the Group’s internal control systems and its effectiveness in safeguarding the assets and

providing accurate and timely information for decision making. This covers controls in respect of financial, operational and

compliance related activities and risk management.

The key companies in the Group have established internal audit divisions and are guided by the annual internal audit plans

approved by the respective Boards. The Audit Committee and the Group Audit and Compliance Division constantly review

and monitor the activities and the findings of the internal audit divisions.

Going ConcernThe Directors have reviewed the Group’s budgets, capital expenditure requirements and future cash flows and are

satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Therefore, the Going

Concern principle has been adopted in the preparation of the Financial Statements.

Group managementThe Group Management headed by the Group CEO assists the Board in the formulation and implementation of

strategies, evaluation of new investments, review and monitoring of Group budgets, financial reporting and Corporate

Governance and Compliance Issues. For this purpose the Group Management Division organises quarterly meetings with

the senior management teams of the various group companies in addition to the annual CEO Forum and the CFO Forum.

The Company’s compliance with the CSE Listing Rules and the best practices set out in the Code of Best Practices on

Corporate Governance issued jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and

Exchange Commission of Sri Lanka is set out in the following table.




SECTION APPLICABLE RULE COMPLIANCE




Non-Executive DirectorsAt least one third of the total number of Directors should be Non-Executive Directors.

Independent DirectorsTwo or one third of Non-Executive Directors, whichever is higher, should beIndependent.

Independent Director’s Declaration Each Non-Executive Director should submit a declaration of independence / non-independence in the prescribed format.

Disclosures relating to DirectorsThe Board shall annually make a determination as to the independence or otherwiseof the Non-Executive Directors and names of Independent Directors should be disclosed in the Annual Report.

The basis for the Board to determine a Director is independent, if criteria specified forIndependence is not met.

A brief résumé of each Director should be included in the Annual Report and shouldinclude the Director’s areas of expertise.

Forthwith provide a brief résumé of new Directors appointed to the Board with detailsspecified in 7.10.3(a), (b) and (c) to the Exchange.

Remuneration CommitteeA Listed Company shall have a Remuneration Committee.

CompositionShall comprise of Non-Executive Directors a majority of whom will be Independent.

Functions The Remuneration Committee shall recommend the remuneration of the ChiefExecutive Officer and Executive Directors.

Disclosures The Annual Report should set out;

a. Names of the Directors comprising the Remuneration Committeeb. Statement of Remuneration Policyc. Aggregated remuneration paid to Executive and Non-Executive Directors.

Audit CommitteeThe Company shall have an Audit Committee

CompositionShall comprise of Non-Executive Directors a majority of whom will be Independent.

FunctionsFunctions of the Committee are in accordance with Corporate Governance requirements.

Disclosure in the Annual Report– The names of the Directors comprising the Audit Committee– Basis of the determination of the Independence of the Auditors – Report by the Audit Committee setting out the manner of compliance by the

Company.

7.10.1(a)

7.10.2(a)

7.10.2(b)

7.10.3 7.10.3(a)

7.10.3(b)

7.10.3(c)

7.10.3(d)

7.10.5

7.10.5(a)

7.10.5(b)

7.10.5(c)

7.10.6

7.10.6(a)

7.10.6(b)

7.10.6(c)

Four of the seven Directors are Non-Executive Directors

Three of the seven Directors areIndependent Directors

Complied

Complied

Complied

Complied

Brief résumés of Mr. C. F. Fernando andDr. A. N. Balasuriya have been provided to the Colombo StockExchange

Complied

Complied

Complied

Complied

Complied Please refer Audit Committee reporton page 23.

Complied

Complied

Complied Please refer Audit Committee reporton page 23.



Board Committee reports

Composition

The Audit Committee, appointed by and responsible to

the Board of Directors was reconstituted in December

2008 and comprise of three Independent Non-Executive

Directors. The Chairman of the Committee is

Mr. C. F. Fernando, a Senior Chartered Accountant and a

former Managing Director of the Company. The other

members of the Audit Committee comprise of

Mr. N. de S. Deva Aditya, Member of the European

Parliament and Dr. A. N. Balasuriya, a renowned

Motivational Speaker and Corporate Trainer. A brief

profile of each member is given on pages 14 to 15.

The Company Secretary functions as the Secretary to the

Audit Committee.

meetings

The Audit Committee met three times during the year.

The attendance of each member is given on page 20.

The Group Chief Executive Officer, the Group Head of

Audit and Compliance, Group Financial Controller, Head

of Finance and Chief Internal Auditor also attended these

meetings by invitation.

terms of reference

The Audit Committee Charter clearly sets out the

specific terms of reference governing the Audit

Committee ensuring highest compliance with the

Corporate Governance Rules applicable to Listed

Companies.

activities and responsibilitiesfinancial reporting

The Committee reviewed and discussed the financial

reporting system adopted by the Group in the

preparation of its quarterly and annual financial statements

with the Management and the External Auditors to ensure

reliability of the processes and the consistency of the

Accounting Policies adopted and its compliance with the

Sri Lanka Accounting Standards and the provisions of the

Companies Act No. 07 of 2007.

risks and Controls

The Committee obtained and reviewed the major

business risks and mitigatory action taken or

contemplated for each business sector of the Group. In

particular, the Committee deliberated on the financial

implications to the Group arising from the Supreme Court

judgement on the privatisation of the Sri Lanka Insurance

Corporation Limited and appraised the Board as

appropriate.

internal audit

The internal audit function of the Company was carried

out by the Internal Audit Division supported by the Group

Management Division. The Committee reviewed the

effectiveness of the internal audit plan to ensure that it has

been designed to provide reasonable assurance that the

financial reporting system adopted by the Group can be

relied on the preparation and presentation of the

Financial Statements. The Committee also reviewed

the findings of the Internal Auditors and their

recommendations together with the management

responses and regularly followed up the progress of the

implementation of such recommendations in order to

enhance the overall control environment.

external audit

The Audit Committee met with the External Auditors to

discuss the scope and the audit strategy including the

coordination of the Group Audit. The Committee also

reviewed and discussed the Report of the Auditors and

Management Letters issued by them with and without the

Management on separate occasions to ensure that no

limitations have been placed on their scope of work and

conduct of the audit.

The Committee carried out an annual evaluation of the

External Auditors to establish their independence and

objectivity and also obtained a written declaration from

the Auditors in this regard. The Committee has stipulated

that the Lead Audit Partner is rotated every five years.

The Audit Committee has recommended to the Board of

Directors that Messrs. KPMG Ford, Rhodes, Thornton &

audit Committee report

Co. be reappointed as the External Auditors for the

financial year ending 31 March 2010.

Compliance with laws and regulations

The Committee reviews the quarterly compliance reports

submitted by the relevant officers to ensure that the

Company has complied with all statutory requirements.

Conclusion

The Audit Committee is satisfied that the Group’s

accounting policies, operational controls and risk

management processes provide reasonable assurance that

the affairs of the Group are managed in accordance with

Group policies and that the Group assets are properly

accounted for and adequately safeguarded.

C. F. Fernando

Chairman

Audit Committee

20 August 2009

The Remuneration Committee consists of the three

Independent Non-Executive Directors and is chaired by

Dr. A. N. Balasuriya. The other members of the

Committee are Mr. C. F. Fernando and Mr. N. de S. Deva

Aditya.

This Committee is responsible for determining the

remuneration package of the Chairman / Managing

Director, Executive Directors and Key Management

Personnel of DCSL.

The primary objective of the Committee is to formulate

and implement po licies to attract, retain and motivate

qualified and experienced Key Management Personnel

including Executive Directors.

The Remuneration Committee was constituted in

December 2008. The Remuneration Committee Charter

was established when it met formally for the first time.

This Charter ensures that the compensation packages of

the Directors and Key Management Personnel are in line

with market trends and commensurate with their

expertise and contribution to the organisation.

The Chairman / Managing Director assists the Committee

by providing relevant information as well as participating in

its deliberations except when his own compensation

package is reviewed.

Dr. Naomal Balasuriya

Chairman

Remuneration Committee

20 August 2009

audit Committee report - Contd.,

remuneration Committee report



Board Committee reports

enterprise risk management



The Board considers risk assessment and identification of

mitigating activities to be vital to achieving the Group’s

strategic objectives. In the pursuit of opportunities it is

unavoidable that we are subject to various risks. The

management ensures that such risks are systematically

identified and have in place procedures to manage and

control the same.

The principal risks in achieving the Group objective of

enhancing shareholder value and safeguarding the Group’s

assets have been identified as set out below. The nature

and the scope of risks are subject to change and not all of

the factors listed are within the control of your Company.

It should be noted that the other factors besides those

listed may affect the performance of the business.

Credit risk

Credit risk refers to the possibility of non payment by the

Group’s customers resulting in incurring bad debts. The

controls in place to mitigate such risk include assessment

of customer credit worthiness, setting credit limits,

obtaining security or bank guarantees and stringent follow

up procedures.

legal & regulatory risk

Regulatory decisions and changes in the legal and

regulatory environment have increased our costs and

liabilities and at the same time limited our business

activities. Most of our operations are subject to extensive

regulatory requirements specially beverages and

telecommunications industries. In particular the liquor

market operates with restrictions on advertising and other

communication to consumers through promotion and

distribution activities where beverage alcohol is sold, have

directly limited the sales of our products. The Company

has employed relevant professionals to review and report

on regulatory and legal matters to the Board in order to

ensure compliance with the laws of the land.

The Board of Directors believe in obtaining services of the

most reputed legal luminaries in Sri Lanka to defend any

major litigation brought against the Group.

investment risk

The Board provides guidance on developing policies and

procedures to ensure that new investments and initiatives

are subject to an appropriate level of due diligence and are

supported by a robust process of economic and business

appraisal with professional advise where necessary.

Where new businesses are either acquired or created,

formal Group-defined governance structures are

established from the outset and, at a minimum provide

guidance regarding capital expenditure processes and

procedures, the implementation of which are subject to a

review by the Audit Committee as well as the Internal

Audit Division. The Chairman / Managing Director

frequently monitor the returns of the Group’s investments

with the assistance of the Head of Finance.

Human risk

The mobility of knowledge workers due to escalating

migration tendencies and the dearth of qualified

professionals in the local market exposes the Group to the

risk of losing key personnel which may have a short term

impact on operations.

The Group seeks to ensure loyalty and long term

commitment of its employees through various human

resource practices such as training and development,

counseling, career advancement plans and performance

based reward systems.

operational risk

This is the risk of loss resulting from inadequate or failed

internal processes and external events. The Group is

exposed to several common operational risks that include

fraud, human errors, natural perils, loss of data and

unrequited disclosure of sensitive information. The Group

has well established systems of controls to minimise the

exposure to these risks through the engagement of high

caliber professionals, effective internal audit, MIS and

appropriate insurance policies.

socio economic risk

The election manifesto of the current government is

dedicated to the task of curtailing the consumption of

tobacco and alcohol in the country which will significantly

impact the future of the alcoholic beverage industry. It is

also a well known fact that the industry is severely

affected by the flourishing illicit and illegal trade. Our

Investigations Unit is entrusted with the task of monitoring

and reporting such activities to the law enforcement

authorities.

A general decline especially in consumption of liquor can

be seen in connection with a downturn in the economy

where consumption tends to move with changes in

disposable income despite the fact that liquor is a resilient

consumer category compared to other goods.

technology risk

The Group depends on accurate, timely information for

reporting and decision making. The Group is heavily reliant

on computerised business processes for this purpose. As

a result the Group is exposed to the various inherent risks

arising from system failures and theft of information which

can cause significant levels of operational, reputational and

financial loss to the Group. In principal the Group has

identified these risks and articulated policies such as

stringent user guidelines, contingency plans and physical

security measures which are monitored closely by the

Central IT Unit.

Counterfeiting

The success of our brands depends upon the positive

image that consumers have of those brands. Therefore,

deliberate third-party action or other events that harm the

integrity or consumer support for those brands could

adversely affect sales. We are aware that certain third

parties sell sub-standard products which are counterfeit

versions of DCSL brands. In the market consumers could

fall victim to such counterfeit products and as a result

refrain from purchasing DCSL products which in turn

could impair brand equity and adversely affect our

business. Our Investigations Unit is entrusted with the task

of curbing these illegal activities by monitoring sales outlets

and bringing the presence of counterfeit products to the

notice of the relevant authorities.

enterprise risk management



financial Highlights



Rs. 40.83bnGross Turnover

Rs. 37.64bnTotal Assets

Rs. 3.43bnNet Profit After Tax

Rs.11.29Basic Earnings Per Share

2009 2008 2009 2008Group Group Company Company

Summary of Results

Gross turnover rs. mn 40,831 57,686 29,570 27,416

excise Duty rs. mn 18,958 16,993 18,339 16,458

net turnover rs. mn 21,872 38,942 11,231 10,958

profit after tax rs. mn 3,430 4,175 2,682 1,982

shareholders' funds rs. mn 22,433 18,859 13,117 10,960

Working Capital rs. mn 1,172 20,441 448 (1,234)

total assets rs. mn 37,643 86,212 18,994 18,380

staff Cost rs. mn 2,524 4,790 774 708

no. of employees 15,330 29,540 1,291 1,035

Per Share

Basic earnings rs. 11.29 13.67 8.94 6.61

net assets rs. 81.97 70.75 43.72 36.53

market Value -High rs. – – 112.00 113.25

- low rs. – – 50.00 80.00

- year end rs. – – 65.00 98.00

Dividend rs. – – 2.25 1.75

Ratios

price earnings times 5.76 7.17 7.27 14.83

return on shareholder's funds % 15.29 22.14 20.45 18.08

Current ratio times 1.11 2.25 1.08 0.83

Dividend yield % – – 3.46 1.78

Gross Turnover 2008/09

75%

16%

5%

4%

Beverages Plantations

ProÞt Before Tax 2008/09

90%

2%2%

6%

Telecommunications Diversified



management Discussion & analysis

At the outset, it is important to explain that the

comparability of the Financial Statements as set out in this

Annual Report may be complex and confusing due to the

adjustments made in respect of the Supreme Court Order

reversing the sale of the Sri Lanka Insurance Corporation

Limited. The Group has presented the Consolidated

Financial Statements in strict interpretation of the relevant

Sri Lanka Accounting Standards (SLAS) as confirmed by

the Company’s Auditors and the Institute of Chartered

Accountants of Sri Lanka and has not adjusted for the

impact of this judgement as a prior period error.

Furthermore, since the judgement was delivered on 4 June

2009, the event has been considered as a ‘post balance

sheet event’ and not adjusted in the current year as well.

However, for the benefit of the readers of the Financial

Statements, we have grouped the possible impact of this

Court Order as explained in Note 38.1 to the Accounts.

A synopsis of the Supreme Court Order is given below.

the sliC Judgement

On 4 June 2009, the Supreme Court of the Democratic

Socialist Republic of Sri Lanka held that the sale of 90% of

shares of the Sri Lanka Insurance Corporation Limited

(SLIC) to the Distilleries Consortium under the Share Sale

and Purchase Agreement (SSPA) signed on 11 April 2003

was illegal and invalid ab-initio. Accordingly, the Court

declared that the legal ownership of the shares purported

to have been sold to the Distilleries Consortium shall

forthwith vest in the Secretary to the Treasury.

The Courts also directed that;

l The purchase price of 90% of the shares of SLIC shall be

returned to the Distilleries Consortium (respondents).

l The respondents are entitled to retain the profits derived by

them from 11 April 2003 to 4 June 2009 in lieu of interest

for the aforesaid purchase price.

l Any shares purchased by the respondents from the

employees of SLIC in terms of the SSPA shall also vest in the

Secretary to the Treasury and payment shall be effected

accordingly.

l Payment for the above shall be effected by way of issuing

Treasury Bonds redeemable in 5 years from the date of the

judgement at interest rates prevailing at that date.

the DCsl Group

As explained in the Chairman’s Message, the general

economic and business environment which prevailed

locally as well as globally affected the growth and

profitability of the Group. Nevertheless, the Group’s gross

revenue grew marginally by 4.7% over the previous year.

However, the net profit declined marginally by 1.9%

mainly due to the poor performance of the telecom

sector as explained below.

Consequent to the SLIC judgement, the Group

contracted to four main sectors with the disposal of the

financial services sector and the healthcare sector. For the

purpose of this discussion, the comparable Group results

excluding Associates and SLIC related investments were as

follows.



2008/09 2007/08

Gross Turnover(Rs. Mn.)

30

,47

0

27

,95

1

2008/09 2007/08

Profit Before Tax(Rs. Mn.)

4,2

25

3,1

47

Beverages

2009 2008

Rs. Mn Rs. Mn Change

Gross Turnover 40,831 39,002 4.7%

Net Profit Before Tax 4,677 4,767 -1.9%

the Beverage sector

The Beverage Sector contributes 75% of the Group’s revenue and

90% of the profits before tax. During the year under review, this

sector recorded a 9.0% increase compared to the previous financial

year. However, the real growth in terms of volume was even lower

as the alcohol industry continues to be plagued by the unabated

growth of the illegal and illicit liquor market. Stringent legislation,

negative social perceptions and the reduction in disposable income

of the consumers due to the current economic scenario also

contributed to this less than desired growth of this sector.

Nevertheless, the Beverage Sector led by DCSL recorded an

impressive 34% increase in profits before tax. This was possible due

to the Company being able to negotiate better prices for its inputs,

in particular, rectified spirits.

The installation of the new distilling and bottling equipment

mentioned in the Annual Report of the previous year has now been

completed and is in operation. This will undoubtedly improve the

Company’s capacity to serve the new markets in the North and East.

The Board of Directors resolved to transfer the operations of

Beruwala Distillery (Pvt) Ltd. (BDL), to its parent company; DCSL

with effect from 1 March 2009 and to lease its premises to ensure

the continuity of the distilling of coconut spirits. Also, since June

2008, Periceyl (Pvt) Ltd. took over the distribution of its own

product range which was earlier carried out by DCSL.

the plantations sector

The management decided to consider Madulsima Plantations PLC as

an associate from the current year in accordance with the Sri Lanka

Accounting Standards. Therefore, the results reflected in this

segment will only comprise that of Balangoda Plantations PLC (BPP).

The production and the revenue from this sector were stagnant as

compared to last year despite the first three quarters of the year

showing relatively good results. This was due to the drastic drop in

tea prices in the 4th quarter of 2008 resulting from the global

financial meltdown. A decline in oil prices in the latter part of the

year increased the demand for synthetic rubber. Consequently, the

demand and prices for natural rubber decreased sharply.

The Plantations continue to be affected by labour problems and the

company lost approximately 7,200 man days due to strikes.

BPP continued its development programme and invested Rs. 230 Mn

mainly in replanting rubber, tea and alternative plantations for fuel

wood and timber.

the telecommunications sector

The local telecom industry was one of the worst affected during

2008 as was evident from the results published by some of the

leaders in the industry. The advent of a 5th mobile operator to the

market spurred a price war which ultimately adversely affected the

telecom industry as a whole. As a result, the sector turnover as well

as profits decreased sharply in the current year.

Despite the current economic and business environment, Lanka Bell

continued to expand its range of products and services with the

introduction of innovative packages such as ‘Infinity’ and ‘Infinity Plus’.

Furthermore, Lanka Bell reinforced its reputation as a trend setter in

the telecom industry by paying consumers for incoming IDD calls. As

the only truly Sri Lankan owned telecom operator in the country,

Lanka Bell made a strategic investment in commissioning the FLAG

submarine cable to connect Sri Lanka to the world. The Company

also introduced the low cost ‘Dial 15’ route and ‘Call Home’ packages

to help Sri Lankans living abroad to keep in touch with their loved

ones back home.

In order to expand services beyond fixed line communication and

offer a wider array of ICT solutions, Lanka Bell incorporated two new

companies; Bell Solutions (Pvt) Ltd., and Bellvantage (Pvt) Ltd. These



4,2

25

Plantations

2008/09 2007/08

2,1

60

2,1

48

2008/09 2007/089

4

23

3



companies will provide communication and computer related

solutions, Data Centre and Call Centre hosting and KPO / BPO

services etc. The return of peace to the country will not only open

up new markets but also provide opportunities for such services.

Diversified Businesses

The Group has made investments in the areas of unit trust

management, vehicle repairs and textile printing. The reason for the

decrease in revenue and profits from this sector is mainly due to the

significant reduction of dividends received by Milford Holdings (Pvt)

Ltd., from the Sri Lanka Insurance Corporation Limited during the

year. The textile printing business also did not perform well due to

the severe decrease in apparel exports from Sri Lanka.

National Asset Management Limited was able to identify economic

and business trends accurately and align investment strategy

accordingly to maximise returns for its funds. As a result the

Company reported an increase of 24% in profits in the year under

discussion. The Group decided to suspend operations of Aion SG

Residencies (Pvt) Ltd., with effect from April 2009 until the revival of

the real estate and property development sector.

The Collision Repair Centre provided vehicle repair services

exclusively to the ‘Formula Plus” motor policyholders of Sri Lanka

Insurance Corporation. However, with SLIC reverting to the State

consequent to the Supreme Court Order, the Management is now

considering the various options that are available to ensure the best

return to the Company.



4,2

25

Telecommunications

2008/09 2007/08

6,5

42

7,3

33

2008/09 2007/08

76

90

7



4,2

25

DiversiÞed

2008/09 2007/08

1,6

59

1,5

71

2008/09 2007/08

28

1

48

0



annual report of the Board of Directors



The Board of Directors of Distilleries Company of Sri

Lanka PLC have pleasure in presenting the 19th Annual

Report and the Audited Financial Statements of the

Company and the Group for the financial year ended

31 March 2009.

principal activities

The principal activities of Distilleries Company of Sri Lanka

PLC are distillation, manufacture and distribution of liquor

products. The Company has also invested in a portfolio

of diverse business enterprises comprising the DCSL

Group.

Consequent to the recent Supreme Court decision to

revert Sri Lanka Insurance Corporation Limited (SLIC) to

the State, the activities of the Group have been

re-categorised in to 4 main sectors comprising Beverages,

Plantations, Telecommunications and Diversified

businesses.

Business review

A review of the Group’s business, providing a

comprehensive analysis of the financial and operational

performance along with future trends and business

development activities are described in the ‘Chairman’s

Message’ and ‘Management Discussion and Analysis’

sections of the Annual Report.

As discussed in detail in the Chairman’s Message, the Share

Sale and Purchase Agreement (SSPA) regarding the

privatisation of the Sri Lanka Insurance Corporation

Limited signed between the Government of Sri Lanka and

the Distilleries led consortium in April 2003 was declared

null and void ab-initio by the Supreme Court of Sri Lanka

and accordingly the company was vested in the State as of

4th June 2009.

The Financial Statements of the Group for the year under

review have been adjusted for this event and its impact as

described in the notes to the Financial Statements.

Further, the ‘Report of the Auditors’ has also drawn

reference to issues arising from the Supreme Court

decision to better describe the adjustments done as per

the interpretation of the Sri Lanka Accounting Standards

and their impact on the Financial Statements.

results and appropriations

The gross turnover of the Group in the year under review

was Rs. 40,831Mn excluding SLIC and related investments.

