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Annual Report 2011/2012

Do you know...

www.brownsgroup.com

Brow

n & C

ompany PLC

| Annual R

eport 2011/2012

10 Our history 12 The Browns Group 14 Sector overview 16 Financial highlights 18 Chairperson’s review 20 Group Managing Director/ Chief Executive Officer’s Review24 The Board of Directors 28 Corporate Senior Management

30 Investing in Brands 32 Sector Reviews57 Information and Communications Technology 58 Corporate Social Responsibility 60 Human Resources 62 Corporate Governance 67 Audit Committee Report 68 Business Operations Committee Report 68 Remuneration Committee Report

70 Directors’ Report 74 Statement of Directors’ Responsibilities 75 Independent Auditors’ Report 76 Income Statement 77 Balance Sheet 78 Statement of Changes in Equity 79 Cash Flow Statement 80 Significant Accounting Policies 90 Notes to the Financial Statements

Corporate Information

Brown & Company PLC Legal FormA Public Limited Liability Company quoted on the Colombo Stock Exchange on 25th April 1991 and incorporated in Sri Lanka on 17th August 1892

Company No.PQ 25 DirectorsMrs. R. L. NanayakkaraNon-Executive Chairperson

A. L. DevasurendraDeputy Chairman / Non-Executive Director

N. M. PrakashExecutive Group Managing Director/CEO

S. V. SomasunderamNon-Executive Director

I. C. NanayakkaraNon- Executive Director

H. P. J. de SilvaIndependant Non-Executive Director

R. N. AsirwathamIndependant Non-Executive Director (resigned w.e.f. 10/5/2012)

W. D. K. JayawardenaNon-Executive Director (Appointed on 24/7/2012)

Mrs. K. U. AmarasingheNon-Executive Director (Appointed on 24/7/2012)

SecretariesStandard Finance (Pvt) Limited481, T. B. Jayah Mawatha,Colombo 10.

Registered Office481, T. B. Jayah Mawatha, (Darley Road),P O Box 200, Colombo 10.Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsgroup.com

Business OfficeNo. 34, Sir Mohamed Macan Markar Mawatha, Colombo 3Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsgroup.com

Auditors Messrs KPMGChartered Accountants32A, Sir Mohamed Macan Markar MawathaColombo 3.

BankersCommercial Bank of Ceylon PLC Hatton National Bank PLCHongkong & Shanghai Banking Corporation NDB BankPeoples BankStandard Chartered Bank PLCSampath Bank PLCSeylan Bank PLCDFCC Varadhana Bank

What makes a company truly great?

136 Economic Value Statement 137 Ten Year Summary 138 Share Information 140 Subsidiaries & Associates 143 Glossary 145 Notice of the Annual General Meeting 146 Notes 147 Form of Proxy

Read this report to learn some surprising answers....

2 Brown & Company PLC l Annual Report 2011/2012

PLANTATIONS

We’re one of Sri Lanka’s best known names.

Brown & Company PLC l Annual Report 2011/2012 3

So we don’t need to say much.

AGRICULTURE


While our history goes back over 135 years…

HOME & OFFICE SOLUTIONS


…we’re also one of the nation’s fastest evolving conglomerates.

TRAVEL & LEISURE


VET PHARMA

Diversified, broad-based and fiscally solid…


…we’re as vital and relevant to contemporary needs as we have always been.

POWER GENERATION


INVESTMENTS

This report talks about who we were and who we are today.


It’s quite a story to tell.

MARINE & MANUFACTURE


Q: How did we become one of the nation’s best loved brands?

Our history

1872

18

75

1892

1947

James Brown sails from London to Ceylon and sets up a bicycle repair business in Hatton

Brown and Company incorporated as a rupee company

Becomes Browns Group with purchase of Hatton Bank Limited and Hatton Transport & Agency Co Ltd

Expansion to Colombo and Nawalapitiya

Obtains a Ceylonese Traders’ License, which allows international trade

Brown and Company launched to manufacture and repair agricultural machinery

1860 1872 1880 1888 1890 1893 1897 1898 1900 1902 1910 1915 1922 1930 1950 1957 1958

1897

1959


A: Through an amazing journey of over one hundred and thirty five years...

1960

1963

2011

1966

1980

2006

1970

Incorporation of Browns Group Industries for local manufacture

Browns Group moved to a new office premises

The Hatton Bank Ltd becomes Hatton National Bank, today one of the country’s leading banks and corporate entities

Browns Tours launched, offering a gamut of travel services. Browns Group was

the leading blue-chip conglomerate in the country with an extensive network of engineering projects aiding the estate sector

Change over of management for the Browns Group

An year of acquisitions and new beginnings as the Company, acquires Hoare & Company which was renamed Engineering Services Limited; Standard Finance Ltd to handle hire-purchase finance; Walker & Greig Ltd, which was a major competitor and Mason’s Mixture Ltd. In the same year, Associated Battery Manufacturers (Ceylon) Ltd begins commercial production of automotive batteries.

1960 1965 1968 1970 1974 1976 1979 1980 1984 1986 1999 2002 2004 2006 2008 2010 2011


The Browns Group

50We hold partnerships with over 50 global brands

2000We operate over 2000 dealers islandwide

1000’sWe serve 1000’s of customers every day

Q: What does our business look like?

VisionTo be a leading Sri Lankan conglomerate excelling through sunshine industries with a global presence and cutting edge technology by the year 2013.

MissionWith generations of trust and reliability, our aim is to continuously enhance the value propositions to our stakeholders through innovative and customer-centric solutions.


724Brown & Company directly employs 724 people islandwide

A: We are a diversified conglomerate, managing a fast-growing and valuable portfolio of brands across several industry sectors in which we hold top market position.

50

2000


MARINE & MANUFACTUREBrowns Group Industries (Pvt) Ltd.Browns Thermal Engineering (Pvt) Ltd.

POWER GENERATIONBatteryKlevenberg (Pvt) Ltd. Power SystemsGeneral Trading

Sector overview

Q: What do we do?

HOME & OFFICE SOLUTIONSIntegrated Business SolutionsRetailConsumer

INVESTMENTS Browns Investments PLCFree Lanka Capital Holdings PLCLOLC Leisure Ltd.Sierra Holdings (Pvt) Ltd.Agstar Fertilisers PLCRoyal Fernwood Porcelain Ltd.Other Investments

AGRICULTURE & PLANTATIONSAgriculture DivisionSifang Lanka (Pvt) Ltd.Plantation Support Services

2008

/09

2009

/10

2010

/11

2011

/12

0500

1,0001,5002,0002,5003,000

RevenueRs. Mn

2008

/09

2009

/10

2010

/11

2011

/12

0

100

200

300

400

500

RevenueRs. Mn

2008

/09

2009

/10

2010

/11

2011

/12

Revenue

0500

1,0001,5002,0002,5003,0003,500Rs. Mn

2008

/09

2009

/10

2010

/11

2011

/12

0

1,000

2,000

3,000

4,000

RevenueRs. Mn

2008

/09

2009

/10

2010

/11

2011

/12

0

1,000

2,000

3,000

4,000

5,000

RevenueRs. Mn


A: Brown and Company has invested in emerging industries. We now have a presence in agriculture, power generation, consumer goods, travel and leisure, healthcare, pharmaceuticals, real estate and more.

2011 NEW SECTORS:

REAL ESTATEBrowns Real Estates (Pvt) Ltd.

HEALTHCARE Browns Health Care (Pvt) Ltd.

HOTELSSamudra Beach Resorts (Pvt) Ltd.

TRAVEL & LEISUREBrowns Tours (Pvt) Ltd.BG Air Services (Pvt) Ltd.

VET PHARMAVeterinary Pharmaceuticals

2008

/09

2009

/10

2010

/11

2011

/12

0

5

10

15

20

25

RevenueRs. Mn

2008

/09

2009

/10

2010

/11

2011

/12

0

100

200

300

400

RevenueRs. Mn


Financial highlights

Q: How did we perform?

31st March 2012 2011

Earnings HighlightsGroup Turnover Rs. Mn 14,415 12,095EBIT Rs. Mn 3,836 3,895Group Profit Before Tax Rs. Mn 3,379 3,604Group Profit After Tax Rs. Mn 3,060 3,282Group Profit Attributable to Equity holders Rs. Mn 1,177 2,188

Balance Sheet HighlightsTotal Assets Rs. Mn 32,948 27,190Total Debt Rs. Mn 5,388 2,209Total Shareholders’ Funds Rs. Mn 14,346 15,192Number of Shares Issued ‘000 70,875 70,875

Share InformationMarket Value(year-end) Rs. 155.10 289.80Market Capitalisation Rs. Mn 10,993 20,540Earnings Per Share Rs. 16.61 30.87Net Assets Per Share Rs. 202.41 214.35Price Earnings (year-end) Times 9.34 9.39

Financial RatiosGross Profit % 23.39 26.39Return on Shareholders’ Funds % 8.21 14.40Debt to Equity % 22.94 10.05Return on Capital Employed % 13.28 16.10Interest Cover Times 8.40 13.36Current Ratio Times 1.76 3.03

OtherEconomic Value Generated Rs.Mn 17,739 14,674Economic Value Distributed Employees Rs.Mn 1,235 1,057 Government Rs.Mn 244 231 Others Rs.Mn 13,046 10,032Economic Value Retained Rs.Mn 3,212 3,354Total Number of Employees Number 724 653


A: Brown and Company has grown from strength to strength, recording a 19% growth in revenues to Rs. 14.4 billion, while profitability was also up by 6%.

+19%Increase in revenue

Rs. 2.3 Bn

+6%Increase in Gross Profit

Rs. 179 Mn

+7%Increase in Total Equity

Rs. 1.5 Bn

Growth in Revenue Rs. (Mn)

11/1

2

2008

/09

6,8

16 8,9

53

12,0

95

2009

/10

2010

/11

2011

/120

3,000

6,000

9,000

12,000

15,000

14,4

15

Growth in Gross Pro�t Rs. (Mn)

11/1

2

2008

/09

1,3

90

1,49

1

3,19

2

2009

/10

2010

/11

2011

/120

500

1,000

1,500

2,000

2,500

3,000

3,500

3,3

71

Growth in Equity Rs. (Mn)

11/1

2

2008

/09

9,3

31 13,4

58

21,9

91

2009

/10

2010

/11

2011

/120

5,000

10,000

15,000

20,000

25,000

23,4

87


Despite the challenges, overall Group and Company

earnings improved year on year. The Group recorded

a 19% growth in turnover to Rs 14 Bn in the year

under review, while net profit is 3,060 Mn compared

to Rs. 3,282 Mn in 2010/11. A more detailed review

of financial performance is available later in this

report.

Given the business climate Browns operated in, the

year under review was one of increased emphasis

on improving service levels, rationalising the business

where required to increase efficiencies and expanding

product ranges to meet identified gaps in the market.

The vision of Brown and Company PLC to embrace

cutting edge technology by 2013 became a reality

during the year through the adoption of the Enterprise

Resource Planning (ERP) solution. The ERP will

seamlessly integrate the business functions of the

Group from assembly and production to core finance

functions, and will be further expanded in a second

phase to provide business intelligence services.

The investment in information technology is a key

strategy in driving growth and making the Browns

Group a dynamic and competitive Company at the

forefront of change and innovation.

Through decades of developing close relationships

with its customers, Browns has always been

a responsive Company, being quick to identify

customer needs and respond to them. Nearly all of

its business divisions are now positioned as being a

provider of services rather than simply a supplier of

products. Through its many value added functions,

service centres and concept stores, Browns is being

recognised as a place where customers can obtain

a complete package of goods and services. This is

further enhanced through synergies between current

business lines and new investments. For example,

in the agriculture sector, Browns Investments PLC

together with its partners, can now offer a farmer

everything from seeds, crop-care and fertiliser, to

machinery and micro-financing; its plantation support

services division will tie in well with the Group’s

investments in the plantation crop sector, and so

on. In doing so, Browns has taken advantage of the

close relationships it shares with partners such as

the LOLC group. The Company has also set up an

industrial park that will eventually house all assembly

and warehouse operations, serving as a central

manufacturing and logistics hub for the Group.

Brown and Company PLC has ventured into two new

areas of business - healthcare and leisure. Browns has

invested in building a secondary care general hospital

in Kandy, and will expand to other under-served areas

of Sri Lanka that show demand for quality private

healthcare. Through the Company’s investment

vehicle, Browns Investments PLC and its partners,

the Group has made strategic investments in several

hotel properties. These will become operational

over the next few years, capitalising on the boom in

Sri Lanka’s tourism industry that will see increased

demand for hotels and related services. Both of

these new business lines are expected to contribute

significantly to the Company’s bottomline in the years

ahead. Other important areas of expansion include

real estate and entertainment, taking advantage of

several key commercial properties that the Company

holds. Browns will continue to invest strategically

to meet identified gaps in the market, in line with

its vision of being a conglomerate that excels in

emerging or sunshine industries.

Looking ahead, Browns will build on its successes

and continue to invest in the future - in new ideas,

technology and business areas. Browns has an

established heritage of trust and has always been

a Company that meets the diverse needs of a wide

range of people. We will continue to stay relevant

to our customers and ensure that Browns remains

an innovative Company and a household name

across Sri Lanka. As we expand in new geographical

areas including the North and East, we are hopeful

that Government policies will continue to remain

supportive of the business and Browns’ contribution

towards the development of the country.

In conclusion, I would like to place on record my

deep appreciation towards all our employees for

their dedication and hard work that has taken

the Company from strength to strength, even in

challenging times. I would also like to thank our

principals for their confidence in the Company and we

look forward to working with them in the future. Our

success could not have been achieved without the

able support and guidance of the Board of Directors,

Group Managing Director and Senior Management, to

whom I am deeply thankful.

I look forward to another year of sustained growth,

as Browns continues to excel as one of Sri Lanka’s

leading conglomerates.

Mrs. R.L Nanayakkara

Chairperson

Chairperson’s review

Dear Shareholder,

On behalf of the Board of Directors of Brown and

Company PLC, it is my pleasure to present to you the

annual report and financial statements for the year

ended 31st March 2012, and to briefly review the

performance of the Company during this period.

Sri Lanka’s economy grew by 8.3% in 2011, the

highest in the country’s post-independence history,

led by the industry and service sectors. The end of

the war and the resulting climate of peace, stability

and optimism saw renewed economic activity and

infrastructure building. Sectors such as fisheries and

agriculture flourished, as new agricultural lands

were cleared in the North and East and restrictions

removed on fishing in these areas. Browns was

well positioned to take advantage of these new

opportunities, supported by its widespread presence

across the country, its impeccable reputation and

brand recognition in almost all regions. The Company

was encouraged by government policies that

emphasised development of the provinces, which

supported the Company’s initiatives to expand its

presence in all regions of Sri Lanka. However, while

macro-economic conditions were reasonably stable

for most of the year, the rapid depreciation of the

rupee and volatility in interest rates in the latter

part of 2011/12, significantly affected the financial

performance of the Company. As Browns is primarily

a trading Company, these unforeseen changes in the

fiscal policy resulted in a steep increase in finance

and working capital costs. These are reflected in the

earnings of the different business divisions for the

year under review, while the Company also suffered

mark to market losses on short term investments.

Q: What makes the Browns Group successful?Chairperson Mrs. Rohini Nanayakkara reflects on a successful 2011 and looks ahead to 2012.


A: Its close relationships with its customers fostered over decades, its widespread reach across the country, strong brand recognition, and its culture of constant innovation.


Q: What was the strategy for growth this year?

Group Managing Director/Chief Executive Officer’s Review


A: Consolidation, restructuring, strategic investment in sunshine industries and new investments in technology, which will be one of the main drivers of growth in the future.

Group Managing Director & CEO Mr. Murali Prakash talks about the Company’s operations in the year under review, and his vision for the future.

It is my pleasure to review the performance of

Brown and Company PLC for the financial year ended

31st March 2012, and present to you the financial

statements for the same period.

The year under review in terms of the macro-

economic climate, was one of mixed fortunes. Sri

Lanka’s economy grew by 8.3% in 2011, led by

growth in the industry and service sectors, while

agriculture also performed well. Inflation was in

single digits at 6%, unemployment was a low 4.2%

and there was an upward trend in savings and

investments over the same period. Globally, the

economic downturn in Europe resulted in negative

demand for the Company’s export categories of

business such as porcelain. The rupee was stable for

much of the year until steep depreciation towards the

latter quarter resulted in substantial exchange losses

on imports. As Browns is predominantly an import

trading Company, the volatility in exchange rates that

has persisted into the beginning of the new financial

year, is cause for concern. Interest rates also went

up towards the end of the year, increasing costs of

finance. An attempt by monetary authorities to curtail

credit by increasing interest rates and limiting credit,

may have a positive medium term impact, but this

also resulted in slower sales and collections towards

the end of the financial year under review.

The Company adopted a three-pronged strategy of

consolidation, restructuring and strategic investment

in emerging business areas or sunshine industries

during the year. The Company strengthened its

brand portfolio, its distribution channels and invested

in new markets such as the North and East of Sri

Lanka, in order to consolidate its market share and

leadership position in several business segments. In

order to support business expansion and improve cost

efficiencies, Browns implemented the first phase of

an Enterprise Resource Planning (ERP) solution, which

will integrate the different functions of the Group, as

well as provide business intelligence services. With

this, the entire organisation will migrate towards a

Microsoft architecture platform. The ERP together with

the Browns ‘shared service centre’, which combines

all support and back-office functions, was launched

under the name ‘Infopal’. The shared service centre

was supported by consultants from Price Waterhouse

Coopers and is an integral part of the restructuring

efforts of the Company. Browns continued to make

strategic investments in emerging industries, through

its investment arm – Browns Investments PLC, as

explained later in this review.

Browns has always stayed ahead of the competition

because of the close relationship it has maintained

with customers across the country and its innovative

customer-centric solutions. The Company has always

stayed relevant, responding quickly to changing

customer needs. Browns has also continued to invest

in offering service solutions to support its products,

such as speedier after-sales services, the Battmobile,

door-to-door deliveries, farmer training workshops,

and continuous improvements in quality. There has

also been greater emphasis on internal restructuring,

regrouping of teams and training of staff to deliver

customer satisfaction.

Financial Performance

Turnover at Company level increased by 35% to Rs.

10.56 billion, while at Group level, turnover grew by

19% to Rs. 14.4 billion. The best performing sectors

were agriculture, general trading, consumer, retail,

plantation support services and power systems, all

of which grew by 40% year on year. Gross profits at

Company level grew by 33%, and 6% at the Group

level. This was primarily due to the 73% drop in gross

profits of Browns Investments due to disposal of

investments the previous year. The Company posted

a profit before tax of Rs. 621.8 million, while at

group level this was Rs. 3.3 billion, for the year under

review.

Distribution expenses of Browns and Company PLC

increased by 37% and by 33% at Group level. This

was due to increased expenditure on advertising,

commissions and packaging, which contributed to

brand and market development. Interest expenses

increased by 50% and 57% at Company and Group

levels respectively, due to an increase in interest rates

and increased borrowings to fund new investments.

Administrative expenses increased by 24% due

to employee related expenditure, depreciation on

buildings and software, as well as increased cost

of utilities. A steep increase in ‘other expenses’ at

Group level is due to investment share portfolios

being adjusted on a mark to market basis and losses

arising out of the same. All other expense items were

under control and working capital was managed well

despite a 35% increase in sales. This was the result of

closer coordination between all sections in managing

inventories and receivables. The Company also

successfully negotiated for additional supplier credit in

certain sectors.

Gearing leverage at Group level was a healthy 22%

despite all the investments made by the Company,

with quick ratio at 1.34 and debtor days of 45 days

indicating sound field administrative controls. Sales

also grew by 35%, but in the latter part of the year,

due to a decline in the agriculture sector, a stock of

tractors imported in February/March 2012 remained

in stocks. Therefore, stock turnover days increased

to 65, with the Company already initiating action to

clear this. EBIDTA stood at a healthy 27.9%, and PBIT

was 26.9%. Return on Capital Employed was 13.28%

despite several medium to long-term investments.


Group Managing Director/Chief Executive Officer’s Review

The group also benefitted from negative goodwill

arising out of the acquisition of Excel Global Holdings

(Pvt) Ltd.

While overall growth has been positive, there was

continued erosion of investments both at the level of

the parent Company as well as subsidiaries. This was

brought about by mark to market losses, largely due

to external factors such as the dismal performance of

the Colombo Stock Exchange. However, we expect

this impact to be temporary and are confident in the

value of these investments in the medium to long

term. The Browns share price closed at Rs. 155/10 as

at year end, as against Rs. 289/80 the previous year.

Net Assets per Share was Rs. 202/41, while Earnings

per Share were Rs. 16/61 at Group level. The Price

Earnings (PE) ratio of 9.34 times at Group level,

and market capitalisation was 10.9 Bn in the year

under review. We believe that the stock market was

overheated during the year due to speculative buying

and required a correction.

Browns Investments PLC a Subsidiary Company of

Brown & Co. PLC, raised Rs. 4.4 billion through a

private placement and an Initial Public Offer. Part of

these funds were utilised to settle interest bearing

loans, while the rest was used to make strategic

investments such as in Agstar Fertilisers PLC and in

the construction of hotel properties. The issue price

of the share was Rs. 5 per share, but market prices

remained low throughout the year and Net Assets per

Share remained at Rs.5.85.

Performance of Divisions and Subsidiaries

A detailed review of divisional performance is

available elsewhere in this report, so this review will

only mention some important aspects relating to

the performance of these business divisions during

the year. We established five clusters of Strategic

Business Units during the year, headed by Senior

Vice Presidents, some of whom are Chief Executive

Officers of subsidiary companies. This change has

provided greater focus and leadership to the business

divisions.

All operational divisions and subsidiaries performed

well in the year under review. A key indicator

of performance would be the level of customer

acceptance. The Company continued to dominate

the market in several business segments, holding

either first or second place by market share. These

include batteries at 72% market share, power tools

at 37%, generators at 30%, franking machines at

90%, four-wheel tractors at 60%, two-wheel tractors

at 33%, radiators at 42%, marine engines at 32%,

pet food at 29%, veterinary pharmaceuticals at 30%,

plantation machinery at 50%, grinding wheels at

54%, and office automation at 24%. The favourable

growth of sectors such as agriculture, industry and

services augured well for the growth of the business,

specifically agricultural machinery, power tools,

plantation support services and retail sales. New

agricultural lands in the North and East being brought

under cultivation as well as expansion of the fisheries

sector due to removal of fishing restrictions after

the war, had a significant positive impact on sales

and returns of the agricultural and marine business

divisions of Browns. Government spending and

emphasis on the construction sector and tourism also

yielded positive results in related business areas.

The divisions carried out integrated sales and

marketing campaigns with dealers and customers,

which paid both short term dividends – as can be

seen in the performance of the divisions during

the year – as well as medium term dividends. The

Company also harnessed the benefits of continued

investment over the past five years in maintaining the

market leadership position of several of its products.

There was also closer co-ordination with principals for

better pricing benefits and supply chain management.

The divisions continued to expand in the North

and East, supported by its extensive network of

distributors and regional centres across the island. All

manufacturing operations are being relocated into

a central hub in Pannala, called Browns Industrial

Park, which allows the Company to achieve greater

synergies in terms of resource use and logistics,

between the various manufacturing and assembly

operations of Browns.

The Company laid the groundwork for its foray into

the healthcare sector, with the acquisition of land

in Kandy for a secondary care general hospital. This

will be the first of a chain of hospitals and diagnostic

centres around the island that Browns has envisioned

setting up. Several other key investments were made

during the year through Browns Investments PLC,

including the acquisition of Excel Global Holdings

(Pvt) Ltd and Ajax Engineering (Pvt) Ltd, and the

construction of several new hotel projects. All of these

new investments have been in emerging or sunshine

industries that are poised to grow over the next few

years.

The first phase of the ERP solutions was

launched,connecting all the divisions of Brown and

Company PLC, and by July 2012, all direct subsidiaries

will also be connected to the ERP system. With the

ERP phase one, the divisions’ operational functions

such as sales, purchases, inventory management,

production, assembly and finance will be supported.

Under the second phase of ERP, business intelligence

will be brought in, where strategic information will

be provided to top management through group Key

Performance Indicators and balance scorecards.

In the area of human resources, the HR division

consolidated its operations during the year under

review, following a voluntary retirement scheme that

was offered to employees the previous year. New

employees who were hired following the VRS were

trained to better meet the needs of the Company in

the year ahead.

Marketing and Branding

Marketing is a hybrid function at Browns. Brand

teams from both the corporate division of Browns as

well as the strategic business units’ work together to

align the different divisional brands with the parent

brand. While keeping with the overall vision and goals

of the parent Company, the individual divisions and

subsidiaries market and promote their own brands

through its respective sales teams. This emphasis on

brand management and strategic management of

the brand portfolio is led by the CEO. The Company

undertakes constant research to stay relevant to

customers and meet their changing needs, both

through product expansion and by aligning existing

products and services accordingly. Browns manages a

portfolio of world class brands such as Exide, Massey

Ferguson, TAFE, FG Wilson, Sharp, Olympus, Yanmar,

Eukanuba and Intervet, to name a few.

There is no substitute for strong sales teams

supporting the Company’s brands and Browns

has some of the best in the business. Sound sales

management ensures that internal customers to

dealers are cared for, while external customers

are addressed through marketing and relationship

The company has always stayed relevant, responding quickly to changing customer needs.


building. All of these efforts have made Browns a

household name synonymous with trust, reliability

and quality and there have been strong sales growth

at Company and Group levels over the years. This

also reflects the Company’s ability to deliver on its

brand promise through continuous innovation and the

provision of several easily accessible customer touch-

points across the island.

Corporate Social Responsibility

At Browns, the philosophy guiding our social

responsibility efforts is to stay true to the values and

principles that the Company holds important, and

meet our obligations toward the community we

live and work in. In line with this, the Company’s

sustainability initiatives involve marketing genuine

products and services to our customers, providing

services that are also accessible to the community,

such as workshops for farmers and fishermen.

Another good example of this is the Battmobile,

a mobile battery service that is available free of

charge to any motorist who needs urgent roadside

assistance.

In addition to this, it was decided in the year

under review that one of the main platforms on

which sustainability initiatives would be based,

was increasing IT literacy in schools and supporting

youth education. Each division also undertakes

smaller welfare projects for disadvantaged groups of

individuals.

Future Outlook

Looking ahead, there are two main drivers of growth

that will propel the Company to further success.

These are technology and innovation. The appropriate

technology can change the course of an entire

industry and define new standards of customer

care, cost efficiency, speedy delivery and marketing

communications. In keeping with the vision of Browns

to excel through cutting edge technology, we have

invested in the ERP and Shared Services solutions,

which will provide the Company with the technical

advancement required to improve processes and

facilitate the growth envisaged. In addition, Browns

will continuously innovate to provide new and

improved services, giving the Company a strategic

advantage.

In terms of new business areas, Browns will focus

on expanding its presence in healthcare, leisure and

real estate. Sri Lanka has a rapidly ageing population

as well as increased incidence of non-communicable

diseases brought about by affluence and changing

lifestyle habits. Demand for private healthcare is

expected to rise and therefore, Browns will further

explore opportunities in the healthcare sector.

Another important area of focus will be the leisure

industry, which is expected to grow significantly

over the next few years. The Browns Group has

invested in several hotel properties that will become

operational in the medium term. Real estate is

another important growth area, and the Company will

leverage on its existing assets as it has a relatively

large bank of prime locations in the city and the

suburbs. Development plans being considered for

these locations range from entertainment complexes

to mixed development and housing projects. An

improved business climate, political stability and

increased per capita income, makes real estate a

sector to watch for.

Some of the main challenges the Company expects

to face in the year ahead is the continued devaluation

of the rupee together with the credit squeeze that

will affect credit available to dealers for purchases.

Further, the rising cost of capital due to increasing

interest rates could affect the viability of business

expansion in the short term. Cost efficiency is

especially crucial given high energy costs that

have impacted on local manufacturing operations.

Improved energy efficiency and use of alternate

energy sources are crucial areas that will be explored

as we consider further expansion in the years ahead.

I would like to conclude this review by thanking

our customers, financial institutions, suppliers,

shareholders and other business partners for their

continued loyalty and support. I would also like

to thank our employees for their hard work and

dedication that has been instrumental in achieving

the success we have to date. I also place on record

my appreciation to the Chairperson and Board of

Directors for their constant support and guidance.

Browns is a Company that is growing from strength to

strength and is well poised to achieve great success.

We look forward to the continued support of our

customers, our shareholders and our partners, as we

continue on this journey.

Murali PrakashGroup Managing Director / CEO


The Board of Directors


Mrs. R. L. NanayakkaraChairperson

Mr. A. L. DevasurendraDeputy Chairman/ Non-Executive Director

Mr. N. M. PrakashGroup Managing Director/ CEO

Mr. H. P. J. de SilvaIndependent Non-Executive Director

Mr. I. C. NanayakkaraNon-Executive Director

Mr. S. V. SomasunderamNon-Executive Director

Mr. W. D. K. JayawardenaNon-Executive Director

Mrs. K. U. AmarasingheNon-Executive Director

Mrs. R.L. Nanayakkara

Chairperson

In July 2006, Mrs. Nanayakkara assumed duties as

Chairperson of Browns Group of Companies.

Mrs. Rohini Nanayakkara obtained her BA Second

Class Honours Degree from the University of

Peradeniya, Sri Lanka and a Diploma in French from

the Chamber of Commerce, Brussels. She is a Fellow

of the Institute of Management & the Institute of

Bankers, Sri Lanka.

She was the first woman executive to join a

commercial bank with the rare distinction of not only

being the first woman General Manager / CEO of a

bank in Sri Lanka but the entire Asian Region.

Mrs. Nanayakkara was also Chairperson / Director

of several financial institutions such as the National

Development Bank, DFCC Bank, Merchant Bank of

Sri Lanka and the First Capital Group of Companies.

She is presently the Chairperson of NDB Venture

Investments (Pvt) Ltd, Ayojana Fund Management

(Pvt) Ltd and the Taprobane Investment Group of

Companies. She is also a Director of Trans Asia Hotels

Ltd and the largest property development companies

such as Mireka Capital Lanka Ltd and Overseas Realty

PLC as a nominee of the main Singaporean investor.

After her retirement from Bank of Ceylon, she re-

joined the banking and financial sector to share her

experience with one of the largest private sector

banks - Seylan Bank, as Director -General Manager /

CEO. During her tenure of office there she successfully

improved the performance of the Bank which

achieved acceptable credit ratings and ISO standards

and was recognised as a major player in the market.

During the latter part of her tenure at the Bank,

Seylan Bank received (in 2003) its first credit rating of

A(-) from Fitch Ratings Lanka Ltd.


The Board of Directors

In August 2004 she accepted the invitation extended

to her by the shareholders of Lanka ORIX Leasing Co.

PLC (LOLC) to be the Chairperson of the LOLC Group of

Companies.

In January 2005, her Excellency the President of Sri

Lanka appointed her as a member of the Task Force

to Rebuild the Nation (TAFREN). This Task Force

will be converted to a special authority by an Act of

Parliament to undertake the rebuilding exercise over

the next 5 year period.

Mrs. Nanayakkara has also been the President of Sri

Lanka Bankers Association, Association of Professional

Bankers and Institute of Management Sri Lanka

and was a member of the Council of University of

Colombo. She is presently the president of the United

Nations Association of Sri Lanka.

Mr. A. L. Devasurendra

Mr. Ajith Devasurendra is a veteran in the financial

services industry in Sri Lanka and counts more than

28 years work experience both in Sri Lanka and

Overseas. He pioneered in Money Broking and

Government Securities markets and was able to bring

new dimensions to the Sri Lankan Money market

industry. He is the former group CEO of First Capital

Group. Mr. Devasurendra was a past President of the

Sri Lanka Money Brokers’ Association and also the first

President of the Sri Lanka Primary Dealers Association.

He acted as a consultant to Price Water House

Coopers, Bombay, India on a USAID project.

At present he is a Director of Seylan Bank PLC, the

Group CEO of Taprobane Group of Companies and he

serves in the capacity of Deputy Chairman of Brown

and Company PLC as well as in many committees

that focuses on the development of the Financial

Markets in Sri Lanka.

Mr. N. M. Prakash

Mr. Prakash holds a MBA from University of

Southern Queensland and is also a Certified

Professional Marketer (Asia Pacific) and a Certified

Management Accountant (Aust.). He also holds

an Executive Diploma in Business Administration

from the University of Colombo and is an Alumni of

National University of Singapore & Asian Institute of

Management, Manila. He is a Fellow of Chartered

Management Institute (London) and Certified

Professional Managers Sri Lanka.

He served as the Sales Director for Singer (Sri Lanka)

PLC, a multinational company involved in retailing

of durables. Mr. Prakash has also served as the

Deputy Credit Director and Credit Manager for many

years handling the marketing and management of

hire purchase and related credit portfolios at Singer.

He also served on the Boards of Singer (Sri Lanka)

Ltd, Singer Finance Lanka Ltd and Singer Industries

(Ceylon) Ltd.

At present, he is the Group Managing Director / Chief

Executive Officer of Browns Group of Companies,

a public quoted conglomerate involved in trading,

manufacturing, finance, travel & tours, plantations and

investments.

Mr. H. P. J. de Silva

Mr. Janaka de Silva holds a B.Sc., (Ceylon) and a

M.B.A. (Sri Jayawardenapura). He is a Fellow of

the Institute of Chartered Accountants of Sri Lanka,

Chartered Institute of Management Accountants and

Institute of Bankers of Sri Lanka.

Mr. de Silva served as a Consultant to National

Development Bank during the period of August 2003

to December 2007 and advised the Bank on the

integration of financial and accounting systems on the

merger of NDB Bank with NDB.

He joined Union Bank of Colombo Ltd at the pre

operational stage of the Bank as General Manager/

Chief Operations Officer and was responsible for

the design and implementation of all operational

policies, procedures and systems. He designed and

implemented the information systems topology,

pioneered web presence and Internet banking

amongst indigenous banks. Under his direction the

Bank obtained ISO 9002 Quality Certification covering

all divisions and became the first bank in Sri Lanka to

connect ATMs to a major international network. Mr.

de Silva was appointed Managing Director/CEO in

May 2002.

During April 1992 to April 1995 Mr. de Silva served as

the Director - Operations of American Express Bank,

Colombo and was responsible for all operational

activities and functioned as the Quality Coordinator of

the Colombo Office.

In February 1987 Mr. de Silva joined Sampath Bank

and was the founder General Manager/CEO. He

made the bank the most technologically advanced

financial institution with all branches connected

on-line for the first time in Sri Lanka. He was the first

to introduce credit cards with a major international

franchise and a multipoint ATM network. He

pioneered many new innovations such as extended

banking hours, interest on daily balance on Savings

Accounts, and the use of UV lights for signature

verification.

In September 1976 Mr. de Silva joined Bank of Ceylon

as Assistant General Manager/Controller and was

elevated to the position of Corporate Advisor in 1979.

He set up the IT function in 1978 and by end of 1985

was the largest IT facility in the country. He introduced

computerised banking with central processing and

multipoint access to Sri Lanka. He was the head of

the Audit function conducting internal audit of over

200 branch offices throughout the country. Further

he introduced new techniques such as statistical

sampling. He was also a member of the Steering

Committee to set up the Automated Clearing House

of Sri Lanka.

Mr. de Silva also served as a Lecturer/ Accountant

at Indeco Ltd, Lusaka, Zambia, from 1973 -1976,

the Finance Manager Building Material Corporation

and during the period 1970 to 1972 was Senior

Accountant of the State Engineering Corporation.

Mr. I.C. Nanayakkara

Mr. Ishara Nanayakkara is an astute businessman

who holds Directorial positions in many corporates

and conglomerates in Sri Lanka. He is a Director of

Brown & Company PLC since September 2005,a

conglomerate as well as several group companies in

trade, leisure, manufacturing, consumer appliances

and agriculture equipment.