The Group profit after tax for the year from continuing

operations was Rs. 2,700 Mn. The total net profit for the

year was Rs. 3,430 Mn which includes Rs. 730 Mn being the

profit share from SLIC and related investments.

The segmental analysis of the revenue and income is

provided in Note 36 to the Financial Statements.

The Board of Directors have recommended a dividend of

Rs. 2.25 per share (2007/08 -Rs. 1.75 per share) for the

financial year ended 31 March 2009, amounting to

Rs. 675 Mn. The dividend pay out for the year under

review has been formulated in accordance with the

Company’s policy to pay sustainable dividends linked to

long term performance, keeping in view the Company’s

need for capital for its growth plans and the intent to

finance such plans through internally generated funds.

The Directors confirm that the Company satisfies the

requirements of the Solvency Test in accordance with

Section 56 (2) of the Companies Act No. 07 of 2007 on

the payment of the proposed dividend. A solvency

certificate in this regard has been sought from the

Auditors.

financial statements

The Financial Statements of the Company and the Group

for the year ended 31 March 2009 are given on pages 40

to 80.

audit report

The Auditor’s Report on the Financial Statements of the

Company and the Group is given on page 39.

accounting policies

The accounting policies adopted in the preparation and

presentation of the Financial Statements are given on

pages 44 to 49. There were no material changes in the

accounting policies adopted by the Group during the year

under review except for the policy on ‘Employee Benefits

– Defined Benefit Plans’, which has been revised to

comply with the changes in SLAS 16 and described in

detail under the Accounting Policies referred above.

The key changes in the basis of preparation and

presentation of the Financial Statements was in respect of

the accounting treatment for the aforesaid judgement on

SLIC. The Company sought advice from the Urgent Issues

Task Force (UITF) of the Institute of Chartered

Accountants of Sri Lanka in the interpretation of the

relevant Sri Lanka Accounting Standards in line with the

Supreme Court Order and has presented the Financial

Statements accordingly. A detailed discussion of this

matter is available in Note 38.1(b) to the Financial

Statements.

Also during the year, the Board decided to consider the

investment in Madulsima Plantations PLC as an associate in

accordance with the Sri Lanka Accounting Standards

(SLAS 26).

investments

Total investments of the Company in subsidiaries,

associates and other equity investments amounted to

Rs. 11,634 Mn (2007/08 – Rs. 11,369 Mn). The details of

the investments are given in Notes 15 and 16 to the

Financial Statements.

property, plant and equipment

The net book value of property, plant and equipment of

the Company and the Group as at 31 March 2009 was

Rs.1,191 Mn (2007/08 – Rs. 918 Mn) and Rs. 8,496 Mn

(2007/08 – Rs. 15,553 Mn including SLIC and related

investments) respectively.

Total capital expenditure during the year for acquisition of

property, plant and equipment by the Company and the

Group amounted to Rs. 269 Mn (2007/08 – Rs. 356 Mn)

and Rs. 3,533 Mn (2007/08 – Rs. 1,988 Mn) respectively.

The details of property, plant and equipment are given in

Note 12 to the Financial Statements.

stated Capital and reserves

The stated capital of the Company as at 31 March 2009

was Rs. 300 Mn consisting of an equal number of

ordinary shares. There was no change in the stated

capital during the year.

The total Group Reserves as at 31 March 2009

amounted to Rs. 22,133 Mn comprising of Capital

Reserves of Rs. 2,500 Mn and Revenue Reserves of Rs.

19,633 Mn, the movement of which is disclosed in the

Statement of Changes in Equity.

internal Controls and risk management

The Directors acknowledge their responsibility for the

Groups’ system of internal control. The systems are

designed to provide reasonable assurance that the assets

of the Group are safeguarded and to ensure that proper

accounting records are maintained.

The Board, having reviewed the system of internal control

is satisfied with the systems and measures in effect at the

date of signing this Report.

post Balance sheet events

Subsequent to the date of the Balance Sheet, the Supreme

Court of Sri Lanka held the privatisation of the Sri Lanka

Insurance Corporation Limited null and void ab-initio.

Other significant events after the balance sheet date are

given in Note 38 to the Financial Statements.

employees

The number of persons employed by the Company and

Group as at 31 March 2009 was 1,291 (2007/08 - 1,035)

and 15,330 (2007/08 -29,540) respectively.

Board of Directors

The Board of Directors of the Company as at 31 March

2009 and their brief profiles are given on pages 14 to 15.

Mr. L. U. D. Fernando resigned from the Board on

15 December 2008 to facilitate the appointment of

additional Independent Directors in keeping with

corporate governance requirements. Consequently,

Mr. C. F. Fernando and Dr. A. N. Balasuriya were

appointed to the Board on 15 December 2008.

Directors standing for re-election

In terms of Article 92 of the Articles of Association of the

Company, Mr. R. K. Obeyesekere and Mr. C. R. Jansz retire

by rotation and being eligible, offer themselves for

reappointment at the ensuing Annual General Meeting.

Also, Mr. C. F. Fernando and Dr. A. N. Balasuriya, who were

appointed as Directors during the year, retires in pursuant

to Article 98 of the Articles of Association of the

Company and being eligible, offer themselves for

reappointment at the forthcoming Annual General

Meeting. Further, in terms of section 210 of the

Companies Act, Mr. C. F. Fernando who is over the age of




70 years has to be reappointed by the membership

annually. Accordingly, a resolution will be proposed for the

re-appointment of Mr. C. F. Fernando a Director, not

withstanding the age limit of 70 years.

Directors’ interests in Contracts

Directors’ interests in the contracts are disclosed in the

Related Party Transactions under Note 37 to the Financial

Statements. Internal controls are in place to ensure that

related party transactions involving directors, or their

connected parties, are conducted on an arm’s length basis.

Directors’ shareholdings

The shareholdings of Directors of the Company as defined

under the Colombo Stock Exchange Rules are as follows.

As at 31 As at 31

March 2009 March 2008

D. H. S. Jayawardena Nil Nil

R. K. Obeyesekere Nil Nil

C. R. Jansz Nil Nil

N. de S. Deva Aditya Nil Nil

K. J. Kahanda Nil Nil

C. F. Fernando 2,062 N/A

A. N. Balasuriya Nil N/A

M/s. D. H. S. Jayawardena and R. K. Obeyesekere are

shareholders of Milford Exports (Ceylon) Ltd. and Stassen

Exports Limited, who hold significant stakes in the

Company directly and indirectly. The shareholdings of

these entities are available on page 83 of the Annual

Report.

Directors’ remuneration

Directors’ remuneration in respect of the Company for

the year is given in Note 8 to the Financial Statements.

share information

Information relating to earnings, dividends, net assets and

market value per share is given on pages 40 and 27.

There were 12,680 registered shareholders holding

ordinary voting shares as at 31 March 2009. The

distribution and the composition of shareholdings are

given on page 82 of this report.

major shareholdings

The details of the twenty major shareholders of the

Company including the number of shares held by them are

given on page 83 of the Annual Report.


The Board has ensured that the Company has complied

with the Listing Rules of the Colombo Stock Exchange and

the Code of Best Practices on Corporate Governance

issued by the Securities and Exchange Commission and

the Institute of Chartered Accountants of Sri Lanka.

The Board is committed towards the furtherance of

Corporate Governance principles of the Company.

The measures taken in this regard are set out in the

Corporate Governance Report.

environment

The Company has not engaged in any activity that was

detrimental to the environment and has been in due

compliance with all applicable laws and regulations of the

country to the best of its ability.

Board Committees

The Board has two Sub-Committees i.e. the Audit

Committee and the Remuneration Committee. The

reports of the said Committees are given on pages

23 to 24 respectively. The membership of each

committee is given in the Corporate Governance Report.

statutory payments

The directors, to the best of their knowledge and belief

are satisfied that all statutory obligations due to the

government and its employees have been duly paid or

adequately provided for in the Financial Statements as

confirmed by the Statement of Directors’ Responsibility.

Going Concern

The directors having reviewed the business plans, capital

expenditure commitments and expected cash flows are

satisfied that the Company and the Group have adequate

resources to continue operations for the foreseeable

future and therefore continue to adopt the going concern

basis in preparing these Financial Statements.




auditors

Messrs. KPMG Ford, Rhodes, Thornton & Co, Chartered

Accountants are deemed re-appointed, in terms of section

158 of the Companies Act No. 07 of 2007, as Auditors of

the Company. A resolution to authorise the Directors to

determine their remuneration will be proposed at the

Annual General Meeting.

Total audit fees paid to Messrs. KPMG Ford, Rhodes,

Thornton & Co, and other Auditors of Group companies

are disclosed in Note 8 to the Financial Statements.

The Auditors of the Company and its subsidiaries have

confirmed that they do not have any relationship with the

Company or its subsidiaries (other than that of Auditor)

that would have an impact on their independence.

annual General meeting

The 19th Annual General Meeting of the Company will be

held at the Committee Room “B” of the Bandaranaike

Memorial International Conference Hall (BMICH),

Bauddhaloka Mawatha, Colombo 07 on Tuesday, 29

September 2009 at 10.00 a.m. The Notice of Meeting

appears on page 89 of the Annual Report.

For and on behalf of the Board of Directors,




D. H. S. Jayawardena

Chairman/ Managing Director

20 August 2009

Colombo

C. R. Jansz

Director

V. J. Senaratne

Company Secretary

“What gets measured,gets managed”

- Peter Drucker

Statement of Directors' Responsibility 38

Report of the Auditors 39

Income Statements 40

Balance Sheets 41

Statements of Changes in Equity 42

Cash Flow Statements 43

Accounting Policies 44

Notes to the Financial Statements 50

FinancialReports



The Directors are responsible under the Companies Act No.

07 of 2007, to ensure compliance of the requirements set out

therein to prepare Financial Statements for each financial

year giving a true and fair view of the state of the affairs of

the Company and its Subsidiaries as at the balance sheet date

and the profit of the Company and its Subsidiaries for the

financial year.

The Board accepts the responsibility for the integrity and

objectivity of the Financial Statements presented. The

Directors confirm that proper accounting records have been

maintained and appropriate accounting policies have been

selected and applied consistently in the preparation of such

Financial Statements which have been prepared and

presented in accordance with the Sri Lanka Accounting

Standards and provide information required by the

Companies Act and the Listing Rules of the Colombo Stock

Exchange.

Further, the Directors confirm that the Financial Statements

have been prepared on a going concern basis and are of the

view that sufficient funds and other resources are available

within the Group to continue its operations and to facilitate

planned future expansions and capital commitments.

The Directors have taken adequate measures to safeguard

the assets of the Group and in this regard have established

appropriate systems of internal control with a view to

preventing and detecting fraud and other irregularities.

The External Auditors were provided with all information and

explanations necessary to enable them to form their opinion

on the Financial Statements.

The Directors are confident that the Company would satisfy

the solvency test as mandated under Section 56 ( 2) of the

Companies Act No. 07 of 2007 regarding the payment of the

proposed dividend and have sought a Certificate of Solvency

from its Auditors.

COMPLIANCE REPORT

The Directors confirm that to the best of their knowledge and

belief that all statutory payments in relation to regulatory and

statutory authorities that were due in respect of the Company

and its Subsidiaries as at the balance sheet date have been

paid or where relevant, provided for.

By Order of the Board,

V. J. Senaratne

Company Secretary

20 August 2009

Statement of Directors' Responsibility

TO THE SHAREHOLDERS OF DISTILLERIES COMPANY

OF SRI LANKA PLC

Report on the Financial Statements

We have audited the accompanying Financial Statements of Distilleries

Company of Sri Lanka PLC, the Consolidated Financial Statements of the

Company and its subsidiaries as at 31 March 2009 which comprise the

Balance Sheet as at 31 March 2009, the Income Statement, Statement of

Changes in Equity and Cash Flow Statement for the year then ended,

summary of significant accounting policies and other explanatory notes as set

out on pages 40 to 80

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these

Financial Statements in accordance with Sri Lanka Accounting Standards. This

responsibility includes: designing, implementing and maintaining internal

controls relevant to the preparation and fair presentation of financial

statements that are free from material misstatement, whether due to fraud or

error; selecting and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these Financial Statements

based on our audit. We conducted our audit in accordance with Sri Lanka

Auditing Standards. Those standards require that we plan and perform the

audit to obtain reasonable assurance whether the Financial Statements are free

from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts

and disclosures in the Financial Statements. An audit also includes assessing

the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our

knowledge and belief were necessary for the purposes of our audit except that

the Consolidated Financial Statements of the Group is based on un-audited

financial statements of Sri Lanka Insurance Corporation Limited ( SLIC) for the

year ended 31 December 2008 as noted in the Consolidated opinion

paragraph. We therefore, believe that our audit provides a reasonable basis for

our opinion.

Opinion

Company

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

maintained proper accounting records for the year ended 31 March 2009 and

the Financial Statements give a true and fair view of the Company’s state of

affairs as at 31 March 2009 and its profit and cash flows for the year then

ended in accordance with Sri Lanka Accounting Standards.

Without qualifying our opinion, we draw attention to Note 38.1 to the Financial

Statements which describes that due to the implications of the Supreme Court

Judgement issued subsequent to the Balance Sheet date an uncertainty exists

as to the recoverability of the following items.

• Amount due from Sri Lanka Insurance Corporation Ltd. amounting to

Rs. 44.3 Mn.

• The Company has an investment in Collision Repair Centre ( Pvt) Limited

with a carrying amount of Rs. 310 Mn as at the Balance Sheet date, The said

comp any provides exclusive vehicle repairs and related services to SLIC.

However, consequent to the Supreme Court judgement described in Note

38.1 to the Financial Statements, the Directors are of the opinion that it is

premature to consider the possibility of the investment being impaired due

to the said Supreme Court Judgement issued subsequent to the Balance

Sheet date.

Consolidated

The profits of SLIC for the year ended 31 December 2008 and the

financial position of SLIC as at 31 December 2008 have been

incorporated in the Consolidated Financial Statements of the Group based on

un-audited financial statements. Therefore, we were unable to satisfy ourselves

as to the completeness and accuracy of the amounts included in the

Consolidated Financial Statements in respect of the above as at 31 March

2009.

In our opinion, except for the effects of such adjustments if any, as might have

been determined to be necessary had audited Financial Statements of SLIC

been made available, the Consolidated Financial Statements give a true and fair

view of the state of affairs as at 31 March 2009 and the profit and cash flows

for the year then ended in accordance with Sri Lanka Accounting Standards of

the Company and its subsidiaries dealt with thereby, so far as concerns the

shareholders of the Company.

Without further qualifying our opinion we draw attention to Note 38.1 to the

Financial Statements. The amount included as profit from the SLIC Group of

Rs. 730.5 Mn and the Net assets in respect of SLIC of Rs. 10,542 Mn are based

on the un-audited financial statements of SLIC as at 31 December 2008.

However, a conclusive determination has not been made as to the amount of

such profits and amounts receivable on account of the said investment in SLIC

arising from the said Supreme Court Judgement.

Report on Other Legal and Regulatory Requirements

These financial statements also comply with the requirements of Section

153( 2) to 153( 7) of the Companies Act No. 07 of 2007.

KPMG Ford, Rhodes, Thornton & Co.

Chartered Accountants

Colombo,

20 August 2009

Income Statements



CONSOLIDATED COMPANY

For the Year Ended 31 March 2009 2008 2009 2008

Notes Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Continuing Operations

Gross Turnover 4 40,830,967 57,685,562 29,569,825 27,416,021

Net Turnover 21,872,493 38,941,718 11,230,590 10,958,051

Cost of Sales, Benefits & Losses ( 12,175,569) ( 27,254,592) ( 7,277,928) ( 7,645,264)

Gross Profit/Underwriting Revenue 9,696,924 11,687,126 3,952,662 3,312,787

Investment Income & Other Income 5 686,817 6,021,725 786,229 411,691

Distribution Cost ( 2,571,091) ( 2,783,266) ( 173,260) ( 191,691)

Administrative Expenses ( 3,018,600) ( 5,467,526) ( 520,102) ( 442,212)

Increase in Life Fund – ( 3,527,971) – –

Other Operating Gain 6 – 36,842 90,456 36,237

Profit from Operations 4,794,050 5,966,930 4,135,985 3,126,812

Negative Goodwill on Acquisition – 61,907 – –

Finance Cost 7 ( 747,873) ( 636,879) ( 158,050) ( 111,900)

Share of Profit of Equity Accounted Investees 16.1 336,563 546,680 – –

Profit Before Taxation 8 4,382,740 5,938,638 3,977,935 3,014,912

Income Tax Expense 9 ( 1,682,794) ( 1,763,938) ( 1,295,499) ( 1,033,383)

Profit for the Year from Continuing Operations 2,699,946 4,174,700 2,682,436 1,981,529

Profit for the Year from Discontinuing Operations

Profit for the Year attributable to SLIC Group 38.1( d) 730,498 – – –

Profit for the Year 3,430,444 4,174,700 2,682,436 1,981,529

Attributable to Equity Holders of the Company 3,387,190 4,100,755 2,682,436 1,981,529

Minority Interest 43,254 73,945 – –

Profit for the Year 3,430,444 4,174,700 2,682,436 1,981,529

Earnings per Share ( Rs.)

Basic Earnings per Share 10

- Profit from Continuing Operations 8.86 13.67 8.94 6.61

- Profit from Discontinuing Operations 2.43 – – –

11.29 13.67 8.94 6.61

Diluted Earnings per Share 11.29 13.67 8.94 6.61

Dividend per Share ( Rs.) 11 2.25 1.75 2.25 1.75

Notes from Pages 44 to 80 form an integral part of these Financial Statements.

Figures in brackets indicate deduction.



Balance Sheets


As at 31 March 2009 2008 2009 2008

Notes Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Non-Current AssetsProperty, Plant and Equipment 12 8,106,360 15,144,758 1,190,868 917,930 Leasehold Properties 13 390,107 408,499 – – Intangible Assets 14 2,787,008 129,834 – –Investments in Subsidiaries 15 – – 10,062,660 10,820,337Investments in Equity Accounted Investees 16 3,368,294 3,134,234 1,571,601 548,904 Other Long Term Investments 17 46,420 25,625,434 15,750 15,750 Goodwill on Acquisition 18 255,446 2,371,100 – – Policyholders Loans – 2,544,447 – – Advance Lease Premium 3,800 84,746 – –

14,957,435 49,443,052 12,840,879 12,302,921Current AssetsShort Term Investments 17 1,927,338 20,742,873 1,325,803 1,198,053 Inventories 19 4,271,757 4,676,580 1,851,658 1,417,853 Trade & Other Receivables 20 4,245,350 7,109,889 2,177,333 1,788,103Amounts Due from Subsidiaries 21 – – 106,679 290,977Amounts Due from Associate and Related Companies 22 479,007 930,813 322,188 606,125 Short Term Deposits 23 335,561 727,490 41,980 459,293 Bank & Cash Balances 24 884,678 2,581,088 327,550 317,098

12,143,691 36,768,733 6,153,191 6,077,502 Net Assets in Sri Lanka Insurance Corporation Ltd. ( SLIC) 38.1( c) 10,542,011 – – –

Total Assets 37,643,137 86,211,785 18,994,070 18,380,423

EQUITY AND LIABILITIESEquityStated Capital 25 300,000 300,000 300,000 300,000 Capital Reserves 2,499,892 1,954,438 107,882 107,882 Revenue Reserves 19,633,002 16,604,397 12,709,329 10,551,893 Total Equity Attributable to Equity Holders of the Company 22,432,894 18,858,835 13,117,211 10,959,775

Minority Interest 2,157,591 2,366,171 – –Total Equity 24,590,485 21,225,006 13,117,211 10,959,775

Non-Current LiabilitiesInsurance Provision - Life 26.1 – 35,654,297 – – Insurance Provision - Non Life 26.2 – 9,887,724 – – Interest Bearing Loans & Borrowings 27 1,219,625 1,193,459 – – Deferred Tax Liabilities 28 84,832 537,866 73,095 –Retirement Benefit Obligations 29 570,984 1,101,569 98,429 109,600 Deferred Income 30 205,097 283,583 – –

2,080,538 48,658,498 171,524 109,600

Current LiabilitiesTrade and Other Payables 31 5,994,302 9,192,933 3,695,380 3,113,641 Amount Due to Related Companies and Subsidiaries 32 94,648 120,069 228,625 746,636 Income Tax Payable 925,586 1,243,247 861,176 802,665Interest Bearing Loans & Borrowings 27 3,957,578 5,772,032 920,154 2,648,106

10,972,114 16,328,281 5,705,335 7,311,048

Total Equity and Liabilities 37,643,137 86,211,785 18,994,070 18,380,423

Net Assets per Share ( Rs.) 81.97 70.75 43.72 36.53

I certify that the Financial Statements have been prepared in compliance with the requirements of Companies Act No. 07 of 2007.

N. N. NagahawatteHead of Finance

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

D. H. S. Jayawardena C. F. FernandoChairman / Managing Director Director

Notes on pages 44 to 80 form an integral part of these Financial Statements. Figures in brackets indicate deductions. 20 August, 2009

Statements of Changes in Equity



Attributable to Equity Holders of the Company

Consolidated Capital ExchangeStated Capital Reserve on General Fluctuation Retained MinorityCapital Reserves Scrip Issue Reserves Reserve Earnings Total Interest Total

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs '000 Rs '000

Balance as at 1 April, 2007 300,000 869,412 1,095,538 7,399,341 22,348 4,935,311 14,621,950 2,607,364 17,229,314

Prior year Adjustments ( Note a) – – – – – 507,500 507,500 – 507,500

Tax effect on prior year adjustments – – – – – ( 180,289) ( 180,289) – ( 180,289)

Balance as at 1 April, 2007 – Restated 300,000 869,412 1,095,538 7,399,341 22,348 5,262,522 14,949,161 2,607,364 17,556,525

On Acquisition of Subsidiaries – – – – – 585,874 585,874 ( 585,874) –

Exchange Fluctuations Reserve – Associate – – – – 53,950 – 53,950 – 53,950

Adjustment due to Holding Changes in Subsidiaries – – – – – ( 355,393) ( 355,393) 355,393 –

Surplus on Revaluation – Associate – 21,050 – – – – 21,050 – 21,050

Dividend Paid 2006/2007 Final – – – – – ( 465,000) ( 465,000) ( 66,120) ( 531,120)

Net Profit – – – – – 4,100,755 4,100,755 73,945 4,174,700

Surplus on Revaluation of Property, Plant & Equipment – ( 31,562) – – – – ( 31,562) ( 18,537) ( 50,099)

Transfers – – – 165,756 – ( 165,756) – – –

Balance as at 31 March 2008 300,000 858,900 1,095,538 7,565,097 76,298 8,963,002 18,858,835 2,366,171 21,225,006

Balance as at 1 April, 2008 300,000 858,900 1,095,538 7,565,097 76,298 8,963,002 18,858,834 2,366,171 21,225,006

Dividend paid to Minority – – – – – – – ( 36,608) ( 36,609)

Inter Company Elimination – – – – – 176,639 176,639 – 176,639

Adjustments of Madulsima Plantations PLC – – – – – ( 18,454) ( 18,454) ( 215,299) ( 233,752)

Deferred Tax Adjustments of Subsidiary – – – – – ( 4,998) ( 4,998) – ( 4,998)

During the year Acquisition – – – – – ( 2,162) ( 2,162) – ( 2,162)

Currency Translation Reserve – Associates – – – – 13,305 – 13,305 – 13,305

Surplus on Revaluation – Associates – 545,454 – – – – 545,454 – 545,454

Effect of changes in Percentage – – – 779 – – 779 – 779

Effect on Changes in Accounting policy Changes – – – 1,379 – – 1,379 – 1,379

Adjustments on Negative Minority Interest – – – – – ( 73) ( 73) 73 –

Dividend Paid – – – – – ( 525,000) ( 525,000) – ( 525,000)

Net Profit for the year – – – – – 3,387,190 3,387,190 43,254 3,430,444

Balance as at 31 March 2009 300,000 1,404,354 1,095,538 7,567,255 89,603 11,976,144 22,432,893 2,157,591 24,590,485

Company Stated Capital General RetainedCapital Reserves Reserves Earnings Total

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at 1 April, 2007 300,000 107,882 8,210,000 498,153 9,116,035

Prior year Adjustments ( Note a) – – – 507,500 507,500

Tax effect on prior year adjustments – – – ( 180,289) ( 180,289)

Balance as at 1 April, 2007 - Restated 300,000 107,882 8,210,000 825,364 9,443,246

Dividend Paid – – – ( 465,000) ( 465,000)

Net Profit – – – 1,981,529 1,981,529

Transfers – – – – –

Balance as at 31 March 2008 300,000 107,882 8,210,000 2,341,893 10,959,775

Balance as at 1 April, 2008 300,000 107,882 8,210,000 2,341,893 10,959,775

Dividend Paid – – – ( 525,000) ( 525,000)

Net Profit – – – 2,682,436 2,682,436

Transfers – – – – –

Balance as at 31 March 2009 300,000 107,882 8,210,000 4,499,329 13,117,211

Note

( a) Prior Year Adjustment

The Company has made an excess provision amounting to Rs 507.5 Million in respect of promotional activities pertaining to the previous year

and this was adjusted during the year retrospectively as per SLAS 10 Changes in Accounting policies, estimates and errors ( Revised 2005)



Cash Flow Statements


For the Year Ended 31 March 2009 2008 2009 2008

Notes Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Operating Activities Profit before Taxation 4,382,740 5,938,638 3,977,935 3,014,912

Adjustment forDepreciation/Amortisation Property, Plant & Equipment 1,170,618 1,401,520 113,068 100,198 Provision for Retirement Gratuity 97,448 276,672 758 46,621 Interest Expenses 734,513 700,572 158,050 111,900 Interest Income ( 256,838) ( 4,487,811) ( 139,467) ( 151,528)Dividend Income ( 143,100) ( 639,656) ( 501,057) ( 89,998)Gain on disposal of Property, Plant & Equipment ( 65,521) ( 46,436) ( 11,631) ( 42,619)Increase in Life Fund during the year – 3,527,971 – –Movement in Technical Reserve – 1,545,549 – –Movement in Life Fund – 221,299 – –Amortisation of Goodwill on Acquisition – ( 61,907) – –Amortisation of Deferred Income ( 10,408) ( 14,320) – –Provision for Inventories 46,799 199,400 5,443 –Provision for Bad & Doubtful Debts 179,449 596,188 34,400 17,282 Gain on Disposal of Shares – – ( 510) –Share of Profit of Equity Accounted Investees ( 336,563) ( 546,680) – –Reversal of Provision for Fall in Value of Investments – ( 36,842) ( 90,456) ( 36,237)

Operating Profit before Working Capital Changes 5,799,137 8,574,157 3,546,533 2,970,531 ( Increase)/Decrease in Inventories 242,076 ( 1,842,048) ( 439,247) ( 374,122)( Increase)/Decrease in Receivables ( 241,862) ( 2,270,090) 44,605 372,920Increase/( Decrease) in Payables ( 225,998) 2,311,443 63,728 836,877

Cash Generated from Operations 5,573,353 6,773,462 3,215,619 3,806,206Interest Paid ( 734,513) ( 700,572) ( 158,050) ( 55,142)Income Tax Paid ( 2,453,489) ( 2,138,059) ( 1,163,894) ( 1,230,080)Retiring Gratuity Paid ( 64,908) ( 103,462) ( 11,929) ( 11,706)

Net Cash Flow from Operating Activities 2,320,443 3,831,369 1,881,746 2,509,278

Cash flow from Investing Activities

Acquisition of Property, Plant & Equipment ( 2,051,010) ( 3,840,214) ( 431,019) ( 477,905)Acquisition of Intangible Assets ( 2,798,411) – – –Grants Received 59,046 18,231 – –Purchases of Shares and Other Investments ( 122,065) ( 9,213,968) ( 307,490) ( 2,737,881)Dividends Received 143,100 639,656 501,057 89,998 Proceeds on Disposal of Property, Plant & Equipment 1,129,814 115,082 56,644 42,620 Adjustments/Proceeds on Disposal of Shares and Other Investments 638,727 3,564,686 5,686 2Interest Received 256,838 4,487,811 139,467 41,416

Net cash Flow used in Investing Activities ( 2,743,961) ( 4,228,716) ( 35,655) ( 3,041,750)

Cash Flow from Financing Activities

Dividend Paid/( Investment made by) Minority ( 36,609) ( 66,110) – –Term Loan Received 4,998,439 34,354 – –Repayment of Loans ( 2,877,575) ( 272,061) – –Dividend Paid ( 525,000) ( 465,000) ( 525,000) ( 465,000)Lease Rental Paid – ( 31,780) – –Redemption of Debentures – ( 100,000) – –

Net Cash Flow from Financing Activities 1,559,255 ( 900,597) ( 525,000) ( 465,000)

Net Increase/( Decrease) in Cash & Cash Equivalent during the year 1,135,737 ( 1,297,944) 1,321,091 ( 997,472)

Cash & Cash Equivalents At the beginning of the year ( 2,151,933) ( 853,989) ( 1,871,715) ( 874,243)Net movement during the year 1,135,737 ( 1,297,944) 1,321,091 ( 997,472)

At the End of the year ( Note A) ( 1,016,196) ( 2,151,933) ( 550,624) ( 1,871,715)

Note A - Cash and Equivalents are as follows

Short Term Deposits 335,561 727,490 41,980 459,293 Cash in Transit 111,131 238,879 111,131 236,598 Cash in Hand & Bank 773,547 2,342,209 216,419 80,500

Bank & Other Borrowings ( 2,236,435) ( 5,460,511) ( 920,154) ( 2,648,106)

( 1,016,196) ( 2,151,933) ( 550,624) ( 1,871,715)



Accounting Policies

1. Reporting Entity

Distilleries Company of Sri Lanka PLC, is a quoted Public Limited Company incorporated and domiciled in Sri Lanka. The registeredoffice and principal place of business of the Company is located at110, Norris Canal Road, Colombo 10.

The consolidated Financial Statements of Distilleries Company of SriLanka PLC., as at and for the year ended 31 March 2009 comprisethe Company and its subsidiaries ( together referred to as the" Group" ) and the group's interests in associates. The principal activities of the Company are production and distribution of liquor.Description of the nature of the operations and principal activities ofthe subsidiaries and associates are given in Note 16.

Distilleries Company of Sri Lanka PLC’s parent entity is MilfordExports ( Ceylon) Limited.

The Financial Statements of all the companies in the Group otherthan those mentioned in Note 16 to the Financial Statements are prepared for a common financial year, which ends on 31 March.

2. Basis of Preparation

2.1 Statement of Compliance

The Financial Statements of Distilleries Company of Sri Lanka PLCand those consolidated with such comprise the balance sheet,income statement, cash flow statement, statement of changes inequity, accounting policies and notes to the Financial Statements.These Financial Statements are prepared in accordance with the Sri Lanka Accounting Standards laid down by the Institute ofChartered Accountants of Sri Lanka and Companies Act No. 07 of2007.

The Financial Statements were authorised for issue by the Directorson 20 August 2009.

SLASs that are not yet effective and not adopted by the Group.

The following standards have been published and are mandatory forthe Group’s accounting periods beginning on or after 1 January 2011or later periods:

SLAS 44 - Financial Instruments: Presentation

The objective of this standard is to establish principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities. It applies to theclassification of financial instruments, from the perspective of theissuer, in to financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, lossesand gains and the circumstances in which financial assets and financial liabilities should be offset.

The substance of a financial instrument, rather than its legal form,governs its classification on the entity’s balance sheet. Substanceand legal form are commonly consistent, but not always. Somefinancial instruments take the legal form of equity but are liabilitiesin substance and others may combine features associated with equity instruments and features associated with financial liabilities.Accordingly, the preference share that provides for mandatoryredemption by the issuer for a fixed or determinable amount at afixed or determinable future date, or gives the holder the right torequire the issuer to redeem the instrument at or after a particulardate for a fixed or determinable amount, is a financial liability.

SLAS 45 – Financial Instruments: Recognition and Measurement

The objective of this standard is to establish principles for recognising and measuring financial assets, financial liabilities andsome contracts to buy or sell non-financial items.

2.2 Basis of Measurement

The Financial Statements have been prepared on the historical costbasis except that certain land and short-term investments are measured/ stated at fair value as explained in Notes to the FinancialStatements.

2.3 Functional and Presentation Currency

The Financial Statements are presented in Sri Lankan Rupees, whichis the Company’s functional currency. All financial information presented in Sri Lankan Rupees has been given to the nearest thousand, unless stated otherwise.

2.4 Use of Estimates and Judgments

The preparation of Financial Statements requires management tomake judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts ofassets, liabilities, income and expenses. Actual results may differfrom those estimates and judgmental decisions. Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period inwhich the estimate is revised if the revision affects only that periodor in the period of the revision and future periods if the revisionaffects both current and future periods.

3. Significant Accounting PoliciesAccounting Policies set out below have been applied consistently toall periods presented in these consolidated Financial Statements.

The Accounting Policies have been applied consistently by the entities in the Group.

Comparative information has where necessary been reclassified toconfirm with the current year’s presentation.

3.1 Basis of Consolidation

3.1.1 Subsidiaries

Subsidiaries are those entities controlled by the Group. Controlexists when the Group has the power directly or indirectly to governthe financial and operating policies of an entity so as to obtain benefits from its activities which is evident when the Company controls the composition of the Board of Directors of the entity orhold more than 50% of issued shares of the entity or hold more than50% of voting rights of the entity and is entitled or receive more thanhalf of every dividend from shares carrying unlimited right to participate in distribution of profit or capital.

Entities that are subsidiaries of another entity which is a Subsidiaryof the Company are also treated as Subsidiaries of the Company. TheFinancial Statements of Subsidiaries are included in the consolidatedFinancial Statements when control effectively commences and untilcontrol effectively ceases.

3.1.2 Minority Interests

Minority interest is measured at the minorities’ share of the postacquisition fair value of the identifiable assets and liabilities of theacquired entity. Separate disclosure is made of minority interests.



Accounting Policies

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group.Disposals of minority interests result in gains and losses for theGroup and recorded in the Income Statement. Purchases fromminority interests result in goodwill being the difference between anyconsideration paid and the relevant share acquired of the carryingvalue of net assets of the subsidiary.

3.1.3 Associates

Associates are those entities in which the Group has significant influence, but no control, over financial and operating policies generally accompanying a shareholding of between 20% and 50% ofvoting rights. Investments in associates are accounted for using theequity method. The consolidated Financial Statements include theGroup's share of income and expenses of equity accountedinvestees, from the date that significant influence commences untilthe date that significant influence ceases. When the Group's share oflosses exceed its investment in an equity accounted investee, thecarrying amount of that interest is reduced to nil and the recognitionof further losses is discontinued except to the extent that the Grouphas incurred obligations or has made payments on behalf of theinvestee.

3.1.4 Reporting Date

All the Group’s subsidiaries and associate companies have a common financial year end other than Periceyl ( Pvt) Limited,Balangoda Plantations PLC and Madulsima Plantations PLC, whosefinancial year ends on 31 December. The difference between thereporting date of the above companies and that of the parent doesnot exceed three months.

3.1.5 Transactions Eliminated on Consolidation

Intra-group balances and transactions and any unrealised gains arising from intra-group transactions, are eliminated in preparing theconsolidated Financial Statements. Unrealised gains arising fromtransactions with associates are eliminated against the investment inthe associate, to the extent of the Group’s interest in the enterprise.

3.2 Foreign Currency Translation

Transactions in foreign currencies are translated into Rupees at therate of exchange prevailing on the dates of the transactions.Monetary assets and liabilities denominated in foreign currencies aretranslated into Rupees at the rate of exchange prevailing at the dateof the Balance Sheet. Gains and losses resulting from the settlementof such transactions and translation of monetary assets and liabilities denominated in foreign currencies are included in theIncome Statement.

3.2.1 Property, Plant & Equipment

3.2.1.1 Freehold Assets

Items of property, plant & equipment are measured at cost ( or at fairvalue in the case of land and buildings) less accumulated depreciation and accumulated impairment losses.

The cost of property, plant & equipment includes expenditures thatare directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and directlabour, any other costs directly attributable to bringing the asset to aworking condition for its intended use, and the costs of dismantlingand removing the items and restoring the site on which they are located.

Carrying amount of property plant & equipment are reviewed forimpairment whenever events or changes in circumstances indicatethat the carrying amount may not be recoverable. An asset’s carrying amount is written down immediately to its recoverableamount if the asset’s carrying amount is greater than its estimatedrecoverable amount.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefit associated with the item willflow to the Group and the cost of the item can be measured reliably.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from itsuse or disposal. Any gain or loss arising on derecognising of theasset ( calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in theIncome Statement in the year the asset is derecognised.

The assets’ residual values, useful lives and methods of depreciationare reviewed, and adjusted if appropriate, at each financial year end.

3.2.1.2 Leased Assets

Leases in terms of which the Group assumes that substantially of allthe risks and rewards of ownership are classified as finance leases.Assets acquired by way of a finance lease are measured at an amountequal to the lower of their fair value or the present value of minimumlease payments at the inception less accumulated depreciation andaccumulated impairment losses.

3.2.1.3 Depreciation

Depreciation is recognised in profit and loss on a straight-line basisover the estimated useful lives of each part of an item of property,plant & equipment. Freehold land is not depreciated. Assets heldunder finance lease are depreciated over the shorter of the lease termor the useful lives of equivalent owned assets.

The principal annual rates used for this purpose, which are consistent with that of the preceding years are:

Freehold Buildings 5%

Plant, Machinery & Equipment 10%

Furniture, Fittings, Office Equipment

& Fire Fighting Equipment 10%

Vats & Casks 10%

Oil Storage Tanks 10%

Crates 20%

Motor Vehicles 25%

Empty Drums 50%

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held forsale and the date that the asset is derecognised.

3.2.1.4 Operating Lease

When the lessor effectively retains substantially all the risks andrewards of an asset under the lease agreement, such leases are classified as operating leases. Payments under operating leases arerecognised as expense in the Income Statement over the period oflease on a straight line basis.



Accounting Policies

3.2.1.5 Goodwill

Goodwill represents the excess of the cost of acquisition over the fairvalue of Group’s share of the net identifiable assets of the acquiredsubsidiary at the rate of acquisition. Goodwill acquired in a businesscombination is tested annually for impairment or more frequently ifevents or changes in circumstance indicate that it might beimpaired; and carried at cost less accumulated impairment losses.Impairment losses on goodwill are not reversed.

Goodwill is allocated to cash generating units for the purpose ofimpairment testing. The allocation is made to those cash generatingunits or groups of loan generating units that are expected to benefitfrom the business combination in which goodwill arose.

3.2.1.6 Investments

Cost of investment includes purchase cost and acquisition chargessuch as brokerages, fees, duties and bank regulatory fees.

( a) Quoted Shares, Quoted Debt Instruments and Unit TrustInvestments

Quoted shares, quoted debt instruments and unit trust investmentsare stated at lower of cost or market value determined on an aggregate portfolio basis in total.

( b) Unquoted Shares and Unquoted Debt Instruments

Unquoted shares and unquoted debt instruments are held on a long-term basis and stated at cost. Provision for diminution in valueis made when there has been a decline, other than temporary in thevalue of the investment.

( c) Investments in Government Securities

Investments in treasury bills, treasury bonds, loans to the government and repurchase agreements are stated at cost and interest is accrued up to year-end.

( d) Long Term Investments

Quoted and unquoted investments held on long term basis are classified as non-current investments and are measured at cost lessimpairment losses. The cost of the investment is the cost of acquisition inclusive of brokerage and cost of transaction. Provisionfor impairment is made in the Income Statement, when there hasbeen a decline other than temporary in the value of investments, determined on individual basis.

Marketable securities which have been classified under short term investments are valued at lower of cost or market value, on an aggregate portfolio basis. Market value is calculated by reference toclosing share value as at the Balance Sheet date published by theColombo Stock Exchange.

3.2.1.7 Inventories

Inventories are measured at the lower of cost or net realisable value.Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completionand selling expenses. The general basis on which cost is determinedis:

All inventory items, except manufactured inventories and work-in-progress are measured at weighted average directly attributable cost.

Manufactured inventories and work-in-progress are measured atweighted average factory cost which includes all direct expenditureand appropriate shares of production overhead based on normaloperating capacity.

3.2.1.8 Trade and Other Receivables

Trade receivables are recognised at the amounts that they are estimated to realise less provision for impairment. A provision forimpairment of trade receivable is established when there is objectiveevidence that the Group will not be able to collect all amounts due inaccordance with the original term of receivables. Significant financialdifficulties of the debtor, probability that the debtors will enter bankruptcy or financial reorganisation and default or delinquency in payment are considered as indicators that trade receivable isimpaired. The amount of the provision is the difference between theasset’s carrying amount and the estimated realisable value. Theamount of the provision is recognised in the income statement within selling and distribution cost when a trade receivable is uncollectible, it is written off against the allowance account for tradereceivables. Subsequent recoveries of amounts previously written offare credited in the Income Statement.

3.2.1.9 Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call deposits.Bank overdrafts that are repayable on demand and form an integralpart of the Group's cash management are included as a componentof cash and cash equivalents for the purpose of the Statement ofCash Flows.

3.2.1.10 Impairment

The carrying amounts of the Group’s assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverableamount is estimated. For goodwill that has indefinite life, recoverableamount is estimated at each reporting date or more frequently, ifevents or changes in circumstances indicate that it might beimpaired.

An impairment loss is recognised if the carrying amount of an assetor its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group thatgenerates cash flows that are largely independent from other assetsand groups.

The recoverable amount of an asset or cash-generating unit is thegreater of its value in use and its fair value less costs to sell. Inassessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money andthe risks specific to the asset. An impairment loss in respect of goodwill is not reversed.

3.3 Liabilities and Provisions

Liabilities classified as current liabilities on the Balance Sheet arethose which fall due for payment on demand or within one year fromthe balance sheet date. Non-current liabilities are those balances thatfall due for payment later than one year from the balance sheet date.

All known liabilities have been accounted for in preparing theFinancial Statements.



Accounting Policies

3.3.1 Employee Benefits

3.3.1.1 Defined Benefit Plan – Gratuity

A defined benefit plan is a post employment benefit plan other thana defined contribution plan. The liability recognised in the BalanceSheet in respect of the defined benefit plan is the present value ofdefined benefit obligation at the balance sheet date. Benefits fallingdue more than 12 months after the balance sheet date are discounted to present value. The defined benefit obligation is calculated annually by independent actuaries using Projected UnitCredit method ( PUC) as recommended by SLAS 16, “EmployeeBenefits”. The present value of the defined benefit obligation isdetermined by discounting the estimated future cash flows. The gratuity liability was based on the actuarial valuation carried out.

The actuarial gains and losses are charged or credited to the Income Statement in the period in which they arise. The assumptions basedon which the results of actuarial valuation was determined are included in Note 29.3 to the Financial Statements.

However, according to the payment of Gratuity Act No. 12 of 1983,the liability for the gratuity payment to an employee arise only on the completion of 5 years of continued service with the Company.

3.3.1.2 Defined Contribution Plans- Employees’ Provident Fund andEmployees’ Trust Fund

A defined contribution plan is a post employment benefit plan underwhich an entity pays a fixed contribution into a separate entity andwill have no legal or constructive obligation to pay further amounts.

All the employees who are eligible for Employees’ Provident Fundand Employees’ Trust Fund are covered by relevant contributionfunds in line with the respective statutes. Employers’ contribution todefined contribution plans are recognised as an expense in theIncome Statement when incurred.

3.3.2 Provisions, Contingent Assets and Contingent Liabilities

A provision is recognised if, as a result of a past event, the Group hasa present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits willbe required to settle the obligation. All the contingent liabilities are disclosed, as notes to the Financial Statements unless the outflow ofresources is made contingent assets if exits are disclosed wheninflow of economic benefit is probable.

Commitments

All material commitments as at the balance sheet date have beenidentified and disclosed in the notes to the Financial Statements.

3.3.3 Trade and Other Payables

Trade and other payables are stated at their cost.

3.4 Income Statements

For the purpose of presentation of the Income Statement, the function of expenses method is adopted, as it represents fairly theelements of Company performance.

3.4.1 Revenue

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances,trade discounts and volume rebates. Revenue is recognised whenthe significant risks and rewards of ownership have been transferred

to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement withthe goods.

Interest income is recognised in profit and loss as it accrues.

Gains and losses on the disposal of Investments held by the Grouphas been accounted for in the Income Statement.

Gains and losses on the disposal of property, plant & equipment are determined by comparing the net sales proceeds with carryingamount. These are included in profit and loss.

3.4.2 Expenses

All expenditure incurred in the running of the business has beencharged to income in arriving at the profit for the year.

Repairs and renewals are charged to the profit and loss in the year inwhich the expenditure is incurred.

Expenditure incurred for the purpose of acquiring, extending orimproving assets of a permanent nature by means of which to carry on the business or for the purpose of increasing the earningcapacity of the business has been treated as capital expenditure.

3.4.2.1 Borrowing Costs

Borrowing costs are recognised as an expense in the period in whichthey are incurred, except to the extent where borrowing costs thatare directly attributable to the acquisition, construction or production of a qualifying asset that takes a substantial period oftime to get ready for its intended use or sale is capitalised as part ofthat asset. The amount of borrowing costs eligible for capitalisationis determined in accordance with SLAS 20 – Borrowing Costs –Allowed Alternative Treatment.

.

3.4.2.2 Finance Income and Expenses

Finance income comprises gains on translation of foreign currency. A finance cost comprises interest payable on borrowingsand losses on translation of foreign currency. The interest expensecomponent of finance lease payments is recognised in the IncomeStatement.

3.4.2.3 Income Tax Expense

Income tax expense comprises current and deferred tax. Income taxexpense is recognised in profit or loss except to the extent that itrelates to items recognised directly in equity, in which case it is recognised in equity.