Mr. Nanayakkara holds a diploma in Business

Accounting from Australia, and is a Director of Ishara

Traders Group. He serves as the Deputy Chairman on

the Board of LOLC and most of its subsidiaries

and associate companies, including Commercial

Leasing Company. His business philosophy based

on sustainable development has made LOLC to

enter into many new business ventures with high

potential for growth in all three spheres economic,

social and environment. He was appointed to the

Board of Seylan Bank PLC in September 2009 and has

contributed in designing the new strategic direction

of the Bank.


He is also a Director of Colombo Land Exchange and

Taprobane Group, focusing on primary markets.

With the exposure in the SME sector and going

further into the Micro sector, he is a Director of

the companies he spearheads – LOLC Micro Credit

Company Ltd - the only private sector microfinance

institution with foreign equity in the country and

PRASAC- the largest microfinance Company in

Cambodia.

His passion for sustainable investment is reflected

through his involvement in renewable energy,

forestry and plantations. Mr. Nanayakkara is a Director

of Maturata and Pussellawa Plantations, Sundaya

Lanka (Pvt) Ltd- a leading solar panel manufacturing

company, United Dendro Energy (Pvt) Ltd -

renewable energy through bio-mass, Agstar Fertilizers

PLC - a leading agri input & fertiliser company and

HydroPower Free Lanka PLC - mini hydro projects

across the island.

Mr. Nanayakkara is also focused on the immense

opportunities presented by the leisure sector. With the

recent acquisitions of some of the leading hotels in

the Southern Coast, Mr. Nanayakkara is the Chairman

of the Confifi Group Hotels which comprises of Eden

Resort Spa, Riverina Hotel and Club Palm Garden

Hotel. He is also a Director of the Tropical

Villas (Pvt) Ltd.

His recent involvement in construction through Sierra

Constructions (Pvt) Ltd, is fine proof of his perpetual

interest in the growth sectors of the Sri Lankan

economy.

Mr. S. V. Somasunderam

Mr. Somasunderam is a Chartered Management

Accountant and a fellow member of CIMA (U.K.)

He joined Walker & Greig in 1985 for a period of one

year as Management Trainee and thereafter joined

his family business.

In 1994 Mr. Somasunderam established a company

in the U.K. together with his British partners for the

purpose of acquiring a wireless local loop licence to

provide telecommunication services in Sri Lanka and

to seek funding for the same. In 1994 he founded

Lanka Bell Ltd and was successful in obtaining the

licence. He was Executive Director thereafter Deputy

Chairman of Lanka Bell Ltd until he divested his shares

in 2005 together with his foreign partners.

Mr. Somasunderam acquired controlling interest

of Browns Group of Companies together with his

partners in year 2005 and was appointed to the Board

of Browns Group of Companies as Deputy Chairman

and thereafter Group Director from 1st July 2006.

He is also Managing Director and Chairman of Lexus

Developers Ltd. It was established in 2005 for the

purpose of constructing apartments.

Mr. Somasunderam is also an investor in the Sri

Lankan stock market with the blue chip companies.

Mr. W. D. K. Jayawardena

Mr. Kapila Jayawardena was appointed as the Group

Managing Director / CEO of LOLC in June 2007. He

holds a MBA in Financial Management, is an Associate

of the Institute of Cost and Executive Accountants and

was awarded Fellowship of the Institute of Bankers

(IBSL) in 2006.

He has varied experience in the fields of Banking ,

Audit , Relationship Management, Corporate Finance,

Corporate Banking Investment Banking and Treasury

Management.

Mr. Jayawardena was appointed as the Chairman of

the Sri Lanka Banks Association (SLBA) in 2003/04

and served as President of the American Chamber of

Commerce in Sri Lanka in 2006/2007.

He served as a Director of Lanka Clear, National

Institute of Business Management (NIBM) and The

Institute of Bankers (IBSL).

Mr. Jayawardena was appointed to the Financial

Sector Reforms Committee (FSRC) by the Prime

Minister and was a member of the Finance Sector

and Capital markets cluster of the National Council

of Economic Development (NCED). He was a key

member of the inaugural sovereign rating team

and sovereign debt for Sri Lanka appointed by the

Governor of the Central Bank.

He was presented with the prestigious Combined

Support Group Award by the US Navy for services

rendered after the Tsunami in 2005. The Government

of Sri Lanka appointed him to the Board of the Sri

Lanka Fulbright Commission in 2010.

Mr. Jayawardena was appointed to the Council of the

National Chamber of Commerce of Sri Lanka on 27th

January 2011.

Mr. Jayawardena has over 27 years experience in

all areas of banking out of which 9 years was in the

capacity of CEO/Country Head Citibank Sri Lanka and

Maldives. He was the first Sri Lankan to be appointed

as a senior credit officer (SCO) by Citi Bank in Sri

Lanka. During his leadership Citi Bank in Sri Lanka

was rated AAA by Fitch Rating in Sri Lanka. Citi Bank

Sri Lanka was the first foreign Bank to obtain an AAA

rating.

Mr. Jayawardena is the Chairman of Lanka ORIX

Finance PLC, LOLC Insurance Ltd , LOLC General

Insurance Ltd, LOLC Life Insurance Ltd, LOLC Leisure

Ltd , LOLC Motors Ltd , LOLC Securities Ltd , Speed

Italia (Pvt) Ltd , United Dendro Energy Solutions (Pvt)

Ltd, Palm Garden Hotels PLC , Riverina Hotel PLC, &

Eden Hotel PLC.

He is also on the Boards of LOLC Micro Credit Ltd and

Commercial Leasing & Finance Company Ltd, which

are subsidiaries of the LOLC Group. Mr. Jayawardena is

also a Director of HDFC Bank.

Mrs. K. U. Amarasinghe

Mrs. Kalsha Amarasinghe holds an Honours Degree

in Economics. She serves on the Boards of Lanka

ORIX Leasing Company PLC, LOLC Insurance Ltd, LOLC

General Insurance Ltd, LOLC Life Insurance Ltd, LOLC

Leisure Ltd , LOLC Motors Ltd , LOLC Securities Ltd ,

Speed Italia (Pvt) Ltd , United Dendro Energy Solutions

(Pvt) Ltd, Palm Garden Hotels PLC , Riverina Hotel PLC

and Eden Hotel PLC. She also serves as a Director on

the Board of Commercial Leasing & Finance Limited.


Anoj MunidasaDirector - Browns Thermal Engineering (Pvt) Ltd.

Dr. Sajeeva NarangodaDirector/ General Manager - Browns Health Care (Pvt) Ltd.

Rimoe Saldin Group Chief Operating Officer/ Director/CEO - Browns Investments PLC

Chaminda EdiriwickramaSenior Vice President - Director/CEO Sifang Lanka (Pvt) Ltd & Sifang Trading (Pvt) Ltd.

Canisius FernandoSenior Vice President - Director/CEO Browns Industrial Park Ltd, Browns Thermal Engineering (Pvt) Ltd. & Browns Group Industries (Pvt) Ltd.

Jeremy RajiahGeneral Manager - Plantation Support Services

Kennedy JosephSenior Vice President - General Trading, Power Systems & Environmental Engineering

Suresh TissaaratchySenior Vice President - Brands, Corporate Affairs, Integrated Business Solutions, Consumer and Retail Sector

Panduka WeerasingheSenior Vice President - Agriculture, Battery, Porcelain & New Business/ Director/ CEO- Browns Tours (Pvt) Ltd., B.G. Air Services (Pvt) Ltd. & Browns Real Estates (Pvt) Ltd.

Nayantha DelpechitraGeneral Manager - Group Legal/Group Secretary

Panduka GoonawardenaGroup Chief Financial Officer

Vishwa LokugamageGeneral Manager - Browns Group Industries (Pvt) Ltd & Browns Thermal Engineering (Pvt) Ltd.

Corporate Senior Management


Vishwa KumarasingheGeneral Manager - Sifang Lanka (Pvt) Ltd.

Dinesh SamarathunghaGroup Chief Information Officer

Dilan SenevirathneGeneral Manager - Browns Real Estates (Pvt) Ltd.

Rajitha SeneviratneDirector – Browns Tours (Pvt) Ltd./ General Manager - B.G. Air Services (Pvt) Ltd.

Gihan De SilvaGeneral Manager - Agriculture

Mr. C. N. RathakrishananGeneral Manager - Enterprise Resource Planning Process

Manjula WijemanneDirector/General Manager - Klevenberg (Pvt) Ltd.

Nalin Jayawardena General Manager - Consumer

Steffan De RosairoGeneral Manager - Porcelain Division


Investing in Brands

How does Browns build sustainable Brands?

Browns is a household name across Sri Lanka,

synonymous with trust, reliability and quality since the

Company’s inception in 1875. Its strong acceptance

across generations of customers has instilled a deep-

rooted sense of loyalty, such that customers have

rallied around the Browns label even during times of

challenge and adversity. The Company maintains a

portfolio of world-class brands across varied business

segments, including agricultural machinery, power

generation tools, consumer electronics, marine

engines, business automation, porcelain, commodities,

tourism and much more. All of its products are

supported by unmatched services, marking the

evolution of Browns from a marketer of products, to

a complete solutions provider. The Company invests

heavily in brand building activities, continuously

assessing customer requirements and developing

solutions to meet changing needs and staying relevant

to the business segments it operates in.

The Launch of Browns ‘BG’

With the expertise developed over decades of

understanding its customers’ varied needs, Browns

launched its own ‘BG’ brand label in several market

segments it operates in. The Company identified a

gap for high quality, value for money products in

the mid-range pricing segment across several of

the industries it operated in, that couldn’t be met

by the existing product range. A decision was taken

for Brown and Company to launch its own brand

to meet this need. The new brand will bring with it

the trust and quality that the parent brand has long

been known for. Several products have been sourced

for this label, from highly reputed manufacturers

around the world. These products include LCDs, LEDs,

water pumps, DVD players and the entire range

of small appliances. There is a separate product

development team for the BG brand, headed by the

Group Managing Director who personally visits all the

factories and lays down the quality parameters that

are essential and expected from a BG product.

Sales of BG products in the local market have been

exceptional since its launch, indicating a very high

acceptance of this brand by customers who recognise

a sound value-for-money offer. The Company will

expand further to market consumer goods and power

solutions under this brand. The brand has reached

households across Sri Lanka through its 300 plus

dealers, showrooms, regional centres and modern

trade channels, around the island, making it a truly

local brand. BG is currently the fastest growing brand

in the Company’s portfolio as well as in key segments

in the Sri Lankan market. These BG branded products

have enhanced the Group’s portfolio in many areas

and looking to the future, there will be a significant

line expansion within the BG brand.

Sustaining World-Class Brands

Brown and Company has made substantial

investments over the years in ensuring the long term

sustainability of the brands it markets. All the brands

in the Company’s portfolio are carefully managed,

positioned to suit specific market segments and

supported by the appropriate marketing strategies

and distribution channels. For these reasons, it is no

surprise that Browns is a market leader in no less

than seven sectors of business: vehicle batteries

(72%), four wheel and two wheel tractors (70%),

marine engines (32%), office automation (24%),

radiators (42%), power tools (37%) and veterinary

pharmaceuticals (30%). New brands have been

introduced into the Company’s portfolio during the

2011/12 financial year that will further drive growth.

These include Belkin power surges, IT products and

accessories such as laptop bags; the Mitachi range of

affordable gaming equipment; the Biancare range of

luxury furniture for hotels, and C&S electrical products,

to name a few.

A dedicated corporate marketing arm is responsible

for aligning the different divisional brands with the

parent brand, such that synergies are obtained.

While keeping with the overall vision and goals of

the parent company, the individual divisions and

subsidiaries market and promote their own brands

through its respective sales teams.


Offering Unmatched Services

An integral part of the Browns brand experience

is its range of value-added services that augment

the product offerings and have contributed to the

longevity and market recognition that Browns enjoys.

These services are supported by the Company’s

unmatched reach across Sri Lanka that facilitates

ease of access for customers, quick response times

by service personnel and technicians and heightened

efficiency. At present, the Group has a service

network that spans across 250 touch points across Sri

Lanka. These service centres are in the form of large

regional centres, Power Marts, direct service teams

and franchise operations.

Each of the divisions has worked towards a vision

of being a complete solutions provider than simply

a marketer of products. These services range from

after-sales services and quick response times in an

emergency, to training workshops for farmers in the

use of agricultural machinery or for fishermen on the

maintenance of marine engines. These workshops

are not limited to the brands Brown and Company

markets, making it a truly value-added service.

Some divisions such as Animal Healthcare have

home delivery services, while Integrated Business

Solutions have a 24-hour service network in addition

to providing tailor-made office automation solutions

that reduce costs and improve efficiencies for clients.

One of the most successful service concepts for

Browns has been the Battmobile – mobile battery

service units that handle any kind of battery related

technical difficulty, servicing even brands outside of

Browns battery range, at no cost. Further, Browns

Power Marts are designed to be hospitable and highly

efficient service centres.

The Company introduced a new retail channel during

the year called the ‘Discovery Store’. This outlet in

Colombo will market Browns range of IT and gaming

products, but is also an interactive store, allowing

customers to use the products and explore the

technology on offer ahead of purchase.

A customer oriented approach to the work that

Browns does, together with constant innovation, has

strengthened the top-of mind recall of the Company’s

brands in the different market segments it operates

in. Going ahead, Brown and Company will continue

to introduce new brands, products and services, while

investing heavily in sustaining the market position

and growth that it has achieved to date.


Q: Did Browns Investments expand into new business areas during the year?

Browns Investments PLCBrowns Investments PLC is a subsidiary and the

strategic investment vehicle of Brown and Company

PLC. Taprobane Holdings PLC is also a major

shareholder. In the year under review, the Company

consolidated its investments, with several projects

currently under development and due to become

operational in the next few years. It also made a few

strategic acquisitions as discussed below. Group profit

after tax grew by 32% as compared to the previous

year. During the year, Browns Investments PLC issued

50 million shares at Rs. 5/- a share in an Initial Public

Offering, raising Rs. 250 million.

Plantations

Browns Investments PLC has interests in the

plantation sector through Free Lanka Capital Holdings

PLC (FLCHPLC).

Free Lanka Capital Holdings PLC

FLCH is the holding Company of Pussellawa and

Maturata Plantations – a joint venture between

Browns Investments PLC and Perpetual Holdings

(Pvt) Limited. The two plantation companies manage

31 tea estates, 9 rubber estates with a limited

acreage under coconut and other crops including

timber. Pussellawa Plantations also manages two

green tea factories.

The year under review was challenging for the

plantation sector as production costs increased, led by

a wage hike. Tea prices also fell and there was a loss

of traditional markets due to turmoil in the Middle

East. Rubber performed well however, following an

increase in output and prices. These conditions were

reflected in earnings for 2011/12. FLCH posted a 14%

drop in turnover in the financial year under review,

while profitability also fell by 66%. The Company

leveraged on assets available on the estates and

developed a hydropower plant that currently

generates 5,368,415 KWh of electricity to supply the

national electricity grid.

Agri-Business

Browns Investments PLC together with LOLC and the

Sierra Group, hold over 80% of Agstar Fertilizers PLC, a

mid-sized Company in the local agri-business industry.

Agstar Fertilizers PLC supply straight and blended

fertilisers, crop care products and planting material to

the agriculture community. In the year under review,

the Company expanded its product range to include

fertilisers for chili and maize varieties, with plans for

different blends of fertiliser based on soil and crop

type. Agstar Fertilisers PLC had a Private Placement of

Rs. 1 billion in the financial year under review. During

the year Agstar Fertilizers PLC was also listed on the

Colombo Stock Exchange. The Company which was

incorporated in 2003 with an asset base of

Rs. 38 million now boasts of a net asset position of

Rs. 1.9 billion. With this acquisition, the Browns group

is uniquely positioned to offer a complete range of

agricultural products and services to customers.

Leisure

The Company has made significant investments in

the leisure sector with the acquisition of select new

properties.

Browns Investments PLC holds a 30% stake in LOLC

Leisure – the managing company for resorts Palm

Garden, Riverina, Tropical Villas and Eden while the

Company acquired Dickwella Resort and Spa during

the year. These properties together, account for the

highest number of rooms on the Southern coast.

Eden is currently operational, while an extensive

renovation is underway to combine the other three

adjacent properties into a single 500 room hotel.

Browns Investments PLC has also begun construction

of a 150-room star class hotel in Kosgoda and is

negotiating with an international hotel chain to

manage the property in time for the winter tourist

season in 2014. Browns Investments PLC is also in

the process of obtaining the necessary approvals

for two boutique hotels on estates in Maturata and

Pussellawa Plantations.

INVESTMENTS

INVESTMENTS

Browns Investments PLCFree Lanka Capital Holdings PLCLOLC Leisure Ltd.Sierra Holdings (Pvt) Ltd.Agstar Fertilizers PLCRoyal Fernwood Porcelain Ltd.Other Investments

Sector Review


A: Browns has made strategic investments in emerging areas of healthcare, porcelain, leisure and entertainment.


Construction

Browns Investments PLC and LOLC hold a 10% stake

each in Sierra Construction as well as a 10% stake

each in Sierra Holdings. The investment in the Sierra

Group has been a passive one for Browns, although

it did assist the Company with management support

during the year under review. Sierra also successfully

bid for and obtained the contract for construction

of some of Browns property projects. In 2011/12,

Browns bought a 51% stake in Ajax Engineering

(Pvt) Ltd at a cost of Rs. 100 million. The Company

manufactures glass and aluminium doors and

windows. Browns will restructure the Company and

strengthen its manufacturing capacity in the near

future.

Free Lanka Capital Properties (Pvt) Ltd is developing

a commercial building complex at a cost of Rs. 625

million. FLCH will invest in Rs. 600 million in Ordinary

Shares of Free Lanka Capital Properties (Pvt) Ltd,

with the balance funded through bank borrowings or

pre-sales. Construction on this property is due to be

completed by July 2013.

Entertainment

Browns Investments PLC acquired Excel Global

Holdings (Pvt) Ltd in the year under review. Excel

Global Holdings (Pvt) Ltd’s subsidiary, Millennium

Development (Pvt) Ltd has leasehold rights to a

property termed Excel World which is around 6

acres in extent. The lease has a further 31 years to

run. In the short term, Browns has upgraded some

facilities for corporate events and conferences, as

well as some restaurants and entertainment areas.

Plans are to have a mixed development property in

collaboration with a developer, with a hypermarket,

conferencing, entertainment, restaurant facilities and

more.

Manufacturing

The manufacturing arm of Browns Investments PLC

consists of Royal Fernwood Porcelain Limited (RFPL),

which manufactures high quality tableware. In the

year under review, Browns Investments PLC adopted

a strategy of expanding local sales and reducing

emphasis on export markets. In line with this, RFPL

expanded its product range and distribution network,

opening up a new store called the ‘Loft’ to cater to Sri

Lanka’s urban clientele. Plans are to improve factory

efficiencies by 10-15% through better sourcing of

raw materials and restructuring of factory operations

in the year ahead. Several new designs will also be

introduced and quality enhanced further.

Other Investments

Browns Investments PLC holds a trading portfolio

in excess of Rs. 1 billion. The portfolio includes

investments in financial services, diversified holdings,

agriculture and plantation sectors. The significant

decline in the indices of the Colombo Stock Exchange

resulted in a charge of Rs. 356 million to the Profit

and Loss account in line with the Company’s policy to

mark to market its trading portfolio.

The Company also has a land portfolio in excess of

Rs. 500 million. These properties, which are based in

Colombo and its suburbs as well as in Trincomalee,

are being held for future development.

Porcelain Royal Fernwood Porcelain Ltd (RFPL) was established

in 1987 to produce porcelain products for the export

market, with its manufacturing facility based at

Kosgama and Meegoda (Lanka Decal Ltd) a subsidiary

of RFPL. At maximum capacity this facility can deliver

around 550,000 products per month. In November

2011, Brown Investments PLC acquired a majority

shareholding of RFPL thereby taking control of all of

RFPL’s facilities.

Operating Review

RFPL posted heavy operating losses for many years

prior to the acquisition by Browns Investments PLC in

2011. Upon takeover of RFPL, Browns Group set up

a separate Strategic Business Unit to manage local

sales and distribution of its products. Where RFPL

concentrated on the export market, the strategy

of the Browns Group has been to strengthen local

distribution and sales. In doing so the Group has

ensured tight internal systems, it has envisioned

an improved and expanded product offering and

emphasised higher quality so that the product will be

better received by the local market.

The export market has dwindled due to higher cost

of manufacturing, recession and economic downturn

in western markets over the last few years. There

has been an overall decline in demand as well as

stiff price competition from countries such as China,

Bangladesh and Indonesia as these countries have

cheaper raw materials and energy, lowering their cost

of manufacturing,

Therefore, to support the new business strategy of

concentrating sales in Sri Lanka, a new flagship store

called the ‘Loft’ was opened in Colombo and has

proven popular among urban clientele. The dealer

network which stood at 50 at the time of takeover of

RFPL was expanded to 250 in the year under review.

The Company also opted to do away with Board of

Investment (BOI) status that would have restricted

local sales. Over time it is expected that local sales

will make a 70% contribution to earnings, growing

from about 40% at present. Royal Fernwood Porcelain

Ltd plans to cater to all market segments with a wide

range of designs to meet varied demand across Sri

Lanka.

One of the main challenges in the year under

review was the high cost of fuel that increased

manufacturing costs. Although some furnaces were

switched to kerosene from diesel, this only provided a

temporary reduction in costs.

Future Outlook

Looking ahead, Browns will make a substantial

investment in brand building and marketing

campaigns to drive sales of the Royal Fernwood

brand. These campaigns will be launched in the

second half of the year, following several internal

changes that will lay the groundwork for these

plans. Several new designs will be introduced and

quality enhanced further. The dealer network will be

expanded to 750 outlets across Sri Lanka, ensuring

superior product reach for customers. Browns will also

Browns will enter the healthcare industry through development of a chain of fully-fledged secondary care general hospitals and diagnostic centres.

INVESTMENTSSector Review


introduce another brand in 2012/13 that will cater

to the local mass market. The Company is targeting a

revenue growth of 100%.

Gal Oya Holdings (Pvt) Ltd. Brown and Company PLC and Lanka Orix Leasing

Company PLC entered into a public-private partnership

agreement with the Government of Sri Lanka in

2007 to revive the Hingurana Sugar Company. The

Government holds a 51% stake in the sugar factory,

while a consortium of Browns & Company PLC, LOLC

and promoters hold 49%.

Browns and its partners have invested in

refurbishment of the factory. Modernisation of the

factory is in its final stages and once complete, the

factory will produce cane sugar and will also be used

to refine sugar. Refining of sugar has already been

tested and commercial operations of 600-700 metric

tonnes a day will commence in the new financial

year. Production of cane sugar is due to begin by

August 2012, with the factory able to crush 2000

metric tonnes of cane a day. The factory will work

with a network of out-grower farmers for supply of

sugar cane. Currently 507 hectares are being planted

with sugar cane, and this is to be expanded to 1390

hectares in the year ahead.

Browns Health Care (Pvt) LtdHealthcare is a new business area for Brown and

Company PLC and one in which the Group sees

significant potential for growth. Browns will enter the

healthcare industry through development of a chain

of fully-fledged secondary care general hospitals and

diagnostic centres. The vision of this division is to

deliver quality healthcare through comprehensive and

integrated clinical practices and personalised care for

rural and urban Sri Lankans.

There is currently a significant demand for private

healthcare in Sri Lanka as there is a shortage of

around 40,000 hospital beds. Total expenditure on

health in Sri Lanka is estimated at 4% of national

Gross Domestic Product and there are 69,000

government beds and 9000 private hospital beds.

In the private healthcare industry, just four hospital

chains enjoy 75% of market share, with the

estimated industry size being Rs. 22 billion in 2010.

Most of the large hospitals are based in Colombo

and in the past four years, the demand for private

sector outpatient care has increased at an average

rate of 6.2%. There is also a trend of increasing

non-communicable diseases brought about by wealth

and changing lifestyle habits, with diseases such as

coronary heart disease, hypertension and diabetes on

the rise. Sri Lanka also has a rapidly aging population

creating a demand for an age-care facilities.

Browns has identified a gap in affordable healthcare

outside of Colombo and has earmarked strategic

locations for expansion based on the significant

presence of middle income groups. The Company’s

first secondary care general hospital will be located

in Kandy at an investment of over Rs. 1 billion. In

the year under review the site for the hospital was

identified and preparatory groundwork begun. The

required approvals have been sought and plans are to

commission the hospital by the end of 2013. Kandy

was selected due to the demand for healthcare

and the absence of established private healthcare

providers in the area meeting this need. The hospital

in Kandy will be a multi-speciality, secondary care

general hospital. The approach is to minimise the

average length of stay through the use of specialised

surgical techniques like laproscopic surgery and

excellent nursing care. A multi-speciality hospital

could serve a population of around 200,000 people.

There are some specialities that the hospital in Kandy

will focus on such as orthopaedic surgery, transplant

surgery and diagnostic facilities like imaging, MRI, CT

scan, mammography, advanced endoscopic facilities

and renal dialysis. Development of a nursing school is

already underway as a precursor to the hospital. The

school will offer a three year diploma in nursing and

graduates will be absorbed into the Browns hospital.

Premises for the school have been identified and

qualified lecturers and staff will be hired. Once the

hospital is commissioned, the school will be shifted

into a fully fledged training facility within the hospital

premises.

While this property is under development, Browns

is also looking for a suitable acquisition in or around

Colombo. The Company has identified gaps in certain

specialities such as nephrology, orthopaedics and

even cardiology, which it could serve through a

presence in Colombo.

Several other towns for expansion of healthcare

services have been identified that generally have

over 100,000 middle income groups within a radius

of 5-7 km. These include cities in and around Colombo

such as Negombo, Maharagama, Boralesgamuwa,

Ratmalana, Battaramulla as well as cities in other

parts of the country such as Ratnapura, Kegalle and

Kurunagala. Different models of healthcare are being

developed based on the requirements of different

towns. Hospital models have been developed for 35-

bed, 50-bed, 75-bed and over 100-bed hospitals, as

well as poly-clinics and diagnostic centres. There is a

big market for diagnostic centres in Sri Lanka offering

medical laboratory technology and imaging facilities.

Plans are to link up with standardised general practice

clinics as well, such that there is a practice of referral

of cases, whereby hospitals treat patients when

required and refer them back to general practice

clinics for post-care. General clinics in turn screen

patients, referring them to hospitals as required.

Given the entry of the Browns group into the leisure

sector, there are synergies that can be achieved

with the healthcare division in the area of medical

tourism. This division expects that it will have the

necessary infrastructure and skills to cater to demand

and be competitive in the region and is currently

negotiating with international collaborators. To this

end, Browns healthcare will apply for international

hospital accreditation through a reputed international

accreditation agency so that it will have the

necessary recognition by overseas clientele and

partners such as international insurance companies.

This comprehensive accreditation will look at all

aspects of hospital functions, from infrastructure and

occupational safety to nursing. Currently there is

only one hospital chain in Sri Lanka that has similar

international hospital accreditation.

Browns Health Care (Pvt) Ltd is supported by a highly

experienced team, the strength of the Browns brand

and its reputation for being a reliable and trusted

supplier of goods and services, especially in peripheral

markets.


Q: What makes Browns unique in the agriculture and plantation services business?

Agriculture Brown and Company PLC is a household name

across Sri Lanka and is perhaps most well known for

pioneering agriculture mechanisation in Sri Lanka. The

Agriculture Strategic Business Unit (SBU) of Browns is

the sole distributor for Massey Ferguson and TAFE four

wheel tractors. It also markets Howard implements

from Malaysia and Bharmpuri implements from India.

With its comprehensive product portfolio, Browns

provides high quality farming solutions to farmers

across Sri Lanka, empowering them to achieve

greater farm productivity and yields.

Financial and Operating Performance

The agriculture sector in Sri Lanka offers tremendous

opportunity for growth of this business. The release

of lands for cultivation in the North and East following

the end of the war resulted in higher production and

yields, as farmers invested in cultivation. However,

there has since been unfavourable weather and

some volatility in prices that could affect output the

following year. The sector also faced challenges

brought about by the heavy fluctuation in the

US dollar and the near doubling of interest rates

in the year under review. As much as 90-95%

of agricultural machinery is sold through easy

payment schemes through banks and other financial

institutions. With the rise in interest costs, farmers

struggled to afford leasing payments and were also

affected by lending restrictions.

Despite these challenges Browns agriculture held

number one position in the industry with a market

share of 60%, which it has maintained over several

years. Sales grew by 37% during the year. There are

two main reasons behind this strong performance:

exceptional after-sales services and a highly

committed and motivated team. The division has

constantly strived to add value to the brand and in

the year under review, several service initiatives

were offered. These included free registrations for

farmers, as well as full insurance cover for farmers

for the first year at no cost, in partnership with Sri

Lanka Insurance. The division also focused efforts on

branding and marketing activities with the aim of

building brand recognition among its customers and

enhancing top-of-mind recall. Several employees

including technicians and assistant managers

were sent on overseas training to further improve

the skills of the team working in the division. The

Howard rotovator was re-launched during the year,

building awareness for the product through customer

interactions as well as field demonstrations. Following

these initiatives, sales of this product increased

150% in the year under review and are expected to

increase further. Finance costs were a challenge and

are a continued concern in the year ahead.

Browns has a strong dealer network for distribution of

agricultural machinery. The exclusive dealer network

was increased by 26% and the overall dealer network

increased by 13% in the year under review. The

Agriculture division is also equipped with a strong

franchise dealer network and has the best after-sales

service team in the country.

Browns agriculture won the MASS Lanka award for

2011, recognising the role Browns has played in

uplifting the lives of Sri Lanka’s farming community

through introduction of world class technology to

Sri Lanka. The TAFE 45DI got the silver award at the

National Agribusiness Awards 2010 conducted by the

National Agri-business Council, affiliated to the Ceylon

Chamber of Commerce.

Future Outlook

In the year ahead, the division will concentrate on

growing its genuine spare parts business, an area

which has considerable potential as the market is

currently flooded with cheap substitutes. Distribution

of spare parts is to be expanded, while the Company

is in negotiations with suppliers for better terms so as

to offer customers competitive pricing.

After-sales services of the Agriculture SBU will be

further improved and the division is exploring new

avenues by which to offer customers unique service

solutions such as a 24 hour mobile service unit.

AGRICULTURE & PLANTATIONSAgriculture DivisionSifang Lanka (Pvt) Ltd,Plantation Support Services

AGRICULTURE & PLANTATIONSSector Review


A: We offer a complete package of services to farmers & the plantation industry, from seeds, fertiliser & agro-chemicals to tractors & related machinery.


A new, slightly more premium model of tractor under

the TAFE brand will be introduced to the market in the

next financial year.

The SBU is targeting to maintain its current market

leadership position in the next financial year as well.

Sifang Lanka (Pvt) LimitedSifang Lanka is a wholly owned subsidiary of Brown

and Company PLC, marketing light agricultural

machinery such as two-wheel tractors, mini-combine

harvesters and harvesting reapers to farmers under

the Sifang and Yamasha brands. The Company

also markets convenient transport solutions that

include mopeds and scooters from Chinese-Indian

collaboration B2 India, marketing them under the

brands BG Zoom and BG-F1. The two wheel tractors

are imported in semi-knocked down form and

assembled in Sri Lanka at the Company’s state-of-the-

art assembly plant in Pannala.


The focus of this business in the year under review

was to diversify its product portfolio so as to reduce

the Company’s dependence on sales of seasonal

agricultural machinery. The Company therefore

expanded its non-agricultural area of business, while

maintaining sales of agricultural machinery.

The overall market for agricultural machinery grew

during the year, with growth led by increased

investment in the agriculture sector and the

associated demand for agricultural machinery and

equipment. Sifang maintained a 33% market share in

the year under review, although sales of two-wheel

tractors in the latter part of the year declined due to

lowered demand brought about by adverse weather

conditions impacting on output. The agricultural sector

has also shown price volatility in recent months,

with farmers receiving low farm-gate prices for their

crops. In an effort to hedge against the seasonal

demand for agricultural machinery and the volatility

in the agriculture sector, the Company introduced a

range of new products. One of these was the Sifang

mini-combine harvester for the paddy sector. These

harvesters are small and affordable, making them a

popular product.

The Company has gradually been expanding its light

transport products with the introduction of scooters

and mopeds. Sales are targeted in more rural areas

of Sri Lanka, where there is only a limited presence

by competitor brands, unlike in the cities. In the year

under the review the groundwork was laid for the

introduction of a new brand of three wheelers in

collaboration with Indian based Pace Agro. A specific

model of diesel three-wheeler was identified, designs

were modified to suit Sri Lankan preferences, and the

required infrastructure such as the assembly line, was

developed.

The Company has 58 franchise service agents

covering all the business areas island-wide. These

agents are supported by Company service technicians

who deal with manufacturing defects in the field with

a promise to deliver within 24 hours.

Future Outlook

Diversification of its product portfolio to reduce

dependence on seasonal sales of agricultural

machinery will continue to be the main focus of

business in the year ahead. Introduction of a new

diesel three wheeler will be an important product

addition. This product will be targeted at rural markets

where three-wheelers are purchased as family

vehicles as against the use of three-wheelers as

commercial vehicles in the city. Although there is

strong competition in the market for three wheelers

in Sri Lanka and exit and entry barriers are strong,

Browns has several advantages. It enjoys strong

brand recognition and acceptance in rural areas

where it hopes to market its product, it can leverage

on the widespread, well-established distribution and

service networks of Brown and Company, and it has

strong technical skills in-house.

Plantation Support Services The Plantation Support Services Division supplies tea

and rubber processing machinery as well as allied

products to Regional Plantation Companies, private

tea factory owners and state owned plantations. It

also provides a comprehensive after-sales service.

Browns represents some well-known brands within

this division: Parucco from India for heating and drying

solutions, Marshall - Fowler – a Kenyan Company

based in India – for a wide range of tea machinery,

the Indian Aarkay Group for tea driers, Benson

Corporation from Taiwan for green tea machinery

and Kelachandra Iron and Steel Works from Kerala,

India for rubber machinery. This division also serves

as a point of contact for plantation related products

of other divisions or companies within the Browns

Group.


The year under review saw wages for plantation

workers rise by 27% under a collective agreement

between plantation companies and workers, fixed

for three years. The resulting increase in the cost

of production led many companies to curtail new

and planned investments in factory expansion and

upgrades. This had a negative impact on the business

of this division during the year under review. Average

tea prices in 2011 dipped slightly to US$ 3.17 a

kilogram, over US$ 3.31 per kilogram the previous

year, while output also dipped marginally from 326

million kilos to 325 million kilos of black tea for the

same period. However, exchange rate fluctuations in

the local market were favourable to exporters. Prices

and volumes in the industry remained steady overall

despite the loss of traditional markets in the Middle

East due to the turmoil of the Arab Spring during the

year. There was also a spill-over effect of US sanctions

on Iran, an important market for Ceylon tea, due to

banks not extending Letters of Credit to buyers from

Iran. Rubber production in 2011 increased by 3.2% to

157.9 million kilos, while the average price of rubber

sheets in 2011 was Rs. 517 per kilo of RSS 1, driven

by favourable weather conditions

Browns Plantation Support Services embarked on few

key projects in the year under review. The division

The division has constantly strived to add value to the brand and in the year under review, several service initiatives were offered.

AGRICULTURE & PLANTATIONSSector Review


evaluated and sourced all machinery, plants and

equipment for the Hingurana Sugar factory under Gal

Oya Holdings, a joint venture between LOLC, Browns

and Company and the Government of Sri Lanka.

Installation and refurbishment was undertaken in line

with plans to begin production at the sugar factory by

August 2012. Browns also entered into an agreement

with the Finlays Group to supply and maintain

machinery to its two plantation companies, namely

Hapugastenne and Udapussellawa Plantations. The

division manages the entire engineering services

requirements for Finlays on the basis of a monthly

fee. A dedicated team makes monthly visits to the

estates for evaluation and servicing and is available

around the clock for emergencies. Considerable

work has already been carried out, which includes

fixing of new machinery into some of their factories

and the division is currently working on a factory

modernisation programme that will continue into

the new financial year. Such an agreement is a first

in this industry and is a reflection of the innovative

approach to business that is a hallmark at Browns.