Income Tax

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

Deferred Tax

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and theamounts used for taxation purposes. Deferred tax is not recognisedfor the following temporary differences: the initial recognition ofgoodwill, the initial recognition of assets or liabilities in a transactionthat is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments



Accounting Policies

in subsidiaries to the extent that they probably will not reverse in theforeseeable future. Deferred tax is measured at the tax rates that areexpected to be applied to the temporary differences when theyreverse, based on the laws that have been enacted or substantivelyenacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which theasset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Tax withheld on dividend income from subsidiaries and associates is recognised as an expense in the Consolidated Income Statement atthe same time as the liability to pay the related dividend is recognised.

3.5 General

3.5.1 Events Occurring after the Balance Sheet Date

All material post balance sheet events have been considered andwhere appropriate adjustments or disclosures have been made in therespective notes to the Financial Statements.

3.5.2 Earnings Per Share

The Group presents basic and diluted Earnings Per Share ( EPS) forits ordinary shares. Basic EPS is calculated by dividing the profit orloss attributable to ordinary shareholders of the Company by theweighted average number of ordinary shares outstanding during theperiod. Diluted EPS is determined by adjusting the profit or lossattributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutivepotential ordinary shares.

3.5.3 Segment Reporting

A segment is a distinguishable component of the Group that isengaged either in providing related products or services ( BusinessSegment) or in providing products or services within a particulareconomic environment ( Geographical Segment), which is subject torisks and rewards that are different from those of other segments.

The activities of the segments are described on pages 76 and 77 inNotes to the Financial Statements.

3.5.4 Comparative Figures

Where necessary comparative figures have been reclassified to conform to the current year’s presentation.

3.5.5 Retiring Benefits

Provision of Gratuity for all workers and staff is on an actuarial basis,using the Projected Unit Credit ( PUC) method as recommended bySri Lanka Accounting Standard No. 16 “Retirement Benefit Costs”.The actuarial valuation was carried out by professionally qualifiedfirm of actuary, Messrs. Actuarial and Management Consultants( Pvt) Limited. The Company expects to carry out actuarial valuationonce in every two years.

Actuarial valuation gain and losses are recognised as income orexpenses over expected average remaining working lives of the participants of plan.

This item is grouped under retirement benefit obligations in theBalance Sheet. The liability is not externally funded.

3.5.6 Grants and Subsidies

Grants and subsidies are credited to the Income Statement over theperiods necessary to match them with the related costs which theyare intended to compensate, on a systematic basis. Grants related toassets, including non-monetary grants at fair value, are deferred inthe Balance Sheet and credited to the Income Statement over the useful life of the related asset.

Grants related to income are recognised in the Income Statement inthe period in which it is receivable.

3.5.7 Pricing

The Group transfers products from one industry segment for use in another. These transfers are based on cost / fair market prices.

3.6 Policies Specific to Plantation Company

The significant accounting policies of Balangoda Plantations PLC aregiven below. No adjustments have been made in respect of accounting policies, which differ, from that of the Group, since thenature of operations of these Companies are significantly differentfrom that of the rest of the Group.

3.6.1 Immature & Mature Plantations

The cost of replanting and new planting are classified as immatureplantations up to the time of harvesting the crop.

Further the general charges incurred on the plantations are apportioned based on the labour days spent on respective replantingand new planting and capitalised on the immature areas. The remaining portion of general charges is expensed in the accountingperiod in which it is incurred.

The cost of areas coming into bearing are transferred to mature plantations and depreciated over their estimated useful life.

3.6.2 Infilling Cost

Where infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of performance, the costs are capitalised in accordance with Sri LankaAccounting Standard No. 32 - Plantations and depreciated over theuseful life at rates applicable to mature plantations.

Infilling costs that are not capitalised have been charged to theIncome Statement in the year in which they are incurred.

3.6.3 Depreciation

Depreciation is provided on a straight line basis over the estimateduseful lives of property, plant & equipment other than freehold landas follows:

Buildings 2.5%

Plant & Machinery 7.5%

Furniture & Fittings 10.0%

Motor Vehicles 20.0%

Sanitation, Water & Electricity Supply 5.0%

Equipment 12.5%

Replanting & New Planting – Tea 3.0%

Replanting & New Planting – Rubber 5.0%



Accounting Policies

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held forsale and the date that the asset is derecognised.

3.6.3.2 Leased Assets

Leasehold property comprising of land use rights obtained on a longterm basis is stated at recorded carrying values as at the effectivedate of SLAS 19 - Leases, in line with ruling of Urgent Issue TaskForce of the Institute of Chartered Accountants of Sri Lanka. Suchcarrying amounts are amortised over the remaining lease term oruseful life of the leased property whichever is shorter. No further revaluation of these Leasehold properties will be carried out.

Leasehold rights are being amortised /depreciated in equal annualamounts over the following periods:

Bare Land 53 years

Buildings 25 years

Machinery 15 years

Mature Plantations - Tea 30 years

3.6.4 Inventories

Inventories other than produce stocks are valued at the lower of costor estimated net realisable value, after making due allowances forobsolete and slow moving items. Net realisable value is the price atwhich stocks can be sold in the normal course of business afterallowing for cost of realisation and/or cost of conversion from theirexisting state to saleable condition.

Input material At average cost

Growing Crop At the cost of direct materials, Nurseries direct labour and an appropriate

proportion of directly attributable overheads.

Harvested Crop Valued at estimated selling price

or since realised price.

Spares & Consumables At actual cost

3.7 Policies specific to Telecommunication Sector

3.7.1 Revenue Recognition

Revenue is recognised on an accrual basis when it is probable thatthe economic benefits will flow to the Company and the revenue and associated costs can be reliably measured. Revenue is measured atthe amount of consideration net of discounts and taxes. The criteriaused for recognition of revenue are as follows:

( a) Domestic and International Call Revenue and Rental Income

The customers are billed for calls and rental on a billing cycle.Customers are charged government taxes at the applicable rates butaccounted for as a liability. Revenue is recognised net of such taxesbased on the amounts billed.

( b) Connection fees

This income is recognised in the period in which it is received, asthere is no continuing performance obligation attached to such connection fee.

3.7.2 Property, Plant and Equipment

Depreciation

Depreciation is charged to the Income Statement on a straight linebasis over the estimated useful life of items of property, plant andequipment from the month of purchase and no depreciation or sincerealised prices in the month of disposal. Land is not depreciated. Thedepreciation rates used are as follows,

Customer Premise Equipment 10%

Customer Premise Equipment ( CDMA) 100%

Network Equipment 10%

Shelters and Other Equipment 20%

Buildings 10%

Vehicles 20%

Computer Software 33 1/3%

Office/Other Equipment 20%

Furniture & Fittings 20%

3.7.3 Intangible Assets

( a) License Fee

Expenditure on operator license fee and external gateway license feesthat are deemed to benefit or relate to more than one financial yearis classified as license fee and is being amortised over the license period on a straight line basis.

( b) FLAG Cable Access Right

Expenditure on FLAG cable access rights deemed to benefit beyondone financial year and is classified as intangible assets and is beingamortised over the license period on a straight line basis.

3.8 Policies specific to Asset Management Sector

3.8.1 Intangible Assets

All computer software costs incurred, licensed for use by theCompany, which are not integrally associated to hardware, which canbe clearly identified, reliably measured and its probable that they willlead to future economic benefits, are included in the Balance Sheetunder the category intangible assets and carried at cost less accumulated amortisation and any accumulated impairment losses.The amortisation rates are as follows,

Software Packages 20%

Company Logo 15%

Y2K Software 33.33%

3.8.2 Revenue Recognition

( a) Management Fees

Revenue from management fees is recognised in the Income Statement on accrual basis.

( b) Front End Fees

Having regard to the timing and the nature of the related services tobe provided to the Unit Holders and the associated costs as may beincurred in this connection the Company recognises 50% of theFront End Fees received in the year of receiving such fees, with thebalance deferred to the next two financial years equally.



Notes to the Financial Statements


2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

4. TURNOVER

Gross Turnover* ( Note-36) 41,612,968 58,308,982 29,569,825 27,416,021Intra-Group Sales ( 782,001) ( 623,420) – –

Gross Turnover 40,830,967 57,685,562 29,569,825 27,416,021Less: Excise Duty ( 18,958,474) ( 16,992,680) ( 18,339,235) ( 16,457,970)Less: Insurance Related Adjustments – ( 1,751,164) – –

Net Turnover 21,872,493 38,941,718 11,230,590 10,958,051

* Gross Turnover is stated Net of Nation Building Tax ( NBT).

5. INVESTMENT INCOME & OTHER INCOME

Interest Income ( Note-5.1) 256,838 4,487,811 139,467 151,527

Dividend Income from Quoted Investments 98,495 639,656 111,200 45,184

Dividend Income from Un Quoted Investments 44,605 – 372,920 –

Dividend Income from Associate - Quoted – – 16,769 44,814

Dividend Income from Associate - Un Quoted – – 168 –

Sale of Timber 41,603 12,511 – –

Gain on disposal of shares – – 510 –

Gain on Disposal of Property, Plant & Equipment 65,521 46,436 11,631 42,619

Amortisation of Capital Grants 10,408 14,320 – –

Rent Income 19,530 70,379 17,730 17,851

Interest on Loans to Policyholders – 301,442 – –

Fee and Commission Income 93,791 124,677 93,791 91,330

Sundry Income 56,026 324,493 22,043 18,366

686,817 6,021,725 786,229 411,691

Note - 5.1 Interest Income

Interest income includes income earned from secondary market transactions in Government Securities for the year by National Asset

Management Limited, a subsidiary of the Company and has been grossed up in the Financial Statements and resulting notional tax credit

amount is Rs. 1,773,650 ( 2008 : Rs. 1,672,071)

6. OTHER OPERATING GAIN

Reversal of Provision for Fall in Value of Investments – 36,842 90,456 36,237

– 36,842 90,456 36,237

7. FINANCE COST

Interest on Long Term Loans and Borrowings 337,326 408,739 – –

Interest on Short Term Loans and Borrowings 359,706 261,809 158,050 111,900

Interest on Finance Leases 37,481 30,024 – –

Gain/( Loss) on Translation of Foreign Currency 31,457 ( 52,695) – –

765,970 647,877 158,050 111,900

Less: Borrowing Cost Capitalised ( Note 7.1) ( 18,097) ( 10,998) – –

747,873 636,879 158,050 111,900

Note 7.1 – Borrowing Cost Capitalised

During the year Balangoda Plantation PLC, a subsidiary of the Company, capitalised borrowing cost amounting to Rs.18,096,872

( 2007- Rs. 10,998,130) incurred on borrowings obtained to meet expenses relating to immature plantations being part of the

cost of the immature plantations. The amount of borrowing cost eligible for capitalisation is determined in accordance with SLAS

20 ( Borrowing Costs) - Allowed Alternative Treatment. A capitalisation rate of 11.77 % ( 2007 - 11.82 %) was used.





2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

8. PROFIT BEFORE TAXProfit before tax is stated after charging all expenses including the following:

Depreciation/Amortisation 1,170,618 1,401,520 113,068 100,198Auditors’ Remuneration – KPMG Ford Rhodes Thornton & Co., 5,375 5,690 3,100 2,800

Other Auditors Remuneration 2,562 5,070 – –Audit Related Services – KPMG Ford Rhodes Thornton & Co., 69 – – –

Other Auditors – – – –Non Audit Services – KPMG Ford Rhodes Thornton & Co., 541 80 – –

Other Auditors 510 – – –Directors’ Emoluments 29,349 35,462 20,391 22,443Managing Agent Fees 87,186 138,906 – –Provision for Bad Debts 179,449 596,188 34,400 17,282Provision for Inventory 46,799 199,400 5,443 –Defined Benefit Plan Cost - Retiring Gratuity 97,448 276,672 758 46,621Defined Contribution Plan Cost - EPF/ETF 259,308 429,594 66,354 53,907Other Staff Cost 2,166,874 4,083,244 707,021 607,022

Number of Staff 15,330 29,540 1,291 1,035

9. TAXATION( a) Income Tax Expense

Income Tax on current year ( Note b) 1,606,682 1,904,949 1,222,403 1,046,724

Over/( Under) Provision in respect of Previous Year ( 1,344) ( 19,721) – –1,605,338 1,885,228 1,222,403 1,046,724

Deferred Tax Charge/( Credit) - Note 28 77,456 ( 121,290) 73,096 ( 13,341)

Charge to the Income Statement 1,682,794 1,763,938 1,295,499 1,033,383

( b) Reconciliation of Accounting Profit to Income Tax Expense

Profit Before Tax 4,382,740 5,938,638 3,977,935 3,014,912

Consolidation Adjustments ( 136,193) – – –

Increase in Life Fund – 3,527,971 – –4,246,547 9,466,609 3,977,935 3,014,912

Income not Subject to Tax ( 1,209,650) ( 785,910) ( 743,124) ( 320,384)

Disallowable Expenses 2,983,928 1,476,234 309,938 347,613

Allowable Expenses ( 1,481,410) ( 4,766,077) ( 103,784) ( 81,111)

Taxable Profit 4,539,415 5,390,856 3,440,965 2,961,030

Income Tax @ 35% 1,582,605 1,886,088 1,204,338 1,036,359

Income Tax @ 15% 2,653 – – –

1,585,258 1,886,088 1,204,338 1,036,359

Social Responsibility Levy Liability 21,424 18,861 18,065 10,365

Taxation on Profit for the Year 1,606,682 1,904,949 1,222,403 1,046,724

Tax Loss Brought Forward ( 265,070) ( 212,957) – –

Adjustment to Tax Loss 246,246 ( 52,113) – –

Tax Loss Absorbed – – – –

Tax Loss Carried Forward ( 18,824) ( 265,070) – –




( c) The corporate income tax applicable to Companies within the Group, excluding those that are enjoying a tax holiday or a concessionary rateof tax as referred to below is 35%.

The operating profit of Lanka Bell Ltd is exempted from Income tax in accordance with the agreement entered in to under Section 17 of theBOI Law No. 04 of 1978. As per the agreement, the Company enjoys a 20 year tax holiday from the commencement of business operations ( ie. 1997). However Taxation is payable on local interest income at 35%.

The operating profit of Lanka Hospitals Corporation PLC is exempted from Income tax in accordance with the agreement entered in to underSection 17 of the BOI Law No. 04 of 1978. As per the agreement, the Company enjoys a tax holiday of 12 years commencing from 2002.

( d) The income and profit of Texpro Industries Ltd., was exempted from taxation for a period of 5 years from 01 February 2004 which expiredin February 2009 and the Company became liable for tax at 35% thereafter.

10. EARNINGS PER SHARE

Basic Earnings per ShareThe calculation of basic earnings per share is based on the profit attributable to ordinary shareholders and the weighted average number ofordinary shares outstanding during the year.


2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Profit attributable to ordinary shareholders

From continuing operation attributable to the parent entity 2,656,692 4,100,755 2,682,436 1,981,529

From discontinuing operation attributable to the parent entity 730,498 – – –

3,387,190 4,100,755 2,682,436 1,981,529

Weighted average number of ordinary shares 300,000 300,000 300,000 300,000

Basic Earnings per Share

From continuing operations ( Rs.) 8.86 13.67 8.94 6.61

From discontinuing operations ( Rs.) 2.43 – – –

11.29 13.67 8.94 6.61

Diluted Earnings per ShareThe calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders and the weighted average numberof ordinary shares outstanding after adjustment for the effect of all dilutive potential ordinary shares. There were no potentially dilutive ordinary shares outstanding at any time during the year/previous year.

11. DIVIDEND PER SHARE

Final Dividend Proposed 675,000 525,000

Dividend per Ordinary Share ( Rs.) 2.25 1.75

The Directors recommended a final dividend of Rs. 2.25 per share for the year ended 31 March, 2009 for approval by the shareholders atthe Annual General meeting to be held on 29 September 2009. As stipulated by Sri Lanka Accounting Standards No.12 ( Revised) - EventsOccurring After the Balance Sheet date, this proposed dividend is not recognised as a liability as at 31 March 2009.

However for the purpose of computing dividend per share, the final dividend to be approved has been taken in to consideration.




12. PROPERTY, PLANT & EQUIPMENT

( a) Consolidated

Cost/Valuation

AdditionsFreehold As at During the As at

01.04.2008 Year Adjustments* Disposals 31.03.2009Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Freehold Land 2,478,682 – ( 2,126,284) ( 1,500) 350,898

Improvement to Land 9,918 35,525 – ( 2,793) 42,650

Freehold Buildings 2,014,427 25,353 ( 1,124,488) ( 167,417) 747,875

Plant, Machinery & Water Sanitation 1,286,226 298,304 ( 73,424) ( 170,991) 1,340,115

Fire Fighting Equipment 3,717 88 – – 3,805

Medical Equipment 853,104 – ( 853,104) – –

Furniture, Fittings & Office Equipment 1,441,722 174,989 ( 614,077) ( 32,697) 969,937

Computer Equipment 74,472 17,449 ( 51,424) – 40,497

Vats & Casks 44,766 6,172 ( 32) ( 745) 50,161

Medical Vehicles 8,902 – ( 8,902) – –

Motor Vehicles 1,201,449 91,915 ( 316,873) ( 88,820) 887,671

Oil Storage Tanks 404 – – ( 89) 315

Crates 165,010 – – ( 165,010) –

Drums 80 – – – 80

Others 11,727 – ( 11,727) – –

FLAG Projects – 37,982 – – 37,982

Wi-Max – 204,849 – ( 101,806) 103,043

Electrical Generators 33,844 – ( 33,844) – –

Electrical Fixtures and Fittings 29,483 33 ( 28,469) – 1,047

Passenger Lifts 56,194 – ( 56,194) – –

Air Conditioners 61,043 – ( 61,043) – –

Shelters and Other Equipment 273,306 118,988 – – 392,294

Computer Software 114,474 77,668 – ( 73,021) 119,121

Other Equipment 478,487 63,834 ( 326,416) – 215,905

Network Equipment 2,290,677 836,216 – – 3,126,893

Customer Premise Equipment 1,363,096 291,295 – – 1,654,391

14,295,210 2,280,660 ( 5,686,301) ( 804,889) 10,084,680

Leasehold

Cost/Valuation

Leasehold Right to Bare Land 245,928 – ( 22,699) ( 223,229) –

Mature/Immature Plantations ( Note 12.1.1) 1,495,958 – ( 893,186) ( 602,772) –

Buildings 353,117 – ( 323,136) ( 29,981) –

Buildings on Leasehold Land 1,848,669 189,992 ( 1,700,069) – 338,592

Plant & Machinery 7,988 229,353 – ( 7,988) 229,353

Improvements to Land 153,770 833,332 ( 11,544) – 975,558

Leasehold Land 1,734 – – – 1,734

Mini Hydro Water Supply Schemes 12,638 – – ( 12,638) –

Equipment 14,028 – – – 14,028

Others 1,051 – ( 1,051) – –

4,134,881 1,252,677 ( 2,951,685) ( 876,608) 1,559,265

Total 18,430,091 3,533,337 ( 8,637,986) ( 1,681,497) 11,643,945

* Adjustments are made in respect of Sri Lanka Insurance Corporation Ltd., The Lanka Hospitals Corporation PLC and Madulsima

Planatations PLC on account of reclassification.




12. PROPERTY, PLANT & EQUIPMENT

( a) Consolidated

Depreciation/Amortisation

Freehold As at Charge for On On As at01.04.2008 the Year Revaluation Adjustments* Disposals 31.03.2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Improvements to Land 2,900 – 1,224 – ( 857) 3,267

Freehold Buildings 322,312 19,921 5,973 ( 111,426) ( 21,392) 215,388

Plant, Machinery & Water Sanitation 638,488 34,889 58,253 ( 36,943) ( 81,111) 613,576

Fire Fighting Equipment 2,763 163 – – – 2,926

Medical Equipment 390,009 – – ( 390,009) – –

Furniture, Fittings & Office Equipment 891,610 104,309 7,666 ( 452,513) ( 27,430) 523,642

Computer Equipment 51,594 4,132 – ( 32,847) – 22,879

Vats & Casks 38,822 1,562 – – ( 665) 39,719

Medical Vehicles 14,120 – – ( 14,120) – –

Motor Vehicles 869,765 86,277 – ( 202,903) ( 86,247) 666,891

Oil Storage Tanks 346 8 – – ( 64) 290

Crates 121,495 – – – ( 121,495) –

Drums 80 – – – – 80

Others 3,408 – – ( 3,408) – –

FLAG Projects – 3,082 – – – 3,082

Wi-Max – 14,757 – – ( 5,961) 8,796

Electrical Generators 20,956 – – ( 20,956) – –

Electrical Fixtures and Fittings 20,064 – – ( 19,136) – 928

Passenger Lifts 56,194 – – ( 56,194) – –

Air Conditioners 12,477 – – ( 12,477) – –

Shelters and Other Equipment 183,244 55,278 – – – 238,522

Computer Software 93,776 15,961 – ( 495) ( 6,085) 103,157

Other Equipment 204,416 33,679 – ( 141,391) – 96,704

Network Equipment 714,095 259,196 – – ( 14,004) 959,287

Customer Premise Equipment 935,323 198,309 – – ( 14,004) 1,119,628

5,588,256 831,523 73,116 ( 1,494,818) ( 379,315) 4,618,762

Leasehold

Depreciation/Amortisation

Leasehold Right to Bare Land 69,993 – – ( 4,710) ( 65,283) –

Mature/Immature Plantations ( Note 12.1.1) 246,140 – – ( 111,126) ( 135,014) –

Buildings 49,997 – – ( 31,410) ( 18,587) –

Buildings on Leasehold Land 76,161 24,495 – ( 61,354) – 39,302

Plant & Machinery 15,439 124,871 – – ( 7,988) 132,322

Improvements to Land 120,521 28,586 – – – 149,107

Leasehold Land 5,564 1,453 – ( 5,283) – 1,734

Mini Hydro Water Supply Schemes 11,020 – – – ( 11,020) –

Equipment 14,028 – – – – 14,028

Others 399 – – ( 399) – –

609,262 179,405 – ( 214,282) ( 237,892) 336,493

Total 6,197,518 1,010,928 73,116 ( 1,709,100) ( 617,207) 4,955,255

Net Book Value 12,232,573 – – – – 6,688,690

As at Additions On As at01.04.2008 during the Year Capitalisation Adjustments Disposals 31.03.2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Capital Work-in-Progress 2,912,185 3,235,556 ( 4,717,920) – ( 12,151) 1,417,670

15,144,758 8,106,360

* Adjustments are made in respect of Sri Lanka Insurance Corporation Ltd., The Lanka Hospitals Corporation PLC and Madulsima

Plantations PLC on account of reclassification.




12.1.1 Immature/Mature PlantationsImmature/mature plantations are improvement to leasehold properties by Balangoda Plantations PLC ( BPP) a subsidiary of the Company since the formation of BPP. The assets ( including plantations assets) taken over by way of estate leases are set out in Notes 13.1 and 13.2. Further, investmentsmade in immature plantations taken over by way of these leases are shown in the above note. When such plantations become mature, the additionalinvestment made since take over to bring them to maturity will be moved from immature to mature under this Note13.A corresponding movement fromimmature to mature of the investment undertaken by JEDB/SLSPC on the same plantation prior to the lease will be carried out under Note 13.2. Additionsinclude Rs 18.096 million ( Rs. 10,998 million - 2007) of borrowing costs capitalised during the year.

12.1.2 The assets shown above also include movable assets vested in the Balangoda Plantations PLC ( BPP), vested in BPP by gazette notification on the dateof formation of the company ( 11 June 1992) and all investments in tangible assets by BPP since its formation. The assets taken over by way of estateleases are set out in notes 13.2. Further, the valuation of immovable JEDB/SLSPC estate assets on finance lease ( other than bare land) and tangible assetsother than immature/mature plantations taken over as at 11 June 1992 is based on net book value obtained from the State Plantations Corporation as atsuch date. These values were not available by individual asset.

12.1.3 The Land, Building, Plant and Machinery of Texpro Industries Limited, a subsidiary of the Company, were revalued in year 2003 by a professionally qualified independent valuer based on contractors method of valuation.

12 ( b) Company

As at Additions Disposals As at01.04.2008 During the Year During the Year 31.03.2009

Cost/Valuation Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Freehold Land 347,763 – ( 1,500) 346,263

Leasehold Land 1,734 – – 1,734

Freehold Buildings 314,438 – – 314,438

Plant & Machinery 185,402 214,846 – 400,248

Fire Fighting Equipment 3,710 88 – 3,798

Furniture, Fittings & Office Equipment 49,133 5,369 – 54,502

Computer Equipment 9,844 15,388 – 25,232

Vats & Casks 43,989 6,172 – 50,161

Motor Vehicles 561,970 26,742 ( 1,580) 587,132

Oil Storage Tanks 315 – – 315

Crates 165,010 – ( 165,010) –

Drums 80 – – 80

1,683,388 268,605 ( 168,090) 1,783,903

As at Charge On As at01.04.2008 During the Year Disposals 31.03.2009

Accumulated Depreciation Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Leasehold Land 281 1,453 – 1,734

Freehold Buildings 132,541 15,722 – 148,263

Plant & Machinery 148,473 21,718 – 170,191

Fire Fighting Equipment 2,756 162 – 2,918

Furniture, Fittings & Office Equipment 27,704 3,499 – 31,203

Computer Equipment 9,844 2,515 – 12,359

Vats & Casks 38,223 1,494 – 39,717

Motor Vehicles - Purchased Outright 406,598 66,505 ( 1,580) 471,525

- Leased – – – –

Oil Storage Tanks 290 – – 290

Crates 121,497 – ( 121,497) –

Drums 80 – – 80

888,289 113,068 ( 123,077) 878,280

Written Down Value 795,099 – – 905,623

Capital Work-in-Progress 122,831 279,884 ( 117,470) 285,245

917,930 279,884 ( 117,470) 1,190,868




The valuation of Freehold Land, Buildings and Plant & Machinery held by the Company as at 31 December 1990, were incorporated in the Company’sbooks on 31 March 1993, based on a valuation carried out by the Government Valuation Department in August 1991. This exercise was carried outto incorporate the deemed cost of assets as at the date of the acquisition. The surplus on revaluation was credited to a “Revaluation ReserveAccount.” The additions to Freehold Land, Freehold Buildings and Plant & Machinery subsequent to 31 December, 1990 are stated at cost.

The most recent valuation of Freehold Land and Buildings valued on open market value for existing use basis was Rs. 2,257.5 million.

CONSOLIDATED

2009 2008

As at 31 March Rs. ’000 Rs. ’000

13. LEASEHOLD PROPERTY PLANT AND EQUIPMENT

Leasehold right to bare land ( Note 13.1) 227,727 233,976

Immovable lease assets ( Note 13.2) 162,380 174,523

390,107 408,499

13.1. Leasehold Right to Bare land

Leases have been executed for all estates of Balangoda Plantations PLC ( BPP) for a period of 53 years. All of these leases are retroactive

to 22 June 1992 the date of formation of the Company. The leasehold right to the land on all of these estates have been taken into the

books of the Company on 22 June 1992 immediately after formation of the Company, in terms of the ruling obtained from the Urgent

Issues Task Force ( UITF) of the Institute of Chartered Accountants of Sri Lanka. For this purpose the Board of Directors of BPP decided

at its meeting on 8 March 1995 that this bare land would be revalued at the value established for this land by valuation specialist,

Mr D.R. Wickramasinghe just prior to the formation of the Company.

The above mentioned leasehold right to bare land comprising of land use rights obtained on a long term basis is re-classified as leasehold

property and stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard 19 - Leases, in line with

revised Ruling of the Urgent Issue Task Force of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are

amortised over the remaining lease term or useful life of the leased property whichever is shorter. The leasehold right to land is disclosed

under non current assets under Leasehold Property. The revised UITF ruling does not permit further revaluation of Leasehold Property.

The values taken into the 22 June 1992 Balance Sheet and amortisation of the leasehold property up to 31 March 2008 are as follows.

Accumulated AccumulatedRevaluation Amortisation Amortisation W.D.V. W.D.V.

As at As at As at As at As at

11/06/1992 01/01/2008 Amortisation 31/12/2008 31/12/2008 31/12/2007

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Leasehold Property 331,201 97,225 6,249 103,474 227,727 233,976

Estates on which leases have been executed

Cullen, Ury, Wewessa, Wikiliya, Mahawela, Gowerakelle, Millawitiya, Palmgarden, Walaboda, Rambukkande, Cecilton, Galatura, Spring Valley,

Mutuwagalla, Rasagalla, Pettiyagala, Maddekande, Agrasland, Telbedde.

Estates on which leases have not been executed

Rye estate

13.2 Immovable Lease Assets

As morefully explained in Note 13.1 although all JEDB/SLSPC estate leases have not been executed as at the Balance Sheet date, in terms of

the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka all immovable assets in these estates under finance leases have

been taken into the books of the Company retroactive to 11 June 1992. For this purpose the Board of Directors of BPP decided at its

meeting on 8 March 1995 that these assets would be taken at their book values as they appear in the books of the JEDB/SLSPC, on the day

immediately preceding the date of formation of the Company. These assets are taken into the 11 June 1992 Balance Sheet and depreciated

as follows :

Accumulated AccumulatedRevaluation Transfer Revaluation Depreciation Depreciation W.D.V. W.D.V.

As at Immature to As at As at Depreciation As at As at As at11/06/1992 Mature 31/12/2008 01/011/2008 31/12/2008 31/12/2008 31/12/2007

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Unimproved Lease Land 899 – 899 264 17 280 619 635

Improvements to Land 15,702 – 15,702 8,144 523 8,667 7,035 7,559

Other vested Assets 152 – 152 152 – 152 – –

Mature Plantations 69,939 201,286 271,225 129,075 9,041 138,116 133,108 142,149

Immature Plantations 201,286 ( 201,286) – – – – – –

Buildings 64,024 – 64,024 39,844 2,561 42,405 21,619 24,180

Leasehold Property 26,164 – 26,164 26,164 – 26,164 – –

378,166 – 378,166 203,643 12,142 215,784 162,381 174,523

Note : Investment in plantation assets which were immature at the time of handing over to the Company by way of estate leases are shown under

immature plantation ( revalued as at 22 June 1992). Further, investment in such immature plantations to bring them to maturity are shown

under Note 12. When these plantations become mature, the additional investment to bring them to maturity will be moved from the

category immature plantations to mature plantations under Note -12 and a corresponding move from immature plantations to mature

plantations will be made in the above.







14. INTANGIBLE ASSETS

CONSOLIDATED

As at 31 March 2009 2008

Rs. ’000 Rs. ’000

License Fees ( Note -14.1) 112,077 128,491

FLAG Cable ( Note -14.2) 2,673,335 –

Software Cost & Implementation ( Note -14.3) 1,596 1,343

2,787,008 129,834

14.1 License Fees

Balance at the beginning of the year 128,491 144,905

Less: Amortised during the year ( 16,414) ( 16,414)

Balance at the end of the year 112,077 128,491

Licence fee represent the operator license fee of Rs. 300 Mn which was paid in 1996, amortised over 226 months on straight line basis

commencing from that year. The External Gateway License fee of Rs. 4.85 Mn which was paid in 2003 is amortised over the period of 10

years, commencing from 01 March 2003.

14.2 FLAG Cable

Cost

Additions during the year 2,797,761 –

Balance at the end of the year 2,797,761 –

Accumulated Amortisation

Amortised during the year 124,426

Balance at the end of the year 124,426 –

Net book value 2,673,335 –

FLAG expenditure represents the expenditure incurred on under sea fiber optic cable and landing station, which enables Lanka Bell Ltd., to

offer direct global connectivity and a complete end to end data connectivity solution, with guaranteed reliability. The total expenditure will be

amortised over the license period of 15 years based on straight line basis from August 2008.

14.3 Software Cost & Implementation

Cost


Additions during the year 650 523


Accumulated Amortisation


Property, Plant & Equipment ( 38) –

Amortised during the year 435 363


Net book value 1,596 1,343




15. INVESTMENTS IN SUBSIDIARIES

Company

Investee % Holding No. of Shares Market Value Company

As at 31 March 2009 2008 2009 2008 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Quoted Investments

Balangoda Plantations PLC 43 43 10,200,000 10,200,000 137,700 357,000 430,007 430,007

Madulsima Plantations PLC – 31 – 9,000,000 – 155,250 – 90,000

The Lanka Hospitals Corporation PLC – 63 – 64,353,000 – 1,029,648 – 965,295

Total Quoted Investments 137,700 1,541,898 430,007 1,485,302

Unquoted Investments

Beruwala Distillery ( Pvt) Ltd. 100 100 2,600,000 2,600,000 – – 26,000 26,000

Timpex ( Pvt) Ltd. 51 51 15,611,661 15,611,661 – – 156,117 156,117

Milford Holdings ( Pvt) Ltd. - Pending Allotment* – – 133,833,580 133,833,580 – – 1,338,336 1,338,336

Milford Holdings ( Pvt) Ltd. 98 98 766,344,998 766,344,998 – – 7,663,500 7,663,500

AION SG Residencies ( Pvt) Ltd. 100 – 2,500,000 – – – 25,000 –

Periceyl ( Pvt) Ltd. 100 100 40,000 40,000 – – 113,700 113,700

Collision Repair Centre ( Pvt) Ltd. ( Note-15.1) 100 100 15,500,000 15,500,000 – – 155,000 155,000

Collision Repair Centre ( Pvt) Ltd. - Pending Allotment* 15,500,000 – – – 155,000 –

– – – 9,632.653 9,452,653

Provision for fall in value of Investment – – – – ( 117,618)

Total Unquoted Investments – – – 9,632.653 9,335,035

– – – 10,062,660 10,820,337

15.1 Investment in Collision Repair Centre ( Pvt) Ltd.

Collision Repair Centre ( Pvt) Ltd. provides exclusive vehicle repair services to the “Formula Plus” policyholders of Sri Lanka Insurance Corporation.

The Directors of the Company are of the opinion that it is too premature to consider impairment of this investment consequent to the Supreme Court order

regarding the sale of Sri Lanka Insurance Corporation Ltd.

* Refer Note 38.2 and 38.3.

16. INVESTMENTS IN EQUITY ACCOUNTED INVESTEES


As at 31 March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Aitken Spence PLC 548,904 548,904 548,904 548,904

Reclassifications during the year

Madulsima Plantations PLC 90,000 – 90,000 –

The Lanka Hospitals Corporation PLC 959,610 – 959,610 –

Splendor Media ( Pvt) Ltd. 250 – 250 –

1,598,764 548,904 1,598,764 548,904

Provision for fall in value of Investment – – ( 27,163) –

Investment by Subsidiaries 250 793,808 – –

Unrealised Profits ( 475,612) ( 475,267) – –

Negative Goodwill on Acquisition 89,186 89,186 – –

Group Share of Associate Company Retained Profits 2,155,706 2,177,603 – –

3,368,294 3,134,234 1,571,601 548,904




16.1 SHARE OF PROFITS FROM EQUITY ACCOUNTED INVESTEES

( Net of Income Tax)

CONSOLIDATED

As at 31 March 2009 2008

Rs. ’000 Rs. ’000

The Lanka Hospitals Corporation PLC 11,758 –

Splendor Media ( Pvt) Ltd. 6,380 –

Aitken Spence PLC 351,085 546,680

Madulsima Plantations PLC ( 32,660) –

336,563 546,680

Name of the Subsidiary/Associate Principal Activity Company Group Financial

Holding % Holding % Year End

Subsidiaries

Balangoda Plantations PLC Cultivation and processing of Tea & Rubber 43.15 43.15 31 Dec

Beruwala Distillery ( Pvt) Ltd.** Manufacture of Coconut Spirit 100.00 100.00 31 March

Timpex ( Pvt) Ltd. Investment Company 51.03 51.03 31 March

Texpro Industries Ltd.*( a) Dyeing and Printing Woven Fabrics – 43.35 31 March

Periceyl ( Pvt) Ltd. Distribution of locally manufactured Foreign Liquor 100.00 100.00 31 Dec

Milford Holdings ( Pvt) Ltd. Investment Company 98.08 98.08 31 March

Lanka Bell Ltd.*( b) Telecommunication Services – 97.81 31 March

National Asset Management Ltd.*( b) Fund / Unit Trust Management – 68.66 31 March

Collision Repair Centre ( Pvt) Ltd. Repairing of Vehicles 100.00 100.00 31 March

AION SG Residencies ( Pvt) Ltd. Property Development 100.00 100.00 31 March

Bellvantage ( Pvt) Ltd.*( c) BPO, KPO & Software Development – 97.81 31 March

Bell Solutions ( Pvt) Ltd.*( c) Information & Communication Technology – 97.81 31 March

Lanka Bell Services ( Pvt) Ltd.*( c) Telecommunication Services – 97.81 31 March

Associates

Splendor Media ( Pvt) Ltd. Media Buying & Creative Services 25.00 49.48 31 March

Aitken Spence PLC*** Diversified 17.21 17.21 31 March

The Lanka Hospitals Corporation PLC Healthcare Services 28.76 28.76 31 March

Madulsima Plantations PLC Cultivation and Processing of Tea 31.00 31.00 31 Dec

* Indirect holding through subsidiaries.

( a) Timpex ( Pvt) Ltd.

( b) Milford Holdings ( Pvt) Ltd.

( c) Lanka Bell Ltd.

** Beruwala Distillery ( Pvt) Limited transfered its operations to the Parent Company ( DCSL) on 01 March 2009, but continue to lease its

premises to DCSL for this purpose.

*** Aitken Spence PLC continue to be treated associate since it is beleive that DCSL exerts significant influence on the Management of the

Company




17. OTHER INVESTMENTS


As at 31 March 2009 2008 2009 2008

Note Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Non CurrentInvestments in Unit Trust and Other Investments 17.1 43,770 59,047 15,750 15,750

Investments in Debentures – 3,957,035 – –

Other Long Term Investments 17.2 2,650 4,651 – –

Investment in Government Securities – 21,604,701 – ––

Other Long Term Investments 46,420 25,625,434 15,750 15,750

CurrentInvestments in Equity Securities 17.3 1,325,803 9,792,558 1,325,803 1,198,053

Investments in Preference Shares 17.4 – 450,000 – –

Investments in Unit Trust Group 17.1.3 – 1,366,354 – -

Investments in Fixed Deposits 361,000 1,452,797 – –

Investment in Treasury Bills 240,535 280,405 – –

Treasury Bonds – 65,339 – –

Treasury Bonds ( REPO) – 7,293,970 – –

Loans to Companies – 31,450 – –

Central Finance Lease Trusts – 10,000 – –

Short Term Investments 1,927,338 20,742,873 1,325,803 1,198,053

17.1 Investments in Unit Trust and Other Investments

2009 2008

As at 31 March No. of Carrying Market No. of CarryingUnits Value Value Units Value

Rs. ’000 Rs. ’000 Rs. ’000

17.1.1 Company

Equity Investments Lanka Ltd. 1,125,000 13,500 – 1,125,000 13,500

Unit Trust Mgt. Co., Ltd. 300,000 3,000 – 300,000 3,000

16,500 – 16,500

Provision for decline in value other than temporary ( 750) – ( 750)

15,750 – 15,750

17.1.2 Subsidiaries

Metal Packaging Ltd. 23,400 1,170 – 23,400 1,170

Compak Morison ( Lanka) Ltd. 8,000 80 – 8,000 80

Lanka Ventures Ltd. 50,500 1,010 290 50,500 1,010

Samson Reclaim Rubbers Ltd. 100,000 2,500 3,115 100,000 2,500

NAMAL Flexi Income Fund – – – – 15,000

NAMAL Money Market Fund 1,222,129 12,729 12,735 1,222,129 12,729

NAMAL Guilt Edge Fund 1,250,337 12,500 12,778 1,250,337 12,500

Total Value of investment in Unit Trust & Other investments 29,989 28,918 44,989

Provision for fall in Value in Investments ( 1,969) – ( 1,692)

Net Carrying Value of Investment in Unit Trust 28,020 28,918 43,297

43,770 59,047

17.1.3 Investment In Unit Trust Group 1,366,354

Metal Packaging Limited and Compak Morison ( Lanka) Ltd are under liquidation. Hence full provision have been made in NAMAL books.




17.2 Other Long Term Investments

2009 2008

As at 31 March No. of Carrying Market No. of Carrying

Shares Value Value Shares Value

Rs. ’000 Rs. ’000 Rs. ’000

Bank, Finance & Insurance

National Development Bank PLC 1,626 150 144 1,626 150

VINC Advertising ( Pvt) Ltd. 250,000 2,500 – 250,000 2,500

Lanka Bell Services ( Pvt) Ltd.* – – – 100,000 1,000

Bell Solutions ( Pvt) Ltd.* – – – 100,000 1,000

Bellvantage ( Pvt) Ltd.* – – – 100 12,650 144 4,651

* These companies have been considered as subsidiaries during the year and are consolidated in the Financial Statements.

17.3 Investments in Equity Securities

17.3.1. Investments in Equity Securities - Quoted

Company

Bank, Finance and Insurance

Asia Capital PLC 108,680 3,055 625 108,680 3,055

CF Venture Fund PLC 692,200 12,376 10,729 692,200 12,376

Commercial Bank of Ceylon PLC 5,182,614 255,779 410,722 5,182,614 255,779

DFCC Bank PLC 8,407,628 586,525 571,719 8,407,628 586,525

Hatton National Bank PLC 5,961,708 272,013 465,013 2,980,854 272,013

Hatton National Bank PLC – ( Non-voting) 675,132 19,950 25,655 675,132 19,950

Lanka Ventures PLC 250,000 5,000 1,438 250,000 5,000

Merchant Bank of Sri Lanka PLC 959,911 50,854 8,639 959,911 50,854

Seylan Bank PLC 98,700 1,806 3,553 98,700 1,806

Seylan Bank PLC – ( Non-voting) 98,700 1,234 542 98,700 1,234

1,208,592 1,498,635 1,208,592

Beverages, Foods and Tobacco

International Distilleries Lanka Ltd. 100 3 – 100 3

Lanka Milk Foods ( CWE) PLC 572,800 3,244 21,766 572,800 3,244

3,247 21,766 3,247

Hotel and Travels

Browns Beach Hotels PLC 329,921 6,510 9,568 329,921 6,5106,510 9,568 6,510

Manufacturing

Dankotuwa Porcelain PLC 83,333 3,667 437 1,000,000 3,6673,667 437 3,667

Diversified Investments

Hayleys PLC 36,739 2,190 3,307 36,739 2,190

John Keels Holdings PLC 2,000,000 128,000 125,500 – –130,190 128,807 2,190

Hospitals

Asiri Hospitals PLC 354,187 16,718 19,480 354,187 16,71816,718 19,480 16,718

17.3.2. Investments in Equity Securities - Un Quoted

W. M. Mendis & Co., Ltd. 200 4 – 200 4

Splendor Media ( Pvt) Ltd. – – – 25,000 2504 – 254

Total Non-Current Investments in Equity Securities 1.368,928 1,678,693 1,241,178

Provision for Fall in Value of Investments ( 43,125) – ( 43,125)

Company Total 1,325,803 1,678,693 1,198,053




17.3.2. Investments in Equity Securities - Un Quoted ( Contd.,)

As at 31 March 2009 2008Cost Cost

Consolidated Rs. ’000 Rs. ’000

Advertising – 2,750

Bank, Finance and Insurance – 3,105,733

Beverage, Food & Tobacco – 653,679

Footwear and Textiles – 58,234

Hotel and Travels – 92,640

Manufacturing – 312,522

Investment Trust – 15

Trading – –

Health Care – 1,484,349

Construction and Engineering – –

Information Technology – 54,639

Diversified Investments – 749,398

Telecommunications – 1,568,471

Plantations – 25,217

Power and Energy – 464,151

Total Gross Carrying Value of Investments in Quoted Equity Securities – 8,571,798

Provision for Non-Recoverable Investments in Quoted Equity Securities – ( 12,633)

Total Net Carrying Value of Investments in Quoted Equity Securities – 8,559,165

Total Gross Carrying Value of Investments in Un-Quoted Equity Securities – 40,570

Allowance for Decline in value other than Temporary – ( 5,230)

Total Net Carrying Value of Investments in Un Quoted Equity Securities – 35,340

Consolidated Net Carrying Value of Investments in Equity Securities – 9,792,558

17.4 Investments in Preference Shares

As at 31 March No. of Redeemable CarryingShares Date Value

Investee 2008 2008

Commercial Bank of Ceylon PLC 5,000,000 13.05.2008 500,000Provision for fall in Value of Investments ( 50,000)

Total Gross Investments in Preference Shares 450,000

18. GOODWILL ON ACQUISITION

CONSOLIDATED

As at 31 March 2009 2008

Rs. ’000 Rs. ’000

Cost

At the Beginning of the Year 4,143,856 4,143,856

Adjustment on discontinuing operations ( 3,697,425) –

At the End of the Year 446,431 4,143,856

Amortisation

At the Beginning of the Year 1,772,756 1,772,756

Adjustment on discontinuing operations ( 1,581,771) –

At the End of the Year 190,985 1,772,756

Carrying Amount 255,446 2,371,100

Goodwill on acquisition represents the excess of purchase price over the net tangible assets acquired, in respect of the acquisition of

Balangoda Plantations PLC and Timpex ( Pvt) Ltd.