This division is a market leader in supplying of tea

driers for the plantation industry with a 70% market

share. During the year the division also ventured into

repair of existing machinery for companies, regardless

of the supplier. The division’s after-sales service has

also acquired a reputation for its strong and reliable

after-sales services that is available around the

clock. Browns Plantation Support Services division

is currently the preferred partner for the plantation

sector for engineering services. These ventures saw

revenues grow by 50% year on year despite market

conditions, while gross profits grew by 30% in the

financial year under review.

Future Outlook

Looking ahead, the division hopes to further

strengthen its business of repair and replacement of

existing machinery, regardless of suppliers. This area

is important as particular types of machines available

in the industry are old and antiquated, such that

repairs are very costly to the user, making it more

cost effective to undertake replacement. At the same

time, the division is also concentrating heavily on

repairs where possible and is acquiring a reputation

for being efficient and reliable. Some challenges

remain such as tax structures on imported machinery.

For example, energy saving devices attracts high duty,

which is counter-productive to the development of

the industry and ‘green’, energy efficient businesses.

It is hoped that a buoyant industry would spur

investment in the year ahead. There is a trend of

rubber prices remaining strong as compared to tea,

and companies that have sufficiently diversified into

rubber have shown marginal profitability even in a

difficult market. Some companies are also expanding

their rubber factories, making this an important

area of business for the Plantation Support Services

Division. Browns is well poised to take advantage of

a strong rubber industry with its range of high quality

rubber processing machinery.


Q: How does Browns maintain leading market shares in power generation?

Battery The Browns Battery Strategic Business Unit (SBU) is

the sole distributor of the Exide brand of batteries in

Sri Lanka. The SBU currently markets the Exide range

of automotive and motorcycle batteries supplied by

Associated Battery Manufacturers Limited, as well as

BG deionised battery water, which is the only battery

water product that has received ‘SLS’ status from the

Sri Lanka Standards Institution.


The market for batteries in Sri Lanka is dominated

by several companies as there are low entry and

exit barriers. Browns has consistently maintained a

leading market share of 56%, with a vast distribution

network of over 600 outlets around the country.

Financially the Company performed exceedingly

well. Turnover increased marginally in the year under

review. Finance costs saw an increase as a result

of the volatility in the foreign exchange market. The

main reasons for the SBU’s strong performance are

the marketing of new products that have shown

tremendous potential, as well as a strong team

driving sales growth and performance.

In the year under review the SBU introduced a new

battery called Exide Marine for boats and yachts.

With the end of the war, large extents of sea have

been opened up for commercial fisheries, with

new investments being made in fishing boats.

Marine fish production grew by 16% in 2011 with

the Government identifying a need to expand the

fisheries fleet so as to increase contribution from

the Northern and Eastern provinces. The time was

opportune for the SBU to introduce a marine battery

and three types were introduced - 120, 150, and

200 amperes. Three new products were introduced

under the Browns BG brand: battery testers, jump-

starters and jumper cables. In the motorcycle battery

segment, the SBU expanded distribution and sales

grew, leading to a considerable growth in the market

for motorcycles. New distributors were appointed for

motorcycle batteries and BG water, reaching 1500

outlets, which will contribute toward driving future

sales volumes.

In the automotive battery segment, the reduction

in tariffs during the year saw an inflow of vehicles,

which means that 2013/14 will be a good year for

battery sales as these vehicles come in for battery

replacement and maintenance. The number of

motor cars registered increased by 151% in 2011

according to Central Bank data. However, as vehicle

import tariffs increased again by 49% in March,

inflow of vehicles have dipped, which may have

an impact on future performance. The number of

Battmobiles was increased to 60. The Battmobile is

the SBU’s trademark mobile battery unit that provides

customers with quick assistance in case of battery

problems while on the move. The service is offered to

customers irrespective of the battery brand that they

use and is an unmatched service in Sri Lanka. Browns

Battery SBU operates Power Marts in Kurunegala,

Galle and Colombo, where vehicles can be brought

in for servicing. High levels of efficiency were

maintained during the year, further reinforcing the

impeccable reputation that these centres have earned

for its superior service levels.

Aggressive marketing and branding activities were

carried out for all its products. A total of 20 technical

seminars were held during the year in addition to 220

free service campaigns across Sri Lanka. The division

sponsored 12 rallies conducted by the Sri Lanka

Army and Airforce and was the principal sponsor

of the Foxhill Supercross 2012. The SBU achieved

a milestone when the Company was ranked 16th

under the Unlisted Brands category in the Brands

Finance Survey, surpassing other large brands. Brand

Exide also became the first battery brand to achieve

SuperBrand status for the 2011 and 2012 calendar

years.

POWER GENERATIONBatteryKlevenberg (Pvt) Ltd. Power SystemsGeneral Trading.

Trusted for Generations, Worldwide

POWER GENERATIONSector Review


A: By marketing a portfolio of world class brands, supported by innovative services and a widespread distribution network.


Future Outlook

The main goal of the SBU is to add value to the

Exide brand through campaigns to enhance product

awareness and the aspirational value of the brand.

Aggressive marketing will support the SBU’s product

expansion. A battery for three-wheelers is to be

launched in the new financial year. This new product

will be modified to suit the specific requirements

and usage patterns of three-wheelers in Sri Lanka.

Further, the Dagenite range of automotive batteries

will be re-launched to target more value-conscious

customers. With the re-launch of Dagenite, Brown

and Company will be present in all three market

segments: premium, mid-range and low-cost. The

SBU will continue to push sales of its marine and

motorcycle batteries and actively market its semi-

maintenance battery – Exide Ultra and its BG brand of

deionised battery water. The number of Battmobiles

will be increased to 75 in 2012/13 to meet increased

demand for its services around the island.

The volatility in the US dollar exchange rate continues

to be a challenge as raw materials for the batteries

are imported. Further, the high cost of living has

affected disposable incomes of people and together

with expensive fuel, there is an emerging trend of

reduced usage of vehicles. This has resulted in a very

competitive market for battery and related products,

which may have an impact on performance going

ahead.

The division is targeting a 10% growth in turnover in

the 2012/13 financial year.

Klevenberg (Pvt) LimitedKlevenberg is a subsidiary of Brown and Company

PLC and is the sole distributor of Lucas automotive

products from the UK. The Company markets a

complete range of premium automotive batteries to

all categories of vehicles including European origin

cars as well as utility vehicles. Lucas Premium MF,

which is a top-of-the-range maintenance free battery

with a two year comprehensive warranty, has won

the trust of the consumers with its high performance.

The Company also operates service centres called

Lucas Premium Centres in Orugodawatte and

Kohuwala. These centres are open to all who wish to

service their auto batteries and check on the electrical

system in their vehicles, and not only to Lucas

customers.


The year under review was one of consolidation

for Klevenberg, as it focused on strategic marketing

and brand building activities within the premium

end of the business. Lucas automotive batteries are

positioned as premium life style products supported

by unmatched pre-sales and post-sales services and

trusted for better performance in the market. The

budget for marketing and branding activities was

increased by three fold in the year under review,

and executed to be in line with its goal of brand

positioning and image building for the long term.

During the year, Klevenberg (Pvt) Ltd entered into

an agreement with the Automobile Association (AA)

of Sri Lanka to provide a joint service to all motorists

in Sri Lanka. This is to upgrade all the call boxes of

AA to take over the auto-rescue services offered

by the Association. The Automobile Association and

Klevenberg (Pvt) Ltd will provide motorists with

around the clock services to all motorists, including

additional functions such as towing of vehicles in an

emergency situation. The facility is currently being

tested and will be rolled out in the new financial

year. It is expected that this value added service

will augment the products and services offered by

Klevenberg (Pvt) Ltd, further cementing its brand

position as a supplier of superior products and

services. This is an extension of the Company’s

The Battmobile is the SBU’s trademark mobile battery unit that provides customers with quick assistance in case of battery problems while on the move.

existing Auto-Rescue facility that offers a 24-hour

mobile service with fully equipped workshop facilities

to accommodate auto repairs. It provides on-site

replacement of batteries, doorstep assistance in the

event of auto-electrical failure, among other services.

During the year under review, the Company also

negotiated with Lucas UK to fill product gaps within

Klevenberg (Pvt) Ltd’s current range. These batteries,

provided under a two to four year warranty, will

cater to demand by owners of European origin

vehicles. Klevenberg (Pvt) Ltd’s market share in

automotive products has been maintained at 16%

despite aggressive competition based on price and

promotions. The reduction in vehicle taxes in 2011 is

favourable for the motor vehicle industry, though the

benefits in terms of increased sales of batteries and

related services will only be seen in a year or two.

Net profits for the year under review grew by

155% compared to the previous year. The Company

underwent financial restructuring that contributed to

its profitability. This involved Brown and Company PLC

investing a further Rs. 100 million to increase its stake

from 60% to 74%, and settling of all outstanding

debt, which resulted in a significant reduction in

finance costs during the year under review. However,

this reduction was tempered by the devaluation of

the rupee, which continues to have an impact on

costs.

Future Outlook

Building on its strong branding and marketing

activities, Klevenberg (Pvt) Ltd will focus on

growing sales volumes in the next financial year, by

maximising on its channel potential. The Company

currently has a dealer network of 375, which may

increase further. It will also add two more service

centres to its network. Klevenberg will also expand

its product portfolio by venturing into related business

lines that show significant promise. Among these new

product lines is a range of motorcycle batteries of

Indian origin. The North and East of Sri Lanka are new

markets that offer a great deal of potential, especially

in segments such as motorcycle batteries. The

Company is hoping to achieve a 20% market share in

the automotive segment in the new financial year.

Aggressive competition, high raw material costs

and an economic slowdown are challenges that

could affect business in the coming year. High fuel

prices and an increased cost of living could have a

negative impact on consumer behaviour and spend

as maintaining a vehicle becomes expensive. The

increase in interest rates and restriction of overdraft

facilities by banks could also adversely affect the

dealer business.

POWER GENERATIONSector Review


Power Systems Brown and Company PLC imports and markets FG

Wilson generators from the United Kingdom, one

of the world’s most recognised brands of power

generating systems. In addition, this division has

become well-known for its superior after-sales

services which include complete technical support

such as installation, maintenance, sales of spare parts

and more.


The year under review has been one of enhanced

service levels, with the division evolving from being

simply a supplier of generators to becoming a

complete electrical energy solutions provider. The

division evaluates customer needs and provides

specific tailor-made solutions based on their

requirements. This package of services includes

provision of equipment, installation, 24-hour

assistance across the country through Browns regional

centres in Jaffna, Ampara and Kurunegala where

technicians are on standby should the need arise with

a response time of a maximum of three hours. The

division has achieved a milestone of 1000 service

contracts in the year under review. There are currently

1160 service contracts in operation and similar

service contracts are being aggressively pursued by

the division’s service team. Some key institutional

customers include Hatton National Bank, Seylan Bank,

and the National Water Supply and Drainage Board,

LOLC and CLC among others.

Sales of generators grew tremendously from an

average of 75-100 units a year to 215 units in the

year under review. In this industry Browns holds

number one position with a 35% market share. The

division successfully negotiated with its suppliers for

advantages on pricing and technical support, which

contributed to the improved sales performance during

the year. Browns has also achieved the number

one dealer position for FG Wilson in South Asia with

highest recorded sales. This performance was despite

an 18% increase in finance costs following exchange

rate volatility during the year, which resulted in a

price increase being passed on to customers. The

division also improved availability of stocks, currently

stocking even high capacity generators. While this

has doubled inventory costs, the alternative delay of

four to six months to import and supply generators

to meet a request would have resulted in an erosion

of the customer base. A remote monitoring system

was implemented during the year, which linked 60%

of generators in the division’s network. This system

allowed instant monitoring of any breakdown or

malfunction via SMS alerts, which improved response

times and resulted in higher efficiencies in the year

under review.

The division’s revenue grew by 41% while gross

profitability grew by to 12% as compared to the

previous year.

Future Outlook

The division will expand into rental operations in the

next financial year, having laid down the required

infrastructure during the year under review. The

division will operate a fleet of 15 generators that

can be rented out to customers or offered at a

nominal rate as a temporary replacement following

a breakdown. There will also be an expansion into

allied products and services in the power projects and

power industry segments.

Competition continues to be a challenge in all

segments of the market from high, medium to small

capacity generators. Browns has retained its market

share despite other products being more cost-

competitive, due to the superior quality of its products

and services. The devaluation in currency continues

to be a challenge both in terms of increased finance

costs as well as the restrictive impact it has on capital

investment in the construction industry, which in turn

affects this division’s business. It is hoped that some

stability in foreign exchange markets is introduced in

the new financial year.

General Trading The General Trading division of Browns is a supplier

of power tools, accessories and hand tools, marketing

some of the world’s most renowned brands that

include Makita, Maktec, Tailin, Eclipse and more. There

are two main areas of business under this division:

machinery and tools, and electrical products.


Total turnover of this division grew by 35% in the

year under review, while profitability grew by 33%

as compared to last year. Much of the growth was

concentrated in the second half of the year, following

several key initiatives that were undertaken. These

included, introduction of new products, better product

features, price negotiations with suppliers for more

advantageous terms and a one year extended

warranty on all portable generator units. These

initiatives helped drive business performance in the

year under review.

In the area of power tools, Makita and Maktec are

market leaders with sales growing by 33%. This

resulted in Browns market share in the professional

power tools segment, growing from 32% to 37%

in the year under review. Sales of Tailin cutting and

grinding wheels also grew by 54% as compared

to the previous year, resulting in a market share of

65%. Sales of Eclipse hacksaw blades declined due

to product issues, which were resolved in the second

half of the year with sales of the product recovering

strongly. A torque range of power tools under the

brand name of Eclipse was introduced in the year

under review. One of the challenges facing the power

tools business is competition from cheaper Chinese

products and the lack of a presence of Browns in the

low-value segment of the business.

The electrical division markets C&S switchgears BG

fans, Usha Eurolex CFL bulbs, and Firman generators

up to 5kVA capacity. This area of business did not

perform as expected for most of the year under

review due to the limited product range, as well as

product issues. However, the business showed a

strong turnaround in the fourth quarter following the

introduction of new products and an improvement

in service levels. A high quality CFL bulb under the

brand Usha Eurolux was introduced and has been

successfully accepted in the market as it is an

affordable, value-for-money product. The improved

performance in this area of business was also due

to the improved sales of portable generators, with

market share of Firman generators growing from 2%

to 11%. Generators have been identified as a product

with significant potential and Browns market share is

expected to grow further to 17% in the short term.

Kerosene generators, as well as a decorative range

of ceiling fans under the brand name of BG, were

introduced during the year.

There has been a growth in service contracts in

both areas of business - power tools and electrical

products, leveraging on the Browns network of

regional centres across Sri Lanka. The division

manages seven franchise service points in all major

towns, further improving the after sales service of

products.

Future Outlook

The division is targeting a 6% growth in market share

in power tools and a further expansion in market

share of electrical products. This growth will be

supported by new products that are volume driven.

Plans to widen its product offering such that it reduces

the gap between its mid-range products and the

price conscious segment of the market are underway.

Dealer networks are to also be expanded to support

the division’s new product ranges. An estimated 15

distributors are to be appointed in the new financial

year, while expanding the after sales network to

reduce the down-time of customers.


Q: How has the Company improved manufactur-ing efficien-cies across the group?

Browns Industrial Park LimitedBrowns Industrial Park Ltd will serve as a total

warehousing hub for the Browns group of companies,

with all manufacturing operations of the Browns

Group to be relocated here for improved efficiencies.

In the year under review, the operations of Browns

Group Industries (Pvt) Ltd (BGIL) and Browns Thermal

Engineering (Pvt) Ltd, the Browns agricultural division

assembly plants for Tafe and Sifang tractors and the

logistics operations for the Browns Group that includes

the central warehouse and stores, began relocation

into the new complex. The industrial park is spread

across 25 acres of land, making it one of the biggest

factory complexes in the country. Buildings occupy 12

acres of this land, while the balance is open. Common

facilities such as waste water treatment facilities

for manufacturing operations are available, with all

the required environmental certifications in place.

The entire relocation process is to be completed by

December of the new financial year.

The relocation of manufacturing operations under

one roof is expected to improve synergies between

the different divisions and companies of the

Browns group that were previously scattered across

seven locations. This would improve efficiencies

in operations and resource use, productivity and

handling. Future plans include creating an outbound

training centre because the infrastructure and location

is considered ideal, as lodging, food, and training

grounds are all available on site.

Browns Group Industries (Pvt) LimitedBrowns Group Industries (Pvt) Ltd, a subsidiary of

Brown and Company PLC, provides complete marine

solutions for the boat building industry. It markets

a high quality range of marine engines under the

brands Yanmar, Ashok Leyland, Hyundai DaeDong and

related accessories imported from Leong Seng Co.

Pte. Ltd and Teleflex Pte. Ltd from Singapore, Tokyo

Compass Mfg Co. Ltd from Japan, Seafirst Engineering

Co. and Dong-I Industrial Co. Ltd, from Korea. The

Company also manufactures plastic containers and

other plastic components for batteries manufactured

by Associated Battery Manufacturers (Ceylon) Ltd.

The Company also manages a boiler division, which it

acquired from Brown and Company PLC the previous

year. All operations of Browns Group Industries (Pvt)

Ltd (BGIL) and Browns Thermal Engineering (Pvt) Ltd

(BTEL) are currently located in the Browns Industrial

Park Ltd in Pannala.


The marine fisheries industry within which Browns

Group Industries (Pvt) Ltd operated grew by 16% in

2011 with the highest growth in the marine fishing

sector according to Central Bank statistics. Following

the end of the war however, the fisheries sector

in the North and East, in which Browns is hoping

to expand, is yet to develop as expected though

there is potential for growth. Fish production in the

Eastern Province declined by around 4% in 2011

and its contribution to total fish production declined

from 28% in 2010 to 23% in 2011. Although fish

production grew by 38% in the Northern Province

in 2011, it still contributes just 12% to total industry

catch. The government has identified a need to

expand the fisheries fleet and infrastructure in these

two areas.

During the year under review, Browns Group

Industries (Pvt) Ltd introduced new brands that

have expanded its value for money segment of

the business, while building internal capabilities

to venture into local assembly the following year.

The Hyundai DaeDong brand of marine engines

from Korea was introduced in 2011 and has been

successful, with sales meeting the entire volume

requirement at a mid level pricing position. In the

market for brand new on-board engines, BGIL

currently holds a 25% market share, with a product

offering that reaches both premium and price

conscious segments. The introduction of these

products is in line with Company plans to expand its

value-for-money segment of the business. In keeping

with the Company vision of being a complete marine

solutions provider, its products are supported by

comprehensive after-sales services such as training

MARINE & MANUFACTUREBrowns Group Industries (Pvt) Ltd.Browns Thermal Engineering (Pvt) Ltd.

MARINE & MANUFACTURINGSector Review


A: All assembly and logistics operations have been relocated to a dedicated industrial park, improving synergies between divisions.


The company will venture into local assembly of the DaeDong brand of engines in the next financial year.

for users through workshops at fisheries harbours.

Several promotional activities were also conducted to

popularise the Company’s product range.

The Company also manufactures plastic casings and

other battery components to meet an estimated 40%

of requirements of Associated Battery Manufacturers

(Ceylon) Limited. There is potential to improve on

volumes to supply internal divisions, as BGIL is not

currently manufacturing to full capacity.

Browns Group Industries (Pvt) Ltd markets the

Chochran brand of boilers. Sales grew by 41% during

the last financial year. The performance of this

division was affected by the slowdown in industrial

expansion in the country. The business is dependent

on after-sales services such as replacement and

planned maintenance of existing boilers. The division

has identified that there is a gap in marketing and

brand awareness, which will be improved in the next

financial year.

Browns Group Industries (Pvt) Ltd achieved its

targeted sales volumes due to the initiatives outlined

above and the Company posted a revenue growth

of 41%. Profitability was affected however, with the

company posting a 179% Increase in Net Profit After

Tax as compared to the previous year.

Future Outlook

The Company expects the market for marine

engines to be buoyant in the next financial year

if the government provides the incentives that

have been promised to fishermen and removes

fishing restrictions in the North and East. Browns is

recognised for the high quality and reliability of its

products and services in the North and East and these

two areas are important new markets for Browns.

The Company will venture into local assembly of the

DaeDong brand of engines in the next financial year,

with possibilities of supplying even export markets

such as the Maldives and other South Asian countries

through existing trade agreements. Local assembly

will reduce costs and improve margins as well as

the technical skills base of staff. An agreement was

also signed with Korean suppliers of the Hyundai

DaeDong brand at the start of the new financial year

to purchase US$ 2 million worth of products for sale

in the local market. Further, business negotiations

were held with 10 Korean companies on the sidelines

of the Yacht and Boat Korea 2012 show for supply

of marine engines, spare parts and accessories like

radar and detection systems. A new petro-kerosene

marine engine under the brand name of PARSUN is

to be introduced into the market in collaboration with

a Chinese partner. A new range of wood-fired boilers

and wind turbines may also be introduced in the next

financial year. Boiler after-sales services will also be

enhanced, especially in the area of spare parts where

significant margins can be achieved. Other areas

being considered for expansion is a bottling plant for

ready-to-drink beverages as well as a joint venture in

boat-building.

The Company has allocated 7.5% of its revenue for

marketing activities in the new financial year with

expectations of a 40% increase in sales volumes for

the same period.

Browns Thermal Engineering (Pvt) Ltd.

Browns Thermal Engineering (Pvt) Ltd. is a 100%

owned subsidiary of Brown and Company PLC. Its

brand RADCO is currently market leader in the radiator

industry holding a 42% market share in the brand

new radiator segment. Browns Thermal Engineering

(Pvt) Ltd manufactures heat exchangers for the auto

and non-auto segment, which includes automotive

radiators, locomotive radiators, non-auto radiators, oil

and air coolers, and driers.


The year under review was a challenging one

for this industry due to stiff competition from the

second-hand market for used radiators and high raw

material costs. The inflow of cheap, used radiators

from countries like Japan has begun to affect sales

and margins. There is also a scarcity of copper in

world markets with prices rising by 24% in the

year under review. In order to stay competitive,

Browns Thermal Engineering (Pvt) Ltd expanded its

product range to include aluminium core radiators

(imports), in addition to its existing range of copper

based radiators. Although copper based radiators

are considered to be more efficient, there is a trend

of users shifting to aluminium radiators due to

the volatility and uncertainty in global markets for

copper. The new range of aluminium core radiators

introduced by Browns under the Dolphin brand label

is intended to test the market and compete with the

second-hand market for radiators. A radiator coolant

was also introduced during the financial year under

the brand name of RADCO, in collaboration with a

Middle Eastern supplier. These products are distributed

through 13 regional service centres of the Browns

group. Franchise workshops were also increased from

four to ten in the year under review.

The Company expects to drive sales growth through

improved service levels and competitive product

offerings. In the year under review Browns Thermal

Industries recorded a revenue growth of 8%, while

Net Profit After Tax showed a 116% increase. The

growth in business was led by improved efficiencies

in production and the Company’s made-to-order

product lines.

Future Outlook

Looking ahead the Company has expanded its

marketing budget to enhance packaging of its

products and build awareness of the superior quality

of products and services offered. The Company is also

developing its customer relationships with garages

to encourage use and promotion of the Company’s

products. A few medium to large garages have been

selected to conduct training workshops for their

MARINE & MANUFACTURINGSector Review


technicians. The Company will expand its suppliers

for copper radiators to ensure a consistent supply

to meet local market requirements. Distribution

will also be enhanced through streamlining of the

250-strong dealer network. Metal prices continue to

be a concern that the Company will address through

product diversification into aluminium core radiators.

Sales of non-auto products will also be driven

through canvassing of institutional sales by offering

tailor-made products and solutions. Browns Thermal

Engineering also plans to introduce a brand of

domestic air conditioners and condensers and expand

its franchise outlets by the beginning of the next year.

Internal capabilities in terms of improved efficiencies

and productivity have been strengthened, building a

strong foundation for enhanced growth in the future.

The Company is targeting a 60% growth in revenue

in the next financial year.


Q: How has Browns stayed a household name across Sri Lanka?

Home and Office Integrated Business Solutions together with the Retail

and Consumer divisions is an integral part of Browns

‘home and office’ area of business. The Company has

looked at evolving consumer needs and has tried

to address these changing preferences through its

products, services and customer touch-points across

Sri Lanka. Browns is one of the few companies that

can completely fulfil individual and organisational

consumer needs under one roof. The Company put in

place new structures and personnel to concentrate on

this large area of business in the year under review,

while better segmenting the business to meet the

different needs of this sector.

Integrated Business Solutions

Integrated Business Solutions (IBS) has evolved

to become a complete solutions provider to the

corporate sector in areas such as information

technology, computer security and even leisure.

This is a shift upwards from the division’s previous

strategy of being positioned as a one-stop shop for

products meeting corporate sector needs. While

the division sources products as required to offer a

complete solution, it is also complemented by the

range of products that Browns IBS division markets,

representing world class brands such as Sharp, Pitney

Bowes, Oce Printers, Ezy Computers, Biancarane

leisure products, among others. The sale of office

automation equipment also continues to be an

important area of business.


In the provision of business solutions, the year under

review was one of strategic investments in products

and people. In line with this strategy, the division

sourced innovative products and solutions for the

local market and recruited highly skilled people to

lead this growth. The division also made tremendous

strides in growing sales volumes of office automation

products. Sri Lanka’s economy was not as buoyant as

expected however and compared to 2010/11, there

was a slight contraction in sales of office automation

products in the middle half of the year, which placed

a great deal of pressure on pricing margins and

profitability. The general market for office automation

products in Sri Lanka grew 5-6%, with significant

potential in the North and East. Browns was well

poised to take advantage of this due to its strong

distribution network and strong brand recognition in

those areas.

IBS currently holds a market share of 24% in the

photocopier segment which makes it a leading

player in this category. The division invested in

several new products such as the Belkin range of

power surges, structured cabling and IT products.

Dealer networks were also expanded, growing from

12 dealers to 25 in the year under review

The division also continued to be one of the most

significant players in the high end category of printers

with our facilities of data printing, cut sheet and wide

format printing through the Oce range of products

marketed by this division. IBS also provides a number

of inserting, formatting and franking machines

through its brand Pitney Bowes.

Another significant achievement during the year has

been the expansion of its rental business named

“Doculine” which has shown good potential. Our

rental concept is not only limited to photocopy

machines but other products as well based on the

solution we develop for customers.

Browns is one of the few organisations with service

networks across Sri Lanka, making ease of access

for customers across the country, a reality. The

service offerings were also strengthened through

the implementation of job tracking mechanisms and

faster response times to key clients right across

Sri Lanka. The division’s service portfolio includes 24

hour service facilities for mission critical operations.

The introduction of the Enterprise Resource Planning

(ERP) system across the Company will assist the

HOME & OFFICE SOLUTIONSIntegrated Business SolutionsRetailConsumer

HOME & OFFICE SOLUTIONSSector Review


A: Expansion of customer touch-points, unique retailing concepts and innovative services has driven brand recognition and sales growth across Sri Lanka.


division in this process of better managing customers

and field level operations. Volume sales grew by 18%

in the year under review and the division posted a

revenue growth of 34% over the previous year.

Future Outlook

Looking ahead, Browns IBS will continue to drive the

solutions business through provision of tailor-made,

innovative solutions to individuals and companies

across categories. The division also hopes to introduce

several new products and services in the area of IT,

security and printing to the local market. One of the

biggest challenges the division continues to face is

the emergence of duplicate products as well as small

scale service providers who source sub-standard

products at cheap prices. The entire industry would be

The Home & Office Sector will be looking at launching a number of products and services whilst expanding its touch points through innovative channel enhancements.

benefitted by more stringent regulations to ensure all

products maintain certain quality standards.

The targets of this division are to grow revenues by

20% in the current financial year.

Home and Office - Retail The Retail division manages the retail showrooms of

Brown and Company PLC, which includes 13 Browns

centres, regional centres and a new concept store.

These retail stores sell most of the brands that Brown

and Company PLC market across its various business

segments. That includes tractors and implements,

office automation products, consumer electronics,

water, pumps, generators, batteries, pet food, marine

engines and much more.


In the year under review, this division built on the

success of previous restructuring efforts, resulting

in an excellent turnaround. It posted a growth of

27% over the previous year, while profitability grew

by 19%. Leading this growth was the marketing

of a wide range of products and the creation of

new customer touch-points for sale of agricultural

equipment such as tractors. Sales were greatly

facilitated by the growth in agriculture and increased

investment in this sector during the year under

review, together with the strategic locations of

the retail centres, including the regional centres in

Dambulla, Ampara and Jaffna. Several promotions

were also carried out to push agri-product sales

through these retail channels.

In keeping with the division’s vision of having the

right products in the right place, Browns Retail

expanded its modern trade channel during the period

under review. Browns products could be purchased

in all major super market chains namely Arpico,

Keells and Cargills through its shop in shop stores

or directly through the supermarket chains. This

new touch point has begun to show results and this

operation will be expanded in the new financial year.

Browns innovated its retail operations during the year

with the introduction of a new concept called the

Discovery Store. Technological products marketed by

Browns are carried in this store, such as computers,

cameras and gaming products, targeted at specific

customers in urban centres. It is a place where people

can interact with the products, testing them so as to

get a better feel for what is on offer. The first store

was opened in Colpetty in December 2011 and the

concept has proven popular among urban clientele.

It is expected that this retail channel will spearhead

sales of IT and other technology products marketed

by Browns.

Future Outlook

Looking ahead the division is targeting a significant

growth in turnover in the next financial year with

plans to expand into new geographical areas as

required. The retail channel will continue to look at

new retailing concepts and touch points so that it

can better target its customers and provide them

with a better service. The new year will also see the

introduction of a comprehensive range of products

in the Consumer Electronics category ranging from

air conditioners to LED’s to home appliances, office

automation products generators, power surges etc.,

that will complement the vast range of agricultural

products and spares that this division markets. The

Company’s vision for Retail is to be a one stop shop

for both our urban and rural customers.

Home and Office - Consumer In the year under review the consumer related

operations of Brown and Company PLC were

removed from general trading operations and

included in the home and office segment of business.

The main function of this division is the marketing and

sale of consumer electronics and related products to

consumers through dealers. Some of the main brands

marketed by this division include Sharp electronic

products, Usha Lexus home appliances, Olympic brand

of digital cameras, binoculars and voice recorders,

Mitashi, Belkin, as well as electronics and small

appliances under the BG brand of the Browns group.


The Browns Consumer division performed

exceedingly well in the year under review, with

revenues growing by 147% while gross profits saw

a 158% increase compared to the previous year. The

main reasons for this performance were the division’s

vast dealer network, its brands and product portfolio,

its superior service levels, and strong relationships

with its business partners. Government policy has also

been favourable due to a revision in tariff structures

on several categories two years ago, that has resulted

in increased sales volumes. Volume driven products

include air conditioners, LCD players, LEDs and small

appliances. Browns currently holds the third position

in the dealer market.

In the year under review the division introduced

water pumps, domestic fans, fridges, washing

machines, audio systems, home appliances, and the

Olympic brand of digital cameras, binoculars, and

HOME & OFFICE SOLUTIONSSector Review


voice recorders. The product expansion contributed to

the increased sales performance.

The company’s specialised retail arm ‘Direct2U’

warehouse outlets proved to be an unparalleled

success. This innovative no-frills channel offers

customers high quality products at competitive prices.

This has led to overall prices being readjusted by

other competitors in the market, resulting in the end

consumer being able to purchase branded products

at the best possible prices. The division has Direct2U

outlets in Kotahena, Moratuwa and Wattala and will

expand further as required.

Future Outlook

The division is gearing itself to reach market

leadership position in the dealer segment through

strategic product expansion, supported by a well-

established distribution network and the strong brand

recognition of Browns. In the new financial year,

the division will expand its product range further

by introducing the Belkin range of surge protectors,

Mitashi gaming and audio-video products, and CFL

bulbs. The Browns ‘BG’ brand is also being developed

and will fill gaps in the division’s product portfolio,

ensuring that the customer has a wide range of

quality products to meet his or her needs. Dealer

networks are to also be expanded further to reach

600 dealers currently. The challenge in the year

ahead will be to maintain the division’s growth

momentum despite reduced purchasing power of Sri

Lankans that could affect consumer spending.

The division is targeting a 35% growth in revenue in

the 2012/13 financial year.


Q: How did Browns achieve a 30% market share in veterinary pharma-ceuticals?

Veterinary Pharmaceuticals The Veterinary Pharmaceuticals division of Browns

markets a portfolio of leading global brands that

include Intervet Schering Plough biologicals such as

vaccines from Netherlands, Zagro feed additives,

antibiotics, minerals and vitamins from Singapore,

Eukanuba dog food from Proctor and Gamble USA

and the Stallen brand of organic minerals and growth

promoters from Italy, manufactured in India. Most of

the products marketed by this division cater to the

poultry and pet animal sectors, with a few products

for the dairy industry.


The division performed well in the year under review

and has been growing from strength to strength over

the past five years. Turnover for the year 2011/12

grew by 24% , while gross profits increased by 17%

in 2011/12. Brown and Company PLC hold an overall

market share of about a 30% in the market for

veterinary pharmaceuticals. Following the success of

a pilot introduction of the Stallen brand the previous

year, commercial rollout of this brand took place

in the year under review and sales of this brand

contributed to positive earnings this year.

Divisional performance was also supported by the

significant growth seen in all segments of the poultry

industry: broiler, layer and breeder. The industry grew

by 10-12% during the year, with companies enjoying

manageable costs of production, high prices and

margins. There was considerable reinvestment into

development of the sector, especially the breeder

business, indicating the positive outlook for this

industry. In the middle of the year however there

was a slight slowdown as a result of over-optimistic

investments, which resulted in a situation of over-

supply in the layer and breeder markets in the last

quarter of the year. Brown and Company PLC reaches

all segments of the poultry industry, and is currently

market leader for biologicals and one of the major

players in antibiotics, vitamins and minerals. The

division also boasts of 365 day support services, with

in-house veterinary surgeons for field assistance.

The pet animal segment too performed well during

the year 2011/12. Eukanuba is a premium product

with sales concentrated in the city, suburbs and

major out-station cities. Brown and Company PLC

holds second position with a market share of 29%

but has gained ground through its superior service

levels such as home delivery facilities. Service levels

were enhanced further during the year, achieving

‘no complaints’ status on home deliveries, working

12 hours a day, seven days a week. The division

has also introduced a range of bird care products. It

currently caters to nearly 1000 active customers in

the pet animal segment. The pet animal segment is

growing, not just in Colombo, but in other towns such

as Kurunegala, Gampaha and Negombo, indicating

potential new markets.

The division markets a range of pharmaceuticals for

the dairy industry through Intervet, Stallen and Zagro.

However, sales are very limited due to the under-

development of Sri Lanka’s dairy industry, with only a

few private and state farms in the business.

Future Outlook

Looking ahead, the division plans to introduce new

products in the poultry and pet animal segments of

the business. In the next financial year Browns will

introduce SG9R from Intervet, which is a live vaccine

for Salmonella infections that affects the poultry

industry. All government clearances have been

obtained. Four new feed additive products from Zagro

have also been registered and will be launched in the

new financial year. Finally, the Company also plans to

import a multi-vitamin solution for pets, which will be

marketed in August 2012.

One of the challenges the division faces next year

as well is continuing volatility in foreign exchange

markets that have impacted on finance costs.

Together with price increases on the supplier end,

margins may get negatively affected in the 2012/13

financial year.

VET PHARMAVeterinary Pharmaceuticals

VET PHARMASector Review


A: We market a range of leading global brands supported by superior service levels, and home delivery for pet animal products.


Q: How did Browns Tours achieve 60% growth this year?

Browns Tours (Pvt) Limited and BG Air Services (Pvt) LimitedThe vision of Browns Leisure division is to be

recognised by customers, business partners and

authorities as one of Sri Lanka’s premier destination

management companies by 2013. This division

includes BG Air Services, which is the General Sales

Agent for European based Austrian Airlines and

Scandinavian Airlines, while Browns Tours handles

outbound and inbound travel packages. Brown’s

travel division provides a one-stop shop to meet the

travel needs of any customer.