19. INVENTORIES


As at 31 March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Raw Materials 1,149,464 938,012 974,780 646,482

Harvested Crop 215,153 299,074 – –

Nurseries 12,249 12,300 – –

Packing & Other Materials 2,539,391 2,786,411 516,952 301,250

Work-in-Progress 201,678 228,269 111,764 130,148

Finished Goods 414,746 624,199 253,605 339,973

Pharmaceutical Items – 30,685 – –

Stationery & Miscellaneous 15,873 – – –

Goods in Transit 16,347 3,975 – –4,564,901 4,922,925 1,857,101 1,417,853

Provision for Obsolete Inventories ( 293,144) ( 246,345) ( 5,443) –

4,271,757 4,676,580 1,851,658 1,417,853

20. TRADE & OTHER RECEIVABLES

Trade Receivables 4,042,889 3,498,578 1,571,066 1,149,329

Other Receivables 962,161 2,027,097 71,299 141,905

Deposits, Advances and Prepayments 598,915 746,096 586,650 514,151

Accrued Income – 47 – –

Loans to Company Officers 389 21,375 – –

Tax Recoverable ( Note 20.1) 188,088 169,154 – –

5,792,442 6,462,347 2,229,015 1,805,385

Provision for Bad and Doubtful Debts ( 1,547,092) ( 1,367,643) ( 51,682) ( 17,282)

4,245,350 5,094,704 2,177,333 1,788,103

Premium Receivable – 1,084,479 – –

Reinsurance Receivable – 930,706 – –

– 2,015,185 – –

Total Trade and Other Receivables 4,245,350 7,109,889 2,177,333 1,788,103

20.1 Tax Recoverable

Tax recoverable includes, GST receivable of Rs. 3,178,080, Tax recoverable of Rs. 14,255,682 and VAT recoverable of Rs. 79,833,658

relating to Texpro Industries Ltd. The Management of Texpro Industries Limited is of the view that these amounts are recoverable and

accordingly no provision has been made for the said balance.

21. AMOUNTS DUE FROM SUBSIDIARIES

Beruwala Distillery Pvt) Limited – – – 65,565

Sri Lanka Insurance Corporation Ltd – – – 29,840

AION SG Residencies ( Pvt) Ltd – – 9,769 –

Periceyl ( Pvt) Ltd – – – 126,563

Collision Repair Centre ( Pvt) Ltd ( Note 21.1) – – 84,440 69,000

Lanka Bell Limited – – 8,200 9

Texpro Industries Ltd. – – 4,270 –

– – 106,679 290,977

21.1 This amount includes a temporary loan given to Collision Repair Centre ( Pvt) Limited, at 22% interest per annum.




22. AMOUNTS DUE FROM ASSOCIATES AND RELATED COMPANIES


As at 31 March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Stassen Exports Limited ( Note 22.1) 226,397 693,877 195,441 606,125 Stassen Natural Foods ( Pvt) Ltd. 25 – – –Lanka Milk Foods ( CWE) PLC 2,640 107 2,620 –Ace Cargo ( Pvt) Ltd. 41 22 – –Ace Distriparks ( Pvt) Ltd. 59 16 – –Browns Beach Hotels PLC 406 – 314 –The Lanka Hospitals Corporations PLC 17,145 – 12,393 –Ace Power Generation Matara Ltd. – 4 – –AION SG Residencies ( Pvt) Ltd. – 17 – –Aitken Spence PLC 4 4 – –Aitken Spence Hotel Holdings PLC 3,460 48 – –Splendor Media ( Pvt) Ltd. 6,030 – – –Spence Shipping ( Pvt) Ltd. 580 – – –Hatton National Bank PLC 4,528 – – –Madulsima Plantation PLC ( Note 22.2) 69,336 – 67,123 –Aitken Spence Overseas Travel Services 298 285 – –Lanka Stassens Distributors ( Pvt) Ltd. 124 126 – –Neptune Ayurvedic Village ( Pvt) Ltd. 107 148 – –Pattipola Livestock Co. Ltd. 6 6 – –Milford Exports ( Ceylon) Ltd. ( Note 22.3) 102,875 236,107 – –Heritance Hotel - Ahungalla 91 – – –Heritance Kandalama Hotel Ltd. 347 – – –E-Chanelling PLC 211 46 – –Sri Lanka Insurance Corporation Ltd. 44,297 – 44,297 –

479,007 930,813 322,188 606,125

22.1 The above amount includes a short term loan given by Distilleries Company of Sri Lanka PLC of Rs. 100 Mn at 15% interest per annum and

outstanding as at 31 March 2009. The principal was settled in full in May 2009. Further Rs. 13 Mn being the balance of a loan given by Milford

Holdings ( Pvt) Ltd., to Staseen Exports Ltd., at an interest of 15% per annum along with accrued interest is included in the above balance.The

principal was settled in full in June 2009.

22.2 This amount represents the balance remaining on a short term loan given to Madulsima Plantations PLC along with the interest accrued at

22% per annum.

22.3 This amount represents the balance of a loan given by Milford Holdings ( Pvt) Ltd., of Rs. 37 Mn at an interest of 15% per annum along with

accrued interest. The principal was fully settled in June 2009.

23. SHORT TERM DEPOSITS

Call and Fixed Deposits 335,561 727,490 41,980 459,293

335,561 727,490 41,980 459,293

24. BANK & CASH BALANCES

Cash at Bank and in Hand 773,547 2,342,209 216,419 80,500

Cash in Transit 111,131 238,879 111,131 236,598

884,678 2,581,088 327,550 317,098

25. STATED CAPITAL

300,000,000 Ordinary Shares 300,000 300,000 300,000 300,000

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at

meetings of the shareholders.




CONSOLIDATED

As at 31 March 2009 2008

Rs. ’000 Rs. ’000

26. INSURANCE PROVISION

26.1 INSURANCE PROVISION - LIFE

Life Insurance Fund as at 1 January – 30,885,268

Movement of the Fund – 3,527,971

Transfers of Surplus from Long Term Insurance Business – ( 275,000)

Life Insurance Fund as at 31 December – 34,138,239

Policyholder Outstanding Claims – 940,800

Transfer to Shareholder's Fund – 523,998

Surplus on Revaluation of Property, Plant & Equipment – 4,992

Deferred Tax effect on Revaluation – 4,168

General Reserve – 42,100– 1,516,058

Insurance Provision - Life as at 31 December 2007 – 35,654,297

26.2 INSURANCE PROVISION - NON LIFE

PremiumsUnearned Premium

Gross – 3,917,585

Reinsurance – ( 614,126)

Net – 3,303,459

Unexpired Risks

Gross – 1,238,565

Reinsurance – ( 348,987)

Net – 889,578

Deferred Income on Reinsurance Commission – 46,573

Deferred Acquisition Expenses – ( 241,469)– ( 194,896)

– 3,998,141

Gross Claims Reserve

Claims Outstanding ( Gross) – 3,297,956

Claims Incurred But Not Reported ( IBNR) – 1,443,495

Catastrophe ( CAT) – 90,000

Contingency – 1,058,132

Claims Reserve Total – 5,889,583

Insurance Provision - Non Life as at 31 December 2007 – 9,887,724

Technical Reserve

Insurance Provision – 9,887,724

Reinsurance on Claims Reserve – ( 653,815)

Technical Reserve as at 31 December 2007 – 9,233,909




27. INTEREST BEARING LOANS & BORROWINGS


As at 31 March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Repayable after one year

Term Loan 27( a) 1,113,120 922,377 – –

Lease Creditors JEDB/SLPC Estates 27( b) 106,505 145,026 – –

Trust Loan – 3,592 – –

Long Term Loan – 122,464 – –

1,219,625 1,193,459 – –

Repayable within one year

Term Loan 27( a) 1,719,785 209,765 – –

Finance Lease Obligations JEDB/SLPA Estates 27( b) 1,358 1,756 – –

Bank & Other Borrowings 2,236,435 5,460,511 920,154 2,648,106

Debentures 27( c) – 100,000 – –

3,957,578 5,772,032 920,154 2,648,106

27( a) Term Loans

Balangoda Lanka Madulsima Total Total

Plantations Lanka Bell Hospitals Texpro Plantations 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

At the beginning of the yearPayable after one year 157,192 400,000 219,823 56,601 88,761 922,377 1,179,545Payable within one year 37,819 – 87,489 60,429 21,907 207,644 220,416

195,011 400,000 307,312 117,030 110,668 1,130,021 1,399,961

Adjustments – – ( 307,312) – ( 110,668) ( 417,980) –Add: Loans obtained during the year 10,079 4,476,507 – 511,853 – 4,998,439 –Less: Repayments during the year ( 39,942) ( 2,777,204) – ( 60,429) – ( 2,877,575) ( 269,940)

Balance at the end of the year 27( a)( i) 165,146 2,099,303 – 568,454 – 2,832,905 1,130,021Less: Payable within one year ( 45,778) ( 1,278,881) – ( 395,126) – ( 1,719,785) ( 207,644)

119,368 820,422 – 173,328 – 1,113,120 922,377

27( a) ( 1)Texpro Industries Ltd.

As at 31 March 2009 2008

Rs. ’000 Rs. ’000

Long Term Loans

Bank borrowings ( Note 27.( a) 1.1) 60,089 117,030

Long Term Loan - Stassen Exports Ltd. ( Interest Free) 139,962 124,087

Current portion of Non-Current Borrowings ( 26,723) ( 62,740)

Loans due after one Year 173,328 178,377

Loans due within one Year 26,722 62,740

Short Term Borrowings 368,404 283,856

Total Borrowings 568,454 524,973




Note 27( a)1.1 Details of bank borrowings outstanding as at the balance sheet date are given below:

Bank Loan Principal Amount Amount Interest Rates Repayment MonthlyLoan outstanding as outstanding as Basis Repayment

at 31/03/2009 at 31/03/2008Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Hatton National Bank 118,170 5,367 6,531 Interest Free 60 monthly instalments 2,085from July 2003.

Hatton National Bank – – 18,623 LIBOR+2.5% 60 monthly instalments –from July 2003.

Hatton National Bank – – 8,240 LIBOR+1.5% 60 monthly instalments –from July 2005.

Hatton National Bank 15,098 10,599 13,874 3 mths LIBOR+1.5% 53 monthly instalments 300from September 2006.

Hatton National Bank 24,670 1,386 19,399 3 mths LIBOR+1.5% 18 monthly instalments 2,263x9from December 2007. 754x8

538x1

Peoples Bank 57,934 42,737 50,363 LIBOR+6.5% 60 monthly instalments 965from August 2007.

215,872 60,089 117,030

These loans were utilised to purchase plant and machinery and secured by a primary mortgage over land, buildings and immovable assets.

Balangoda Plantations PLC

Lender / Loan No. Repayable Repayable Balance as Balance as Nominal rateAsian Development Bank within 1 year after 1 year at 31/12/08 at 31/12/07 of interest Terms of Repayment( Through the DFCC Bank) Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 %

0000029143 1,983 5,948 7,931 9,914 15.71 120 equal monthly instalments at Rs. 165,234commencing from 30.11.2002.

0000029144 5,272 15,815 21,087 26,359 13.60 120 equal monthly instalments at Rs. 439,314 commencing from 30.11.2002.

0000029671 8,834 32,390 41,224 50,058 11.75 120 equal monthly instalments after a grace period of 60 months from the date of first disbursement.

0000030320 8,155 38,735 46,889 55,043 13.10 120 equal monthly instalments after a grace period of 60 months from the date of first disbursement

0000030714 9,557 25,484 35,042 44,599 12.44 96 equal monthly instalments after a grace period 48 months from the date of First disbursement.

HNB Bank 03-4366201-01 4,020 998 5,018 9,038 10.50 59 equal monthly instalments at Rs. 335,000 after a grace period of 12 months from the dateof disbursement and a final installment of Rs. 235,000.

People’s Leasing Company 7,957 – 7,957 – – 12 equal monthly instalments at Rs. 1,226,552commencing from 04.08.2008.

45,778 119,370 165,148 195,011 –

Securities Pledged

DFCC Bank

Primary mortgage over the Leasehold rights to the land and building of Palmgarden, Pettiagalla and Balangoda Estates.

Further mortgage over the leasehold rights to the land and building of Palmgarden, Pettiagalla and Galatura Estates.

Primary mortgage over the leasehold rights to the land and buildings of Balangoda, Meddekande and Rasagalla Estates.

Hatton National Bank PLC

Primary floating mortgage bond over the immovable property of Walaboda Estate.





Amount Balance Balance NominalLender Obtained as at as at rate of Terms of Repayment( i) National Development Bank 31/12/08 31/12/07 Interest

Rs. ’000 Rs. ’000 Rs. ’000 %

Term Loan - 400203 18,810 – 7,210 13.33 Repayable over 120 monthly instalments commencing from 30.11.2001.

- 400228 21,779 – 10,527 13.90 Repayable over 120 monthly instalments commencing from 30.11.2002.


- 400228 15,851 – 7,661 9.65 Repayable over 120 monthly instalments commencing from 30.11.2002.


- 400228 1,898 – 917 9.65 Repayable over 120 monthly instalments commencing from 30.11.2002.

78,409 – 33,932

Security: Leasehold rights to the land and building of EI Teb and Kirkoswald Estates.


Amount Balance Balance NominalObtained as at as at rate of Terms of Repayment

ii) DFCC Bank 31/12/08 31/12/07 InterestRs. ’000 Rs. ’000 Rs. ’000 %

Term Loan - 29670/1 5,736 – 3,249 13.55 Repayable over 120 monthly 23,833 – 13,503 13.55 instalments commenced

9,369 – 5,308 13.55 from 14.08.2003.

Term Loan - 30421/1 8,140 – 5,494 14.00 Repayable over 120 monthly 21,449 – 14,478 14.00 instalments commenced

2,446 – 1,652 14.00 from 29.09.2004.

Term Loan - 30715/1 15,612 – 9,270 14.00 Repayable over 96 monthly 14,274 – 8,475 14.00 instalments commenced 25,779 – 15,307 14.00 from 10.10.2004.

126,638 – 76,736

Amount Balance Balance NominalLender Obtained as at as at rate of( iii) HNB Bank 31/12/08 31/12/07 Interest

Rs. ’000 Rs. ’000 Rs. ’000 %

Payable within one year – – 21,907 –Payable after one year – – 88,761 –

– – 110,668 – .




The Lanka Hospitals Corporation PLC

As at 31 March 2009 2008

Rs. ’000 Rs. ’000

Bank BorrowingsSyndicate Loan ( Note 27.( a).1.1) – 204,176NDB Loan ( Note 27.( a).1.2) – 102,100State Bank of India ( Note 27.( a).1.3) – 1,036

– 307,312

Amount payable within one year – 87,490

Amount payable after one year – 219,822

– 307,312

27.( a).1.1 Syndicate LoanNational Development Bank – 51,044Hatton National Bank – 102,088Seylan Bank – 51,044

– 204,176

RepaymentsThe syndicate loan shall be repaid by the Company in 32 consecutive quarterly instalments commencing from the last business day ofthe first quarter after the second anniversary date of the first disbursement ( November 2001) of such syndicate loan.

Interest RateThe Interest Rate payable by the Company is computed at the interest rate of the one year weighted average treasury bills rate prevailing immediately prior to each interest review period plus 6% per annum. However, in the event of making the payment regularly and punctually, a rebate of 3% per annum is applicable to this interest rate.

SecuritySecurity for the above syndicate loan provided were as follows.

Partial GuaranteePartial Guarantee is provided by the International Finance Corporation in terms of the partial syndicate loan guarantee agreement to themaximum value of Rs.230,000,000 for the principal amount excluding interest, penalty interest, late payment charges.

Non Guarantee portion of the syndicate loan

The Non Guaranteed portion of the syndicate will be subject to the following security

a) A primary concurrent mortgage over the movable and immovable assets of the Company.

b) An assignment of the project documents ( other than the investment agreement)

c) A secondary mortgage over the stock in trade, book debts and receivables.

27.( a).1.2 NDB Loan

As at 31 March 2009 2008

Rs. Rs.

National Development Bank – 102,100

RepaymentsThe Principal outstanding shall be repaid over a period of 8 years in 32 consecutive quarterly instalments after a grace period of 2 years.Such grace period shall be effective from the date of first disbursement ( November 2001)

Interest RateThe Interest Rate payable by the company is Computed at the interest rate of the simple average one year treasury bills rate prevailingsix months immediately prior to each interest review period plus 7% per annum. However, in the event of making the payment regularly and punctually, a rebate of 3% per annum is applicable to this interest rate.

SecurityThe Security provided for the above loan is as follows.

a) A primary concurrent mortgage over the movable and immovable assets of the Company.

b) An assignment of the project documents ( other than the investment agreement)

c) A secondary mortgage over the stock in trade, book debts and other receivables of the Company.




27.( a).1.3. State Bank of India Term Loan

As at 31 March 2009 2008

Rs. Rs.

State Bank of India – 1,036

RepaymentsThe Term Loan shall be repaid over a period of 5 years in 60 consecutive monthly instalments on or before the thirtieth day of each andevery month commencing from October 2003.

Interest RateThe fixed Interest Rate payable by the Company is 11.50% per annum.

SecuritySecurity is provided over the immovable assets of the company.

27.( b) Finance LeaseJEBD/SLPC Estates

Balangoda Plantations PLC Madulsima Plantations PLC 2009 2008

Repayable Repayable Repayable Repayable Repayable Repayable Repayable Repayable Total Totalwithin one after one after within within one after one after within after one within one

year year 5 years 2-5 years year year 5 years 2-5 years year yearRs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gross Liability 5,673 – 178,385 22,692 – – – – 201,077 278,015

Finance charges allowed to future periods ( 4,315) – ( 77,880) ( 16,692) – – – – ( 94,572) ( 132,989)

Net Liability to lessor 1,358 – 100,505 6,000 – – – – 106,505 145,026

The leases of the estates have been amended, with effect from 11 June 1996 to an amount substantially higher than the previous lease rental

of Rs. 500/- per estate per annum. The first rental payable under the revised basis is Rs.5.673 million for Balangoda Plantations PLC from

11 June 1996 to 10 June 1997. This amount is inflated annually by the Gross Domestic Product( GDP) deflator, and is in the form of a

contingent rental. The contingent rental charge to the Income Statement amounted to Rs. 10,778,967/- which is based on the GDP deflator

of 14% ( 2007).

27.( c) DEBENTURES

The Lanka Hospitals Corporation PLC

As at 31 March 2009 2008Rs. ‘ 000 Rs. ‘ 000

Balance at beginning of the year – 200,000Redeemed during the year – ( 100,000)

Amount payable within one year – 100,000

Amount payable after one year – –

Type of Debenture Redemption Amount Interest Floor-CapDate Obtained Rate Rates

100,000 Guaranteed Redeemable 7yr floating rate 2008 100,000 Avg.TB Rate+1.6% 15.6%-23.1%

100,000

Security:

The debentures are guaranteed by the International Finance Corporation ( IFC) and the Development Finance Corporation of Ceylon PLC ( DFCC),

as follows.




Amount Guaranteed

Principal InterestRs. Rs.

Name of the Guarantor

International Finance Corporation ( IFC) 50,000,000 34,200,000

Development Finance Corporation of Ceylon PLC ( DFCC) 50,000,000 34.200,000

100,000,000 68,400,000

28. DEFERRED TAXATION


As at 31 March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

28.1 Deferred Tax LiabilitiesBalance as at the beginning of the year 575,477 626,633 – 13,341Adjustment ( 579,905) 50,098 – –On acquisition of subsidiaries – 212 – –Transfered from/( to) Income Statement 102,162 ( 101,466) 73,095 ( 13,341)

Balance as at the end of the year 97,734 575,477 73,095 –

Deferred Tax Assets Balance as at the beginning of the year 37,608 17,784Transfered from/( to) Income Statement ( 24,706) 19,824

Balance as at the end of the year 12,902 37,608

Net Deferred Tax Liability as at the end of the year 84,832 537,866 73,095 –

28.2 In accordance with the BOI agreement dated 09 February 1993 and along with the revised agreement dated 18 August 2005 ,the profits and

income of Texpro Industries Limited were exempted from taxation until year of assessment 2008/09, and at the expiry of the said period the

following options were available for Texpro Industries Limited.

( a) Income tax payable for the year of assessment shall be computed at 2% of the Turnover of the Company or:

( b) The provisions of the Inland Revenue Laws imposed for the time being, imposed shall apply

On the expiration of the Tax exemption period the Company opted for option ( b), and deferred taxation has been computed accordingly. The

total deferred tax assets as at 31 March 2009 amounted to Rs. 185.232,719 based on the carried forward tax losses. The deferred tax

liability as at 31 March 2009 amounted to Rs. 91,834,836. As it is uncertain whether Texpro Industries Limited will have future taxable

profits to recover the full amount of Rs, 185,232,719 the deferred tax asset has been recognised only up to the deferred tax liability. Therefore

the unrecognised deferred tax assets as at 31 March 2009 was Rs. 93,397,883.

28.3 No deferred taxation has been provided for Lanka Bell Limited, a subsidiary of the company, since a majority of assets will be fully

depreciated before the expiration of the tax holiday period of 20 years.




29. RETIREMENT BENEFIT OBLIGATIONS

Provision for Retiring Gratuity


As at 31 March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

At the beginning of the year 1,101,569 928,069 109,600 74,685Acturial ( Gains)/Losses 85,556 – – –On acquisition of subsidiaries – 290 – –Provision for the year 11,892 276,672 758 46,621

1,199,017 1,205,031 110,358 121,306

Adjustments ( 563,125) – – –

Payments during the year ( 64,908) ( 103,462) ( 11,929) ( 11,706)

At the end of the year 570,984 1,101,569 98,429 109,600

29.1 The amounts recognised in the Balance Sheet are as follows

Present Value of Unfunded Obligations 570,984 – 98,429 –Total Present Value of Obligations 570,984 – 98,429 –Fair Value of Plan Assets – – – –Present Value of Net Obligations – – – –Unrecognised Actuarial ( Gain)/ Losses – – – –

Recognised Liability for Defined Benefit Obligations 570,984 – 98,429 –

29.2 The Group has adopted SLAS 16 ( Revised 2006) in determining this liability in respect of retiring gratuity. According to SLAS 16, actuarial

techniques should be used to make a reliable estimate of the amount of the retirement benefit obligation to the employees. The Group has

adopted the ‘ Project Unit Credit Method’ to determine the present value of the retiring benefit obligation as recommended by SLAS 16. The

actuarial valuation was carried out by M/s Actuarial & Management Consultants ( Pvt) Ltd in respect of Distilleries Company of Sri Lanka PLC,

Lanka Bell Limited, and Balangoda Plantations PLC. The estimate of the liability for the other subsidiaries in the Group has been carried out

using the ‘ Formula Method’. The liability is not externally funded.

29.3 The principal actuarial assumptions used in determining this obligation were;

a) Discount rate 10 – 11.50%b) Salary increment 10 – 11%c) Retirement age 55-60 years

It is proposed to obtain a valuation once in every three years.

30. DEFERRED INCOME

CONSOLIDATED

As at 31 March 2009 2008

Rs. ’000 Rs. ’000

At the beginning of the year 283,583 279,672

Disposal of Madulsima Plantations PLC ( 127,124) –

Grants Received during the year 59,046 18,231215,505 297,903

Amortised during the year ( 10,408) ( 14,320)

At the end of the year 205,097 283,583

The above amount represent funding received by Balangoda Plantations PLC from various governmental and Non-governmental Institutions forsocial and infrastructure development of estates.




31. TRADE AND OTHER PAYABLES


As at 31 March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Trade Payables 2,211,848 1,333,635 1,324,745 940,683

Other Payables and Accruals 1,361,794 4,101,095 61,883 24,375

Direct & Indirect Taxes Payable 31( a) 2,305,915 2,125,047 2,195,029 2,081,083

Reinsurance and Insurance Balances Payable 31( b) – 1,563,504 – –

Dividend Payables 114,745 69,652 113,723 67,500

5,994,302 9,192,933 3,695,380 3,113,641

31( a) Direct & Indirect Taxes Payable

Excise Duty 1,720,503 1,600,352 1,642,319 1,599,018

Value Added Tax 534,146 482,426 501,444 439,796

Social Responsibility Levy 24,635 23,985 24,635 23,985

Turnover Tax 1,276 18,284 1,276 18,284

Nation Building Levy 25,355 – 25,355 –2,305,915 2,125,047 2,195,029 2,081,083

31( b) Reinsurance and Insurance Balances Payable

Premium Received in Advance – 1,179,754 – –

Reinsurance Payable – 336,833 – –

Riot Fund Payable – 46,917 – –– 1,563,504 – –

The Premium Received in Advance in Non-Life includes an amount of Rs.518 million, which has not been identified with a specific list of

policies. As a result, this balance may include items which may in fact be premium earned that need to be transferred to the Income

Statement of the Non-Life.

32. AMOUNTS DUE TO RELATED COMPANIES AND SUBSIDIARIES

Stassen Exports Ltd. 63,939 120,069 – 1,562

Madulsima Plantations PLC 680 – – –

Splendor Media ( Pvt) Ltd. 28,422 – 25,841 –

Sri Lanka Insurance Corporation Ltd. 114 – – –

Beruwala Distillery ( Pvt) Ltd. – – 28,815 –

Milford Holdings ( Pvt) Ltd. – – 52,758 364,173

Periceyl ( Pvt) Ltd. – – 121,211 380,901

Ace International ( Pvt) Ltd. 32 – – –

Ace Distriparks( Pvt) Ltd. 133 – – –

Ace Cargo ( Pvt) Ltd. 78 – – –

Aitken Spence Cargo ( Pvt) Ltd. 1,250 – – –

94,648 120,069 228,625 746,636




33. CONTINGENT LIABILITIES

33.1 Pending Litigation

The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business. It is not anticipated that any

material liabilities will arise from such legal cases, nor are additional payments anticipated as of date. Accordingly, no provision has been

made for legal claims in the Financial Statements.

33.2 Distilleries Company of Sri Lanka PLC

The Company has filed two legal cases against W.M. Mendis and Co. Limited. There are no other material pending litigation by or against

the Company.

33.3 Lanka Bell Limited

Sri Lanka Customs ( SLC) carried out an investigation with regard to the importation of handsets / customer premise equipment under duty

free concessions. SLC is of the view that the handsets / customer premise equipment are being sold to the customers and does not form

part of the Company’s assets as such and therefore the Company is liable to pay duty at the time of importation of the equipment. Other

CDMA operators are also subject to similar inquiries and the matter is still under discussion.

33.4 Periceyl ( Pvt) Limited

On August 29, 2006 the Sri Lanka Customs initiated an investigation with regard to the importation of raw materials. The outcome of such

investigation is pending as of date. However, the management is confident that there will not be an unfavorable outcome in this regard.

34. COMPARATIVE FIGURES

To facilitate comparison balances pertaining to the previous year have been re-classified to conform to current year classifications and

presentation.




35. CAPITAL AND OTHER COMMITMENTSThere were no material capital expenditure approved by the Board of Directors as at 31 March 2009.

36. SEGMENTAL INFORMATION

( a) Turnover Consolidated

As at 31 March 2009 2008Rs. ’000 Rs. ’000

Beverages 30,469,637 27,950,731

Plantations 2,160,352 3,468,481

Financial Services – 15,106,683

Telecommunication 6,542,467 7,333,138

Healthcare – 1,919,468

Diversified 1,658,511 1,907,061 Gross Turnover 40,830,967 57,685,562

Less : Turnover based and Other Taxes ( 18,958,474) ( 16,992,680)

Less : Insurance Related Adjustments – ( 1,751,164)Net Turnover 21,872,493 38,941,718

( b) Industry Segment Profit

Beverages 4,225,051 3,147,097

Plantations 93,910 259,265

Financial Services – 946,313

Telecommunications 76,470 907,647

Healthcare – ( 259,324)

Diversified 281,380 479,928 4,676,811 5,480,926

Share of Associate Company Profits 336,563 546,680

Profit from Continuing Operations 5,013,374 6,027,606

Profit for the year of the Disposal Group 730,498 -

Consolidation Adjustment ( 630,634) ( 88,968)Net Profit Before Tax 5,113,238 5,938,638

Taxation ( 1,682,794) ( 1,763,938)Net Profit After Tax 3,430,444 4,174,700

Note

Plantations Sector

Prior year figures include Madulsima Plantations PLC which was classified as an associate in 2009.

Financial Services

Sri Lanka Insurance Corporations Ltd., has not been considered in the current year, while National Asset Management Ltd., has been

reclassified as a diversified investments.

Healthcare Sector

The Lanka Hospitals Corporation PLC is now classified as associate and not included in the current year.




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37 RELATED PARTY TRANSACTIONS

37.1 Details of significant related party transactions are given below,

Name of Company Name of Directors Nature of Interest Nature of Transaction Transaction Balance ( due to)Value / due from

as at 31.03.2009 ( Rs.) ( Rs.)

Milford Exports ( Ceylon) ( Pvt) Ltd. Mr. D.H.S.Jayawardena Parent Co. Dividend Paid 199,775,083

Mr. R.K.Obeyesekere

Periceyl ( Pvt) Limited Mr. D.H.S.Jayawardena Subsidiary Co. Dividend Received 18,900,000 ( 121,210,623)

Mr. R.K.Obeyesekere Purchases 295,654,953

Mr. C.R.Jansz Trf. of Debtor Collection 712,000,000

Balangoda Plantations PLC Mr. D.H.S.Jayawardena Subsidiary Co. Dividend Received 11,475,000

Mr. R.K.Obeyesekere Rent Paid 141,406

Mr. C.R.Jansz Purchase of Tea 51,048

Beruwala Distillery ( Pvt) Limited Mr. D.H.S.Jayawardena Subsidiary Co. Supply of Goods & Services 17,113,913 ( 28,815,171)

Mr. R.K.Obeyesekere Purchases 319,802,003

Mr. C.R.Jansz Sales of Fixed Assets 55,170,285

Rent 162,960

Staff Cost 193,948

Milford Holdings ( Pvt) Limited Mr. D.H.S.Jayawardena Subsidiary Co. Dividend Received 337,193,199 ( 52,758,046)

Mr. R.K.Obeyesekere Interest Paid 25,778,643

Mr. C.R.Jansz Loan Principal Settled 337,193,199

Texpro Industries Limited Mr. D.H.S.Jayawardena Subsidiary Co. Loan Interest 1,100,012 4,269,646

Mr. C.R.Jansz Purchases 792,813

Security & Electricity Charges 3,370,966

Collision Repair Centre ( Pvt) Ltd Mr. C.R.Jansz Subsidiary Co. Loan Interest 7,786,795 84,440,404

Loan Granted 73,000,000

Supply of Goods & Services 4,463,062

Repair Charges 806,464

AION SG Residencies ( Pvt) Ltd. Subsidiary Co. Supply of Services - Nil - 9,769,020

Madulsima Plantations PLC Mr. D.H.S.Jayawardena Associate Co. Loan Interest 6,392,652 67,123,319

Mr. R.K.Obeyesekere Loan Granted 100,000,000

Loan Principal Settled 39,269,333

Supply of Goods & Services 14,875

Aitken Spence PLC Mr. D.H.S.Jayawardena Associate Co. Dividend Received 32,608,485

Mr. N. de S. Deva Aditya

Lanka Hospitals Corporation PLC Mr. D.H.S.Jayawardena Associate Co. Supply of Goods & Services 13,121,874 12,393,204 ( up to 12.08.2009)

Mr. C.R Jansz ( up to 12.08.2009)

Splendor Media ( Pvt) Ltd. Associate Co. Dividend Received 168,750 ( 25,841,351)

Interest Paid 3,499,315

Loan Taken 10,000,000


Advertisement 357,849

Stassen Exports Limited Mr. D.H.S.Jayawardena Related Co. Dividend Paid 3,393,290 195,441,189

Mr. R.K.Obeyesekere Loan Principal Settled 402,500,000Loan Interest 57,503,425

Transport Charges 2,649,096

Repairs & Maintenance 1,218,426

Purchases 21,345,272

Rent Paid 858,429





37 RELATED PARTY TRANSACTIONS - ( Contd.,)

37.1 Details of significant related party transactions are given below,

Name of Company Name of Directors Nature of Interest Nature of Transaction Transaction Balance ( due to)Value / due from

as at 31.03.2009 ( Rs.) ( Rs.)

Lanka Dairies ( Pvt) Ltd. Mr. D.H.S.Jayawardena Related Co. Purchase of Milk Foods 17,950

Mr. R.K.Obeyesekere

Mr. C.R.Jansz

Ambewela Livestock Co., Ltd. Mr. D.H.S.Jayawardena Related Co. Sundry Sales 1,814,410 2,620,479

Mr. R.K.Obeyesekere Supply of Goods & Services 2,620,479

Mr. C.R.Jansz

Lanka Bell Limited Mr. D.H.S.Jayawardena Related Co. Loan Interest 6,395,068 8,200,395

Mr. C.R.Jansz Loan Granted 150,000,000

Loan Principal Setllted 150,000,000

Telephone Bills Paid 3,580,543

Supply of Goods & Services 1,658,700

Bell Solutions ( Pvt) Ltd. Mr. D.H.S.Jayawardena Related Co. Supply of Goods & Services 14,128,625

Mr. C.R.Jansz

Lanka Milk Foods ( CWE) PLC Mr. D.H.S.Jayawardena Related Co. Dividend Received 687,360 2,620,479

Mr. R.K.Obeyesekere Dividend Paid 60,928,186

Mr. C.R.Jansz Purchase of Milk Foods 5,716,663Sundry Sales 1,814,410Supply of wood & services 2,620,479

Hatton National Bank PLC Mr. D.H.S.Jayawardena Related Co. Dividend Received 27,870,492

Mr. R.K.Obeyesekere Dividend Paid 2,859,307

Interest Paid 1,697,364

Loan Interest 6,455,622

Stand by Overdraft 30,000,000

Letters of Credit 230,000,000

Letters of Guarantee 3

Browns Beach Hotels PLC Mr. D.H.S.Jayawardena Related Co. Sales 3,487,136 314,085

Hotel Bills 1,786,560


Aitken Spence Hotel Holdings PLC Mr. D.H.S.Jayawardena Related Co. Hotel Bills 72,759

Sales 6,362,200

Sri Lanka Insurance Corp. Ltd. Related Co. 44,297,000

37.2 Transactions with Key Management Personnel

Key Management Personnel comprises the Directors of the Company and details of their compensation are given Note 08 to the Financial Statements




38. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

38.1 The Supreme Court Judgment on the Fundamental rights case regarding the Privatisation of Sri Lanka Insurance Corporation ( SLIC)

a) Invalidation of the Investment in Sri Lanka Insurance Corporation LimitedMilford Holdings ( Pvt) Limited ( MHL), a subsidiary of the Company, had been named as a respondent in a fundamental rights application filed in the Supreme Court challenging the sale of Sri Lanka Insurance Corporation Limited ( SLIC). As per the Judgment delivered by the Supreme Court of the Democratic Socialist Republic of Sri Lanka on 04 June 2009, the sale of 90% of the shares ofrespondent companies of SLIC to the Distilleries Consortium under and in terms of the Share Sales and Purchase Agreement ( SSPA)was illegal and invalid ab initio. It was also held that the legal ownership of the shares purported to have been sold to the DistilleriesConsortium shall vest in the Secretary to the Treasury. The Board of Directors of SLIC stood removed forthwith.

The Supreme Court also declared and directed that the shares of SLIC purported to have been sold to the Distilleries Consortium on 11April 2003 along with any shares purchased from the employees as per the SSPA shall be deemed to have been held for and on behalfof the Secretary to the Treasury. Further, the Secretary to the Treasury was directed to issue Treasury Bonds redeemable in 5 years fromthe date of judgment at interest rates which prevailed at that date in favour of MHL in a sum equal to the original investment of Rs. 6,050,000,000/- plus any amounts paid to purchase shares from the employees of SLIC subsequently. Further more, MHL was entitled to retain the profits of SLIC derived by MHL from 11 April 2003 to 04 June 2009 in lieu of the interest for the aforesaid sum. TheSecretary to the Treasury was directed to cause the profits of SLIC to be computed and audited from the date of the last audited BalanceSheet of SLIC to 04 June 2009 to enable MHL to obtain such profits.

b) Ruling by the Urgent Issues Task Force ( UITF) of the Institute of Chartered Accountants of Sri LankaThe Company has obtained a ruling from the Urgent Issues Task Force ( UITF) of the Institute of Chartered Accountants of Sri Lanka( ICASL) on the effect of the above judgment on the Consolidated Financial Statements. As per the ruling issued by the UITF on 31 July2009, the effect of the above mentioned Supreme Court judgment ( in the Consolidated Financial Statements of the company) does notqualify as a prior period error under SLAS 10 ( Revised 2005), “Accounting Policies, Changes in Accounting Estimates and Errors "

Further, adjustments on a current period basis in the consolidated Financial statements of Distilleries Company of Sri Lanka PLC for theFinancial year ending 31 March 2009 has been looked at in the context of the provisions of SLAS 12( revised 2005)-Events after theBalance Date, and SLAS 26 ( revised 2005)-Consolidated and Separate Financial Statements

c) Net Assets in Sri Lanka Insurance Corporation

The management has decided to classify the Investment in the Sri Lanka Insurance Corporation Limited and the effect of the change inthe share holding in Lanka Hospitals Corporation PLC and Aitken Spence PLC, which arose consequent to the Supreme Court Judgment,as ‘ Net assets in Sri Lanka Insurance Corporation PLC’ made up as follows,

Net AssetsRs.’000

Sri Lanka Insurance Corporation Limited 7,983,498Aitken Spence PLC 1,729,997Lanka Hospitals Corporation PLC 828,516

Total 10,542,011

d) Profit for the year attributable to SLIC Group.

ProfitRs.’000

Sri Lanka Insurance Corporation Limited 509,883Aitken Spence PLC 206,653 Lanka Hospitals Corporation PLC 13,962

Total 730,498

38.2 Collison Repair Centre ( Pvt) Ltd., a subsidiary of the Company alloted 15,500,000 ordinary shares at Rs. 10/- each to Distilleries Companyof Sri Lanka PLC consequent to a Rights Issue of 1: 1 carried out in May 2009.

38.3 Milford Holdings ( Pvt) Ltd, a subsidiary of the Company resolved to allot 133,833,580 shares to Distilleries Company of Sri Lanka PLC atRs. 10/- each in May 2009.

38.4 Due to the SLIC Judgement and the consequent change in the controlling interest of Lanka Hospitals Corporation PLC ( LHCL) a new Boradof Directors were appointed to LHCL on 12 August 2009.



General Information

STATEMENTS OF VALUE ADDED


For the Year Ended 31st March 2009 2008 2009 2008

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gross Turnover 40,830,967 57,685,562 29,569,825 27,416,021

Cost of Materials & Services purchased

from External sources ( 11,944,361) ( 33,242,317) ( 6,251,039) ( 6,834,519) 28,886,606 24,443,245 23,318,786 20,581,502

Other Operating Income 286,879 931,100 236,161 206,403 Interest/Dividend Income 399,938 5,127,467 640,524 241,525 Interest Expenses ( 734,513) ( 700,572) ( 158,050) ( 111,900)

Share of Profit of Equity Accounted Investees 336,563 546,680 – –Minority Interest ( 43,254) ( 73,945) – –

Value Added 29,132,219 30,273,975 24,037,421 20,917,530

Distributed as follows:

Consolidated 2009 As a % 2008 As a %

Rs. ’000 of Total Rs. ’000 of Total

To the State as Taxes 20,641,268 70.9 18,756,618 62.0 To Employees 2,523,630 8.7 4,789,510 15.8 To Providers of Capital 734,513 2.5 700,572 2.3

To Shareholders 675,000 2.3 525,000 1.7 Retained within the Business

As Depreciation 1,170,618 4.0 1,401,520 4.6 As Retained Profit 3,387,190 11.6 4,100,755 13.6

29,132,219 100.0 30,273,975 100.0

Company 2009 As a % 2008 As a %

Rs. ’000 of Total Rs. ’000 of Total

To the State as Taxes 19,634,734 81.7 17,491,353 83.6

To Employees 774,133 3.2 707,550 3.4 To Providers of Capital 158,050 0.7 111,900 0.5

To Shareholders 675,000 2.8 525,000 2.5 Retained within the Business

As Depreciation 113,068 0.5 100,198 0.5 As Retained Profit 2,682,436 11.1 1,981,529 9.5

24,037,421 100.0 20,917,530 100.0

Group

70%

9%

3%2%

16%

To the States TaxesTo EmployeesTo Providers of CapitalTo ShareholdersRetinad within the Business

61%16%

2%2%

19%

To the States TaxesTo EmployeesTo Providers of CapitalTo ShareholdersRetinad within the Business

2009 2008

To the State Taxes To Employees

To Providers of Capital

To ShareholdersRetained within the Business

ShArE hOLDEr INFOrMATION



General Information

1. Stock Exchange Listing

The Issued Ordinary Shares of the Company are listed with the Colombo Stock Exchange.

Ticker Symbol - DIST.N0000

Market Sector - Beverage, Food & Tobacco

2. Distribution of Shareholding

31 March 2009 31 March 2008

No. of Total % No. of Total %Holding Shareholders Holding Holding Shareholders Holding Holding

Upto to 10,000 12,341 10,424,225 3.48 12,604 11,000,475 3.67

10,001 to 50,000 246 5,253,194 1.75 284 6,278,512 2.09

50,001 to 100,000 32 2,244,581 0.75 37 2,700,097 0.90

100,001 to 1,000,000 44 11,683,700 3.89 49 14,789,900 4.93

1,000,001 to 5,000,000 11 22,793,100 7.60 17 33,506,316 11.17

Over 5,000,001 6 247,601,200 82.53 6 231,724,700 77.24

12,680 300,000,000 100.00 12,997 300,000,000 100.00

Percentage of Shares held by the public : 34.3%

3. Analysis of Shareholding

No. of Shareholders Holding % of Holding

Individuals 12,436 81,724,161 27.24

Institutions 244 218,275,839 72.76

12,680 300,000,000 100.00

Resident 12,574 264,081,750 88.03

Non-Resident 106 35,918,250 11.97

12,680 300,000,000 100.00



General Information

ShArE hOLDEr INFOrMATION

20 Major Shareholders As at 31st March

2009 2008

Rank Name No. of % of Issued No. of % of IssuedShares Capital Shares Capital

1 Milford Exports ( Ceylon) Limited 124,470,500 41.49 124,470,500 41.49

2 Lanka Milk Food ( CWE ) PLC 37,961,500 12.65 37,961,500 12.65

3 Mrs. Lorraine Estelle Marlene Yaseen 31,109,800 10.37 32,673,000 10.89

4 Mr. Muzaffar Ali Yaseen 24,582,600 8.19 19,933,900 6.64

5 Sri Lanka Insurance Corporation Ltd. - Life Fund 22,216,300 7.41 11,443,100 3.81

6 Sri Lanka Insurance Corporation Ltd. - General Fund 7,260,500 2.42 10,000 0.00

7 Ceylon Guardian Investment Trust PLC - A/C No. 01 4,004,100 1.33 2,368,700 0.79

8 Mrs. Shantha Marie Chrysostom 3,646,800 1.22 3,646,800 1.22

9 Mr. Kenneth Rudy Kamon 2,731,700 0.91 2,731,700 0.91

10 Bank of New York-Bear Stearns Securities 2,296,000 0.77 1,644,200 0.55

11 Stassen Exports Limited 2,114,200 0.70 2,114,200 0.70

12 Caceis Bank Luxembourg S/A Barca Global 2,106,900 0.70 _ _

13 Mrs. Raquel Ruhie Yaseen Yatawara 1,593,100 0.53 1,910,000 0.64

14 Hatton National Bank PLC 1,481,500 0.49 1,481,500 0.49

15 Deutsche Bank AG-National Equity Fund 1,400,000 0.47 – –

16 HSBC Intl Nom Ltd - HSBC Bank PLC - CMG 1,144,300 0.38 1,144,300 0.38

17 The Ceylon Investment PLC - A/C No. 02 1,098,000 0.37 1.098,000 0.37

18 Pershing LLC S/A Averbach Grauson & Co. 942,800 0.31 5,242,700 1.75

19 Ceylon Investment PLC - A/C No. 01 648,500 0.22 648,500 0.22

20 HSBC Intl Nom Ltd - SSBT - DEU 555,400 0.19 1,353,500 0.45

Total 273,364,500 91.12 251,876,100 83.86



General Information

DETAILS OF rEAL ESTATE

EXTENT

LOCATION A R P


Colombo 10 Head Office 1 1 13.7

Gampola Wholesale Outlet - 3 38.8

Negombo Wholesale Outlet - 2 31.2

Dickoya Glencairn Estate - 3 9.6

Dankotuwa Carrington Group Estate 2 2 -

Marawila Toddy Collecting Centre 2 - -

Ambalantota - 1 29.02

Katugastota Fertilizer Stores - 2 27.5

Kandy 2 - -

Katugastota 5 - 3.84

Anuradhapura - 3 21.46

Galle - 1 37

Kurunegala - 2 29

Ratmalana 1 - 28.2

Kalutara Warehouse 4 - 33.38

Kalutara Warehouse 1 1 4.27

Kalutara Premises No. 14 & 16 - 2 6.9

Kalutara Teak Stores 1 - 32.82

Mirisena Warehouse - 3 28.32

Badulla Warehouse - 2 8.64

Seeduwa Warehouse & Housing Complex 15 2 16.08

Seeduwa New W/H & Old W/H 5 2 14.74

Vauniya WSO - 3 33.69

Jaffna 1 - 21.6

Batticaloa 3 - 10.84

Trincomalee - 1 38.64

Kaithadi 2 - 11.52

Peliyagoda 1 3 29.95

Seeduwa - - 19.75

Seeduwa - - 42.55

Seeduwa - 1 20.5

Seeduwa - 3 22.6

Badulla - 2 16

Badulla - 1 21.2

Nawagamuwa 10 - -

Lanka Bell Limited

Minuwangoda Warehouse & Switch 1 3 35.35

Texpro Industries Limited

Ranala Factory 6 - 6.05

Embulgama Factory - 2 -



General Information

TEN YEAr SUMMArY

In Rupees million - Company 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

Results

Gross Turnover 29,569.8 27,416.0 22,653.1 18,399.7 14,391.8 12,257.6 10,778.8 10,238.1 9,771.3 8,718.0