The Companies performed well in the year under

review, posting a turnover growth of 60%, while

gross profitability grew by 16% as compared to

the previous year. Much of this growth was led

by expansion in inbound operations and improved

service efficiencies across all aspects of the business.

Browns Tours benefitted from the positive political

climate in Sri Lanka following the end of the war,

as well as growing recognition of Sri Lanka as an

attractive holiday destination. The tourism industry

has grown rapidly, with the country recording the

highest number of tourist arrivals in 2011 at 855,975

tourists, which is a 30.8% increase on the previous

year. Earnings from tourism were also up by 44.2%

to US$830 million in 2011, with targets of 2.5 million

tourists by 2016. Infrastructure development has also

been fast-tracked in key tourist destinations across the

island, giving momentum to plans by Browns Tours to

expand inbound travel, even as it promotes outbound

destinations. Globally, there were some setbacks

in 2011 due to the unrest in the Middle East and a

decline in consumer spending due to the economic

crisis in Europe. However, real GDP growth for the

travel and tourism sector is forecast to grow 2.3%

in 2012 according to the World Travel and Tourism

Council.

In line with the positive growth in the local tourism

industry, Browns expanded its inbound operations –

marketed under the ‘Holiday Sri Lanka’ label – during

the year and embarked on several promotional

activities. A meet-and-greet service was launched,

whereby clients are met by a company representative

and offered services such as VIP checkout facilities,

luxury transport and refreshments. During the year,

several unique tours were offered such as a sunset

cruise on the Navy Jetliner for 450 passengers, while

a catamaran tour is ready for launch. Browns also

organised tours to watch the Kandy Perahera. Much

of the inbound traffic was from Europe, India and

Malaysia. Browns Tours has sought membership at

the Sri Lanka Association of Inbound Tour Operators

(SLAITO), which is a prestigious institution in Sri

Lanka’s tourism industry.

In the area of outbound travel, due to political turmoil

arising from the Arab Spring revolutions in the Middle

East, outbound travel to Egypt, which was one of

Browns Tours main destinations, was affected.

A further challenge that faced the outbound

sector was the volatility in the exchange rate that

made it difficult in offering competitive pricing to

customers. However, improved service levels and

the introduction of unique packages under the ‘World

Holidays’ label saw outbound operations grow in the

year under review, with the number of customers

for outbound travel showing an increase of 60% in

2011/12. One of the main campaigns for outbound

travel was a promotion of the fact that Browns can

offer tours to any continent. During the year, the

main markets for outbound tours were China and

Dambadiva, Thailand, Singapore, Malaysia and Hong

Kong. Browns also opened up a branch in Jaffna

during the year, taking advantage of peace in the

country to expand operations to the North. It has also

been appointed Passenger Sales Agent for Air Arabia

in Jaffna.

The division had a total 5893 customers and close to

100 corporate accounts. A survey carried out by the

Company showed that 51% of clientele are walk-in

clients while the rest are corporate clients, which

makes the Company’s central location in the heart

of Colombo a significant advantage. There has been

strong support from within the Group as well, with all

incentive tours of the Group handled by this division.

TRAVEL & LEISUREBrowns Tours (Pvt) Ltd.BG Air Services (Pvt) Ltd

TRAVEL & LEISURESector Review


A: Expansion of inbound tour operations, improved service efficiencies and growing recognition of Sri Lanka as an attractive holiday destination.


The airline General Sales Agency (GSA) businesses

of Browns Tours remained dormant as all the airlines

represented by Browns Tours are offline and there is

fierce competition from Middle East carriers that offer

attractive connections and fares to travellers.

The note-worthy performance of the division was

recognised by the Thailand Authority of Tourism,

which designated Browns Tours as one of the top 3

agencies that contributed the most tourist traffic to

Thailand in 2011/12.

Future Outlook

The division plans to increase revenues by 82% on

the strength of higher margins mainly on inbound

travel, while also increasing overall passenger

numbers to 7000 in 2012/13. The strategy of the

division to focus on attracting tourists to Sri Lanka

will achieve synergies with Group strategy for the

leisure sector, which will see Browns develop world

class hotel properties around the island. In the area

of outbound travel, Browns Tours has appointed

agents overseas to actively market the destination

to potential customers and has actively participated

in international trade fairs. A unique ‘buy-and-fly’

In line with the positive growth in the local tourism industry, Browns expanded its inbound operations - marketed under the ‘Holiday Sri Lanka’ label - during the year

concept is to be introduced next year, targeted at a

niche market segment. These packages will be for

customers who would like to purchase tickets and/

or tour packages shortly before they choose to travel.

This will be facilitated by office hours being extended

to 10 pm. This is yet another example of how Browns

innovates to stay competitive.

Visa restrictions by some countries, exchange rate

volatility and direct online sales by airlines continue

to be the main challenges facing the business in the

new financial year.

Sector ReviewTRAVEL & LEISURE


Information and Communications Technology

The Information and Communications Technology

(ICT) Department of Browns supports 20 divisions

of Brown and Company PLC and its subsidiaries.

The division handles three main areas of operation:

Group ICT infrastructure, business solutions, and

communications.

ICT infrastructure includes management of the

Local Area Networks, Wide Area Networks, remote

connectivity, desktop connectivity, hardware

firewalls, wireless networking, CCTV solutions, routers,

switches and more, for the Browns Group. The

business solutions and infrastructure divisions have

adopted the Microsoft Enterprise Agreement, which

is the infrastructure and communications platform

that Microsoft has provided through the “Microsoft

Enterprise Agreement (EA) 2008-R2. The entire

infrastructure backbone of Browns is run through

this agreement, such as systems centre operations

management where servers can be monitored

centrally, as well as configuration management

where solutions can be deployed across the Group

from a central location. Business solutions also include

email networks with 400 users on email within the

Group.

Under the Business Solutions area of operation, the

division began running Microsoft Dynamics AX 2009

Enterprise Resource Planning (ERP) solution in the

year under review, which is ranked in the top tier

of similar ERP products globally. This ERP solution

replaced the previous ‘legacy’ system that was in

operation for almost two decades. In phase one of

the ERP rollout, Brown and Company PLC will be

connected, while in July 2012, the direct subsidiaries

will also be connected to this ERP system. The ERP is

an end-to-end integrated business solution, meeting

requirements of trade and logistics, assembly and

production, core finance functions and after-sales

management. Currently, traditional businesses within

the Group such as agriculture and battery require

after-sales services and this ERP will enhance service

levels in the future by improving knowledge of the

customer and enhancing response times. With the

ERP phase one, the division’s operational functions

such as sales, purchases, inventory management, and

production assembly and finance will be supported.

Under the second phase of ERP, business intelligence

will be brought in, where strategic information will

be provided to top management through group

KPI’s and balance scorecards. Phase two will begin

in September 2012 and is planned to be completed

by March 2013. Through the Microsoft Enterprise

Agreement, a collaboration platform called Sharepoint

was also purchased, which will provide users with

a collaborative interface through which they can log

in, manage and share information across the entire

Group. This project too will begin in September 2012.

The ICT division is currently developing business

solutions for areas that will not be covered by the

ERP due to the requirement of industry specific

solutions and needs to be custom built to suit the

specific business requirements. For example, the ICT

division is in the process of developing a solution for

the front-end operations of the healthcare sector,

which is a strategic new investment for the Browns

group. The division is equipped to develop similar

business applications in the future as the need arises,

as the necessary skills are available in-house. The ICT

team is highly skilled and have undergone training in

implementation of the ERP solution.

The third area of operations is handling of voice

communications. The Browns group is connected

through a centralised PABX for management of voice

calls. This function has been outsourced to a call

centre operations manager.

A security audit by a third party has commenced to

ensure that the Company has the necessary control

systems in place in all areas of ICT operations –

infrastructure, business solutions and communication.

This audit will identify gaps if any and means of

addressing the same. This task is to be completed

by end July 2012. A Business Continuity Plan (BCP)

is also being developed which would ensure that

the business will continue to run in the case of an

emergency. A key component of this BCP is a disaster

recovery plan. The division is looking for a remote

location or work with an outsourced partner to have a

disaster recovery site up and running in the next 4-6

months.

Brown and Company PLC has invested Rs. 150 million

in implementing the new ERP system and upgrading

its ICT infrastructure and services. In the new financial

year the emphasis will be on developing new

business solutions for some business sectors such as

healthcare and travel and inbound tour operations,

completing the security audit and implementing its

recommendations to stabilise the ERP and other ICT

solutions and infrastructure, rolling out the second

phase of the ERP to cover the entire Group and

finally, introduce the business intelligence component

of the ERP system. In a 12-18 month roadmap

developed for the Browns group, the ICT division has

been identified as a strategic business enabler by

supporting agile business processes. In the long term,

the ICT division will go from being a strategic business

enabler to being a business partner, which could

see the ICT division becoming a revenue generator

through development of industry specific business

applications.

The developments in the area of ICT have introduced

stability into related systems within the Browns

group. Should there be any issue, the ICT division

is informed via the system itself so that remedial

action can be taken and disruptions are minimised, if

they occur at all. By centralising the communication

functions, monthly costs have been cut down

by 150%. Users have also been given remote

connectivity to be able to work from whichever

location they are present in. Transparency has also

been introduced into IT services, with proper controls

put in place and it has done away with several

manual processes, improving efficiency across the

Group.

The ICT division is currently developing business solutions for areas that will not be covered by the ERP due to the requirement of industry specific solutions



Q: What does social responsibility mean at Browns?

Nawa Kalakaruwo 2012 ExhibitionSnapshots from the exhibition for emerging young artists presented by the George Keyt Foundation

At Brown and Company PLC, Corporate Social

Responsibility means building a sustainable business

that reflects the values that it holds important. This

includes the commitment to support the broader

community it lives and works in.

Investing in the Future

Education and development of the arts have been

identified as two of the main platforms on which

the Browns group will base its social responsibility

activities over the next two years. In the year under

review, the Group sponsored the ‘Nawa Kalakaruwo’

visual arts exhibition organised by The George Keyt

Foundation in an attempt to give exposure to young

and emerging artists. Over 40 artists participated in

the event, which was highly successful.

Every year the Company also supports the children

of staff members who excel at the Grade Five

Scholarship examination, as well as the Ordinary Level

and Advanced Level examinations, with scholarships

so that they may pursue higher studies. The group

also supports students from around the country with

internship opportunities and possible employment

based on their performance and skills.

The Company has also finalised a structured format of

CSR projects to uplift the standard of rural children by

providing them with IT education which will be a key

conduit to make them active participants in the global

village. IT will be a crucial skill that our children will

need to have & the Company has identified a number

of key schools in high poverty districts to start this

programme in the coming financial year.

Public Service Initiatives

In addition to the area of arts and education, the

different divisions of the Browns Group carry out

other community service initiatives, even providing

customers and the general public with value added

services at no additional cost. Several training and

information workshops were conducted by the

different divisions of Browns. For example, workshops

were conducted for farmers and fishermen on the

proper use of related machinery and equipment.

These workshops were not limited to customers of

Browns but to all who were interested and were free

of charge. The Agriculture division conducted 25 such

workshops during the year. Free service camps were

held for trade associations, chambers of commerce

and industrialists. These workshops help promote best

practices among different industries. The Battmobile

service run by Browns is a mobile battery unit that

assists stranded motorists who have urgent trouble

with their vehicles and need roadside assistance.

There are currently 60 Battmobiles in operation and

this will be expanded to 75 to meet the needs of

people across the country.

Supporting the Environment

Browns supports the preservation of the environment

through its Engineering and Environmental Services

Division. This division markets eco-friendly waste

water disposal and treatment solutions to large

manufacturing industries.

The Company also recycles all of its vehicle batteries

through a dedicated recycling unit at its Exide

manufacturing plant.

Supporting the Community

Browns attempted to meet the specific needs of

people in disadvantaged circumstances. During the

year, the Company’s Agriculture division made a

donation to a rural village in Wasgamuwa to set up

an elephant safety fence and also provided a water

tank and a deep well to a rural village in Jaffna.

Donations of stationary and clothes were made to

a children’s orphanage in Minneriya and dry rations

were provided to a family in Diyatalawa.

The Company also donated Exide batteries to the

Dalada Maligawa to illuminate the elephant tusker

carrying the sacred tooth relic at the Kandy Perahera,

in the year under review.


A: It means building a sustainable business reflecting our values, while supporting the community we live in.


Human Resources

Q: How does Browns build strong teams?

TrainingTraining of employees by the HR division on Health & Safety and Brand Management

The Human Resources division of Brown and

Company is a dynamic unit that strives to bring out

the best in people in the pursuit of company goals.

It has evolved from delivering only personnel and

administrative functions to creating an environment

where employees can thrive, develop to their full

potential and achieve satisfaction. As such, the

vision of the Human Resources Division is three fold:

alignment of employees to the vision, mission and

objectives of the Group, engagement of employees

in the business to ensure optimum motivation levels,

and thirdly, development of all employees to build

commitment and drive business performance.

There were 724 permanent employees working with

Brown and Company PLC and 130 contract employees

during the financial year under review.

General Activities during the Year

The focus of the year under review was on

consolidation of operations. Emphasis during the

year was on training the new HR team on Company

processes and regulations relevant to carrying out the

HR functions of the Company.

In addition to training of the core team, several

other initiatives were undertaken. These included

development of comprehensive Human Resource

development policies and processes, development

of improved health and safety procedures. The

Performance Management System that was

introduced in 2008 continued to be implemented,

helping to improve employee productivity. Under this

system, Key Performance Indicators are developed

for each division and these are used to measure

employee performance so that it can be aligned

with Company goals. Two appraisals are carried out

each year, benchmarked against these indicators.

The first of these reviews identify the training and

development needs of each person so as to improve

core competencies. The second review is carried

out to decide promotions and increments. Skills

assessments were also carried out for technical staff,

an appraisal system introduced for manual level

employees and a Continuous Assessment System

introduced for probationers.

The HR information system was enhanced by

introducing a Leave and Attendance module,

automating the attendance and leave applications

and eliminating the manual system. The introduction

of phase one of the Enterprise Resource Planning

(ERP) system served to integrate the HR functions

with the various divisions and subsidiaries of the

Group, which allowed for improved operational

efficiency. Communication between departments

was improved through continued publication of

the internal newsletter and better use of online

communication channels. Inter-departmental

interaction was also encouraged through various

group activities.

The quarterly newsletter was given a facelift with

more focus on business news and promoting

employee interaction. This newsletter has proven to

be popular among the staff of the Company.

A new collective agreement was signed with the

Ceylon Mercantile Union (CMU) and the All Ceylon

Commercial Workers Union (ACCWU), through the

Employers Federation of Ceylon.

Training and Performance Management

The Company identified training and development

needs of its staff through its Performance

Management System. A total of 327 people

underwent training, of which, 272 people were from

executive grades, while 55 employees were from

clerical and manual grades.

An important initiative was introduced during the

year in partnership with the National Vocational

Training Institute. Under this programme, skills of

manual, clerical and technical grade employees

were evaluated so as to provide relevant training to

upgrade their competencies. Participants would also

receive recognised certification once they complete

the assessment. A total of 80 workers participated in

the programme during the year. A revised induction

programme was carried out for newly employed staff

in all categories.

A total of 2162 training hours were spent on training

and development activities during the year under

review.

Employee Benefits and Welfare

The health and welfare of employees is a priority at

Browns and several incentives and benefits were

offered to Company staff during the year under

review.

All employees were given medical benefits in the

form of a hospitalisation allowance, a spectacle

allowance and access to an in-house doctor and

dispensary. In addition, the Company has supported

a scholarship scheme for employees’ children to

encourage their educational achievements.

Future Outlook

A new HR Policy and Procedure manual and a Code

of Ethics will be introduced next year so as to build

awareness among employees of their duties, rights


A: We create an environment where employees can thrive and develop to their full potential.

and responsibilities while employed at Brown and

Company. A Job Analysis project will be conducted

to streamline workflows and provide clarifications

on job functions. This will provide efficient support

for recruitments and job performance. The

Performance Appraisal System is to be revised to

align it more closely with career planning, training

and development needs. Several new training

programmes will be conducted based on a needs

assessment carried out among staff, and will include

executive coaching programmes. To help employees

achieve a healthy work-life balance, the Company will

also provide assistance through counselling services.

Additional measures will be taken to improve

employee health and safety, including the formation

of an Emergency Response Team to face emergency

situations to take quick, remedial action.


We firmly believe in good corporate governance,

a system by which companies are directed and

controlled. It ensures regulatory, compliance and

accountability. The Company holds itself accountable

to the highest standards of corporate governance

and provides public accessibility to the information of

the Company. Corporate Governance lays the basis

for responsible performance–oriented management

and control which is geared towards sustainable

value creation. Corporate Governance has been

institutionalised at all levels in the Group through

a strong set of corporate values which have been

adhered to by the Senior Management and Board

of Directors in the performance of their official

duties and in other situations which could affect the

Group image. The Company is committed to the

highest standards of integrity, ethical values and

professionalism in all its activities.

Formal publication of the Code of Best Practice

on Corporate Governance Rules issued jointly by

Securities and Exchange Commission of Sri Lanka

(SEC) and The Institute of Chartered Accountants of Sri

Lanka is considered as a strong gesture to strengthen

transparency, accountability and disclosure of its

business practices.

The Company is committed towards its corporate

values and adheres to the Code of Best Practice on

Corporate Governance.

Corporate Governance

The consistent adherence to the principles and

practices of good Corporate Governance has resulted

in the Company acquiring a matchless reputation in

Sri Lanka for fidelity and dependability amongst all its

stakeholders.

The Corporate Governance framework has been

incorporated within the Group with adherence to the

following:

Complying with laws , rules and regulations

within the territory

Allegiance to the Group Values

Ensuring that no individual has unfettered

decision making powers

Exercising professionalism and integrity in all

business transactions

Timely and efficient decision making and

resource allocation within a framework which

is compliant with the laws of the territory and

standards of governance

This report sets out the Company’s Corporate

Governance processes with reference to the extent of

compliance with same.

Board of Directors

The Board of Directors are the ultimate governing

body of the Company and is abundant in experience,

professionalism and has a wide range of expertise in

diverse fields as set out on pages 25 to 27. The Board

is responsible for the ultimate supervision of the

Group. In all actions taken by the Board, the Directors

are expected to exercise their business judgment

considering the best interest of the Company.

The Directors participate in defining goals, visions,

strategies and business targets. All Directors are able

to and willingly add value and independent opinion

on the decision making process, which is of immense

benefit for the effective functioning of the Board. The

questions raised by Shareholders at General Meetings

are readily answered by the Board members and

they maintain an appropriate dialogue with the

Shareholders.

Composition of the Board and Directors’

Independence

As at date, the Board consists of 8 members

comprising of-

6 Non-Executive Directors

1 Independent Non-Executive Director

1 Executive Director

Independence of the Directors have been determined

in accordance with the Colombo Stock Exchange Rules

and the Independent Non- Executive Director has

submitted signed confirmations of his independence.

Name of Director Executive / Non Executive Independent/ Non Independent Involvement/interest in Share

holding

Mrs. R. L. Nanayakkara Non-Executive Non Independent No

A. L. Devasurendra Non-Executive Non Independent Yes

N. M. Prakash Executive Non Independent Yes

*R. N. Asirwatham Non-Executive Independent No

S. V. Somasunderam Non-Executive Non Independent Yes

I. C. Nanayakkara Non-Executive Non Independent Yes

H. P. J. de Silva Non-Executive Independent No

**W. D. K. Jayawardena Non-Executive Non Independent No

**Mrs. K. U. Amarasinghe Non-Executive Non Independent No

*Mr. R. N. Asirwatham resigned w.e.f 10th May 2012

**Mr. W. D. K Jayawardena and Mrs. K. U. Amarasinghe appointed w.e.f. 24th July 2012.


The details of the current Board of Directors is stated

in pages 25 to 27 of this report.

Transactions which have a material bearing on

the Company is disclosed by way of circulars to

shareholders and by announcements to the Colombo

Stock Exchange.

The Non-Executive Directors are required to notify

the Chairperson of their outside Board appointments

and the Chairperson reviews such appointments in

consultation with the other Directors where necessary

to ascertain any possible conflicts of interest.

Board responsibilities and decision rights

The business of the Company is conducted by

its managers, officers and employees under the

direction of the Executive Directors and the oversight

of the Board to enhance the long term value of the

Company for its shareholders. The Board aims at

fulfilling its responsibilities by creating value for all

stakeholders that is sustainable and beneficial. The

Board of Directors are well equipped to realise the

Company’s corporate business. The Board meets

monthly and gives full consideration to the following:-

Review strategic and operational issues

Approve Interim and full year Financial

Statements and Annual Budgets

Review Profit and working capital forecasts

and monthly management accounts

Provide advice and guidelines to Senior

Managers through the Group Managing

Director/ Chief Executive Officer

Provide and circulate timely and periodic

reports to Shareholders

Sanction major investments

Adopt Annual and Interim Report before they

are published

The Board is responsible ultimately for the Group

Financial performance.

The Company Secretaries are responsible for ensuring

that Board procedures are followed and all Directors

have access to the Company Secretaries, Standard

Finance (Pvt) Ltd, the Secretaries provide support to

the Board on all Corporate Governance matters &

compliance with applicable rules & regulations.

All Directors receive appropriate training relevant to

their experience and position within the Company.

Board Balance

The balance of Executive, Non-Executive and

Independent Non-Executive Directors on the

Board ensures a right balance between executive

expediency and independent judgment as no

individual Director or small groups of Directors

dominate the Board discussion and decision-making.

The Independent Director shall be able to ensure

equal benefits for all shareholders with independent

views and opinions.

Directors are provided with monthly reports of

performance and minutes of the Board Meetings and

are given the specific documentation necessary, in

advance of such meetings.

The Chairperson ensures all Directors are adequately

briefed on issues arising at meetings.

Board Meetings and Attendance

For the financial year ending 31st March 2012 there

has been a total number of 10 Board Meetings and

Directors attendance for same is shown below.

Name of Director Date of Meeting Total

number

of

meetings

attended

31/05/11 28/06/11 28/07/11 30/08/11 30/09/11 20/10/11 29/11/11 22/12/11 21/02/12 27/03/12

Mrs. R. L. Nanayakkara √ √ √ √ √ √ √ √ √ √ 10

A. L. Devasurendra √ √ √ √ √ - √ √ √ - 08

N. M. Prakash √ √ √ √ √ - √ √ √ √ 09

*R. N. Asirwatham √ √ √ √ √ √ √ √ √ √ 10

S. V. Somasunderam √ √ √ √ - - √ √ √ √ 08

I. C. Nanayakkara - √ - √ - - - - - √ 03

H. P. J. de Silva √ √ √ √ √ √ √ √ - √ 09

**W. D. K. Jayawardena - - - - - - - - - - -

**Mrs. K. U.

Amarasinghe

- - - - - - - - - - -

*Mr. R. N. Asirwatham resigned w.e.f. 10th May 2012

**Mr. W. D. K Jayawardena and Mrs. K. U. Amarasinghe appointed w.e.f. 24th July 2012.



Procedure for Directors to obtain Professional advice

The Directors obtain independent and professional

advice with regard to decision making in their duties.

Financial Acumen

The Board consists of four senior Accountants, who

possess the necessary knowledge to offer the Board

guidance on matters of finance.

Re-election of Directors

The Company’s Articles of Association call for one of

the Directors in office to retire at each Annual General

Meeting. The Directors who retire are those longest

in office since their appointment/ re-appointment.

Retiring Directors are generally eligible for re-election

by the shareholders.

The Managing Director shall not, while he continues

to hold that office, be subject to retirement by

rotation and he shall not be taken into account in

determining the rotation of retirement of Directors.

Board Committees

The Board has delegated some of its functions to

Board Committees while retaining final decision rights

pertaining to matters under the purview of these

committees. The compositions of the Committees are

as follows:

Board

Audit Committee Remuneration Committee Business Operations Committee Group Management Committee

1 Independent Non-Executive

Directors

1 Independent Non-Executive

Directors

Group Managing Director /CEO Group Managing Director / CEO

1 Non-Executive Director 1 Non-Executive Director 3 Non Executive Directors Divisional and Departmental

heads

Audit Committee

The Audit Committee meets on a quarterly basis

to approve the Quarterly and Annual Financial

Statements and to recommend same to the Board

prior to its issuance. The Committee comprises of :

Mr. R. N. Asirwatham

Chairman /Independent Non-Executive

Director (Resigned w.e.f. 10th May 2012)

Mrs. R. L. Nanayakkara

Non Executive Director


Acting Chairman/Independent Non-Executive

Director

Consequent to the resignation of Mr. R.N. Asirwatham

as Chairman of the Audit Committee, Mr. H. P. J. de

Silva was appointed as Acting Chairman.

The Group Managing Director/CEO, the Group Chief

Operating Officer, the Group Chief Financial Officer,

the representatives of the Internal Auditors join

the meetings of the Committee by invitation of its

members.

For the financial year ending 31st March 2012

there have been a total number of five (05) Audit

Committee Meetings and the attendance of the

members are shown below:

Name of member Date of Meeting Attendance

30th May 2011 5th October 2011 8th November 2011 15th February 2012 27th March 2012

Mr. R. N. Asirwatham - √ √ √ √ 4/5

Mrs. R. L. Nanayakkara √ √ √ √ √ 5/5

Mr. H. P. J. de Silva √ √ √ - √ 4/5

The committee recommends the appointment

and fees of the Internal Auditors M/s. Ernst and

Young Advisory Services (Pvt) Ltd, having given due

consideration to their independence.

The Internal Auditors carry out financial audits and

systems audits on a pre-planned basis to ensure

effectiveness of the various functions, reviews

the internal controls, checks compliance with the

accounting standards and reports non-compliance,

serious errors to the Chairperson, Group Managing

Director/CEO and concerned Managers for rectification

or corrective action.

The Audit Committee also meets with the External

Auditors M/s. KPMG to review the Audits and the

objectivity and independence of the Auditors.

Audit Committee report is given on page 67.

Remuneration Committee

The Remuneration Committee, which met on regular

occasions during the period under review, comprises

of one Independent Non-Executive Director and one

Non Executive Director including the Chairperson.

The Remuneration Committee is responsible for-

Assisting the Board of Directors in establishing

remuneration policies and practices in the

Group;


Evaluating the performance of the Executives

of the Group; and

In reviewing and recommending to the Board

appropriate remuneration packages based on

industry level and contributions made to the

organisation

The detailed Remuneration Committee Report is given

on page 68 of the Annual Report.

Business Operations Committee

The Business Operations Committee met on regular

intervals depending on the need and urgency.

The Committee comprises of the Group Managing

Director/CEO, N.M. Prakash and three Directors

namely, A.L. Devasurendra, I.C. Nanayakkara and S.V.

Somasunderam.

The Business Operations Committee Report is given

on page 68 of the Annual Report.

Group Management Committee

The day-to-day affairs of the Group are carried out

by the Group Management Committee chaired by

the Group Managing Director/CEO and consisting

of Divisional and Departmental Heads. The Group

Management Committee meets every month to

review Corporate, Divisional and Departmental

performances against predetermined Annual Business

Plans and Budgets.

The Group Management Committee formulates

strategy, seeks Board approval for these strategies,

and implements it within the policy framework, which

demands best practice in dealing with stakeholders.

The introduction of peer adjusted organisational

ratings in determining pay for performance has

resulted in the search by business units, sectors

and industry group of productivity enhancements,

process improvements and cost efficiencies within a

framework of better teamwork.

Shareholder Value

The Board constantly strives to enhance shareholders’

values who have built this winning organisation.

Shareholder relations

The Board considers the Annual General Meeting as a

prime opportunity to communicate with shareholders.

The Shareholders are given the opportunity of

exercising their rights at the Annual General Meeting.

Each resolution brought before the shareholders at

the Annual General Meeting is voted on separately

by the shareholders. The notice of the Annual General

Meeting and the relevant documents required are

published and sent to the shareholders within the

statutory period. The Company circulates the agenda

for the meeting and shareholders vote on each

issue separately. All shareholders are invited and

encouraged to participate at the Annual General

Meeting. The Annual General Meeting provides an

opportunity for shareholders to seek and obtain

clarifications and information on the performance of

the Company and to informally meet the Directors.

The external auditors are also present at the Annual

General Meeting to render any professional assistance

that may be required. Shareholders who are not in

a position to attend the Annual General Meeting

in person are entitled to have their voting rights

exercised by a proxy of their choice.

The Company published and circulated Quarterly

Accounts in a timely manner as its principal

communications with shareholders and others. This

enables the stakeholders to make a rational judgment

of the Company.

Going concern

The Board of Directors, after reviewing the financial

position and the cash flow of the Company are of the

belief that the Company has adequate resources to

continue operation well into the foreseeable future.

Therefore the Board adopts the going concern basis in

preparing Financial Statements.

Accountability

The Board places greater emphasis on complete

disclosure of Group financial information within the

bounds of commercial reality and has taken necessary

steps to ensure the integrity of the Group’s accounting

and financial reporting systems and internal control

systems and also their review and monitoring on a

periodic basis.

Ethical Standards

The Board is committed to maintain high ethical

standards in conducting its business and to

communicate its values to its employees and agents

and ensure their conduct is based on such values.

Compliance with legal requirements

The Board is conscious of its responsibility to the

shareholders, the government and the society in

which it operates and is committed to upholding the

highest standards of ethical behaviour in conducting

its business. The Board, through the Group Legal

Division, the Group Finance Division and its other

operating structures, strives to ensure that the

Company and all of its subsidiaries and associates

comply with the laws and regulations of the countries

they operate in.

The Group has complied with the requirements of the

new Companies Act No. 07 of 2007.


Rights and claims of Stakeholder Groups such as

employees, consumers, clients, suppliers, creditors

and the government are also considered important

apart from the Shareholders. Corporate decisions are

made with due consideration.

The Group acknowledges the issues facing the

environment and adopts a responsible attitude whilst

meeting all of its business objectives. The Group’s

policy is, wherever economically practical, to recycle

waste material and conserve water and energy.

Risk assessments carried out across the Group’s

operations take account of environmental, social and

ethical matters.

Self Governance Practices by the Company

The Solvency Statements prepared by the Group Chief

Financial Officer is tabled every quarter at the Board

Meeting in order to view whether the Company is

solvent.

As provided by the Companies Act No.7 of 2007, the

Company has obtained insurance covers for Directors

and key officials of the Company.

The New rules of Corporate Governance and

disclosure requirements for listed companies, as

mandated by the Securities Exchange Commission

of Sri Lanka and also in the requirements of the

listing rules of the Colombo Stock Exchange are

complied with diligence as it helps to build an ethical

environment in the Company.

Internal Audit Function

To strengthen internal controls and to obtain

independent assurance M/s. Ernst & Young Advisory

Services (Pvt) Ltd were appointed as internal auditors

to monitor and report on the adequacy of the

Financial and Operational systems of the divisions.

Browns Group – ERP and SSC

In keeping in line with Browns group strategic

vision of enabling its businesses through cutting

edge technology by year 2013, the group wide ERP

(Enterprise Resource Planning) went live on 05th

June 2012. The Microsoft Dynamics AX-2009, is a tier

one global ERP which is owned and marketed by

Microsoft corporation, USA.


With this ERP implementation Browns Group envisage

the following key benefits

With agile business process mapping it

creates agility and flexibility for the business

Enhanced technology puts Browns on par

with renowned business entities and gives a

distinct advantage over its competitors

Effective business system processes will help

to do away with many manual processes and

importantly it will create transparency and

better control of the business across the Group

Availability of real time data means ability to

extract business critical information for the

various decisions makers. This will help the

decision makers to take correct decisions real

time

Ability to provide better customer services

As a direct benefit of the ERP where common

business processes were identified, Browns Group

Shared Services Centre (SSC) was set up. The Browns

SSC is a single entity that will consolidate the entire

back office operations of Financial and Accounting

(F & A) of the entire group to improve processes

and efficiency. These process improvements and

efficiencies will be tracked and monitored thoroughly.

SLA- Service Level Agreements

OLA- Operating Level Agreements

KPI- Key Performance Indicators

The following key objectives were identified when

setting up Browns SSC

Improve decision making process by

freeing up Senior Management’s time from

managing transactional activities in Finance

Introduce a performance driven culture

by implementing KPIs (Key Performance

Indicators) that are governed by SLAs (Service

Level Agreements)

Document policies and procedures of F&A

across the organisation

Standardise reports and streamline processes

for F&A

With Browns Group ERP and SSC, it is expected that

the IT systems and business processes will synergise

more effectively and efficiently to improve current

businesses and help the group to embark on future

business challenges in a positive and proactive

manner.



Audit Committee Report

Composition

The Audit Committee, appointed by and responsible

to the Board of Directors, as at date comprises of

one Independent Non-Executive Director and one

Non-Executive Director, with the Company Secretary

acting as Secretary. One of the above Directors

acts as the Chairman and is also a Fellow of the

Institute of Chartered Accountants of Sri Lanka.

All Non-Executive Directors satisfy the criteria for

independence as specified in the Standards on

Corporate Governance for listed Companies issued by

the Securities & Exchange Commission of Sri Lanka.

The members of the Audit Committee are:-

Mr. H. P. J. de Silva – Acting Chairman /

Independent Non-Executive Director

Mrs. R. L. Nanayakkara- Non Executive Director

Mr. R. N. Asirwatham –Independent Non-

Executive Director (Resigned w.e.f. 10th May

2012)

Consequent to the resignation of Mr. R.N. Asirwatham

as Chairman of the Audit Committee, Mr. H.P.J. de

Silva was appointed as Acting Chairman.

The Group Managing Director/ Chief Executive

Officer together with the Group Chief Operating

Officer and Group Chief Financial Officer attends all

meetings of the Committee by invitation. The other

Senior Managers, Internal and External Auditors are

requested to be present when required.

Meetings

The Audit Committee had five (05) meetings during

the year under review. The minutes of the Audit

Committee are circulated among the Board and are

signed by the Chairman of the Board.

Financial Reporting

The Committee oversees the Company’s financial

reporting on behalf of the Board of Directors as part

of its responsibility and have reviewed the Quarterly

and Annual Financial Statements and recommended

them to the Board for its deliberations prior to their

issuance.

The Committee reviewed the Financial Statements

to ensure consistency of the accounting policies

and their compliance with the Sri Lanka Accounting

Standards.

The Committee has also regularly discussed the

operations of the Company and its future prospects

with the Management and is satisfied that all

relevant matters have been taken into account in the

preparation of the Financial Statements.

Internal Audit

In addition to the Company’s Internal Audit Section,

an independent organisation, M/s. Ernst & Young

Advisory Services (Pvt) Ltd., were engaged during

the year, to enhance the Internal Audit. The reports

submitted by Ernst & Young Advisory Services (Pvt)

Ltd have been reviewed by the Committee in the

presence of the Senior Managers of the Company,

and compliance with the recommendations of the

Internal Auditors have been followed through at

subsequent reviews.

Controls & Risks

During the year, the Committee reviewed the

effectiveness of the Company’s system of Internal

Control. The Committee also assessed the

major business and control risks and the control

environment prevalent in the Company and advised

the Board on action to be taken where weaknesses

were observed.

External Auditors

The Audit Committee evaluated the independence

of the External Auditors and the effectiveness of the

audit process.

The Committee met with the External Auditors in

relation to the scope of the audit and also to discuss

the Management Letter at the conclusion of the audit.

The Committee reviewed the audited financial

statements with the External Auditors who are

responsible for expressing an opinion on its

conformity with the Sri Lanka Accounting Standards.

The Audit Committee evaluated the independence of

the External Auditors and recommended to the Board

of Directors that M/s. KPMG be appointed as Auditors

for the financial year ending 31st March 2013, subject

to the approval of the shareholders at the Annual

General Meeting.

Conclusion

Considering the reports submitted by the External

Auditors and the Internal Auditors of the Company

and the certification provided by the Senior

Management the Committee is of the view that

the financial position of the Company has been

adequately monitored.