Excise Duty 18,339.2 16,458.0 14,020.3 11,263.9 9,235.4 8,059.8 7,214.3 7,378.5 7,151.7 6,299.4

Net Turnover 11,230.5 10,958.0 8,632.8 7,135.8 5,156.4 4,197.8 3,564.5 2,859.6 2,619.6 2,418.6

Profit / ( Loss) before tax 3,977.9 3,014.9 2,826.6 2,480.7 1,762.1 1,938.6 930.7 903.0 700.7 664.2

Profit / ( Loss) after tax 2,682.4 1,981.6 1,868.9 1,807.6 1,247.8 1,625.6 609.0 517.8 420.0 416.3

Funds Employed

Stated Capital 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0 300.0

Capital Reserves 107.9 107.9 107.9 107.9 107.9 107.9 107.9 107.9 107.9 107.9

Revenue Reserves 12,709.3 10,551.8 8,708.1 7,019.2 5,361.6 4,263.9 2,773.0 2,164.3 1,781.5 1,489.1

Shareholders' Funds 13,117.2 10,959.7 9,116.0 7,427.1 5,769.5 4,671.8 3,180.9 2,572.2 2,189.4 1,897.0

Total Borrowings 920.1 2,648.1 1,634.0 2,221.2 1,500.6 3,026.1 915.9 404.9 519.4 333.3

Non- current Liabilities net of Borrowings 171.5 109.6 88.0 99.2 90.7 92.5 101.8 102.3 111.4 103.5

Current Liabilities net of Borrowings 4,785.2 4,662.9 4,279.9 3,390.6 2,135.3 1,779.7 1,517.1 1,864.8 1,836.5 1,792.9

18,994.0 18,380.1 15,118.0 13,138.1 9,495.1 9,570.1 5,716.8 4,944.2 4,656.7 4,127.2

Assets Employed

Non-Current Assets 12,840.9 12,302.9 10,383.5 10,398.5 7,619.1 7,594.3 2,888.3 2,718.5 2,366.1 2,471.9

Current Assets 6,153.1 6,077.5 4,734.4 2,739.6 1,876.0 1,975.8 2,828.5 2,225.7 2,290.6 1,655.3

18,994.0 18,380.4 15,118.0 13,138.1 9,495.1 9,570.1 5,716.8 4,944.2 4,656.7 4,127.2

Cash Flow

Net Cash Flow from Operating Activities 1,881.7 2,509.3 1,118.2 1,974.1 1,774.3 667.8 234.8 295.0 778.8 705.5

Net Cash Flow from Investing Activities ( 35.6) ( 3,041.8) ( 48.4) ( 2,662.4) ( 12.2) ( 3,943.7) ( 172.5) ( 168.9) ( 995.8) ( 995.8)

Net Cash Flow from Financing Activities ( 525) ( 465.0) ( 169.7) ( 149.7) ( 146.4) ( 134.1) ( 140.6) ( 124.2) ( 130.1) ( 148.3)

Net ( Decrease) / Increase in Cash

and Cash Equivalents 1,321.1 ( 997.5) 1,079.5 ( 838.0) 1,615.7 ( 3,410.0) ( 78.3) 2.0 ( 347.1) ( 438.6)

Key Indicators

Earnings per Share ( Rs.) 8.9 6.6 6.2 6.0 4.2 5.4 2.0 1.7 1.4 1.4

Net Assets per Share ( Rs.) 43.7 36.5 30.4 24.8 19.2 15.6 10.6 8.6 7.3 6.3

Market Value per Share ( year end) 65.0 98.0 105.0 35.0 32.0 22.0 9.3 8.0 3.8 4.3

Return on Shareholder Funds ( %) 20.5 18.1 20.5 24.3 21.6 34.8 19.2 20.1 19.2 22.0

BEVErAGES

PLANTATIONS

DIVErSIFIED hOLDINGS

TELECOMMUNICATIONS



General Information

GrOUP DIrECTOrY

LANKA BELL LIMITED

Board of DirectorsD. H. S. Jayawardena – ChairmanT. K. D. A. P. Samarasinghe – Managing DirectorC. R. JanszL. U. D. Fernando

Secretary Ms. S. S. Jayaratne

Registered OfficeLevel 06, Lower Block 1, World Trade Centre, Echelon Square, Colombo 01Tel: ( 94-11) 5335000 Fax: ( 94-11) 5545988 Web: www.lankabell.net Co. Reg. No. PB 306

Auditors KPMG Ford, Rhodes, Thornton & Co. ( Chartered Accountants)

PERICEyL (PVT) LIMITED

Board of DirectorsD. H. S. Jayawardena – ChairmanR. K. ObeyesekereC. R. JanszL. U. D. FernandoS. Amarathunga

Secretary Ms. V. J. Senaratne

Registered Office110, Norris Canal Road, Colombo 10Tel: ( 94-11) 2808565 Fax: ( 94-11) 4-411888Co. Reg. No. PV 5529

Auditors Ernst & Young ( Chartered Accountants)

BERUwALA DISTILLERIES (PVT) LIMITED

Board of DirectorsD. H. S. Jayawardena – ChairmanR. K. ObeyesekereC. R. Jansz

Secretaries Professional Assignment & Secretaries Services ( Pvt) Ltd.

Registered OfficeMoragalle, BeruwalaTel: ( 94-34) 2276258, ( 94-34) 2276103Co. Reg. No. PV 11755


BALANGODA PLANTATIONS PLC

Board of DirectorsD. H. S. Jayawardena – Chairman/Managing DirectorR. K. ObeyesekereC. R. JanszS. K. L. Obeyesekere

Secretary P. A. Jayatunga

Registered Office110, Norris Canal Road, Colombo 10Tel: ( 94-11) 2522871-2 Fax: ( 94-11) 2522913Co. Reg. No. PQ 165

Auditors Ernst & Young ( Chartered Accountants)

MILFORD HOLDINGS ( PVT) LIMITED

Board of DirectorsD. H. S. Jayawardena – ChairmanR. K. ObeyesekereC. R. JanszL. U. D. Fernando

Secretaries Secretaries & Registrars Limited

Registered OfficeNo. 110, Norris Canal Road, Colombo 10Tel: ( 94-11) 2695295-7 Fax: ( 94-11) 2696360Co. Reg. No. N( PVS) 33392


LANKA BELL SERVICES (PVT) LIMITED



Registered OfficeLevel 06, Lower Block 1, World Trade Centre, Echelon Square, Colombo 01Tel: ( 94-11) 5335000 Co. Reg. No. PV 61396

Auditors Amarasekara & Co., ( Chartered Accountants)

BELL SOLUTIONS (PVT) LIMITED





BELLVANTAGE (PVT) LIMITED





ASSOCIATES

DIVErSIFIED hOLDINGS - Contd.,



TIMPEx (PVT) LIMITED

Board of DirectorsD. H. S. Jayawardena – ChairmanJ. D. Peries – Managing DirectorC. R. JanszL. U. D. FernandoH. I. Munasingha

Secretaries SSP Corporate Services ( Pvt) Limited

Registered Office1st Floor, Lakshman’s Building, 321, Galle Road, Colombo 03Tel: ( 94-11) 2565951 Co. Reg. No. N( PBS) 423


NATIONAL ASSET MANAGEMENT LIMITED

Board of DirectorsA. S. Abeyewardene – Chairman ( Appointed w.e.f. 25/03/2009)A. N. FonsekaH. A. HeratL. U. D. FernandoT. W. de Silva ( Appointed w.e.f. 25/03/2009)D. T. R. de Silva – ( Appointed w.e.f. 25/03/2009)C. M. M. S. Gunawardhena – ( Alternate to A. N. Fonseka)C. Jayasuriya – ( Alternate to H. A Herat)

Secretaries Corporate Services Limited

Registered Office73, W.A.D. Ramanayake Mawatha, Colombo 2Tel: ( 94-11) 2244591 Web: www.namal.lkCo. Reg. No. N( PVS)/N( PBS) 6851


TExPRO INDUSTRIES LIMITED

Board of DirectorsD. H. S. Jayawardena – ChairmanJ. D. Peries – Managing DirectorC. R. JanszL. U. D. FernandoH. I. Munasingha

Secretaries SSP Corporate Services ( Pvt) Limited

Registered Office1st Floor, Lakshman’s Building, 321, Galle Road, Colombo 03Tel: ( 94-11) 2565951 Web: www.texproindustries.com Co. Reg. No. PB 748


COLLISION REPAIR CENTRE (PVT) LIMITED

Board of DirectorsC. R. Jansz – ChairmanL. U. D. FernandoS. U. K. M. B. GalagodaD. T. R. de Silva – ( Appointed w.e.f. 11/02/2009)A. M. J. Abeysinghe – ( Appointed w.e.f. 17/07/2009)

Secretaries Financial Services & Commercial Agencies ( Pvt) Limited

Registered Office110, Norris Canal Road, Colombo 10Tel: ( 94-11) 5223300 Fax: ( 94-11) 5223322 Co. Reg. No. PV 14051

Auditors Amarasekara & Company ( Chartered Accountants)

AITKEN SPENCE PLC

Board of DirectorsD. H. S. Jayawardena – ChairmanJ. M. S. Brito – Deputy Chairman/Managing DirectorDr. R. M. FernandoG. C. WickremasingheR. Sivaratnam – ( Expired on 18/07/2008)G. M. Perera – ( Appointed w.e.f. 01/09/2008)C. H. GomezN de S. Deva Aditya

V. M. Fernando – ( Appointed w.e.f. 01/05/2008)

Secretary R. E. V. Casie Chetty

Registered Office305, Vauxhall Street, Colombo 02Tel: ( 94-11) 2308308 Web: www.aitkenspence.lkCo. Reg. No. PQ 120


MADULSIMA PLANTATIONS PLC

Board of DirectorsD. H. S. Jayawardena – Chairman/Managing DirectorR. K. ObeyesekereZaki AlifDr. N. M. Abdul GaffarS. K. L. Obeyesekere

Secretary P. A. Jayatunga

Registered Office833, Sirimavo Bandaranaike Mawatha, Colombo 14Tel: ( 94-11) 2522871-2 Fax: ( 94-11) 2522913Co. Reg. No. PQ 184


THE LANKA HOSPITALS CORPORATION PLC

Board of DirectorsDeshabandu A. M. de S. Jayaratne – Chairman ( Resigned w.e.f. 12/08/2009)D. H. S. Jayawardena – ( Resigned w.e.f. 12/08/2009)C. R. Jansz – ( Resigned w.e.f. 12/08/2009)L. U. D. Fernando – ( Resigned w.e.f. 12/08/2009)S. M. Paranavithana – ( Resigned w.e.f. 12/08/2009)W. A. U. Kariyawasam – ( Resigned w.e.f. 12/08/2009)G. D. C. de Silva – ( Resigned w.e.f. 12/08/2009)B. A. C. Fernando Dr. A. Amerasinghe – ( Resigned w.e.f. 01/04/2009 & Appointed w.e.f. 12/08/2009)Dr. B. Kaluarachchi Gotabaya Rajapaksa – ( Appointed w.e.f. 12/08/2009)P. Kariyawasam – ( Appointed w.e.f. 12/08/2009)

Dr. N. Godahewa – ( Appointed w.e.f. 12/08/2009)Dr. S. S. L. Perera – ( Appointed w.e.f. 12/08/2009)A. N. Pathirane – ( Appointed w.e.f. 12/08/2009)Brigadier ( Dr.) S. H. Munasinghe – ( Appointed w.e.f. 12/08/2009)

Secretaries M/S Accounting Systems Secretarial Services Limited

Registered Office578, Elvitigala Mawatha, Colombo 05Tel: ( 94-11) 4530000 Fax: ( 94-11) 4511199 Web: www.lankahospitals.comCo. Reg. No. PQ 180


SPLENDOR MEDIA (PVT) LIMITED

Board of DirectorsL. U. D. Fernando – ChairmanMs. G. ChakravarthyG. D. C. de Silva – ( Resigned w.e.f. 18/06/2009C. P. AbeywickremaD. T. R. de SilvaMs. N. Pethiyagoda – ( Resigned w.e.f. 06/07/2009Ms. R. Cooray

Secretary Financial Services & Commercial Agencies ( Pvt) Limited

Registered OfficeNo. 110, Norris Canal Road, Colombo 10Tel: ( 94-11) 5655151Co. Reg. No. PV1230




GLOSSArY

General Information

Accounting Policies

Specific principles, bases, conventions,rules and practices adopted by an enterprise in preparing and presentingfinancial statements.

Amortisation

Gradual and periodic reduction of anyamount, such as the periodic write down ofa bond premium, the cost of an intangibleasset or periodic payment of mortgages orother debt.

Basic Earnings Per Share

Profits attributable to ordinary shareholders divided by the weightedaverage number of ordinary shares inissue.

Borrowings

All interest bearing liabilities.

Capital Employed

Shareholders’ funds plus minority interestand debt.

Capital Reserves

Reserves identified for specific purposesand considered not available for distribution.

Cash Equivalents

Short-term ( generally less than threemonths), highly liquid investments that areconvertible to known amounts of cash.

Consolidated Financial Statements

Combined Financial Statements of a parentcompany and one or more of its subsidiaries as one economic unit.

Contingent Liabilities

Conditions or situations at the balancesheet date, the financial effect of which areto be determined by future events whichmay or may not occur.

Debt to Equity

A measure of Company’s financial coverage calculated by dividing total debtby shareholders funds.

Deferred Taxation

The net tax effect on items which havebeen included in the Income Statement,which would only qualify for inclusion on atax return at a future date.

Diluted Earnings Per Share

The calculation of Diluted Earnings PerShare is based on profit attributable to ordinary shareholders and the weightedaverage number of ordinary shares outstanding after adjustment for the effectof all dilutive potential ordinary shares.

Dividend Cover

Profits attributable to ordinary sharehold-ers divided by gross dividend. Measuresthe number of times dividend is covered by distributable profit.

Dividend per Share

Dividends paid and proposed divided bythe number of issued shares which rankedfor those dividends.

Dividend Payout Ratio

Dividend as a percentage of Companyprofits adjusted for non cash items.

Dividend Yield

Gross dividend per share as a percentageof the market price. A measure of returnon investment.

Equity

Shareholders’ funds i.e., Stated Capital andReserves.

Goodwill

Premium paid in the acquisition of an entity over the fair value of its identifiabletangible and intangible assets less liabilities assumed.

Market Capitalisation

Number of shares in issue multiplied bythe market value of a share at the reporteddate.

Market Price per Share

The price at which an ordinary share istraded in the stock market.

Net Assets per Share

Shareholders’ funds divided by the numberof ordinary shares issued.

Price Earnings Ratio

Market price of a share divided by earningsper share as reported at that date.

Related Parties

Parties who could control or significantlyinfluence the financial and operating policies of the business.

Return on Shareholders’ funds

Attributable profits divided by averageshareholders’ funds.

Revenue Reserves

Reserves considered as being available fordistributions and investments.

Segment

Constituent business units grouped interms of similarity of operations and location.

Shareholders Equity

Shareholders funds divided by total assets.Determine how much shareholders wouldreceive on liquidation in terms of totalassets of the entity.

Value Addition

The quantum of wealth generated by theactivities of the Group measured as the difference between turnover and the costof materials and services bought in.

Working Capital

Capital required to finance the day-to-dayoperations computed as the excess of current assets over current liabilities.



Notice of Meeting

N OTICE IS HEREBY GIVEN that the NINETEENTH ANNUAL GENERAL MEETING of DISTILLERIES COMPANY OF SRI LANKA PLC will be held at the

Committee Room ‘ B’ of the Bandaranaike Memorial International Conference Hall ( BMICH), Bauddhaloka Mawatha, Colombo 7 on Tuesday 29

September 2009 at 10.00 a.m. for the following purposes:

1. To consider and adopt the Annual Report of the Directors and the Financial Statements of the Company for the year ended 31 March

2009.

2. To approve a Final Dividend as recommended by the Board of Directors

3. To re-elect Mr. C. R. Jansz who retires by rotation at the Annual General Meeting in terms of Article 92 of the Articles of Association,

as a Director of the Company.

4. To re-elect Mr. R. K. Obeyesekere who retires by rotation at the Annual General Meeting in terms of Article 92 of the Articles of

Association, as a Director of the Company.

5. To re-elect as a Director, Mr. C. F. Fernando who was appointed to the Board during the year and retires pursuant to Article 98 of the

Articles of Association of the Company.

6. To re-elect as a Director, Dr. A. N. Balasuriya who was appointed to the Board during the year and retires pursuant to Article 98 of the

Articles of Association of the Company.

7. To re-elect as a Director, Mr. C. F. Fernando who is over the age of 70 years and who retires in terms of Section 210 of the Companies

Act No. 07 of 2007, by passing the following resolution,

“RESOLVED that Mr. C. F. Fernando, who attained the age of 70 on 01 March 2005, be and is hereby re-elected as a Director of the

Company, and it is hereby declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 07 of 2007 shall

not apply to the said Director.”

8. To authorise the Directors to determine contributions to charities.

9. To authorise the Directors to determine the remuneration of the Auditors, Messrs. KPMG Ford, Rhodes, Thornton & Co. who are

deemed to have been reappointed as Auditors in terms of section 158 of the Companies Act No. 07 of 2007.

By Order of the Board

Ms. V. J. Senaratne

Company Secretary20 August 2009

Colombo

Notes:

1. A member is entitled to attend and vote at the meeting or to appoint a Proxy to attend and vote on behalf of him/her by completing the Form

of Proxy enclosed herewith.

2. A Proxy need not be a member of the Company.

3. The completed Form of Proxy should be deposited at the Registered Office of the Company at 110, Norris Canal Road, Colombo 10 before

10.00 a.m. 27 September 2009.

4. The dividend warrants will be posted within five market days, if the dividend proposed is approved at the Annual General Meeting.

In accordance with the rules of the Colombo Stock Exchange the shares of the Company will be quoted ex-dividend with effect from 30

September 2009.

THE SHAREHOLDERS AND THE PROXY HOLDERS ATTENDING THE MEETING ARE KINDLY REQUESTED TO BE IN THEIR SEATS BY 9.45

A.M. THEY ARE ALSO REQUESTED TO BRING THIS ANNUAL REPORT ALONG WITH AN ACCEPTABLE FORM OF IDENTITY.



Attendance Slip

DISTILLERIES COMPANY OF SRI LANKA PLCPQ 112

110, NORRIS CANAL ROAD, COLOMBO 10, SRI LANKA.

I / We hereby record my / our presence at the Nineteenth Annual General Meeting of the Distilleries Company of Sri Lanka PLC at the Committee

Room ‘ B’ of the Bandaranaike Memorial International Conference Hall ( BMICH), Bauddhaloka Mawatha, Colombo 7 at 10.00 a.m. on Tuesday,

29 September 2009.

1. Full Name of Shareholder ................................................................................................................................................

( In Capital Letters please)

2. Shareholder’s NIC No./Passport No. ................................................................................................................................................

3. Number of Shares held and Folio No. ................................................................................................................................................

4. Name of Proxy Holder ................................................................................................................................................

5. Proxy Holder’s NIC No./Passport No. ................................................................................................................................................

6. Signature of Attendee ................................................................................................................................................

NOTES

1. Shareholders / Proxy Holders are requested to bring this Attendance Slip with them when attending the meeting and hand it over at theentrance to the meeting hall after signing it.

2. Shareholders are also kindly requested to indicate any changes in their addresses / names by completing the following and forward sameto the registered office 110, Norris Canal Road, Colombo 10, if not attending the meeting.

Name of the Shareholder:

Certificate No. ........................................................................................................................................................................

Previous Address ........................................................................................................................................................................

Present Address ........................................................................................................................................................................

Any changes to the Name ........................................................................................................................................................................

I/We............................................................................................................................................................................................................................

of ...........................................................................................................................................................being a member / members* of the

Distilleries Company of Sri Lanka PLC hereby appoint Don Harold Stassen Jayawardena* or failing him Rajpal Kumar Obeyesekere* or failing him

Cedric Royle Jansz* or failing him Niranjan de Silva Deva Aditya* or failing him Kolitha Jagath Kahanda* or failing him Chrisantha Francis

Fernando* or failing him Adrian Naomal Balasuriya*

or ..................................................................................................................................................................................................................

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

as my / our* Proxy to represent me / us* and vote for me/us* on my / our* behalf at the Nineteenth Annual General Meeting of the Company to

be held on the 29 September 2009 and at any adjournment thereof and at every poll which may be taken in consequence thereof.

* Please delete the inappropriate words.

** Please write your Folio Number which is given on the top left of the address sticker.

Dated this ......................................... day of ......................................... 2009

Notes:

1. Proxy need not be a member of the Company.

2. In terms of the Article 71 of the Articles of Association of the Company.

The instrument appointing a Proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing, or where the

appointer is a corporation, either under seal, or under the hand of an officer or attorney duly authorised. A Proxy need not be a member of

the Company.

3. In terms of Article 72 of the Articles of Association of the Company:

The instrument appointing a Proxy and the Power of Attorney or other authority, if any, under which it is signed or notarially certified copy

of that power of attorney shall be deposited at the registered office of the Company or at such other place within Sri Lanka as is specified for

the purpose in the notice convening the meeting not later than 48 hours before the time of the holding of the meeting or adjourned meeting

at which the person named in the instrument proposes to vote or in the case of the poll, not later than 24 hours before the time appointed

for the taking of the poll and in default the instrument of Proxy shall not be treated as valid.

4. In terms of Article 66 of the Articles of Association of the Company:

In case of the joint-holders the votes of the senior who tenders a vote, whether in person or by Proxy, shall be accepted to the exclusion of

the votes of the other joint-holders; and for this purpose seniority shall be determined by the order in which the names stand in the

register of members.

The first joint-holder thereby has power to sign the Proxy without the consent of the other joint holder.

5. Instructions as to completion are noted overleaf.



Form of Proxy

Folio No.**

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

Signature of Shareholder



Instructions as to Completion

1. Kindly perfect the Form of Proxy, after filling in legibly your full name and address, by signing on the space provided and filling in the date

of signature.

2. Kindly return the completed Form of Proxy to the Company after deleting one or other of the alternate words indicated by an

asterisk.

3. To be valid the completed Form of Proxy should be deposited at the Registered Office of the Company at 110, Norris Canal Road, Colombo

10, not later than 48 hours before the time appointed for the holding of the meeting.

4. Every alteration or addition to the Form of Proxy must be duly authenticated by the full signature of the shareholder signing the Form of

Proxy. Such signature should as far as possible be placed in proximity to the alteration or addition intended to be authenticated.

Notes



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isxy, fyda fou< NdIdfjka ilik ,o m˙jr®;khla wjYH kï" ta nj f,alï"

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hk ,smskhg 2009" iema;eïnr® ui 25 fjks †kg m%:u okajkak'

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This report is entirely in English. If you require a translated copy of The Chairman's

Message, Annual Report of the Board of Directors and The Auditor's Report in

Sinhala or Tamil, please make a request by letter addressed to the Secretary,Distilleries Company of Sri Lanka PLC, No. 110, Norris Canal Road, Colombo 10 on or before 25th day of September 2009.

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