Acting Chairman

16th August 2012


Business Operations Committee Report

Remuneration Committee Report

The Remuneration Committee re-constituted

under the new Corporate Governance rules of the

Colombo Stock Exchange, is responsible to the Board

of Directors and comprises of one Independent

Non-Executive Director and one Non-Executive

Director with the Company Secretary functioning as

its Secretary. The members of the Remuneration

Committee are:

(Mrs.) R. L. Nanayakkara – Non Executive

Director

Mr. H. P. Janaka de Silva – Independent Non-

Executive Director

Mr. R. N. Asirwatham – Independent Non-

Executive Director (Resigned w.e.f. 10th May

2012)

The GMD/CEO attends meetings on invitation by the

members.

The Remuneration Committee met half yearly. The

Committee interacted with the Board members

when the necessity arose. The Board was also kept

informed of the work of the Committee.

The main responsibilities of the Remuneration

Committee would be:

To recommend the remuneration of the

Directors, GMD/CEO and members of the

senior management.

To recommend the policy governing annual

increments to staff.

To recommend the policy governing annual

ex-gratia payments to staff.

Accordingly, the Committee reviewed and re-

drafted the remuneration policy and based on the

recommendations of the Committee, the Board

approved the adoption of the policy.

The policy covers the remuneration to Executive and

Non-Executive Directors, including the Non-Executive

Chairperson and the Executive Group Managing

Director/CEO. Under the terms of this policy,

remuneration will be related to performance and

contribution.

Mrs. R. L. Nanayakkara

Chairperson, Remuneration Committee

16th August 2012

The committee comprises of the Group Managing

Director/CEO (N.M. Prakash) and three Directors

namely A.L. Devasurendra, I.C. Nanayakkara and S.V.

Somasunderam.

The primary responsibility of this committee is to look

at strategic directives and investments for the Group

prior to being ratified by the Board so as to have a

better representation in this process and to expedite

decisions.

The Committee meets at regular intervals depending

on the need and urgency.

Browns Group is in the process of expanding which

includes not only investments into the existing

manufacturing and trading operations but also in

areas that are strategic and would complement

the core growth strategies of the organisation. The

Committee also evaluates the pros and cons of such

substantial investments and the related opportunity

costs of funds, to have a better balance between the

growth strategies and stakeholder requirements. In

such evaluations the committee endeavors to strike

a balance between the short, medium and long-

term investments in order to post continuous and

harmonious growth without interruptions.

Mr. N. M. Prakash

Group Managing Director/CEO

16th August 2012



And that’s what makes us truly great...Financial Information70 Directors’ Report 74 Statement of Directors’ Responsibilities 75 Independent Auditors’ Report 76 Income Statement 77 Balance Sheet 78 Statement of Changes in Equity 79 Cash Flow Statement

80 Significant Accounting Policies 90 Notes to the Financial Statements136 Economic Value Statement 137 Ten Year Summary 138 Share Information


Directors’ Report

The Directors of Brown and Company PLC have pleasure in presenting to members their Report and the Audited Consolidated Financial Statements for the year ended 3lst March 2012.

Principal ActivitiesBrowns Group consists of a portfolio of diverse business operations in the commercial market today by continuously expanding in all business segments in line with the core strategy of creating wealth for all stakeholders.

The principal activities of Brown and Company PLC are described in the Group Managing Director/CEO’s Review on pages 20 to 23 of this report, while that of the Subsidiaries and Associate Companies are given on page 32 to 56 of this report.

The review of the Group progress and performance during the year, with comment on the financial results and prospects, is contained in the Chairperson’s Review.

Review of Business and Future DevelopmentsThe Group is looking out for opportunities to venture in to sunshine industries and differentiate to create new paradigms and hybrid markets and be the first in it, whilst it is also actively looking at possibilities of obtaining more foreign agencies for its trading activities.

Group TurnoverThe Turnover of the Group was Rs. 14.41 Bn as compared with Rs. 12.1 Bn in the previous year. A detailed analysis of the Group Turnover is given in Note 48.2 of the Financial Statements.

Gross ProfitThe Group Gross Profit for the year was Rs. 3.37 Bn compared with the Group Gross Profit of Rs.3.19 Bn for the previous year.

InvestmentsInvestments of the Company and the group in Subsidiaries, Associates, Joint ventures and other Long term external Equity Investments amounted to Rs. 4,860 Mn (2011 - Rs. 6,231 Mn) and Rs. 6,220 Mn (2011 -Rs. 7,529 Mn), respectively.

Detailed description of the Long term Investments held as at the balance sheet date, are given in note 17 to the financial statements.

Property, Plant and EquipmentInformation relating to the movement in Property, Plant and Equipment is given in Note 8 of these Financial Statements.

Market Value of PropertiesThe Market values of the Lands and Buildings owned by the Company is included on the basis of valuations carried out by a qualified Valuer and is given in Note 8.4.1 of these Financial Statements.

Stated Capital The Stated Capital of the Company as at the date of this Report is Rs.2,005,601,000 which consists 70,875,000 ordinary shares (2011 – Rs. 2,005,601,000).

ReservesThe total Group Reserves as at 31st March 2012 amounts to Rs. 12.34 Bn as compared with Rs. 13.18 Bn in the previous year.

Segment ReportingSegment wise contribution to Group Revenue, results, Asset and Liabilities is provided in note 48 to the Financial Statements.

TaxationA provision has been made for income tax in Brown and Company PLC amounting to Rs. 215 Mn for the current year, as compared to Rs. 264 Mn in the previous year. The provision for taxation for the Group is Rs. 319 Mn as compared with Rs.322 Mn in the previous year. Taxation has been provided at the appropriate rates indicated in Note. 5 of the Financial Statements.

Share Holdings/Share InformationThe market value of an ordinary share of the Company as at 31st March 2012 was Rs. 155.10 (31st March 2011 – Rs. 289.80). The number of shareholders as at 31st March 2012 was 2422 (31st March 2011 – 2647). An analysis of shareholders based on shares held, the distribution of ownership and market values for the last five years are provided on pages 138 and 139.

The information in respect of earnings, dividends, net assets per share is given on pages 92 and 124.

ShareholdersIt is a Group policy to treat its shareholders equitably and maximize shareholder wealth. Quarterly returns of financial results with any developments or changes would be circulated to the shareholders on a timely basis.

Events Occurring After The Balance Sheet DateThere have been no events subsequent to the balance sheet date, which would have any material effect on the Company or on the Group.

Employment PoliciesThe Group employment policies in respect of the individuals and offer equal career opportunities, regardless of sex, race or religion and consider the relationship with the employees to be good. The number of persons employed in the Company and its subsidiaries as at 31st March 2012 was 724 (653 as at 31st March 2011)

The Company promotes a culture of teamwork, integrity and dedication, and remuneration is linked to performance by annual appraisals of both qualitative and quantitative performance of all employees.

CustomersThe Group firmly believes in investing time and effort in discovering exactly what the customer wants and then giving it to them at the best price and building relationship and loyalty by supplying the demand in the best manner possible every single time. In other words, we believe in selling customer excellence. In addition the Company also carries out customer awareness programmes and customer service campaigns. The Company deals with both corporate and retail customers.

Supplier PolicyThe Group places great emphasis on the importance of suppliers to the Group to build loyalty and ensure payments prompt. Further a clear communication terms of payment


as part of commercial agreements is being maintained.

Statutory Payments Directors, to the best of their knowledge and belief are satisfied that all statutory payments in relation to employees and the Government have been made up to date.

Environmental ProtectionIt is the Group policy to keep adverse effect on the environment to a minimum and to promote co-operation and compliance with the relevant authorities and regulations.

Corporate Governance & Internal Control The information called for by this item with respect to the practice followed by the Group is set out in the Corporate Governance statement on pages 62 to 66.

Going ConcernAs in the statement of Directors’ Responsibilities given on page 74 the Directors have adopted the Going Concern basis in preparing the Financial Statements.

DirectorateThe Directors of the Company during the year under review are as follows:

Mrs. R. L. NanayakkaraNon-Executive Chairperson

Mr. A. L. Devasurendra Non-Executive Deputy Chairman Mr. N. M. Prakash Executive - Group Managing Director/ CEO

Mr. H. P. J. de SilvaIndependent Non-Executive Director

Mr. S. V. SomasunderamNon-Executive Director

Mr. I. C. NanayakkaraNon-Executive Director

Mr. R. N. Asirwatham Independent Non-Executive Director (Resigned with effect from 10th May 2012)

Mr. W. D. K. JayawardenaNon-Executive Director(Appointed with effect from 24th July 2012)

Mrs. K. U. AmarasingheNon-Executive Director(Appointed with effect from 24th July 2012)

Directors’ MeetingsThe Directors conduct Board Meetings on a monthly basis. Board decisions are resolved by resolutions at meetings, by circulation and also through circular Board papers which are approved and signed by all the Directors and tabled at the Board Meetings. The Minutes of the Board Meetings, the Agenda for the next meeting and the monthly Management Reports are circulated to all the Directors in advance to the meetings.

Resignation of Independent Non Executive DirectorMr. R.N. Asirwatham Independent Non-Executive Director resigned from the Board of Directors with effect from 10th May 2012.

Appointment of Non Executive Directors Mr. W. D. K. Jayawardena, Non-Executive Director was appointed to the Board of Directors with effects from 24th July 2012.

Mrs. K. U. Amarasinghe, Non-Executive Director was appointed to the Board of Directors with effect from 24th July 2012.

Re- Election of DirectorsIn accordance with Articles 24(2) of the Articles of Association of the Company, Mr. W. D. K. Jayawardena Non-Executive Director retires and, being eligible, offers himself for re-election.

In accordance with Articles 24(2) of the Articles of Association of the Company, Mrs. K. U. Amarasinghe Non-Executive Director retires and being eligible offers herself for re-election.

In accordance with Articles 24(6) of the Articles of Association of the Company, Mr. A.L. Devasurendra, Non- Executive Director retires by rotation and being eligible offers himself for re-election.

Profit and Appropriations

Group

For the year ended 31st March 2012 2011

Rs. 000 Rs. 000Profit for the year 1,177,192 2,188,219Retained Profit brought forward from previous year 7,045,135 3,050,156Profit before distribution and transfers 8,222,327 5,238,375Realized Revaluation on Disposals 1,970 1,252,243Effect on valuation of Timber (3,191) -Gain on Issue of Shares to Minority - 570,788Effect on disposal of Joint Venture share holding - 77,284Dividend Paid (93,555) (93,555)Retained Profit carried forward 8,127,550 7,045,135

Company


Rs. 000 Rs. 000

Profit for the year 406,513 506,956Retained Profit brought forward from previous year 1,741,272 1,256,247Profit before distribution and transfers 2,147,785 1,763,203Realized Revaluation on Disposals - 71,624Dividend Paid (93,555) (93,555)Retained Profit carried forward 2,054,230 1,741,272


Directors’ Report

In accordance with Section 210 of the Companies Act No 7 of 2007 Mrs. Rohini Nanayakkara, Non Executive Director retires and offers herself for re-election. Special notice has been received pursuant to Sections 145 and 211 of the Companies Act No. 7 of 2007 of the intention to propose ordinary resolution for such re-election notwithstanding the age limit of 70 years stipulated by Section 210 of the said Companies Act.

Board Committees The Board has established Committees for better monitoring and guidance of different aspects of operations and control.

Audit Committee Mr. R.N. Asirwatham Chairman (Resigned with effect from 10th May 2012)

Mrs. R. L Nanayakkara

Mr. H. P. J. de Silva (Appointed as the Acting Chairman)

Consequent to the resignation of Mr. R.N. Asirwatham as Chairman of the Audit Committee, Mr. H.P.J. de Silva was appointed as Acting Chairman.

The Audit Committee reviewed the type and quantum of non-audit services provided by the External Auditors to the Group to ensure that their independence as Auditors has not been impaired.

The report of the Audit Committee is given on page 67.

Remuneration CommitteeMrs. R. L. Nanayakkara Chairperson

Mr. R. N. Asirwatham (Resigned with effect from 10th May 2012)


The report of the Remuneration committee is given on page 68.

Business Operations Committee Mr. N.M. PrakashGroup Managing Director/CEO

Mr. A.L. DevasurendraDeputy Chairman

Mr. I.C. NanayakkaraDirector

Mr. S.V. SomasunderamDirector The report of the Business Operations committee is given on page 68.

Interest Register The Directors have made the declarations required by the Companies Act No. 7 of 2007. These have been entered into the Interest Register which is maintained by the Company.

The Company carried out transactions in the ordinary course of business with entities in which a Director of the Company is a Director. The transactions with entities where a Director of the Company either has control or exercises significant influence have been classified as related party transactions and disclosed in Note 42 to the Financial Statements.

The Directors have no direct or indirect interest in any other contract or proposed contract with the Company.

Remuneration of DirectorsThe remuneration of the Directors are disclosed in Note 4 to the Financial Statements. List of Major ShareholdersThe list of 20 major shareholders and the percentage held by each as at 31st March 2012 is given on page 139 of the Financial Statements.

Directors’ ShareholdingsThe Directors interests in shares as at 31st March 2012 were as follows :-

As at As at

31st March 2012 31st March 2011

Mrs. R. L. Nanayakkara Nil NilMr. A. L. Devasurendra 1,098,900 1,098,900 Mr. N. M. Prakash Margin Trading 35,100 35,100Mr. S. V. Somasunderam Individual 2,,877,400 2,310,800 Margin Trading 150,000 500,000Mr. I. C. Nanayakkara 99,900 99,900Mr. H. P. J. de Silva Nil NilMr. R. N. Asirwatham Nil Nil(Resigned with effect from 10th May 2012)Mr. W. D. K. Jayawardena Nil Nil(Appointed w.e.f. 24th July 2012)Mrs. K. U. Amarasinghe Nil Nil(Appointed w.e.f. 24th July 2012)


Subsidiary and Associate Companies and their DirectorsThe Directors of Subsidiary and Associate companies as at date are given on pages 140 to 142 of the Financial Statements

Accounting PoliciesThe accounting policies adopted in the preparation of the financial statements are given on pages 80 to 89 There were no changes in the accounting policies adopted in the previous year .

Annual ReportThe Board of Directors approved the consolidated financial statements on 16th August 2012. The appropriate number of copies of this report will be submitted to Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitory Board on or before 30th August 2012.

Annual General MeetingThe Annual General Meeting will be held at Park Premier, Excel World, No. 338, T. B. Jayah Mawatha, Colombo 10 on 25th September 2012 at 10.30 a.m. The Notice of the Annual General Meeting is given on page 145.

AuditorsIn accordance with Section 154 (1) of the Companies Act No. 7 of 2007 a resolution proposing the reappointment of Messrs. KPMG, Chartered Accountants as Auditors of the Company for the ensuing year will be proposed at the Annual General Meeting.

In terms of Section 155 (a) of the Companies Act No. 7 of 2007 a resolution authorizing the Directors to fix the remuneration of the Auditors M/s. KPMG, Chartered Accountants for the ensuing year will be proposed at the Annual General Meeting.

The fees paid to Auditors are disclosed in Note 4 to the Financial Statements. As far

as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor) with the Company or any of its subsidiaries other than those disclosed above. The Auditors also do not have any interest in the Company or any of its group Companies.

For and on behalf of the Board

Mrs. R. L. NanayakkaraChairperson

Mr. N. M. PrakashGroup Managing Director/CEO

STANDARD FINANCE (PVT) LTD.SECRETARIES

Colombo, 16th August 2012


Statement of Directors’ Responsibilities

The responsibilities of the Directors in relation to the Financial Statements for the year ended 31st March 2012 which have been prepared and presented in conformity with the requirements of the Sri Lanka Accounting Standards, the Listing Rules of the Colombo Stock Exchange and the Companies Act No.7 of 2007, is set out in the following statement.

The responsibility of the Auditors in relation to the Financial Statements is set out in the Report of the Auditors on page 75 of the Report. As per the provisions of the Companies Act No. 7 of 2007, the Directors are required to prepare financial statements, for each financial year and place before a general meeting which comprise:

1 An Income Statement, which presents a true and fair view of the profit and loss of the Company and its subsidiaries for the financial year; and

2 A Balance Sheet, which presents a true and fair view of the state of affairs of the Company and its subsidiaries as at the end of the financial year.

and which comply with the requirements of the Act.

The Directors are of the view that, in preparing these Financial Statements :

1 The appropriate accounting policies have been selected and applied in a consistent manner. Material deviations, if any have been disclosed and explained;

2 All applicable Accounting Standards, as relevant, have been followed.

3 Judgments and estimates have been made which are reasonable and prudent.

The Directors are also of the view that the Company has adequate resources to continue in operation and have applied the going concern basis in preparing these Financial Statements.

Further, the Directors have a responsibility to ensure that the Company maintains sufficient accounting records to disclose, with reasonable accuracy of the financial position of the Company and of the Group, and to ensure that the financial statements presented comply with the requirements of the Companies Act.

The Directors are also responsible for taking reasonable steps to safeguard the Assets of the Company and that of the Group and in this regard to give proper consideration to the establishment of appropriate internal control systems with a view to preventing and detecting fraud and other irregularities.

The Directors are required to prepare the Financial Statements and to provide the Auditors with every opportunity to take whatever steps and undertake whatever inspections they may consider to be appropriate to enable them to give their Audit Opinion.

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

Compliance ReportThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries, and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the Balance Sheet date have been paid or, where relevant provided for.

By order of the Board

Mr. N. M. PrakashGroup Managing Director/CEO 16th August 2012


Independent Auditors’ Report

TO THE SHAREHOLDERS OF BROWN & COMPANY PLC Report on the Financial StatementsWe have audited the accompanying financial statements of Brown & Company PLC (the “Company”), the consolidated financial statements of the Company and its subsidiaries as at 31 March 2012 which comprise the balance sheet as at 31 March 2012, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes as set on pages 76 to 135 of this annual report.

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

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance

with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

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

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

Opinion - CompanyIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2012 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Opinion - GroupIn our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31 March 2012

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.

Report on Other Legal and Regulatory RequirementsThese financial statements also comply with the requirements of Sections 153(2) to 153(7) of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTSColombo, 16th August 2012


Income Statement

Group Company

For the year ended 31st March 2012 2011 2012 2011

Note Rs.000 Rs.000 Rs.000 Rs.000

Revenue 1 14,414,685 12,095,101 10,558,071 7,810,491

Cost of Sales (11,043,283) (8,902,905) (8,147,381) (5,998,455)

Gross Profit 3,371,402 3,192,196 2,410,690 1,812,036

Other Income 2 3,170,244 2,427,718 293,264 792,549

Distribution Expenses (628,765) (471,293) (440,047) (321,008)

Administrative Expenses (1,462,241) (1,180,870) (920,928) (742,165)

Other Expenses (768,550) (223,582) (274,933) (473,706)

Finance Cost 3 (456,461) (291,605) (447,446) (298,007)

Change in Fair Value of Investment Properties 9 251,224 1,715 1,224 1,715

Share of Profit of Equity Accounted Investees (Net of Tax) 16 (97,549) 149,547 - -

Profit before Taxation 4 3,379,304 3,603,826 621,824 771,414

Taxation 5 (319,677) (322,238) (215,311) (264,458)

Profit for the Year 3,059,627 3,281,588 406,513 506,956

Attributable to:Equity holders of the Company 1,177,192 2,188,219 406,513 506,956

Minority Interest 1,882,435 1,093,369 - -

3,059,627 3,281,588 406,513 506,956

Basic Earnings per Share (Rs.) 6 16.61 30.87 5.74 7.15

Diluted Earnings per Share (Rs.) 6 16.61 30.87 5.74 7.15

Dividend per Share (Rs.) 7 1.32 1.32 1.32 1.32

The Significant Accounting Policies and Notes to the Financial statements from pages 80 to 135 form an integral part of these Financial Statements.


Balance Sheet

Group Company

As at 31st March 2012 2011 2012 2011 Note Rs.000 Rs.000 Rs.000 Rs.000

ASSETSNon-Current AssetsProperty, Plant and Equipment 8 8,383,003 6,645,128 3,951,363 3,562,467Investment Properties 9 3,911,568 160,344 111,971 110,747Prepaid Lease Rentals 10 184,552 189,336 45,649 46,250Intangible Assets 11 168,391 66,240 14,745 21,825Capital Work in Progress 12 128,389 20,337 56,396 -Timber Stock 13 2,062,609 1,714,343 - -Investment in Subsidiaries 14 - - 1,207,201 955,220Investment in Joint Venture 15 - - 10,000 10,000Investments in Equity Accounted Investees 16 1,609,145 1,443,298 248,998 248,998Other Long Term Investments 17 4,611,037 6,086,893 3,394,477 5,017,987Deferred Tax Asset 18 183,611 245,518 76,747 151,985Loans to Related Parties- Due after one year 19 382,767 303,197 505,700 404,938 21,625,072 16,874,634 9,623,247 10,530,417

Current AssetsInventories 20 2,693,674 1,233,965 1,916,403 643,239Trade and Other Receivables 21 2,134,585 1,405,069 1,473,948 1,066,382Deposits and Prepayments 22 290,298 321,797 113,701 178,663Loans to Related Parties -Due within one year 23 1,035,594 153,987 26,815 98Amounts due from Related Parties 24 287,986 288,035 282,791 144,485Tax Recoverable 25 124 124 - -Short Term Investments 26 4,389,095 5,548,065 1,717,809 1,072,560Cash at Bank and in Hand 27 491,811 1,364,490 200,833 737,228 11,323,167 10,315,532 5,732,300 3,842,655TOTAL ASSETS 32,948,239 27,190,166 15,355,547 14,373,072

EQUITY AND LIABILITIESStated Capital 28 2,005,601 2,005,601 2,005,601 2,005,601Capital Reserves 29 4,159,335 6,088,023 3,960,626 5,860,071Revenue Reserves 29 8,180,663 7,098,248 2,063,730 1,750,772Equity Attributable to Equity holders of the Company 14,345,599 15,191,872 8,029,957 9,616,444Minority Interest 9,141,575 6,799,816 - -Total Equity 23,487,174 21,991,688 8,029,957 9,616,444

Non Current LiabilitiesInterest Bearing Borrowings 30 2,262,017 1,050,937 1,538,771 746,439Rescheduled Debentures 31 - 410 - -Finance Lease Obligations 32 85,058 88,725 - -Retirement Benefit Obligations 33 482,261 433,617 64,833 44,592Deferred Tax Liability 34 16,567 33,517 - -Deferred Income 35 178,883 157,727 - -Loans from Related Parties -Due after one year 36 - 28,665 738,580 199,484 3,024,786 1,793,598 2,342,184 990,515

Current LiabilitiesAccounts Payable and Accrued Expenses 37 2,934,195 1,881,100 2,000,381 1,174,507Interest Bearing Borrowings due within one year 30 1,116,208 397,868 593,292 319,457Finance Lease Obligations due within one year 32 5,988 6,300 - 328Loans from Related Parties 38 - 33,119 322,991 1,291,518Amounts due to Related Parties 39 297,842 309,039 282,470 309,459Income Tax Payable 40 135,964 158,148 59,563 103,317Dividend Payable 27,162 16,087 27,161 16,085Short Term Interest Bearing Borrowings 1,640,311 523,770 1,508,057 500,000Bank Overdraft 278,609 79,449 189,491 51,442 6,436,279 3,404,880 4,983,406 3,766,113TOTAL EQUITY AND LIABILITIES 32,948,239 27,190,166 15,355,547 14,373,072

Net Assets per Share (Rs.) 41 202.41 214.35 113.30 135.68


I certify that these Financial Statements are in compliance with the requirements of Companies Act No.7 of 2007.

Mr. P. S. GoonawardenaGroup Chief Financial Officer

The Board of Directors is responsible for the Preparation and Presentation of these Financial Statements.Signed for and on behalf of the Board;

Mrs. R. L. Nanayakkara Mr. N. M. PrakashChairperson Group Managing Director/CEOColombo, 16th August 2012


Statement of Changes in Equity

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ttri

buta

ble

to E

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Com

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Re

valu

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Rs.0

00

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00

Rs.0

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00

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as a

t 31

st M

arch

201

0 2,

005,

601

962,

712

3,33

0,59

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2,21

6 53

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050,

156

9,60

4,39

6 3,

853,

502

13,4

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valu

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- 43

7,16

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7,16

9 2,

791

439,

960

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ing

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- (1

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3)

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(15,

693)

-

(15,

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x im

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on

Rate

diff

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ce

- (9

,186

) -

- -

- (9

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) -

(9,1

86)

Reva

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of In

vest

men

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- -

2,46

2,98

4 -

- -

2,46

2,98

4 -

2,46

2,98

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aliz

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eval

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Dis

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- (1

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- 1,

252,

243

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-Is

sue

of S

hare

s to

Min

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-

- -

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3,02

1,20

0 3,

021,

200

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Issu

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Sha

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to M

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- -

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- 57

0,78

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on

disp

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of

Join

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are

hold

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- (3

0,53

4)

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- 77

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46

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(6

00,2

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(553

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for

the

year

-

- -

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2,18

8,21

9 2,

188,

219

1,09

3,36

9 3,

281,

588

Div

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3,55

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(93,

555)

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(93,

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Bala

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201

1 2,

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1,34

2,86

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7,04

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799,

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Reva

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of P

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123,

166

- -

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123,

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263,

554

386,

720

Reva

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of In

vest

men

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- -

(2,0

61,9

35)

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- (2

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41)

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Build

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- 12

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18

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30

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Real

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970

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to

Min

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-

- -

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(186

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53)

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to M

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- -

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3,60

0 18

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0,40

2 18

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2O

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- (1

06,6

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fect

on

valu

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- -

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- (3

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) 10

6,87

2 10

3,68

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for

the

year

-

- -

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1,17

7,19

2 1,

177,

192

1,88

2,43

5 3,

059,

627

Div

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Bal

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as

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1st

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012

2,00

5,60

1 1,

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2,48

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4 20

2,21

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8,

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99

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(Inv

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Equi

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Rs

.000

Rs

.000

Rs

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Rs

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0

2,

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826,

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7 6,

541,

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Reva

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of P

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164,

193

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6,95

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Reva

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of P

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-

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153,

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5,65

8Re

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- (2

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(2,0

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7

The

Sign

ifica

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ccou

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g Po

licie

s an

d N

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to

the

Fina

ncia

l sta

tem

ents

fro

m p

ages

80

to 1

35 f

orm

an

inte

gral

par

t of

the

se F

inan

cial

Sta

tem

ents

.


Cash Flow Statement

Group CompanyFor the year ended 31st March 2012 2011 2012 2011 Rs.000 Rs.000 Rs.000 Rs.000

Cash flows from Operating ActivitiesProfit before Taxation 3,379,304 3,603,826 621,824 771,414

Adjustments for:Share of Profit of Equity Accounted Investees 97,549 (149,547) - -(Gain)/Loss on Disposal of Investments - (1,548,066) - (130,086)Depreciation on Property, Plant and Equipment 237,903 158,324 54,773 36,892Negative Goodwill (2,671,483) (15,628) - -Amortization of Prepaid Lease Rentals 4,785 4,786 601 601Amortization of Intangible Assets 8,018 8,072 7,839 7,932Provision for Retiring Gratuity 63,954 111,392 22,075 18,491Provision/(Reversal) for Bad & Doubtful Debts 11,848 35,197 5,216 (1,475)Amortization of Deferred Income (5,350) (5,309) - -Provision for Inter Company Receivables - - (12,214) 5,658Provision for fall in value of Investments - 217 - 2,000Provision for Slow Moving Stocks 24,434 13,451 4,246 (3,195)Dividend Income (105,865) (61,961) (212,993) (563,760)Provision for impairment of Goodwill - 10,000 - -Interest Income (219,819) (72,814) (45,311) (61,752)Change in Fair Value of Investment Properties (251,224) (1,715) (1,224) (1,715)(Gain)/Loss on changes in Fair value of Short Term Investments 591,511 (466,014) 235,903 326,598Loss on Disposal of Investment Properties - 853 - 853Gain/(Loss) on Changes in Fair Value of Timber Stocks 14,952 (128,745) - -Gain on Disposal of Property, Plant and Equipment (9,213) (13,173) (2,420) (945)Interest Expense 456,461 291,605 447,446 298,007Operating Profit before Working Capital Changes 1,627,765 1,774,751 1,125,761 705,518

Working Capital Changes(Increase)/Decrease in Inventories (1,459,710) (233,849) (1,277,410) (155,921)(Increase)/Decrease in Trade and Other Receivable (709,865) (286,887) (347,819) (296,662)Increase in Amounts due from Related Companies 49 (21,572) (126,091) 63,984Increase/(Decrease) in Accounts Payable and Accrued Expenses 1,053,095 286,148 825,872 232,044Increase/(Decrease) in Amounts due to Related Companies (11,197) 53,122 (26,989) 1,338,843Cash Generated from Operations 500,137 1,571,713 173,324 1,887,806

Interest Paid (456,461) (291,605) (447,446) (298,007)Income Tax Paid (280,052) (112,344) (178,076) (26,199)Retiring Gratuity Paid (42,365) (75,315) (1,834) (36,683)Net Cash Generated from/(used in) Operating Activities (278,741) 1,092,449 (454,032) 1,526,917

Cash flows from Investing ActivitiesPurchase of Property, Plant and Equipment (1,133,072) (617,912) (290,659) (80,543)Purchase of Investment Properties - (49,597) - -Proceeds from Sale of Investment Properties - 7,596 - 7,596Purchase of Intangible Assets (759) (42,295) (759) (27,288)Acquisition of Subsidiaries (1,197,376) (265,684) (252,081) (287,451)Investment in Equity Accounted Investees (382,586) (1,146,172) - (248,548)Capital Grants Received 9,036 13,854 - -Purchase of Investments (2,353,225) (3,408,194) (1,315,934) (1,716,742)Proceeds from Sale of Property, Plant and Equipment 21,655 52,765 2,599 1,443Investment in Timber Stock (11,632) (140,957) - -Investment in Capital Work in Progress (127,732) - (56,396) -Proceeds from Sale of Investments 408,721 3,385,986 - 317,434Dividend Received 105,865 61,961 212,993 563,760Interest Received 219,819 72,814 45,311 61,752Net Cash used in Investing Activities (4,441,286) (2,075,835) (1,654,926) (1,408,587)

Cash flows from Financing ActivitiesDividend Paid (82,480) (84,807) (82,481) (84,808)Loan Received 3,288,328 1,147,043 2,458,057 1,128,400Repayment of Term Loans (1,514,784) (652,467) (940,734) (348,673)Redemption of Rescheduled Debentures (410) (818) - -Proceeds from issue of Shares to Minority 183,600 4,150,000 - -Lease Rentals Paid (12,606) (19,816) (328) (3,351)Net cash flows Generated from Financing Activities 1,861,648 4,539,135 1,434,514 691,567

Net Increase/(Decrease) in Cash and Cash Equivalents during the year (2,858,379) 3,555,749 (674,444) 809,898Cash and Cash Equivalents at the beginning of the year 3,579,915 24,166 692,586 (117,312)Cash and Cash Equivalents at the end of the year 721,536 3,579,915 18,142 692,586

Analysis of Cash and Cash Equivalents at the end of the yearCash at Bank and in Hand 491,811 1,364,490 200,833 737,228Short Term Deposits 508,334 2,294,874 6,800 6,800Bank Overdraft (278,609) (79,449) (189,491) (51,442) 721,536 3,579,915 18,142 692,586



Significant Accounting Policies

1. CORPORATE INFORMATION 1.1 Reporting EntityBrown & Company PLC (“the Company”) is a public quoted Company incorporated on 17 August 1892 with limited liability, incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No. 481, T. B. Jayah Mawatha, Colombo 10 and the Business Office is located at No 34 Sir Mohamed Macan Marker Mawatha, Colombo 3.

The Consolidated Financial Statements of the Company as at and for the year ended 31 March 2012 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities.

1.2 Principal Activities and Nature of Operations

There were no significant changes in the nature of the principal activities of the Company and the Group during the financial year under review. Principal activities of the Company are described in detail in the “Management Discussion and Analysis” to the Annual Report.

1.3 Date of Authorization for IssueThe Consolidated Financial Statements of Brown & Company PLC for the year ended 31 March 2012 were authorized for issue in accordance with the resolution of the Board of Directors on 16th August 2012.

2. BASIS OF PREPARATION 2.1 Statement of ComplianceThe Consolidated Financial Statements have been prepared in accordance with Sri Lanka Accounting Standards (SLAS), adopted by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act. No. 07 of 2007.

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.2 Basis of MeasurementThe Consolidated Financial Statements have been prepared on a historical cost basis, except for the following material items in the Balance Sheet: Investment properties and land and

buildings that have been measured at fair value.

Long Term & Short Term Investments measured at fair value.

Defined Benefit Obligation measured at present value of the defined benefit obligation.

Valuation of Biological Assets

2.3 Functional and Presentation CurrencyThese Consolidated Financial Statements are presented in Sri Lankan Rupees, which is the Company’s functional currency. All financial information presented in Sri Lankan Rupees has been rounded to the nearest thousand.

2.4 Use of Estimates and JudgementsThe preparation of the Consolidated Financial Statements in conformity with SLASs’ requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the Consolidated Financial Statements is included in the following notes: Note 09 – Classification of Investment

Property

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: Note 18 – utilization of tax losses Note 33 – measurement of defined

benefit obligations

Note 43 – commitments and contingencies

2.5 Going ConcernThe Board of Directors certifies that the Company has adequate resources to continue its operations in the foreseeable future. Therefore, the Going Concern basis has been adopted in preparing the Financial Statements.

2.6 Foreign Currency TransactionsTransactions in foreign currencies are translated into Sri Lanka Rupees (“Rupees”) at the foreign exchange rate ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to rupees at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognized in the Income Statement.

2.7 Materiality and AggregationEach material class of similar items is presented separately in the Consolidated Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial.

3. SIGNIFICANT ACCOUNTING POLICIES3.1 Changes in Accounting PoliciesThe accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements. The accounting policies of the Company have been consistently applied by Group entities where applicable and deviations if any, have been disclosed accordingly.

3.1.1 Comparative informationPrevious year’s figures and phrases have been re-arranged, wherever necessary, to conform to the current year’s presentation.

3.2 Basis of ConsolidationThe Consolidated Financial Statements include the financial statements of the Company, its subsidiaries and other companies over which it has control. The Group’s financial statements comprise of the Consolidated Financial Statements of the


Company and the Group which have been prepared in compliance with the Group’s accounting policies unless otherwise stated.

3.2.1 Acquisitions and divestmentsAcquisitions of subsidiaries are accounted for using the purchase method of accounting. The results of subsidiaries, joint ventures and associates acquired or incorporated during the year have been included from the date of acquisition, or incorporation while results of subsidiaries, joint ventures and associates disposed have been included up to the date of disposal.

3.2.2 SubsidiariesSubsidiaries are those entities controlled by the Group. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. A list of Subsidiaries within the Group is provided in Note 14.

Minority Interest in the net assets not owned, directly or indirectly, by the group are presented in the consolidated Balance Sheet within equity, separately from the equity attributable to equity holders of the Group. Minority Interests in the profit or loss of the Group are presented separately in the consolidated Income Statement.

3.2.3 Financial YearThe Consolidated Financial Statements incorporating all subsidiaries, joint ventures and associates, in the Group are prepared to a common financial year ending March 31st. In the case where the reporting dates are different from the Group reporting dates, adjustments are made for any significant transactions or events up to 31st March.

3.2.4 Joint ventureA joint venture is a contractual arrangement, whereby the Group and other parties undertake an economic activity that is subject to joint control. The group recognizes its interest in the joint venture. using the proportionate consolidation method.

The Group’s share of each of the assets, liabilities, income and expenses of the joint venture are combined with the similar items, line by line, in the Consolidated Financial Statements. A list of joint ventures within the group is provided in Note 15.

3.2.5 Associates – Equity Accounted InvesteesAssociates are those entities in which the Group has significant influence and holds 20% to 50% of the equity and which are neither subsidiaries nor joint ventures of the Group. A list of associate companies of the group which have been accounted for under the equity method of accounting is provided in Note 16.

The investments in associates are carried in the balance sheet, at cost plus post acquisition changes, in the group’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment. After application of the equity method, the group determines whether it is necessary to recognize any additional impairment loss with respect to the group’s net investment in the associate. The income statement reflects the share of the results of operations of the associate. Where there has been a change recognized directly in the equity of the associate, the group recognizes its share of any changes in the statement of changes in equity. When the group’s share of losses in an associate equals or exceeds the interest in the undertaking, the group does not recognize further losses unless it has incurred obligations or made payments on behalf of the entity. The group ceases to use the equity method of accounting on the date from which it no longer has significant influence in the associate. The accounting policies of associate companies conform to those used for similar transactions of the group.

3.2.6 Goodwill acquired in a Business Combination

Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial

recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to groups of cash-generating units that are expected to benefit from the synergies of the combination. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognized. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets pro-rata to the carrying amount of each asset in the unit.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

3.2.7 Transaction Eliminated on ConsolidationIntra-group balances and transactions and any unrealized gains arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. Unrealized gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the enterprise, against the investment in the associate. Unrealized losses are eliminated in the same way as unrealized gains.

3.2.8 Deemed DisposalsChanges in a parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as an equity transaction.

3.3 Assets and Bases of their Valuation;3.3.1 Current AssetsAssets classified as current assets on the balance sheet are cash and bank balances and those which are expected to be realized



in cash during the normal operating cycle or within one year from the balance sheet date, whichever is shorter.

3.3.2 Property, Plant and Equipment3.3.2.1 FreeholdItems of Property, Plant and Equipment are stated at cost or fair value less accumulated depreciation and any accumulated impairment in value.

The cost of Property, Plant and Equipment is the cost of acquisition or construction together with any expenses incurred in bringing the asset to its working condition for its intended use. Where an item of Property, Plant and Equipment comprises major components having different useful lives, they are accounted for as separate items of Property, Plant and Equipment.

3.3.2.2 RevaluationA revaluation of Land & Building is done after a review once a year when there is a substantial distinction between the fair value (market value) and the book value of the asset, and is undertaken by professionally qualified valuers.

When an asset is revalued, any increase in the carrying amount is transferred to a revaluation reserve, unless it reverses a previous revaluation decrease relating to the same asset, and recognized in the Income Statement.

3.3.3 Finance LeasesLeases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets acquired by way of a finance lease are stated at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception, less accumulated depreciation.

3.3.4 Prepaid Lease RentalsPrepaid lease rentals paid to acquire land use rights are amortized over the lease term in accordance with the pattern of benefits provided. Leasehold properties are tested for impairment annually and are written down where applicable. The impairment loss, if any, is recognized in the income statement.

3.3.5 Investment PropertyProperties held to earn rental income, and properties held for capital appreciation have been classified as investment property. Investment properties are initially recognized at cost. Subsequent to initial recognition, the investment properties are stated at fair values, which reflect market conditions at the balance sheet date. Gains or losses arising from changes in fair value are included in the income statement in the year in which they arise. Investment properties are derecognised when disposed, or permanently withdrawn from use because no future economic benefits are expected. Any gains or losses on retirement or disposal are recognized in the income statement in the year of retirement or disposal. Transfers are made from investment property, when there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale. Where group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the Consolidated Financial Statements, and accounted for as per SLAS 18 Property, Plant and Equipment.

3.3.6 Capital Work in ProgressCapital work in progress is transferred to the respective asset accounts at the time of the first utilization or at the time the asset is commissioned.

3.3.7 Subsequent ExpenditureExpenditure incurred to replace a component of an item of Property, Plant and Equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalized. Other subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the item of Property, Plant and Equipment. All other expenditure is recognized in the Income Statement as an expense incurred.

3.3.8 DepreciationDepreciation is charged to the Income Statement on a straight-line basis over the estimated useful lives of items of Property, Plant and Equipment and major components

that are accounted separately. Freehold land is not depreciated. The estimated useful lives are as follows:

Leasehold Property - Over the Lease Period

Buildings - 40 years Plant & Machinery - 10 years Motor Vehicles - 04 years Computers - 04 years Furniture, Fittings &

Office Equipment - 10 years Improvements to

Leasehold Building - Over the Lease Period

Improvements to leasehold buildings and buildings constructed on leasehold land are amortized over the lower of their economic useful life and unexpired period of lease.

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 for sale and the date that the asset is derecognised. The useful life, depreciating methods and residual values are assessed annually or at an earlier date where any circumstance indicates such assessment is required.

3.3.9 DerecognitionAn item of Property, Plant and Equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset calculated is the difference between the net disposal proceeds and the carrying amount. Gains or Losses on derecognition are recognised in profit or loss, and gains are not classified as revenue.

3.3.10 Impairment of AssetsThe group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset,


unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognized in the income statement except for impairment losses in respect of Property, Plant and Equipment which are recognized against the revaluation reserve to the extent that it reverses a previous revaluation surplus. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. Previously recognized impairment losses other than in respect of goodwill, are reversed only if there has been an increase in the recoverable amount of the asset. Such increase is recognized to the extent of the carrying amount being impairment losses been recognized previously.

3.3.11 Intangible AssetsAn intangible asset is initially recognized at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level.

3.3.12 Investments3.3.12.1 Long Term InvestmentsIn the parent Company’s financial statements, the investments in subsidiaries,

joint ventures and associates have been accounted for at cost, net of any impairment losses which are charged to the income statement. Income from these investments is recognized only to the extent of dividends received. Provision for diminution in value is made when, in the opinion of the Directors, there has been a decline other than temporary in the value of the investment.

Long Term marketable securities of the Group are stated at the market value as at the Balance Sheet date. The excess on revaluation is credited to Revaluation of investments in the Statement of Changes in Equity. The carrying amounts of Long Term marketable investments are reduced to recognize a decline, which is considered other than temporary, in the value of investments, determined on an individual investment basis.

All other Long Term investments have been accounted for at cost, net of any impairment losses which are charged to the Income Statement. Income from these investments is recognized only to the extent of dividends received. Provision for diminution in value is made when, in the opinion of the Directors, there has been a decline other than temporary in the value of the investment.

3.3.12.2 Short Term InvestmentsShort Term marketable securities of the Group are stated at the market value as at the Balance Sheet date. The excess or deficit on revaluation is included in the income statement, determined on an individual investment basis.

Government securities held for resale in the near future to benefit from short-term market movements are accounted for at cost plus the relevant proportion of the discounts or premiums.

Debt securities held for resale in the near future are accounted for at cost.

3.3.13 InventoriesInventories are stated at the lower of cost and net realizable value after making due allowance for obsolete and slow moving items. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost incurred is bringing inventories to its present location and condition is accounted for using the cost formula.

A provision for slow moving inventories is made when the holding period exceeds 365 days, and the sale of the inventories is no longer probable.

3.3.14 Trade & Other ReceivablesTrade and other receivables are stated at the amounts they are estimated to realize, net of provisions for bad and doubtful receivables. A provision for doubtful debts is made when the debt exceeds 365 days, and collection of the full amount is no longer probable. Bad debts are written off when identified.

3.3.15 Cash and Cash EquivalentsCash and Cash equivalents comprise cash balances and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of Cash and Cash equivalents for the purpose of the Statement of Cash flows.

3.4 Liabilities & ProvisionsLiabilities classified as current liabilities on the balance sheet are those, which fall due for payment on demand or within one year from the balance sheet date.

Type of Inventory Method of Valuation

Finished Goods First In First Out cost (FIFO).

Work in Progress Factory cost which includes all direct expenditure and production overheads based on normal operating capacity.

Spares and Consumables

At the Actual Cost.



Non - current liabilities are those balances that fall due for payment after one year from the balance sheet date.

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

3.4.1 Employee Benefits3.4.1.1 Defined Benefit Plan – Retirement

Benefit ObligationsA defined benefit plan is a post employment benefit plan other than a defined contribution plan. The liability recognized in the balance sheet in respect of defined benefit plan is the present value of the defined benefit obligation at the balance sheet date. Benefits falling due 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 Unit Credit Method (PUC) as recommended by SLAS – 16 (Revised 2006), “Employees benefits”. The assumptions, based on which the results of the actuarial valuation were determined, are disclosed in Note 33 to the financial statements.

The Retirement Benefit Obligation is based on the actuarial valuation carried out by the Messers Actuarial & Management Consultants (Pvt) Ltd.

However, under the Payment of Gratuity Act No.12 of 1983, the liability to an employee arises only on completion of five years of continued service.

The liability is not externally funded.

3.4.1.2 Defined Contribution PlansContributions to defined contribution plans, Employees Provident Fund & Employees Trust Fund are recognized as an expense in the Income Statement, as incurred.

3.4.1.2.1 Employees’ Provident Fund (EPF)The Company and employees contribute to the above mentioned funds 12% and 8%, respectively on the salary of each employee.

3.4.1.2.2 Employees’ Trust Fund (ETF)The Company contributes 3% of the salary of each employee to the Employees’ Trust Fund.

3.4.2 Provisions, Contingent Assets and Contingent Liabilities

Provisions are made for all obligations existing as at the balance sheet date when it is probable that such an obligation will result in an outflow of resources, and a reliable estimate can be made of the quantum of the outflow. All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote. Contingent assets are disclosed, where inflow of economic benefit is probable.

3.4.3 Accounts Payable and Accrued Expenses

Trade and other payables are stated at cost.

3.5 Income Statement;3.5.1 RevenueThe net Group turnover excludes Value Added Tax, and trade discounts. The gross turnover represents the invoiced value of goods and services to customers outside the Group.

Sale of Goods Revenue from the sale of goods

in the normal course of ordinary activities are measured at the fair value of the consideration received or receivable, net of returns, trade discounts, volume rebates and value added taxes, net of sales within the Group. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, there are no associated costs and there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

Rendering of services Revenue from services rendered is

recognized in the income statement in proportion to the stage of completion

of the transaction at the Balance Sheet date. The stage of completion is assessed by reference to surveys of work performed.

Rental Income Rental income is recognized in the

Income Statement as it accrues.

Dividend Income Dividend income is recognized in

the Income Statement when the Group right to receive payment is established.

Interest Income Interest income is recognized in the

income statement as it accrues.

Gains and Losses Gains or Losses on the disposal of

Property, Plant and Equipment and other Non Current assets, including investments held by the Group have been accounted for in the Income Statement, after deducting from the net sales proceeds on disposal, the carrying amount of such Assets.

3.5.2 ExpensesAll expenditure incurred in running of the business has been charged to income in arriving at the profit for the year.

Preliminary and pre-operational expenditure is recognized in the Income Statement.Repairs and renewals are charged to the income statement in the year in which the expenditure is incurred.

3.5.3 Operating LeasesLeases where the lessor effectively retains substantially all the risks and rewards of ownership over the leased term are classified as operating leases. Payments made under operating leases are recognized in the Income Statement on a straight-line basis over the term of the lease.

3.5.4 Borrowing CostsBorrowing costs are recognized as an expense in the period in which they are incurred, unless they are incurred in respect of qualifying assets, in which case it is capitalized.


3.5.5 Financing CostFinancing cost comprises interest payable on long term borrowings, short term borrowings including bank overdrafts and interest on finance lease. The interest expense component of finance lease payments is recognized in the Income Statement using the effective interest rate method.

3.5.6 Taxation3.5.6.1 Income Tax ExpenseIncome tax on profit or loss for the year comprises current and deferred tax and is recognized in the Income Statement.Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the Balance Sheet date and any adjustments to tax payable in respect of previous years.

3.5.6.2 Deferred TaxDeferred taxation is the tax attributable to the temporary differences that arise when taxation authorities recognize and measure assets and liabilities with rules that differ from those of the Consolidated Financial Statements.

Deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized.

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

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

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

Deferred tax relating to items recognized directly in equity is recognized in equity.

3.5.7 Earnings per Share (EPS)The Group presents basic earnings per share and diluted earnings per share for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares. The details of Earnings per Share are given in Note 6 to the Consolidated Financial Statements.

3.5.8 Related Party TransactionsThe Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard 30 “Related Party Disclosures (Revised 2005)”. The Pricing applicable to such transactions is based on the assessment of the Risk and Pricing model of the Company and is comparable with what is applied to transactions between the Company and its unrelated Customers.

3.5.8.1 Transactions with Key Management Personnel

According to Sri Lanka Accounting Standard 30 (Revised 2005) “Related Party Disclosures”, Key management personnel, are those having authority and responsibility for planning, directing and controlling the

activities of the entity. Accordingly, the Board of Directors (including executive and non-executive Directors), personnel who hold the designation of General Manager and above positions and their immediate family members have been classified as Key Management Personnel of the Company.

The immediate family member is defined as spouse or dependent. Dependent is defined as anyone who depends on the respective Director for more than 50% of his/her financial needs.

3.5.9 Discontinuing OperationsA discontinuing operation is a clearly distinguishable component of the Group’s business that is abandoned or terminated pursuant to a single plan, and which represents a separate major line of industry or geographical area of operations.

3.6 Segment ReportingAn operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the group’s other components. All operating segments’ operating results are reviewed regularly by the Group chief operating decision maker to make decisions about resources to be allocated to the segment, and to assess its performance for which discrete financial information is available.

3.6.1 Reporting SegmentsThe Group’s internal organisation and management is structured based on individual products and services which are similar in nature and process, and for which the risk and return are similar.

3.6.2 Segment InformationSegment information has been prepared in conformity with the accounting policies adopted for preparing and presenting the Consolidated Financial Statements of the Group.

3.7 Cash Flow Statement The Cash Flow Statement has been prepared using the “indirect method”.



Interest paid is classified as operating cash flows.

Government grants received, which are related to purchase and construction of Property, Plant and Equipment, are classified as investing cash flows. Dividend and interest income are classified as cash flows from investing activities.

Dividends paid are classified as financing cash flows.

4. ACCOUNTING POLICIES SPECIFIC TO THE “ BUSINESSES OF THE JOINT VENTURES & SUBSIDIARIES

4.1 Assets and Bases of their Valuation4.1.1 Leasehold Rights to Bare Land of JEDB/

SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estate Assets on Finance Lease

Leasehold Rights to Bare Land of JEDB/SLSPC Estate Assets and Immovable (JEDB/SLSPC) Estate Assets on Finance Lease obtained on a long term basis, are stated at the recorded carrying values as at the effective date of Sri Lanka Accounting Standard No.19 – Leases, in line with Ruling of the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka. Such carrying amounts are amortized over the remaining Lease term or useful life of such asset, whichever is shorter.

Prepaid lease rentals paid to acquire land use rights are amortized over the lease term in accordance with the pattern of benefits provided.

Leasehold properties are tested for impairment annually and are written down where applicable. The impairment loss, if any, is recognized in the income statement.

4.1.2 AmortizationThe leasehold rights of assets taken over from JEDP/SLSPC are amortized in equal amounts over the lower of lease period and economic useful life.

4.1.3 Timber Stocks The accounting policy adopted for Timber Stocks on plantations is stated at fair value less estimated point-of-sale-costs. Point-of-

sales-costs include all the costs that would be necessary to sell the assets, including costs necessary to get the assets to market.

The Company has engaged an Independent Chartered Valuation Surveyor Mr.K.T.D. Tissera in determining the fair value of Timber Stocks. The valuer has valued the Timber Stocks on a per tree valuation basis by using available log and tree prices in city centers, less point-of-sales-costs. Timber Stocks are measured at fair value less estimated-point-of-sales-costs as at each balance sheet date.

4.1.4 Permanent Land Development CostsPermanent land development costs are those costs incurred making major infrastructure development, and building new access roads on leasehold lands. These costs have been capitalized and amortized over the remaining lease period.

4.1.5. Revaluation of Property, Plant & Equipment

Gains/(losses) arising on the revaluation of Property, Plant & Equipment of joint ventures

have been proportionately taken in to the Group Equity.

4.1.6 Immature and Mature PlantationsThe total cost of land preparation, rehabilitation, new planting, replanting, crop diversification, inter-planting and fertilizing etc.., incurred between the time of planting and harvesting (when the planted area attains maturity) are classified as immature plantations. These immature plantations are shown at direct costs plus attributable overheads, including interest attributable to long-term loans used for financing immature plantations.

Attributable overheads incurred on the plantation are apportioned based on the labour days spent on respective replanting and new planting, and capitalized on the immature areas. The remaining non attributable overhead is expensed in the accounting period in which it is incurred.

The expenditure incurred on perennial crop (Tea/Rubber/Coconut) fields, which come into bearing during the year, has been transferred to mature plantations and depreciated over their useful life period.

Amortization rates used for the purpose are as follows.

Class of Asset No. of Years RateBare Land 53 years 1.89% to 2.89%

Mature Plantations 30 years 3.33%

Buildings 25 years 4%Machinery 15 years 6.67%Water and Sanitation 15 years 6.67%Other Vested Assets 15 years 6.67%Improvements to Land 30 years 3.33%Crop Diversifications 30 years 3.33%Permanent Land Developments 53 years 1.89%

Depreciation of Mature Plantations (Re-planting and New Planting)

No. of Years Rate

Tea 30 to 33 1/3 years 3% to 3.33%

Rubber 20 years 5%

Coconut 50 years 2%

Cardamom/Cinnamon 15 years 6.67%

Mature plantations are depreciated over their useful lives or unexpired lease period, whichever is less.

No depreciation is provided for immature plantations and freehold land.


4.1.7 Infilling CostsThe land development costs incurred in the form of infilling have been capitalized to the relevant mature field where infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of performance, in accordance with Sri Lanka Accounting Standard No. 32, and depreciated over the useful life at rates applicable to mature plantation.

Infilling costs that are not capitalized have been charged to the income statement in the year in which they are incurred.

4.1.8 Inventories Inventories other than produce stocks are valued at the lower of cost and estimated net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which inventories can be sold in the ordinary course of business after allowing for cost of realization and/or cost of conversion from their existing state to saleable condition.

The cost incurred in bringing inventories to their present location and condition is accounted for using the cost formula.

Class of Asset No. of Years Rate

Building 40 years 2.5%

Plant and Machinery

13 1/3 years 7.5%

Equipment 08 years 12.5%

Roads 50 years 2%

Vehicles 05 years 20%

Assets are amortized over the shorter of the lease term and their useful lives.

Grants related to assets, including non-monetary grants at fair value, are deferred in the balance sheet and credited to the income statement over the useful life of the related asset.

4.1.10 Revenue Recognitiona) Certified Emission Reduction IncomeIncome from Carbon Credit Units is recognized on accrual basis.

b) Sale of Electrical Energy Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company, and the revenue and associated costs incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and sales taxes.

c) Gains/(Losses) on Change in Fair Valuation of Timber Stocks

Gains/(Losses) arising on the change in the fair valuation of Timber Stocks are dealt with in the Income Statement in the year in which they occur.

5. NEW ACCOUNTING STANDARDS ISSUED, BUT NOT YET EFFECTIVE AS AT BALANCE SHEET DATE

The Institute of Chartered Accountants of Sri Lanka has issued the new volume of Sri Lanka Accounting Standards which will be applicable for financial periods beginning on or after 01 January 2012. Accordingly these Standards have not been applied in preparing these Financial Statements as they were not effective for the year ended 31 March 2012.

Type of Inventory Method of Valuation Input Materials At Average Cost using Weighted Average Cost Formula.

Growing Crop – Nurseries At the cost of direct materials, direct labour and appropriate proportion of directly attributable overheads, less provision for over grown plants.

Harvested Crop Produce Stocks, manufactured up to the Balance Sheet date and sold since then, until the time of preparation of the Financial Statements, are valued at since-realized price. The balance Produce Stocks are valued at estimated selling prices. The prices are net of all attributable expenses relating to the public auction.

Certified Emission Carbon Credit Units as at the Balance Sheet date have been Reduction (CER) valued at their estimated net realizable value as Inventories, and disclosed in the financial statements as Certified Emission Reduction.

Spares and Consumables At the Actual Cost

CER represents units of greenhouse gas reduction that have been generated, certified by the United Nations under the Cleaned Development Mechanism (CDM) provision of the Kyoto Protocol. These CERs can be traded and sold and used by industrialized countries to meet part of their emission reduction targets.

According to the ruling issued by Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB), CER units have been recognized as assets and disclosed under inventories. These inventories have

been measured at Net Realizable Value (NRV) and any changes in value as at Balance Sheet date is recognized in the Income Statement.

4.1.9 Grants and SubsidiesGrants related to Property, Plant and Equipment are initially deferred and allocated to income statement on a systematic basis over the useful life of the related Property, Plant and Equipment as follows:



These Sri Lanka Accounting Standards comprise Accounting Standards prefixed both SLFRS (Corresponding to IFRS) and LKAS (Corresponding to IAS). Application of Sri Lanka Accounting Standards, prefixed SLFRS and LKAS, for the first time shall be deemed to be an adoption of SLFRSs’.

The Group is currently in the process of evaluating the potential effects of these standards on its Consolidated Financial Statements, and the impact on the adoption of these Standards have not been quantified as at Balance Sheet date.

Set out below are the key areas where accounting policies will change and may have an impact on the financial statements of the Group.

a) SLFRS 1 - First Time Adoption of Sri Lanka Accounting Standards requires the Group to prepare and present opening new SLFRS financial statements at the date of transition to new SLFRS. The Group shall use the same accounting policies in its opening new SLFRS financial statements and throughout all comparable periods presented in its first new SLFRS financial statements.

b) SLFRS 2 - Share Based Payments, will require the Company to reflect in its Profit or Loss and financial position the effects of share based payment transactions, including expenses associated with share options granted to employees. An entity is required to recognize share based payment transactions when goods are received or services obtained based on the fair value of goods or services or the fair value of equity instruments granted. Hence the Company will be required to determine the fair value of options issued to employees as remuneration and recognize an expense in the statement of financial performance. This standard is not limited to options and extends to all forms of equity - based remuneration and payments.

c) SLFRS 3 – Business combinations will require the Company to apply this standard to transactions and other events that meet the new definition of a business i.e. an integrated set of assets (inputs) and activities (processes) which are capable of being conducted and managed to provide a return, as opposed to a mere asset acquisition. Under the new acquisition method of accounting, in addition to recognising and measuring in its financial statements the identifiable assets acquired and liabilities assumed, the standard also requires recognition and measurement of any non-controlling interest in the acquiree and re measuring to fair value any previously held interests which could have an impact on the recognition of goodwill. Subsequent to the acquisition of control, any acquisitions or disposals of non-controlling interest without loss of control will be accounted for as equity transactions and cannot be recognized as profit/loss on disposal of investments in the statement of financial performance.

d) LKAS 1 – Presentation of Financial Statements requires an entity to present, in a Statement of Changes in Equity, all owner changes in equity. All non-owner changes in equity are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). This standard also requires the Group to disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital.

e) LKAS 12 - Income Tax requires deferred tax to be provided in respect of temporary differences which will arise as a result of adjustments made to comply with the new SLFRS.

f) LKAS 16 - Property Plant and Equipment requires a Company to initially measure an item of Property, Plant and Equipment at cost, using the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognized as interest over the period, unless such interest is capitalized in accordance with LKAS 23 Borrowing Costs. All site restoration costs, including other environmental restoration and similar costs, must be estimated and capitalized at initial recognition, in order that such costs can be depreciated over the useful life of the asset. This standard requires depreciation of assets over their useful lives, where the residual value of assets is deducted to arrive at the depreciable value. It also requires that significant components of an asset be evaluated separately for depreciation.

g) LKAS 18 - Revenue requires the Company to measure revenue at fair value of the consideration received or receivable. It also specifies recognition criteria for revenue, and the Company/ group needs to apply such recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction.

h) LKAS 32 – Financial Instruments: Presentation, LKAS 39 – Financial Instruments: Recognition and Measurement and SLFRS 7 – Disclosures will result in changes to the current method of recognising financial assets, financial liabilities and equity instruments. These standards will require measurement of financial assets and financial liabilities at fair value at initial measurement. The subsequent measurement of financial assets classified as fair value through Profit and Loss and available for sale will be at fair value, with


the gains and losses routed through the statements of comprehensive income and other comprehensive income respectively. Financial assets classified as held to maturity and loans receivable will be measured subsequently at amortized cost. These assets will need to be assessed for any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) coupled with a reliable estimate of the loss event (or events) impact on the estimated future cash flows of the financial asset or group of financial assets . As such the current method of assessing for impairment will have to be changed to meet the requirements of these new standards. Financial liabilities will be either classified as fair value through profit or loss, or, at amortized cost. At present, the Company/group does not identify, categorise and measure financial assets and liabilities as per the requirements of the standard and also does not recognise certain derivative instruments on the balance sheet.


Notes to the Financial Statements

Group Company


Rs.000 Rs.000 Rs.000 Rs.000

1 RevenueGross Revenue 14,414,685 12,156,125 10,558,071 7,865,751Turnover Tax - (61,024) - (55,260)Net Revenue 14,414,685 12,095,101 10,558,071 7,810,491

2 Other IncomeRent 508 15,915 507 892Management Fees 1,200 - 29,000 29,000Gain on Disposal of Property, Plant and Equipment 9,214 13,173 2,420 945Dividend Income 105,865 61,961 212,993 563,760Interest Income 219,819 72,814 45,311 61,753Gain on Foreign Currency Translation - 13,119 - -Secretarial Fees 335 - - -Gain on Disposal of Investments - 1,225,512 - 130,086Gain on Changes in Fair Value of Timber Stocks - 128,745 - -Gain on Changes in Fair Value of Short term Investments - 466,014 - -Others (Note 2.1) 2,833,303 430,465 3,033 6,113 3,170,244 2,427,718 293,264 792,549

2.1 OthersMiscellaneous Income 115,478 379,580 3,033 6,113Negative Goodwill (Note 9.2.2) 2,671,483 15,628 - -Amortization of Capital Grants 5,350 5,602 - -Sale of Trees 40,992 29,655 - - 2,833,303 430,465 3,033 6,113

3 Finance CostInterest on Loans 388,689 273,353 442,977 290,777Interest on Finance Lease 13,499 22,062 10 324Interest on Benefit Liability 4,940 7,609 4,459 6,906Interest on Overdraft 64,632 5,651 - -Interest Capitalized (15,299) (17,070) - - 456,461 291,605 447,446 298,007


Group Company


Rs.000 Rs.000 Rs.000 Rs.000

4 Profit before TaxationProfit before Taxation is stated after charging all expenses including the following:Directors’ Emoluments 23,760 21,332 12,660 12,097Auditors’ Remuneration Audit fees and expenses- Parent Auditors 2,665 2,272 1,250 1,060 Audit fee and expenses - Other Auditors 3,653 2,544 - -Secretarial Fees 605 668 300 300Depreciation 237,903 158,325 54,773 36,892Amortization of Finite Life Intangible Assets 8,018 8,072 7,839 7,932Provision for impairment of Goodwill - 10,000 - -Provision/ (Reversal) for Bad & Doubtful Debts and Write offs 11,848 35,197 5,216 (1,474)Provision/ (Reversal) for Slow Moving Stocks 24,434 13,451 4,246 (3,195)Provision for fall in value of Investment in Subsidiaries - - - 2,000Wages & Salaries 1,099,777 924,091 234,755 178,897Defined Contribution Plan Cost- EPF and ETF 150,828 132,489 33,509 32,045Defined benefit Plan Cost- Retiring Gratuity 59,446 111,393 17,616 18,490VRS Expenses - 138,520 - 107,476Provision for fall in value of Investment 591,511 377,297 235,903 326,598IPO private placement Expenses 115,792 - - -

5 TaxationThe Company and its Subsidiaries are liable to taxation at the rate of 28% (2010/2011- 35%), 10% and 15% in accordance with the provisions of Inland Revenue Act No. 10 of 2006 and subsequent amendments there to.

Group Company


Rs.000 Rs.000 Rs.000 Rs.000

5.1 Income Tax ExpenseIncome Tax on current year profits (Note 5.2) 244,348 231,474 131,414 124,495Deferred Tax Originating during the year (Note 5.4) 61,811 85,126 80,896 135,072Under Provision during prior years 13,518 5,638 3,001 4,891 319,677 322,238 215,311 264,458

5.2 Reconciliation of Accounting Profit to Income TaxAccounting Profit before Taxation 3,379,304 3,603,826 621,824 771,414Intra Group Adjustments (138,318) 496,192 - - 3,240,986 4,100,018 621,824 771,414

Adjustment on Disallowable Expenses 1,252,686 707,691 411,070 509,346Adjustment on Allowable Expenses (566,933) (2,098,021) (2,082) (37,239)Tax Exempt Income (2,802,634) (1,807,728) (213,618) (672,644)Adjustment on Capital Allowances (109,580) (36,950) (95,140) (31,736)Tax Losses Utilized (Note - 5.3) (332,682) (230,736) (252,719) (188,699)Taxable Income 681,843 634,274 469,335 350,442

Income Tax @ 28% (2010/2011-35%) 224,725 221,998 131,414 122,655Income Tax @ 10% and 15% 19,623 6,146 - -Social Responsibility Levy at 1.5% - 3,330 - 1,840Income Tax on Current year Profits 244,348 231,474 131,414 124,495


Group Company


Rs.000 Rs.000 Rs.000 Rs.000

5.3 Tax Losses UtilizedTax Losses Brought Forward 1,010,085 1,231,919 533,815 722,514Tax Losses Utilized during the year (332,682) (230,736) (252,719) (188,699)Loss incurred during the year 40,203 8,902 - -Tax Losses carried forward 717,606 1,010,085 281,096 533,815

5.4 Deferred Tax ExpenseProvision/(Reversal) from Deferred Taxation 61,811 85,126 80,897 135,072 61,811 85,126 80,897 135,072

6 Earnings Per Share6.1 Basic Earnings per ShareThe calculation of basic Earnings Per Share is based on the profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding during the year.

Basic earnings per share is calculated as follows:

Group Company


Profit Attributable to Equity holders of the Company (Rs.000) 1,177,192 2,188,219 406,513 506,956Weighted Average Number of Ordinary Shares in Issue (‘000) 70,875 70,875 70,875 70,875Basic Earnings per Share (Rs.) 16.61 30.87 5.74 7.15

6.2 Diluted Earnings per ShareThere were no potentially dilutive ordinary shares outstanding at any time during the year/ previous year.

7 Dividend per ShareThe dividend per share is based on the dividend paid for the period covered by the financial statements

Group Company


Dividends Paid (Rs’000) 93,555 93,555 93,555 93,555Weighted average number of Ordinary Shares in issue (‘000) 70,875 70,875 70,875 70,875Dividend per Share (Rs.) 1.32 1.32 1.32 1.32



8 Pr

oper

ty, P

lant

and

Equ

ipm

ent

8.1

Prop

erty

, Pla

nt a

nd E

quip

men

t - G

roup

As

at 3

1st

Mar

ch 2

012

Ass

ets

on

Imm

atur

e/

Im

prov

emen

ts

Furn

iture

Fr

eeho

ld

Leas

ehol

d

Oth

er

Fi

nanc

e M

atur

e Fr

eeho

ld

Free

hold

to

Lea

seho

ld

Leas

ehol

d Pl

ant

and

and

Off

ice

Mot

or

Mot

or

Ta

ngib

le

Le

ase

Plan

tatio

ns

Land

Bu

ildin

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Build

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es

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mpu

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A

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tal

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Cost

/ Va

luat

ion

Bala

nce

at th

e be

ginn

ing

of th

e ye

ar

212,

171

1,19

0,70

0 3,

803,

618

952,

810

95,1

11

35,6

88

569,

799

307,

283

201,

888

39,2

78

33,7

01

108,

656

7,55

0,70

3O

n Ac

quis

ition

of s

ubsi

diar

y -

- -

581,

387

- -

855,

138

222,

931

24,7

85

- 1,

963

- 1,

686,

204

Addi

tions

-

172,

875

440,

334

44,9

55

185,

673

- 33

,009

11

5,50

2 11

9,76

2 -

19,3

82

1,58

0 1,

133,

072

Reva

luat

ion

- -

176,

605

(76,

179)

(1

,952

) -

139,

591

10,9

14

18,1

94

- 2,

321

- 26

9,49

4D

ispo

sals

-

- -

- -

- (9

,297

) (3

77)

(8,1

24)

(3,0

00)

- -

(20,

798)

Tran

sfer

s -

(279

,589

) -

(10)

-

- 6,

872

(1,6

23)

24,5

89

(35,

742)

(8

04)

(14,

321)

(3

00,6

28)

Bala

nce

at th

e en

d of

the

year

21

2,17

1 1,

083,

986

4,42

0,55

7 1,

502,

963

278,

832

35,6

88

1,59

5,11

2 65

4,63

0 38

1,09

4 53

6 56

,563

95

,915

10

,318

,047

Acc

umul

ated

Dep

reci

atio

nBa

lanc

e at

the

begi

nnin

g

of

the

year

13

2,48

4 13

8,32

2 -

28,3

05

47,8

16

2,67

7 19

7,97

0 17

1,55

3 11

7,03

3 33

,628

20

,141

15

,646

90

5,57

5O

n Ac

quis

ition

of s

ubsi

diar

y -

- -

68,5

45

- -

621,

650

168,

967

11,3

59

- 1,

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- 87

2,14

9Ch

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for t

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ear

6,95

0 21

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4,

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55,0

23

17,8

17

892

36,0

40

35,2

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49,6

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136

5,56

0 4,

135

237,

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On

Dis

posa

ls

- -

- -

- -

(219

) (3

64)

(4,7

73)

(3,0

00)

- -

(8,3

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On

Reva

luat

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- -

(4,6

70)

(40,

364)

(1

74)

- (2

1,15

3)

- -

- -

- (6

6,36

1)Tr

ansf

ers

- -

- -

(6)

- (4

61)

(442

) 28

,260

(3

0,31

8)

910

(3,8

09)

(5,8

66)

Bala

nce

at th

e en

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the

year

13

9,43

4 16

0,15

3 -

111,

509

65,4

53

3,56

9 83

3,82

7 37

4,94

8 20

1,49

4 44

6 28

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15

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1,

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044

Net

Boo

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As

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arch

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2 72

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92

3,83

3 4,

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1,39

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4 21

3,37

9 32

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76

1,28

5 27

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2 17

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As a

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t Mar

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79,6

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1,05

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924,

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95

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371,

829

135,

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84,8

55

5,65

0 13

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6,

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8.2

Prop

erty

, Pla

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quip

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ompa

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Impr

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Fu

rnitu

re

Free

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Le

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As

at 3

1st

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012

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Rs.0

00

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00

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00

Rs.0

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Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

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00

Cost

/ Va

luat

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Bala

nce

at th

e be

ginn

ing

of th

e ye

ar

3,

236,

082

167,

290

95,1

10

35,6

88

49,6

97

167,

853

20,3

43

24,1

31

17,4

17

3,81

3,61

1Ad

ditio

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31

,498

-

178,

719

- 11

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57

,905

88

8 -

10,6

24

290,

659

Reva

luat

ion

16

9,21

2 (2

0,20

6)

- -

- -

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- 14

9,00

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(200

) -

(1,3

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(1,5

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Tran

sfer

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- -

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24,1

31

(24,

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-

-Ba

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end

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3,

436,

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147,

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273,

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225,

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44,0

48

- 28

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4,

251,

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Acc

umul

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Dep

reci

atio

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lanc

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the

begi

nnin

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the

year

- -

47,8

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11

6,56

2 5,

951

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1,14

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-

4,18

2 17

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2 2,

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19,7

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n Re

valu

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(4,1

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24,1

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- 65

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Net

Boo

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at 3

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2

3,43

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167,

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8,62

1 3,

562,

467


8.3

Prop

erty

, Pla

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8.

3.1

Asse

ts o

n Fi

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ase

- Gr

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As

expl

aine

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ore

fully

in N

ote

10.1

, all

JED

B/SL

SPC

esta

te le

ase

deed

s ha

ve b

een

exec

uted

to

date

. In

term

s of

the

rul

ing

of t

he U

ITF

of t

he In

stitu

te o

f Ch

arte

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Acc

ount

ants

of

Sri L

anka

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l im

mov

able

ass

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in t

he JE

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SLSP

C es

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finan

ce le

ases

hav

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aken

into

the

boo

ks o

f th

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of

Free

Lan

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ding

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C. (

nam

ely,

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anta

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anta

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Ve

sted

Perm

anen

t

O

ther

A

s at

31s

t M

arch

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2 U

nim

prov

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Impr

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Ve

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M

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mat

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Wat

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Cr

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To

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Pl

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Div

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Ass

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Tota

l

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

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00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Cost

/ Va

luat

ion

Bala

nce

at th

e be

ginn

ing

of th

e ye

ar

243

1,86

8 85

6 16

2,79

2 67

30

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7,

609

4,47

3 13

7 2,

467

348

361

212,

170

Bala

nce

at th

e en

d of

the

year

24

3 1,

868

856

162,

792

67

30,9

49

7,60

9 4,

473

137

2,46

7 34

8 36

1 21

2,17

0

Am

ortiz

atio

nBa

lanc

e at

the

begi

nnin

g of

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year

14

4 1,

164

534

93,3

61

- 23

,195

7,

609

4,30

9 48

1,

545

213

361

132,

483

Char

ge fo

r the

yea

r 8

61

29

5,38

6

1,23

8

133

1 82

12

6,95

0Ba

lanc

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the

end

of th

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ar

152

1,22

5 56

3 98

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-

24,4

33

7,60

9 4,

442

49

1,62

7 22

5 36

1 13

9,43

3

Net

Boo

k Va

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As

at 3

1st M

arch

201

2 91

64

3 29

3 64

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67

6,

516

- 31

88

84

0 12

3 -

72,7

37

As a

t 31s

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011

99

704

322

69,4

31

67

7,75

4 -

164

89

922

135

- 79

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8.3

Prop

erty

, Pla

nt a

nd E

quip

men

t - G

roup

Con

td.

8.3.

2 Im

mat

ure/

Mat

ure

Plan

tatio

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Gro

up

Land

M

atur

e Pl

anta

tions

Im

mat

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Plan

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As

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012

D

evel

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M

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To

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Tota

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Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Rs

.000

Cost

/Val

uatio

nBa

lanc

e at

the

begi

nnin

g of

the

year

16,0

14

274,

630

470,

635

5,53

3 82

1 75

1,61

9 10

7,20

1 31

2,41

0 1,

864

1,59

2 42

3,06

7 1,

190,

700

Addi

tions

498

32,9

17

1,62

5 19

6 13

4 34

,872

36

,841

98

,244

11

3 2,

308

137,

506

172,

876

Tran

sfer

s In

/(O

ut)

-

19,8

47

(210

,458

) -

- (1

90,6

11)

(52,

765)

(3

5,88

3)

(196

) (1

35)

(88,

979)

(2

79,5

90)

Bala

nce

at th

e en

d of

the

year

16,5

12

327,

394

261,

802

5,72

9 95

5 59

5,88

0 91

,277

37

4,77

1 1,

781

3,76

5 47

1,59

4 1,

083,

986

Acc

umul

ated

Dep

reci

atio

nBa

lanc

e at

the

begi

nnin

g of

the

year

1,00

4 64

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71

,737

97

3 17

0 13

7,31

8 -

- -

- -

138,

322

Char

ge fo

r the

yea

r

307

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8.4 Property, Plant and Equipment - Company8.4.1 Revaluation of Land and BuildingsLand and Buildings owned by the Company have been valued by an Incorporated Valuer, Mr.Haleem Ghouse, on the basis of market value as indicated below, and the surplus on revaluation amounting to Rs. 153 Mn (2010/2011- Rs. 164 Mn) has been credited to the Revaluation Reserve Account of the Company during the year.

Details of Company’s land and building stated at valuation are indicated below;

Property Basis of Valuation Effective Date of Property Valuer Total Land Building

Valuation Extent Rs. 000 Rs. 000

Land & Building Open Market Value Basis 31st March 2012 A.Y. Daniel & Son- Mr.Haleem Ghouse A1-R2-P12.44 1,560,131 50,000

At TB Jayah Mawatha, -Incorporated Valuation Consultants

Colombo-10

Land & Building Contractor 31st March 2012 A.Y. Daniel & Son- Mr.Haleem Ghouse A2-Ro-P34.80 1,135,360 34,646

At Devanampiyatissa Mawatha, (Cost/Summation) Basis -Incorporated Valuation Consultants

Colombo-10

Land & Building Contractor (Cost) Basis 31st March 2012 A.Y. Daniel & Son- Mr.Haleem Ghouse A25-R1-P15 322,329 3,000

At Demanhandiya, Negombo. -Incorporated Valuation Consultants

Land & Building Contractor (Cost) Basis 31st March 2012 A.Y. Daniel & Son- Mr.Haleem Ghouse A2-R0-P28.68 209,208 34,485

No 3, Udaya Mawatha Ratmalana. -Incorporated Valuation Consultants

(Now Off Gangadara Mawatha,

Ratmalana)

Land & Building Contractor (Cost) Basis 31st March 2012 A.Y. Daniel & Son- Mr.Haleem Ghouse A0-R3-P10 108,875 18,375

At Colombo-Dambulla Highway -Incorporated Valuation Consultants

Land & Building Contractor (Cost) Basis 31st March 2012 A.Y. Daniel & Son- Mr.Haleem Ghouse A0-R2-P28.75 65,250 6,577

At Gangadara Mawatha, -Incorporated Valuation Consultants

Ratmalana

Land Contractor (Cost) Basis 31st March 2012 A.Y. Daniel & Son- Mr.Haleem Ghouse A0-R1-P24.8 35,640 -

Main Street, Ambalantota. -Incorporated Valuation Consultants

3,436,792 147,084

8.4.2 Surplus on Revaluation during the year

2012 2011

As at 31st March Land Buildings Total Total

Rs.000 Rs.000 Rs.000 Rs.000

No 481,T.B Jayah Mawatha, Colombo 10. 61,061 (55,300) 5,761 63,135Devanampiyatissa Mawatha, Colombo 10. 73,976 33,817 107,793 42,604Demanhandiya , Negombo. 15,349 75 15,424 18,666Gangadara Mawatha, Ratmalana. 8,717 3,919 12,636 17,576Habarana Road, Dambulla 3,250 718 3,968 13,417No 3, Udaya Mawatha Ratmalana. (Now Off Gangadara Mawatha, Ratmalana) 2,719 748 3,467 8,795Main Street, Ambalantota. 4,140 - 4,140 -Total Revaluation Surplus 169,212 (16,023) 153,189 164,193


As at 31st March 2012 2011

Rs.000 Rs.000

8.4.3 Revaluation Reserve - Company Demanhandiya, Negombo. 324,005 308,581No 3, Udaya Mawatha Ratmalana. (Now Off Gangadara Mawatha, Ratmalana) 71,921 68,455Devanampiyatissa Mawatha, Colombo 10. 970,055 862,262No 481,T.B Jayah Mawatha, Colombo 10. 1,578,269 1,572,508Gangadara Mawatha, Ratmalana. 149,826 137,190167/92, Avissawella Road, Orugodawatta. 5,359 5,359Habarana Road, Dambulla 28,584 24,617Main Street, Ambalantota. 4,142 -Total on Land & Buildings 3,132,161 2,978,972Plant & Machinery 5,567 5,567Total Revaluation surplus 3,137,728 2,984,539Appropriated for bonus issue (1997/1998) (14,000) (14,000)Deferred Tax impact on Building Revaluation (2007/2008) (4,831) (4,831)Deferred Tax impact on Building Revaluation (2008/2009) 12,881 12,881Appropriated for bonus issue (2008/2009) (1,984,500) (1,984,500)Deferred Tax impact on Building Revaluation (2009/2010) (3,344) (3,344)Deferred Tax impact on Building Revaluation (2010/2011) (10,427) (10,427)Deferred Tax impact on Building Revaluation (2011/2012) 5,658 -Revaluation Reserve as at 31st March 2012 1,139,165 980,318

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

9 Investment PropertiesBalance at the beginning of the year 160,344 117,480 110,747 117,480On Acquisition of Subsidiary (9.2) 3,500,000 - - -Additions - 49,597 - -Disposals - (8,448) - (8,448)Change in Fair Value during the year 251,224 1,715 1,224 1,715Balance at the end of the year 3,911,568 160,344 111,971 110,747

Land Buildings Total

Rs.000 Rs.000 Rs.000

9.1 Summary of Investment Properties - CompanyBalance as at 31st March 2010 99,002 18,478 117,480Disposals (5,047) (3,401) (8,448)Change in fair value during the year 1,435 280 1,715Balance as at 31st March 2011 95,390 15,357 110,747Change in fair value during the year 5,054 (3,830) 1,224Balance as at 31st March 2012 100,444 11,527 111,971

The investment property is situated in Hatton with the extent of 200 perches bearing the assessment nos 97 and 99, Dunbar Road, Dumburigiriya, Hatton. The properties were valued by Mr.Haleem Ghouse, an Incorporated Valuer having recent experience in the location and category of the investment properties being valued. As at 31st March 2012 and 31st March 2011, the Investment properties were revalued for Rs.111.9 Mn and Rs. 110.7 Mn, respectively, and the resulting gains were recognised in the Income Statement. Rental income earned from investment properties by the Group and the Company during the year amounted to Rs 1.2 Mn (2010/2011 - Rs. 1.7 Mn).



9.2 Investment Properties - Group9.2.1 A land extent of 49.50 perches with an obsolete building, bearing Assessment Nos.17, 19/1 & 19/2, Castle Street, Colombo 08, was purchased

in December 2010 by Free Lanka Capital Properties (Pvt) Ltd., is a 100% owned subsidiary of the Free Lanka Capital Holdings PLC. This property was valued by an Independent Valuer Mr. W. M. Chandrasena, a member of the Institute of Valuers of Sri Lanka, in determining the fair value as at 31st March 2011. The Market Value as per the Valuation Report dated 05th April 2011 is Rs.181.6 Mn. The Group share of Market Value thereof is Rs.49.6 Mn. The Directors are of the view that there would not be any substantial difference in the valuation of the property as at 31st March 2012.

The Group has adopted the Fair Value Model to account for Investment Property as per the Sri Lanka Accounting Standard (SLAS 40- Revised 2005).

9.2.2. Negative Goodwill on Acquisition of Shares 2011/2012 Rs.000

Free Lanka Capital Holdings PLC 15,480Excel Global Holdings (Pvt) Ltd. (Note 9.2.3) 2,607,597Taprobane Capital (Pvt) Ltd. 48,406Total 2,671,483

9.2.3 Browns Investments PLC (Subsidiary) acquired 100% share of Excel Global Holdings (Pvt) Ltd on 22nd July 2011. Upon this acquisition the group gained controlling interest of Millennium Development (Pvt) Ltd (MDL) which is a wholly owned subsidiary of Excel Global Holdings (Pvt) Ltd. The cost of the acquisition was Rs. 888 Mn. MDL has leasehold rights to a block of land at T.B. Jayah Mawatha, 897 Perches in extent, presently known as “Excel World”. The unexpired portion of the lease is 32 years with provision to extend for another 40 years, subject to certain conditions. Certain business activities approved by the lessor are also being carried out at Excel World as per the sixth schedule of the lease agreement.

According to SLAS 25 (14), all business combinations should apply the purchase method of accounting and SLAS 25 (16) ( c ) requires to allocate (at the acquisition date), the cost of the business combination to the assets acquired and liabilities and contingent liabilities assumed.

Further, SLAS 25 (36), requires the acquirer to allocate the cost of the business combination by recognizing the acquirer’s identifiable assets, liabilities and contingent liabilities that satisfy recognition criteria provided in SLAS 25 (37) at their fair value at the acquisition. All identifiable intangible assets acquired in a business combination are recognized separately from goodwill and measured initially at fair values.

The fair value of this intangible asset has been incorporated in the accounts for the period. The negative goodwill of Rs.2.608 Mn computed on acquisition is reflected in the group income statement for the period ended 31st March 2012.

For the purpose of ascertaining the fair value of leasehold interest, a valuation has been obtained from two Chartered Valuation Surveyors U.K (RICS). namely Mr. P.W. Senaratne, who has valued the leasehold interest at Rs 5,102 Mn for a period of 72 years and at Rs 4,320 Mn for a period of 32 years, and Mr. K.T.D. Tissera, who valued the same asset on comparable basis at Rs 4,500 Mn for 72 years and at Rs 3,500 Mn for 32 years. Of the two values, it has been decided to incorporate the lower valuation submitted by Mr. Tissera as a matter of prudence.

MDL intends to develop this property as a mixed development over the next few years. It is planned that the development should be in line with the terms of the lease agreement between MDL and the Lessor namely, the Incorporate Trustees of the Church of England in Ceylon. The proposed development has to be in line with the sixth schedule of the lease agreement and the approved development plan.

On 1st October 2011, Taprobane Plantations Limited, an associate company of the group, took over business activities carried on Excel World formerly operated by MDL. As a result of this, the property was categorized as an investment property as provided for in the Sri Lanka Accounting Standards. Consequently, the intangible asset was classified as an investment property, in terms of SLAS 40(35); the investment property was revalued as at 31st March 2012 using the fair value model resulting in a gain of Rs. 250 Mn which was credited to the Income Statement.

The Value is apportioned for accounting purposes as follows,

As at 31st March 2012 Rs.000

Land 3,175,000Buildings 325,000Total 3,500,000


Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

10 Prepaid Lease RentalsGross ValueBalance at the beginning of the year 256,893 426,727 48,653 48,653On Disposal of Joint Venture - (169,834) - -Balance at the end of the year 256,893 256,893 48,653 48,653AmortizationBalance at the beginning of the year 67,557 113,017 2,403 1,802Amortization during the Period 4,784 4,786 601 601On Disposal of Joint Venture - (50,246) - -Balance at the end of the year 72,341 67,557 3,004 2,403

Carrying Value 184,552 189,336 45,649 46,250

10.1 Prepaid Lease Rentals - Group10.1.1 Leasehold Right to Bare Land of (JEDB/SLPC) EstatesLease agreements of all JEDB/SLSPC estates handed over to the Subsidiaries of Free Lanka Capital Holdings PLC have been executed to date.

The Leasehold Right to Bare Land of JEDB/SLSPC Estates is being amortized by equal amounts over a 53 year period, and the unexpired period of the lease as at the Balance Sheet date is 33 years.

10.1.2 Maturata Plantations Ltd.The Government through the Ministries had recourse to compulsory acquisition procedures in terms of Land Acquisition Act for 1,136.24 hectares from various estates belonging to Maturata Plantations Ltd. Most of the acquisitions were made for the “Village Expansions” and “Public Purposes”. However, Section 2 Notice was issued under Land Acquisition Act for 726 Hectares of three estates in the Low Grown Region for the preservation of Sinharaja World Heritage Forest which is included in the total of 1,136.24 Hectares. In addition, some Gazette Notifications have been issued, divesting 800.48 Hectares (Total extent of 1936.72 hectares of land has been queried/proposed to be acquired as at the balance sheet dates) with the previous owner, Land Reform Commission (LRC) in Low Grown Region. No adjustments have been made to the written down book value in respect of the acquisitions referred above as the compensation is receivable by the company on the Land acquired as per the Lease Agreement.

10.1.3 Pussellawa Plantations Ltd.The Government has acquired 50.3285 Hectares of Pitipana Estate, Homagama under the Section 2 of the Urban Development Authority Act through Section 38(a) for town development by Extra Ordinary Gazette Notification No. 1539/9 dated 03rd March 2008. Pussellawa Plantations Ltd filed a fundamental rights case against the Minister of Lands and Land Development at Supreme Courts, stating that the Gazette is illegal, null and void, the case being pending as at the Balance Sheet date. No adjustments have been made to the written down book value in respect of the acquisitions referred above as the compensation is receivable by the company on the Land acquired as per the Lease Agreement.



10.2 Prepaid Lease Rentals - CompanyLease rentals paid to acquire right to use the lands have been classified as pre paid lease rentals, and are amortized over the lease term (80 years).

Group Company

As at 31st March 2012 2011 2012 2011 Rs.000 Rs.000 Rs.000 Rs.000

11 Intangible AssetsGross ValueBalance at the beginning of the year 102,598 60,420 32,464 5,176Additions during the year 110,209 42,295 759 27,288Transfers (47) - - -On Disposal of Joint Venture - (117) - -Balance at the end of the year 212,760 102,598 33,223 32,464AmortizationBalance at the beginning of the year 36,358 18,286 10,639 2,707Amortization during the year 8,018 18,072 7,839 7,932Transfers (7) - - -Balance at the end of the year 44,369 36,358 18,478 10,639Carrying Value 168,391 66,240 14,745 21,825

Goodwill Software Total As at 31st March 2012 2012 2012 Rs.000 Rs.000 Rs.000

11.1 Summary of Intangible Assets- GroupGross valueBalance at the beginning of the year 68,533 34,065 102,598Additions during the year 109,450 759 110,209Transfers - (47) (47)Balance at the end of the year 177,983 34,777 212,760AmortizationBalance at the beginning of the year 24,818 11,540 36,358Amortization during the year - 8,018 8,018Transfers - (7) (7)Balance at the end of the year 24,818 19,551 44,369Carrying Value 153,165 15,226 168,391

Goodwill on Provision for Carrying Value

Acquisition Impairment 31.3.2012 31.3.2011 Rs.000 Rs.000 Rs.000 Rs.000

11.2 Summary of Goodwill - GroupKlevenberg (Pvt) Ltd. 56,623 (4,818) 51,805 -Galoya Holdings (Pvt) Ltd. 5,026 - 5,026 5,026Sifang Lanka (Pvt) Ltd. 7,698 - 7,698 7,698Walker & Greig (Pvt) Ltd. 36,085 (20,000) 16,085 16,085Browns Motors (Pvt) Ltd. 250 - 250 250IG Browns Rubber Industries (Pvt) Ltd. 14,293 - 14,293 11,793Browns Investments PLC 9,564 - 9,564 -Hydro Power Free Lanka (Pvt) Ltd. 2,863 - 2,863 -Ajax Engineers (Pvt) Ltd. 25,057 - 25,057 -Excel Restaurants (Pvt) Ltd. 20,524 - 20,524 - 177,983 (24,818) 153,165 40,852


11.3 Software with a finite life is amortized over the period of the expected Useful life which derived economic benefits from the assets. Goodwill as at the Balance Sheet date has been tested for impairment and no impairment losses were identified. Recoverable value of Goodwill has been estimated based on the expected future cash flows.

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

12 Capital Work in ProgressBalance at the beginning of the year 20,337 47,378 - -Additions 127,732 16,947 56,396 -Amount Capitalized (19,680) (22,479) - -On Disposal of Joint Venture - (21,509) - -Balance at the end of the year 128,389 20,337 56,396 -

12.1 Capital Work in ProgressCapital Work in Progress comprises of the following items:Buildings 83,531 4,942 56,396 -Plant and Machinery 201 4,760 - -Water Sanitation 106 105 - -Roads and Bridges 4,417 4,170 - -Hydro Power 39,260 6,254 - -Others 874 106 - - 128,389 20,337 56,396 -

13 Timber StockBalance at the beginning of the year 1,714,343 2,884,583 - -Effect on Reclassification 351,586 - - -Additions during the year 11,632 140,957 - -Marginal increase/(decrease) of Timber Contents (14,952) - - -Amounts written off/transferred during the year - (1,596) - -On Disposal of Joint Venture - (1,309,601) - -Balance at the end of the year 2,062,609 1,714,343 - -

13.1 Timber Stock – GroupThe Group has engaged an Independent Chartered Valuation Surveyor Mr. K.T.D.Tissera in determining the fair value of Timber Stocks. The Valuer has valued the Timber Stocks as at 31st March 2012 on a per tree valuation basis. The group has valued the Timber Stocks at fair value less estimated point-of-sale-costs. The direct cost attributable to new/re-planting pertaining to trees having three years or less have been added to the timber stocks.



Timber Trees, namely, Eucalyptus Torariyana, Albezzia, Graveelia, Eucalyptus Grandis, Astonia, Pinus, Toona, Mahogany, Teak, Jack, Turpentine, Rubber, Nadun, Mango, Pellen, Hora, Domba, Lunumidella, Wal Del, Mara, etc. available on the plantations have been taken into consideration in this valuation of Timber Trees.

In valuing the timber plantations, under-mentioned factors have been taken into consideration:

1 The present age of trees.2 Maturity age of the tree. (Maturity of the tree is based on the variety of the species of the tree.)3 Annual marginal increase in timber content.4 Number of years to harvest5 Timber content of harvestable trees on maturity.6 Timber Plants having below three years of age have not been taken into the valuation.7 The timber content of immature trees at an estimated future harvestable year8 The current price of species of timber per cubic foot at the relevant year.

Trees have been valued as per the current timber prices in the domestic market based on the price list of the State Timber Corporation and prices of timber trees sold by estates and prices of logs and sawn timber in the popular timber traders in Sri Lanka.

The fair value is determined on the basis of net present value of expected future cash flows using a discount rate of 12% per annum. The significant assumptions used in the valuation of Timber Stocks are as follows:

a) Future cash flows are determined by references to current timber prices without considering the inflationary effect.

b) The ongoing costs of growing trees, which are deducted in determining the net cash flows, are constant in real terms.

c) Timber Trees that have not come unto a harvestable size are valued working out the period that would take for those trees to grow up to a harvestable size.

d) The Present Value of the Trees is worked out based on the projected size and the estimated number of years it would take to reach that size. This is worked out on the basis of an annual marginal increase of Timber content which normally ranges from 0.50 to 1.50 cm per year for trees of diameter girth over 10 cm.

e) The value of each matured species of timber is worked out on the price of a cubic of timber in the market of the species and the available cubic content of timber in the tree.

f) Due consideration has been given for cost of felling, transport, sawing, cost to sell including obtaining of approval for felling.


14 Investments in Subsidiaries

Group Company

Unquoted No. of shares Holding % Holding % Company

As at 31st March 2012 2011 2012 2011 2012 2011 2012 2011

Rs.000 Rs.000

Browns Tours (Pvt) Ltd. 2,030,000 2,030,000 100% 100% 85% 85% 16,392 16,392

Browns Group Motels Ltd. 333,657 333,657 67% 67% 22% 22% 1,107 1,107

CFT Engineering Ltd. 3,450 3,450 95% 95% 95% 95% 448 448

The Hatton Transport & Agency Co. (Pvt) Ltd. 111,300 111,300 100% 100% 48% 48% 4,338 4,338

Standard Finance (Pvt) Ltd. 2,700,000 2,700,000 100% 100% 100% 100% 25,777 25,777

Browns Group Industries (Pvt) Ltd. 2,800,000 2,800,000 100% 100% 93% 93% 26,000 26,000

Snowcem Products Lanka (Pvt) Ltd. 400,000 400,000 100% 100% 100% 100% 3,374 3,374

B G Air Service (Pvt) Ltd. 50,000 50,000 100% 100% 20% 20% 100 100

Klevenberg (Pvt) Ltd. 11,856,000 9,120,000 76% 60% 76% 60% 153,900 91,200

Browns Battery (Pvt) Ltd. - 10,000 - 100% - 100% - 100

Browns Motors (Pvt) Ltd. 5,000,000 5,000,000 100% 100% 100% 100% 5,000 5,000

Walker & Greig (Pvt) Ltd. 1 1 100% 100% 100% 100% 38,638 38,638

Browns Investments PLC (Note 14.2) 519,946,400 492,330,000 27.95% 27.2% 27.83% 27.07% 698,689 559,308

IG Browns Rubber Industries (Pvt) Ltd. 442,500 412,500 98.33% 92% 10% 10% 450 450

Browns Capital (Pvt) Ltd. 5,000,000 5,000,000 100% 100% 100% 100% 50,000 50,000

Browns Health Care (Pvt) Ltd. 20,000,000 17,500,000 100% 87.5% 87.5% 87.5% 175,000 175,000

Browns Real Estates (Pvt) Ltd. 5,000,000 - 100% - 100% - 50,000 -

1,249,213 997,232

Provision for fall in value

of Investments (Note 14.1) (42,012) (42,012)

1,207,201 955,220

14.1 Provision for fall in value of InvestmentsSnowcem Products Lanka (Pvt) Ltd. 3,374 3,374

Walker & Greig (Pvt) Ltd. 38,638 38,638

42,012 42,012

14.2 Browns Investments PLCIn the year 2008/2009, Brown and Company PLC invested in Browns Investments PLC. Which is an Investments and Management Company owned by Brown and Company PLC and Taprobane Holdings PLC.

Brown & Company PLC holds 27.83% of the shareholding of “Browns Investments PLC”, which amounts to 517,616,400 shares and Taprobane Holdings PLC holds 26.09% of the shareholding of “Browns Investments PLC”, which amounts to 485,318,800 shares. On 29th March 2011, Brown & Co. PLC and Taprobane Holdings PLC entered in to a formal written “share holder agreement” and resolved to grant the authority to Brown & Co. PLC to appoint the members of the Board of Directors of “Browns Investment PLC”. The Board of Directors of Taprobane Holdings PLC has passed a resolution and ratified the shareholder agreement on 15th June 2012.

As per the above agreement, Brown and Company PLC still has the control to govern the financial and operating policies of Browns Investments PLC, as per SLAS 25 (Revised 2004) “Business Combinations”, the Company has accounted for Browns Investments PLC as a Subsidiary. 14.3 Acquisitions of SubsidiariesBrown & Co. PLCThe Company has invested in Browns Real Estates (Pvt) Ltd. (BREPL) on 24th June 2011 as a wholly owned subsidiary, with a purchase consideration of Rs. 50 Mn.



14.3 Acquisitions of Subsidiaries Contd.Browns Investments PLC - (BIPLC)On 22nd July 2011, BIPLC has acquired 100% holding of Excel Global Holdings (Pvt) Ltd. (EGHPL) with a purchase consideration of Rs. 888 Mn, and the main business activity of EGHPL is Investments.

On 4th April 2011, BIPLC has acquired 100% holding of Samudra Beach Resorts (Pvt) Ltd. (SBRPL) with a purchase consideration of Rs. 10 Mn, and the main business activity of SBRPL is operating and managing tourist resorts.

On 30th January 2012, BIPLC has acquired 51% holding of Ajax Engineers (Pvt) Ltd. (AEPL) with a purchase consideration of Rs. 100 Mn, and the main business activity of AEPL is Construction.

On 31st March 2012, Royal Fernwood Porcelain Ltd. (RFPL) has converted Rs.71.3Mn value of loan to ordinary shares. As a result of that, Group holding percentage increased by 18% of the said company and with the indirect holding through Taprobane Capital (Pvt) Ltd. (TCPL) Group holding increased to 77%. Main business activity of RFPL is Manufacturing, Exporting and retailing porcelain related products.

On 27th December 2011, RFPL has acquired the balance 60.33% holding of Taprobane Capital (Pvt) Ltd. and, as a result, TCPL Become a 100% owned Subsidiary. Prior to this acquisition, this company was an Associate Company to the Group.

14.3.1 The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date.

BREPL TCPL SBRPL EGHPL AEPL Total

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Property, Plant and Equipment - 728,295 - 65,979 5,288 799,562Investment Property - - - 3,500,000 - 3,500,000Deferred Expenditure - 43,222 - - - 43,222Investments - - - - 20,090 20,090Inventories - 138,180 - - 63,996 202,176Trade and Other Receivables - 87,947 60,699 8,944 58,734 216,324Amounts due from Related Parties 50,000 - 10,000 - - 60,000Short Term Investments - - - 14,520 75,873 90,393Deposits and Advances - 38,239 - - 2,356 40,595Cash and Cash Equivalents - 6,232 - 3,193 268 9,693Interest Bearing Borrowings - (227,872) - (27,185) - (255,057)Finance Lease Obligation - (2,298) - - (204) (2,502)Retirement Benefit Obligations - (18,994) - (1,603) (6,457) (27,054)Amounts due to Related Parties - (67,483) (60,699) - (6,964) (135,146)Deferred Tax - (7,685) - - - (7,685)Long Term Loan - (196,314) - - - (196,314)Accounts Payable and Accrued Expenses - (179,063) - (22,735) (52,523) (254,321)Deposits and Advances - - - (25,483) - (25,483)Income Tax Payable - - - - (8,259) (8,259)Bank Overdraft - (23,990) - (19,646) (5,250) (48,886)Net Identifiable Assets and Liabilities 50,000 318,416 10,000 3,495,984 146,948 4,021,348

Minority Interest - (85,814) - - (72,005) (157,819)Share of Net Assets recognized in the previous years - (74,400) - - - (74,400)Goodwill / (Negative Goodwill) on Acquisition - (48,406) - (2,607,597) 25,057 (2,630,946)Cash paid on acquisition 50,000 109,796 10,000 888,387 100,000 1,158,183

Analysis of Cash on Acquisition of the SubsidiariesCash paid on Acquisition (50,000) (109,796) (10,000) (888,387) (100,000) (1,158,183)Cash at bank Acquired - (17,758) - (16,453) (4,982) (39,193)Net Cash Outflow (50,000) (127,554) (10,000) (904,840) (104,982) (1,197,376)


Company


Rs.000 Rs.000

15 Investment in Joint VentureGaloya Holdings (Pvt) Ltd. 10,000 10,000 10,000 10,000

The investment in Galoya Holdings (Pvt) Ltd. has been recognised in the financial statements on the basis of proportionate consolidation method. Galoya Holdings (Pvt) Ltd., is the Management Company of Galoya Plantations (Pvt) Ltd. and the progress of the operational activities has disclosed in the Investment sector review.

15.1 The summarized Financial Statements of Galoya Holdings (Pvt) Ltd is as follows:


Rs.000 Rs.000

Non Current Assets 4,594 11,678Current Assets 163 146Non Current Liabilities - -Current Liabilities (50,139) (48,243)Net Assets / (Liabilities) (45,382) (36,419)


Rs.000 Rs.000

Other Income - -Expenses (8,962) (7,384)Loss before Taxation (8,962) (7,384)Taxation - -Loss after Taxation (8,962) (7,384)



Group Holding % No. of shares Group

As at 31st March 2012 2011 2012 2011 2012 2011

Rs.000 Rs.000

16 Investments in Equity Accounted Investees16.1 Investments in Equity Accounted Investees - Group Unquoted Investments* Associated Battery Manufacturers (Cey) Ltd. [ABM(C)L] 38.5% 38.5% 2,439,355 2,439,355 24,394 24,394 Investor Standard Finance (Pvt) Ltd.

* Melfort Green Teas (Pvt) Ltd. (MGTPL) 12.6% 12.6% 650,000 650,000 5,631 5,631 Investor Browns Investments PLC

* Galoya Plantations (Pvt) Ltd.(GPPL) 22.05% 22.05% 22,309,412 22,309,412 248,998 248,998 Investor Brown & Company PLC

* LOLC Leisure Ltd. (LOLCLL) 30.0% 30.0% 48,184,500 48,184,500 1,186,065 848,774 Investor Browns Investments PLC

* Taprobane Capital (Pvt) Ltd. (TCPL) 40.0% 40.0% 4,840,000 4,840,000 - 48,400 Investor Browns Investments PLC

* Virginia International Investments Ltd. (VIIL) 40% - 800,000 - 4,000 - Investor Browns Investments PLC

*Taprobane Plantations Ltd.(TPL) 45% - 22,500 - 23 - Investor Browns Investments PLC

*Rain Forest Eco Lodge ( Pvt) Ltd.(RFELPL) 5.46% - 6,399,375 - 17,470 - Investor Browns Investments PLCTotal Cost of Investment - Group 1,486,581 1,176,197

16.1.1 Group share of Net Assets of Equity Accounted Investees

Equity Value of Investment in Equity Accounted Investees as at 31st March 2012 -Group

RFELPL TPL VIIL LOLCLL TCPL ABM(C)L MGTPL GPPL Total

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Cost of Investment - - - - - 24,394 5,631 - 30,025

Share of net assets as at 31st March 2010 - - - - - 145,058 - - 145,058

On Disposal of Joint Venture - - - - - - (2,565) - (2,565)

Acquisition made during the year - - - 848,774 48,400 - - 248,998 1,146,172

Share of Profit/(Loss) after Tax - - - 46,054 82,402 44,829 2,612 (26,350) 149,547

Dividend Paid - - - - - (23,164) (1,775) - (24,939)

Equity Value of Investment as at 31st March 2011 894,828 130,802 191,117 3,903 222,648 1,443,298

Acquisition made during the year 17,470 23 4,000 337,291 23,802 - - - 382,586

Share of Profit/(Loss) after Tax (2,231) 4,946 - (27,099) (80,204) 51,233 1,187 (45,381) (97,549)

Recognized as a Subsidiary - - - - (74,400) - - - (74,400)

Dividend Paid - - - - - (43,908) (882) - (44,790)

Equity Value of Investment as at 31st March 2012 15,239 4,969 4,000 1,205,020 - 198,441 4,208 177,267 1,609,145


16.1.2 Summarised Financial Information of Equity Accounted Investees

For the year ended 2012 2012 2012 2012 2012 2012 2012 2012 2011 31st March RFELPL TPL VIIL LOLCLL ABM(C)L MGTPL GPPL Total Total Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Revenue 781 78,894 - 799,709 1,852,076 116,967 - 2,768,752 3,843,622Other Income 3,726 72 - 601,339 13,319 3,313 25,231 643,202 584,901Expenses (34,211) (65,499) - (1,705,564) (1,674,855) (109,516) (231,039) (3,720,974) (3,938,670)Profit / (Loss) before Taxation (29,704) 13,467 - (304,516) 190,540 10,764 (205,808) (309,020) 489,853Taxation (462) (3,779) - 18,306 (57,468) (1,400) 4,851 (35,711) (91,502)Profit / (Loss) after Taxation (30,166) 9,688 - (286,210) 133,072 9,364 (200,957) (344,731) 398,351

As at 31st March 2012 2012 2012 2012 2012 2012 2012 2012 2011

RFELPL TPL VIIL LOLCLL ABM(C)L MGTPL GPPL Total Total

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Non Current Assets 341,053 303 - 6,065,681 245,695 10,041 1,208,993 7,530,410 6,579,188Current Assets 45,131 20,559 10,000 1,763,773 764,504 33,427 224,528 2,786,232 3,556,007Total Assets 386,184 20,862 10,000 7,829,454 1,010,199 43,468 1,433,521 10,316,642 10,135,195Non Current Liabilities (81,715) - - (251,406) (52,524) (911) (544,884) (849,725) (1,253,504)Current Liabilities (25,343) (11,335) - (1,646,336) (442,244) (9,394) (751,422) (2,849,396) (2,772,703)Net Assets 279,126 9,527 10,000 5,931,712 515,431 33,163 137,215 6,617,521 6,108,988

16.2 Investments in Equity Accounted Investees - Company

Holding % No. of shares Company

As at 31st March 2012 2011 2012 2011 2012 2011

Rs.000 Rs.000

Unquoted InvestmentsGaloya Plantations (Pvt) Ltd. 22.05% 22.05% 22,309,412 22,309,412 248,998 248,998 248,998 248,998

Galoya Plantations (Pvt) Ltd., is the private public partnership entered into by the Group where a total of 49% of the Company is held by LOLC PLC, Brown & Company PLC and Promotors. The Government of Sri Lanka holds 51% of the Company.

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

17 Other Long Term InvestmentsQuoted (17.1, 17.2) 3,403,147 5,030,263 3,394,477 5,017,987Unquoted (17.3) 1,207,890 1,056,630 - - 4,611,037 6,086,893 3,394,477 5,017,987



Number of shares Cost Carrying Value

As at 31st March 2012 2011 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

17.1 Quoted Investments - GroupHatton National Bank PLC 22,186,124 13,205,230 773,029 338,247 3,394,477 5,017,987Hatton National Bank PLC-Non Voting 7,700 7,700 245 245 1,123 1,626Browns Beach Hotels PLC 386,013 386,013 2,929 2,929 5,889 8,400John Keells Hotels PLC 31,573 31,573 379 379 1,658 2,250 776,582 341,800 3,403,147 5,030,263

17.2 Quoted Investments - CompanyQuoted InvestmentsHatton National Bank PLC 22,186,124 13,205,230 773,029 338,247 3,394,477 5,017,987 773,029 338,247 3,394,477 5,017,987

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

17.3 Unquoted InvestmentsHotel Hanthana Ltd. 190 190 - -Motor Marvels (Pvt) Ltd. 4,800 4,800 4,800 4,800Sierra Constructions (Pvt) Ltd. 600,904 600,904 - -Sierra Holdings (Pvt) Ltd. 199,911 199,911 - -Sierra Cables PLC 106,667 201,494 - -Agstar Fertilizer PLC - 54,476 - -Taprobane Holdings PLC 100,600 - - -Commercial Leasing & Finance Ltd. 200,000 - - -Others 127 164 - - 1,213,199 1,061,939 4,800 4,800Provision for fall in value of Investments (5,309) (5,309) (4,800) (4,800) 1,207,890 1,056,630 - -

18 Deferred Tax AssetBalance at the beginning of the year 245,518 338,288 151,985 297,484On Acquisition of Subsidiary - 3,940 - -Transferred from Deferred Tax Liability - (8) - -Deferred Tax impact on Building Revaluation 2,367 (17,731) 5,658 (10,427)Recognized/ (Reversal) during the year (64,274) (78,971) (80,897) (135,072)Balance at the end of the year 183,611 245,518 76,746 151,985


As at 31st March 2012 2011 Temporary Tax Temporary Tax

Difference Effect Difference Effect

Rs.000 Rs.000 Rs.000 Rs.000

18.1 The Closing Deferred Tax Asset balance relates to the following;18.1.1 GroupAccelerated Depreciation for Tax purposes (121,540) (33,720) (88,457) (24,766)Employee Benefit Liabilities 76,894 21,041 49,228 13,784Losses available for offset against future Taxable Income 615,962 172,469 883,967 247,511Deferred Tax impact on Revaluation of Investment Properties (1,224) (343) (280) (78)Deferred Tax recognized on General Provisions 77,845 21,797 28,060 7,856 647,937 181,244 872,518 244,307Deferred Tax impact on Building Revaluation 8,453 2,367 4,329 1,211 656,390 183,611 876,847 245,518

18.1.2 CompanyAccelerated Depreciation for Tax purposes (106,341) (29,775) (70,883) (19,848)Employee Benefit Liabilities 64,833 18,153 44,592 12,486Losses available for offset against future Taxable Income 281,096 78,707 564,290 158,001Deferred Tax impact on Revaluation of Investment Properties (1,224) (343) (280) (78)Deferred Tax recognized on General Provisions 15,527 4,347 659 184 253,891 71,089 538,378 150,745Deferred Tax impact on Building Revaluation 20,207 5,658 4,431 1,241 274,098 76,747 542,809 151,986

18.2 Deferred Tax charged/credited to EquityAccording to Sri Lanka Accounting Standard 14 (Revised 2005) “Income Taxes”, deferred tax shall be charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or in a different period, directly to equity. Accordingly, the deferred tax liability/asset arising on revaluation of property, plant and equipment of Rs. 12 Mn (2010/2011 - Rs. 15.6 Mn) was charged /credited directly to the revaluation reserve in the Group Statement of Changes in Equity and Rs 5.6 Mn (2010/2011 - Rs. 1.2 Mn) credited to the company revaluation reserve during the year.

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

19 Loans to Related Parties- Due after one yearMasons Mixture Ltd. 57,377 65,822 57,377 64,077Taprobane Fund Management Ltd. 2,328 - - -Galoya Plantations (Pvt) Ltd. 288,962 167,875 288,962 167,875Browns Industrial Park Ltd. (Note 19.1) - - 73,007 73,007BG Air Services (Pvt) Ltd. - - 20,000 20,000Browns Investments PLC - - 40,354 79,979Engineering Services (Pvt) Ltd. 26,000 - 26,000 -Director of Klevenberg (Pvt) Ltd. 8,100 69,500 - - 382,767 303,197 505,700 404,938

19.1 Browns Industrial Park Ltd. - (BIPL) [Formerly known as East West Textiles Lanka Ltd.]The operational activities of the BIPL had ceased during the financial year 1998/1999 and has restructured and converted the premises for the purpose of renting out, as such, part of the Property, Plant and Equipment has been disposed. BIPL has rented out a significant portion of the premises as at the reporting date and the Company has earned a rental income amounting to Rs. 15 Mn during the year. (2010/2011- Rs. 15 Mn) Hence no provision was made for the investment and amounts receivable from East West Textile Lanka Ltd. as at the Balance Sheet date.



Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

20 InventoriesRaw Material 325,288 263,848 - -Work-in-Progress 41,010 19,733 7,895 7,373Finished Goods 2,083,394 812,616 1,944,381 679,634Input Material 94,913 16,520 - -Growing Crop Nurseries 8,723 6,172 - - - Tea 120,541 148,253 - - - Rubber 13,923 25,090 - - - Coconut 115 555 - -Consumables and Spares 75,226 7,798 - -Goods in Transit 60,517 33,820 41,241 29,100Certified Emission Reduction 6,116 11,217 - - 2,829,766 1,345,622 1,993,517 716,107Less: Provision for Slow Moving Stocks (136,092) (111,657) (77,114) (72,868) 2,693,674 1,233,965 1,916,403 643,239

21 Trade and Other ReceivablesTrade Receivables 2,082,589 1,475,540 1,535,167 1,131,993Other Receivables (Note 21.1) 326,639 192,323 107,583 97,975 2,409,228 1,667,863 1,642,750 1,229,968Less: Provision for Bad and Doubtful Debts (274,643) (262,794) (168,802) (163,586) 2,134,585 1,405,069 1,473,948 1,066,382

21.1 Other ReceivablesVAT Recoverable 24,052 10,081 5,175 -Staff Loan 23,644 5,522 - 325WHT Recoverable 20,915 4,799 2,140 342Dividend Receivable 29,660 3,063 - -Others 228,368 168,858 100,268 97,308 326,639 192,323 107,583 97,975

22 Deposits and PrepaymentsDeposits 30,988 18,246 8,784 14,900Prepayments 259,310 303,551 104,917 163,763 290,298 321,797 113,701 178,663

23 Loans to Related Parties -Due within one yearRoyal Fernwood Porcelain Ltd. 82,800 - 26,800 -Lexinton Holdings (Pvt) Ltd. 812,303 10,242 - -Engineering Services (Pvt) Ltd. 6,304 100,329 - -Taprobane Fund Management Ltd. - 40,793 - -Browns Thermal Engineering (Pvt) Ltd. - 2,623 - -Sifang Lanka (Pvt) Ltd. - - 15 -Browns Investments PLC - - - 98Ceylon Estate Teas (Pvt) Ltd. 1,092 - - -Taprobane Holdings PLC 133,095 - - - 1,035,594 153,987 26,815 98


Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

24 Amounts due from Related PartiesFree Lanka Capital (Pvt) Ltd. 190,542 165,543 - -Diesel & Motor Engineering PLC 50 1,113 - -Royal Fernwood Porcelain Ltd. - 50,000 91 -Ceylon Estate Teas (Pvt) Ltd. - 1,601 - -Perpetual Holdings (Pvt) Ltd - 158 - -Free Lanka Trading (Pvt) Ltd. - 42 - -Melfort Green Teas (Pvt) Ltd. 178 2,154 - -Lanka Orix Finance Company Ltd. - 10,025 - -Engineering Services (Pvt) Ltd. 8,916 8,910 7,656 7,356Masons Mixture Ltd. 19,310 36,424 17,105 34,284Associated Battery Manufacturers (Cey) Ltd. 21,321 12,065 8 8LOLC Leisure Ltd. 45,934 - - -Sierra Constructions (Pvt) Ltd. 52 - - -Free Lanka Trading Liquor (Pvt) Ltd. 2 - - -Ceylon Estate Teas (Pvt) Ltd. 1,576 - - -FLMC Sudima Timber Products Ltd. 69 - - -Browns Thermal Engineering (Pvt) Ltd. - - 21,707 12,652IG Browns Rubber Industries (Pvt) Ltd. - - 148 24Galoya Holdings (Pvt) Ltd. 36 - 72 -Standard Finance (Pvt) Ltd. - - 67,902 14,496Browns Group Industries (Pvt) Ltd. - - 45,120 31,001Snowcem Products Lanka (Pvt) Ltd. - - 20,049 17,325C.F.T. Engineering Ltd. - - 106 55The Hatton Transport & Agency Co. (Pvt) Ltd. - - - 1,193Browns Tours (Pvt) Ltd. - - 7,715 7,810Klevenberg (Pvt) Ltd. - - 10,896 -Walker & Greig (Pvt) Ltd. - - - 14,937Browns Investments PLC - - 16,511 5,691Sifang Lanka (Pvt) Ltd. - - 51,655 33,807BG Air Services (Pvt) Ltd. - - 3,112 823Browns Health Care (Pvt) Ltd. - - - 1,660Browns Capital (Pvt) Ltd. - - - 250Browns Real Estates (Pvt) Ltd. - - 299 -Samudra Beach Resorts (Pvt) Ltd. - - 4 -Browns Industrial Park Ltd. [Formerly known as East West Textiles Lanka Ltd.] - - 39,308 - 287,986 288,035 309,464 183,372Less: Provision for Intercompany Receivables (Note 24.1) - - (26,673) (38,887) 287,986 288,035 282,791 144,485



Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

24.1 Provision for Inter Company ReceivablesSnowcem Products Lanka (Pvt) Ltd. - - 20,049 17,325Walker & Greig (Pvt) Ltd. - - - 14,937Masons Mixture Ltd. - - 6,624 6,625 - - 26,673 38,887

25 Tax RecoverableBalance at the beginning of the year 124 2,844 - -On Acquisition of Subsidiary - 124 - -ESC Recoverable 474 - - -Payment made/(Recovered) during the year (474) (2,844) - -Balance at the end of the year 124 124 - -

26 Short Term InvestmentsFixed and Call Deposits 492,041 2,293,079 6,800 6,800Treasury Bills 16,293 1,795 - -Treasury Bonds 23,481 21,903 23,481 21,903Commercial Papers 688,703 940,847 - -REPO 65,380 291,786 - -Unit Trust 68,250 - - -Investment in Shares (Note 26.1) 3,034,947 1,998,655 1,687,528 1,043,857 4,389,095 5,548,065 1,717,809 1,072,560


26.1 Investment in Shares Group Company

Carrying Carrying Carrying Carrying

As at 31st March Value Value Value Value

Number Cost 2012 2011 Number Cost 2012 2011

of Shares Rs.000 Rs.000 Rs.000 of Shares Rs.000 Rs.000 Rs.000

Dialog Axiata PLC 46,990,600 546,189 333,639 498,100 2,000,000 24,325 14,200 21,200

John Keells Holdings PLC 273 26 42 59 273 26 42 59

Seylan Bank PLC- Voting 31,892,164 2,188,647 1,911,858 934,998 24,049,888 2,122,020 1,611,343 934,997

Amaya Leisure PLC 1,000 132 76 124 1,000 132 76 124

Merchant Bank of Sri Lanka PLC 66,000 3,688 1,954 3,043 66,000 3,688 1,954 3,043

Chemanex PLC 183,300 30,706 18,513 23,829 183,300 30,706 18,513 23,829

Hemas Holdings PLC 1,923,100 83,092 50,578 81,521 1,080,000 50,749 28,404 49,680

Hayleys PLC 321,900 131,263 115,920 10,925 28,600 11,279 10,296 10,925

Janashakthi Insurance PLC - - - 10,355 - - - -

Nations Trust Bank PLC 116,100 10,273 6,618 8,905 - - - -

Ceylinco Insurance PLC 1,000 554 845 730 - - - -

Richard Peiris and Company PLC 1,600,400 28,280 12,003 26,233 - - - -

Seylan Bank PLC- Non Voting - - - 68,531 - - - -

Distilleries Company of Sri Lanka PLC 13,800 12,017 2,322 11,808 - - - -

Commercial Bank PLC 160,450 38,478 16,045 40,015 - - - -

Free Lanka Capital Holdings PLC 45,399,113 51,083 86,259 219,890 1,420,900 7,105 2,700 -

Lanka Hospital Corporation PLC - - - 14 - - - -

Vallibel One PLC - - - 13,075 - - - -

The Finance Company PLC 1,250,000 50,000 37,500 46,500 - - - -

Textured Jersey PLC 1,744,700 26,301 12,387 - - - - -

Parquet (Ceylon) PLC 72,800 2,367 1,092 - - - - -

Hydro Power Free Lanka PLC 38,200 - 7,347 - - - - -

Lanka Orix Finance PLC 28,300 123 127 - - - - -

Agstar Fertilizer PLC 39,000,000 272,134 418,350 - - - - -

Taprobane Holdings PLC 166,667 1,000 1,000 - - - - -

CT Land Development PLC 19,500 195 472 - - - - -

3,476,548 3,034,947 1,998,655 2,250,030 1,687,528 1,043,857

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

27 Cash at Bank and in HandCash at Bank 432,010 1,359,122 200,833 737,228Cash in Hand 18,311 4,248 - -Cash in Transit 41,490 1,120 - - 491,811 1,364,490 200,833 737,228

28 Stated Capital70,875,000 Ordinary Shares 2,005,601 2,005,601 2,005,601 2,005,601



Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

29 Reserves29.1 Capital ReservesRevaluation of Property, Plant and Equipment 1,476,115 1,342,868 1,139,165 980,318Revaluation of Investments 2,481,004 4,542,939 2,621,461 4,679,753Capital Reserves 202,216 202,216 200,000 200,000 4,159,335 6,088,023 3,960,626 5,860,071

29.2 Revenue ReservesGeneral Reserve 53,113 53,113 9,500 9,500Retained Earnings 8,127,550 7,045,135 2,054,230 1,741,272 8,180,663 7,098,248 2,063,730 1,750,772

30 Interest Bearing BorrowingsBalance at the beginning of the year 1,448,804 1,600,745 1,065,896 639,580On Acquisition of Subsidiary 255,058 - - -Obtained during the year 2,166,186 806,395 1,450,000 775,000Repayments (491,823) (652,467) (383,833) (348,684)Transfers - (121,250) - -On Disposal of Joint Venture - (184,618) - -Balance at the end of the year 3,378,225 1,448,805 2,132,063 1,065,896

Payable after one Year 2,262,017 1,050,937 1,538,771 746,439Payable within one Year 1,116,208 397,868 593,292 319,457 3,378,225 1,448,805 2,132,063 1,065,896

30.1 Analysis of Interest Bearing Borrowings - Company

Payable after One year

Payable Balance Balance

Within Payable Payable More than as at as at

One year 1-2 years 2-5 Years 5 Years 31.3.2012 31.3.2011

Name of the Lending Institution Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

Hatton National Bank PLC 42,215 - - - 42,215 98,795Hatton National Bank PLC 22,860 6,110 - - 28,970 51,830Hatton National Bank PLC 12,518 - - - 12,518 37,514Hatton National Bank PLC 70,000 70,000 192,500 - 332,500 -Commercial Bank of Ceylon PLC 15,833 14,514 - - 30,347 46,180Commercial Bank of Ceylon PLC 7,500 7,500 8,750 - 23,750 31,250Commercial Bank of Ceylon PLC 20,844 20,844 31,202 - 72,890 93,734Commercial Bank of Ceylon PLC 45,840 45,840 110,740 - 202,420 248,260Commercial Bank of Ceylon PLC 125,000 125,008 83,320 - 333,328 458,333Commercial Bank of Ceylon PLC 112,500 112,500 178,125 - 403,125 -DFCC Bank 118,182 118,182 354,545 59,091 650,000 -Total 593,292 520,498 959,182 59,091 2,132,063 1,065,896


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M

ortg

age

over

pro

pert

y at

Dev

anam

piya

tissa

Maw

atha

28

,970

51

,830

Hat

ton

Nat

iona

l Ban

k PL

C Te

rm L

oan

60 M

onth

ly In

stal

lmen

ts

for

Rs. 7

92 M

n.

332,

500

-H

atto

n N

atio

nal B

ank

PLC

Term

Loa

n 60

Mon

thly

Inst

allm

ents

12,5

18

37,5

14

Com

mer

cial

Ban

k of

Cey

lon

PLC

Term

Loa

n 72

Mon

thly

Inst

allm

ents

30,3

47

46,1

81Co

mm

erci

al B

ank

of C

eylo

n PL

C Te

rm L

oan

96 M

onth

ly In

stal

lmen

ts

23

,750

31

,250

Com

mer

cial

Ban

k of

Cey

lon

PLC

Term

Loa

n 72

Mon

thly

Inst

allm

ents

M

ortg

age

over

Rs.

19

Mn

HN

B sh

ares

. 72

,890

93

,734

Com

mer

cial

Ban

k of

Cey

lon

PLC

Term

Loa

n 72

Mon

thly

Inst

allm

ents

202,

420

248,

260

Com

mer

cial

Ban

k of

Cey

lon

PLC

Term

Loa

n 48

Mon

thly

Inst

allm

ents

333,

328

458,

332

Com

mer

cial

Ban

k of

Cey

lon

PLC

Term

Loa

n 48

Mon

thly

Inst

allm

ents

403,

125

-

DFC

C Ba

nk

Term

Loa

n 66

Mon

thly

Inst

allm

ents

M

ortg

age

over

Rs.

20

Mn

Seyl

an B

ank

shar

es.

650,

000

-Co

mpa

ny T

otal

2,13

2,06

3 1,

065,

896

30.3

Se

curit

y an

d Re

paym

ent T

erm

s -

Gro

upi)

Kl

even

berg

(Pv

t) L

td.

Hat

ton

Nat

iona

l Ban

k PL

C Te

rm L

oan

60 M

onth

ly In

stal

lmen

ts

Mor

tgag

e ov

er 5

0 ye

ars

leas

ehol

d La

nd a

nd B

uild

ing

at

A

viss

awel

la R

oad,

Oru

goda

wat

ta, W

ella

mpi

tiya.

-

2,62

1H

atto

n N

atio

nal B

ank

PLC

Term

Loa

n 60

Mon

thly

Inst

allm

ents

- 3,

488

- 6,

109

ii)

Brow

ns In

dust

rial P

ark

Ltd.

Bank

of

Ceyl

on

Term

Loa

n 9

Ann

ual I

nsta

llmen

ts

Corp

orat

e G

uara

ntee

of

Brow

n &

Com

pany

PLC

and

Mor

tgag

e ov

er

Le

aseh

old

Prop

erty

at

Mak

andu

ra.

139,

998

167,

998

139,

998

167,

998



30.3

Se

curit

y an

d Re

paym

ent T

erm

s -

Gro

up C

ontd

.

Bal

ance

as

at

Bal

ance

as

at

Nam

e of

the

Len

ding

N

atur

e of

Re

paym

ent

31

.3.2

012

31

.3.2

011

Inst

itut

ion

Faci

lity

Term

s Se

curi

ty

Rs.0

00

Rs.0

00

iii)

Aja

x En

gine

ers

(Pvt

) Lt

d.Pe

ople

’s L

easi

ng C

ompa

ny P

LC

Term

Loa

n 24

Mon

thly

Inst

allm

ents

M

ortg

age

over

fix

ed d

epos

it am

ount

ing

to R

s.2.

4 M

n in

Peop

le’s

Lea

sing

Com

pany

. 1,

786

-

1,

786

-

iv)

Mill

enni

um D

evel

opm

ent (

Pvt)

Ltd

.D

FCC

Bank

Te

rm L

oan

54 M

onth

ly In

stal

lmen

ts

Mor

tgag

e ov

er P

lant

and

Mac

hine

ry a

mou

ntin

g to

Rs.

40 M

n in

Exce

l Wor

ld A

dven

ture

Par

k.

19,2

59

-

19

,259

-

v)

Roya

l Fer

nwoo

d Po

rcel

ain

Ltd.

Hat

ton

Nat

iona

l Ban

k PL

C Te

rm L

oan

84 M

onth

ly In

stal

lmen

ts

10

9,41

8 -

Hat

ton

Nat

iona

l Ban

k PL

C Te

rm L

oan

84 M

onth

ly In

stal

lmen

ts

10

,279

-

Hat

ton

Nat

iona

l Ban

k PL

C Te

rm L

oan

84 M

onth

ly In

stal

lmen

ts

Mor

tgag

e ov

er la

nd, b

uild

ing

& im

mov

able

mac

hine

ry a

mou

ntin

g

70,5

24

- H

atto

n N

atio

nal B

ank

PLC

Term

Loa

n 84

Mon

thly

Inst

allm

ents

to

Rs.

300

Mn,

and

land

, bui

ldin

g &

imm

ovab

le m

achi

nery

2,

492

- H

atto

n N

atio

nal B

ank

PLC

Term

Loa

n 84

Mon

thly

Inst

allm

ents

am

ount

ing

to U

SD 3

.25

Mn.

54

,113

-

Hat

ton

Nat

iona

l Ban

k PL

C Te

rm L

oan

84 M

onth

ly In

stal

lmen

ts

10

,416

-

Hat

ton

Nat

iona

l Ban

k PL

C Te

rm L

oan

84 M

onth

ly In

stal

lmen

ts

27

,494

-

284,

736

-

vi)

Brow

ns In

vest

men

ts P

LCSa

mpa

th B

ank

PLC

Term

Loa

n 16

Qua

rter

ly In

stal

lmen

ts

Shar

es a

ccep

tabl

e to

the

ban

k, lo

dged

in a

cus

todi

an a

ccou

nt

of

the

ban

k w

ith c

harg

es o

n se

curit

ies

and

Pow

er o

f A

ttor

ney.

51

2,00

0 -

512,

000

-

vii)

Fr

ee L

anka

Cap

ital H

oldi

ngs

PLC

Lank

a O

rix F

inan

ce C

o. L

td.

Term

Loa

n Re

volv

ing

cred

it fa

cilit

y Rs

.250

Mn

shor

t te

rm d

epos

it in

LO

FC.

22,7

76

-

22

,776

-


30

In

tere

st B

earin

g Bo

rrow

ings

30.3

Se

curit

y an

d Re

paym

ent T

erm

s -

Com

pany

Con

td.

Bal

ance

as

at

Bal

ance

as

at

Nam

e of

the

Len

ding

N

atur

e of

Re

paym

ent

31

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012

31

.3.2

011

Inst

itut

ion

Faci

lity

Term

s Se

curi

ty

Rs.0

00

Rs.0

00

viii)

M

atur

ata

Plan

tatio

ns L

td.

Seyl

an B

ank

PLC

Term

Loa

n 24

Mon

thly

Inst

allm

ents

M

ortg

age

ove

r le

aseh

old

right

s of

Bra

mle

y Es

tate

for

Rs.

13

Mn

-

3,40

9

Term

Loa

n 24

Mon

thly

Inst

allm

ents

Pr

imar

y M

ortg

age

bond

for

Rs.

36 M

n an

d Se

cond

ary

Mor

tgag

e bo

nd

- 2,

957

Te

rm L

oan

48 M

onth

ly In

stal

lmen

ts

for

Rs.5

0Mn

over

leas

ehol

d rig

hts

of G

onap

itiya

Est

ate.

Mor

tgag

e

16,4

90

23,3

17

Te

rm L

oan

48 M

onth

ly In

stal

lmen

ts

over

leas

ehol

d rig

hts

of A

lma

Esta

te f

or R

s.26

Mn.

2,

366

3,25

3

Term

Loa

n 60

Mon

thly

Inst

allm

ents

38,2

20

-

Asi

an D

evel

opm

ent

Bank

Te

rm L

oan

63 M

onth

ly In

stal

lmen

ts

Mor

tgag

e ov

er le

aseh

old

right

s of

est

ate

land

, bui

ldin

gs, f

ixed

3,

313

6,92

5

Term

Loa

n 70

Mon

thly

Inst

allm

ents

an

d flo

atin

g as

sets

of

Raga

lla E

stat

e fo

r Rs

. 74.

75 M

n. M

ortg

age

over

2,

045

3,40

9

Term

Loa

n 64

Mon

thly

Inst

allm

ents

le

aseh

old

right

s of

est

ate

land

, bui

ldin

gs, f

ixed

and

flo

atin

g as

sets

of

19

1 38

2

Term

Loa

n 78

Mon

thly

Inst

allm

ents

M

aha

Uva

Est

ate

for

Rs.1

9.50

Mn.

Mor

tgag

e ov

er le

aseh

old

right

s

1,42

0 2,

075

Te

rm L

oan

84 M

onth

ly In

stal

lmen

ts

of e

stat

e la

nd, b

uild

ings

, fix

ed a

nd f

loat

ing

asse

ts o

f En

selw

atte

2,

033

2,79

6

Term

Loa

n 47

Mon

thly

Inst

allm

ents

Es

tate

for

Rs.

102

.25

Mn.

Prim

ary

Mor

tgag

e ov

er s

tock

in t

rade

for

-

32

Rs

. 200

Mn

Lank

a O

rix L

easi

ng P

LC

PDP

Loan

und

er

108

Mon

thly

Inst

allm

ents

Pr

imar

y Co

ntin

uing

mor

tgag

e bo

nd f

or R

s.42

.93

Mn

on t

he

627

761

A

DB

Plan

tatio

n

102

Mon

thly

Inst

allm

ents

un

expi

red

leas

ehol

d rig

hts

over

the

land

of

Ann

ingk

anda

and

4,

826

6,05

8

Dev

elop

men

t

96 M

onth

ly In

stal

lmen

ts

Pani

lkan

da E

stat

es in

Den

iyay

a, a

nd F

reeh

ill B

unga

low

in N

uwar

a 12

,122

14

,143

Proj

ect

48 M

onth

ly In

stal

lmen

ts

Eliy

a. P

rimar

y co

ntin

uing

mor

tgag

e bo

nd o

n al

l the

une

xpire

d

- 4,

275

le

aseh

old

right

s ov

er L

and,

Est

ate

and

Prem

ises

of

-

12,2

85

“H

ayes

Gro

up”

in D

eniy

aya/

Rath

napu

ra. P

rimar

y co

ntin

uing

6,

079

-

mor

tgag

e bo

nd o

n al

l the

une

xpire

d le

aseh

old

right

s ov

er L

and,

71

,691

-

Es

tate

and

Pre

mis

es o

f “S

t. Le

onar

ds E

stat

e’’.

161,

423

86,0

77



30

In

tere

st B

earin

g Bo

rrow

ings

30.3

Se

curit

y an

d Re

paym

ent T

erm

s -

Com

pany

Con

td.

Bal

ance

as

at

Bal

ance

as

at

Nam

e of

the

Len

ding

N

atur

e of

Re

paym

ent

31

.3.2

012

31

.3.2

011

Inst

itut

ion

Faci

lity

Term

s Se

curi

ty

Rs.0

00

Rs.0

00

ix)

Puss

ella

wa

Plan

tatio

ns L

td.

Bank

of

Ceyl

on

Term

Loa

n 12

0 M

onth

ly In

stal

lmen

ts

Mor

tgag

ed o

ver

Leas

ehol

d rig

hts

of H

elbo

dde

& S

telle

nbur

g Es

tate

s.

5,21

8 7,

258

Te

rm L

oan

120

Mon

thly

Inst

allm

ents

M

ortg

aged

ove

r Le

aseh

old

right

s of

Pus

sella

Est

ate.

2,

365

3,49

7

Term

Loa

n 12

0 M

onth

ly In

stal

lmen

ts

Mor

tgag

ed o

ver

Leas

ehol

d rig

hts

of M

elfo

rt &

Moo

loya

Est

ates

. 2,

984

4,31

0

12

0 M

onth

ly In

stal

lmen

ts

Mor

tgag

ed o

ver

Leas

ehol

d rig

hts

of K

aloo

galla

, Moo

loya

&

G

iraga

ma

Esta

tes.

7,

731

9,93

7

Nat

iona

l Dev

elop

men

t Ba

nk P

LC

Term

Loa

n 12

0 M

onth

ly In

stal

lmen

ts

Mor

tgag

ed o

ver

Leas

ehol

d rig

hts

of D

elta

, Ayr

, Siri

niw

asa,

2,

082

3,39

7

Term

Loa

n 12

0 M

onth

ly In

stal

lmen

ts

Pam

bega

ma

and

Elst

on E

stat

es.

987

1,52

5

Term

Loa

n 12

0 M

onth

ly In

stal

lmen

ts

2,

185

3,49

6

Lank

a O

rix L

easi

ng P

LC

Term

Loa

n 12

0 M

onth

ly In

stal

lmen

ts

Mor

tgag

ed o

ver

Leas

ehol

d rig

hts

of S

omag

ama

Esta

te.

7,35

8 9,

331

Te

rm L

oan

120

Mon

thly

Inst

allm

ents

3,95

5 4,

614

Sam

path

Ban

k PL

C Te

rm L

oan

94 M

onth

ly In

stal

lmen

ts

Prim

ary

mor

tgag

e ov

er le

aseh

old

right

s to

geth

er w

ith f

acto

ry

bu

ildin

g th

erei

n of

Hal

pe E

stat

e.

28,3

72

34,4

10

Com

mer

cial

Ban

k of

Cey

lon

PLC

Term

Loa

n 47

Mon

thly

Inst

allm

ents

Pr

imar

y m

ortg

age

over

leas

ehol

d rig

hts

toge

ther

with

fac

tory

17

,745

17

,745

Te

rm L

oan

47 M

onth

ly In

stal

lmen

ts

build

ing

ther

ein

of R

oths

child

Est

ate

and

Sanq

uhar

Est

ate.

11

,950

11

,950

Te

rm L

oan

47 M

onth

ly In

stal

lmen

ts

11

,254

11

,254

104,

185

122,

724

Gro

up T

otal

3,37

8,22

5 1,

448,

804



Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

31 Rescheduled Debentures Balance at the beginning of the year 410 2,250 - -Settlement of Debentures (410) (818) - -On Disposal of Joint Venture - (1,022) - -Balance at the end of the year - 410 - -

Interest Rate ApplicableInterest rate applicable to Rescheduled Debentures is one year weighted average Treasury Bill gross rate ( before 10% withholding tax ) which prevails immediately prior to 11th November every year.

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

32 Finance Lease ObligationBalance at the beginning of the year 169,867 339,423 328 3,689On Acquisition of Subsidiary 2,500 1,773 - -Obtained during the year 1,323 2,882 - -Paid during the Year (12,606) (19,816) (328) (3,351)On Disposal of Joint Venture - (154,395) - -Balance at the end of the year 161,084 169,867 - 338Interest in Suspense (70,038) (74,842) - (10)Capital outstanding at the end of the year 91,046 95,025 - 328

32.1 Lease Payable due after one yearAmounts due after one year 150,827 158,662 - -Less: Interest in Suspense (65,769) (69,937) - - 85,058 88,725 - -

32.2 Lease Payable due within one yearAmounts due within one year 10,257 11,205 - 338Less: Interest in Suspense (4,269) (4,905) - (10) 5,988 6,300 - 328

33 Retirement Benefit ObligationsChange in the Retirement Benefit Obligations are as follows.Defined Benefit Obligation at the beginning of the year 433,617 661,931 44,592 62,785On Acquisition of Subsidiary 27,054 3,330 - -Interest on Benefit Liability 4,890 7,609 4,459 6,906Current Service Cost 7,596 756 6,853 4,776Actuarial Loss/ (Gain) 10,909 1,242 10,763 6,808Provision for the year 40,560 101,785 -Benefit paid (42,365) (75,315) (1,834) (36,683)On Disposal of Joint Venture - (267,721) - -Defined Benefit Obligation at the end of the year 482,261 433,617 64,833 44,592

This Liability is not externally funded.


33.1 The total amount charged to the Income Statement in respect of Retirement Benefit Obligations is made up as follows:

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

Gratuity charge for the year 40,559 101,593 - -Interest charge for the year 4,890 7,609 4,459 6,906Current service cost 7,596 756 6,853 4,776Actuarial Loss/ (Gain) 10,909 1,242 10,763 6,808 63,954 111,200 22,075 18,490

33.2 As required by the Sri Lanka Accounting Standard 16 (Revised 2006) – “Employee Benefits”, Brown & Company PLC measures its retirement benefit obligation together with following subsidiaries and Joint Ventures using an actuarial valuation carried out by Messer Actuarial and Management Consultants (Pvt) Ltd. Other entities in the group measure their retirement benefit obligations based on the gratuity formula in Appendix E of SLAS 16 (Revised 2006) – “Employee Benefits”.

Sifang Lanka Trading (Pvt) Ltd. BG Air Services (Pvt) Ltd. Browns Tours (Pvt) Ltd. Browns Group Industries (Pvt) Ltd. Browns Thermal Engineering (Pvt) Ltd. Free Lanka Plantations Company (Pvt) Ltd. Free Lanka Management Company (Pvt) Ltd. Free Lanka Capital Holdings PLC

Company


33.3 The principal assumptions used in the actuarial valuation are as follows: 33.3.1 Financial Assumptionsa) Discount rate (the rate of interest used to discount the future 10% 10% cash flows in order to determine the present value)

b) Future salary increase Executive 10% 10% Non- Executive 9% 9%

33.3.2 Demographic AssumptionsIn addition to the above, demographic assumptions such as mortality, withdrawal and disability, and retirement age were considered for the actuarial valuation. “A 67/07 mortality table” issued by the Institute of Actuaries, London was used to estimate the gratuity liability of the Company.


Group Company


34 Deferred Tax LiabilityBalance at the beginning of the year 33,517 - - -On Acquisition of Subsidiary 7,028 - - -Transfers - (8) - -Charged/(Reversal) during the year (2,463) 6,155 - -Deferred Tax Impact on Building Revaluation (21,515) 27,370 - -Balance at the end of the year 16,567 33,517 - -

Group


Temporary Tax Temporary Tax Difference Effect Difference Effect Rs.000 Rs.000 Rs.000 Rs.000

34.1 The Closing Deferred Tax Liability balance relates to the following;Accelerated Depreciation for Tax purposes 24,783 6,857 (31,145) (11,053)Employee Benefit Liabilities 26 26 (1,738) (514) 24,809 6,883 (32,883) (11,567)Deferred Tax impact on Building Revaluation 34,585 9,684 128,811 45,084 59,394 16,567 95,928 33,517

Group Company


35 Deferred Income35.1 Capital GrantsGross valueBalance at the beginning of the year 195,223 332,179 - -Additions during the year 9,036 13,854 - -On Disposal of Joint Venture - (150,810) - -Balance at the end of the year 204,259 195,223 - -AmortizationBalance at the beginning of the year 39,599 62,534 - -Amortization during the year 4,613 5,456 - -On Disposal of Joint Venture - (28,391) - -Balance at the end of the year 44,212 39,599 - -Balance at the end of the year- Net 160,047 155,624 - -

35.2 PHDT Lease RentalsBalance at the beginning of the year 2,103 4,121 - -Amortization during the Year (147) (147) - -On Disposal of Joint Venture - (1,871) - -Balance at the end of the year 1,956 2,103 - -

35.3 Rain Forest Eco Lodge (Pvt) Ltd. - SharesBalance at the beginning of the year - - - -Additions during the year 17,470 - - -Amortization during the year (590) - - -Balance at the end of the year 16,880 - - -

Total Deferred Income at the end of the year 178,883 157,727 - -



35.1.1 The above Capital Grants represent the following:-i The funds received from the Plantation Housing and Social Welfare Trust (PHSWT), MTIP and PHDT are for the development of Workers

Welfare Facilities and improvement to Institutional Facilities.ii The funds received from the Tea Board for the construction of the CTC Tea Factory at Delta Estates.iii The funds received from the Plantation Reform Project for the Development of Forestry Plantations.iv Subsidy received from the Rubber Controller Department for Rubber Replanting.

The amount spent is capitalized under the relevant classification of Property, Plant and Equipment, the corresponding grant component is reflected under Deferred Income and is being amortized over the useful life span of the related assets.

35.2.1 Premises at St. Andrew’s Drive in Nuwara Eliya has been leased out to Plantation Human Development Trust for a period of 20 years commencing from August 2005 for a total lease rental of Rs.10 Mn. Lease Rentals received are deferred and amortized over the lease period commencing from August 2005.

35.3.1 Rain Forest Eco Lodge (Pvt) Ltd. Shares represents the value of 6,399,375. of Ordinary Shares received by Maturata Plantations Ltd. equivalent to 20% of the issued Ordinary Shares of RFELPL at Rs. 10/- each in lieu of releasing the leasehold rights of 488 Hectares in Ensalwatte Estate, Deniyaya for Eco Tourism Project. The value of Ordinary Shares are deferred and amortized over the unexpired lease period.

Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

36 Loans from Related Parties - Due after one yearStandard Finance (Pvt) Ltd. - - 738,580 199,484Ishara Traders (Pvt) Ltd. - 28,665 - - - 28,665 738,580 199,484

37 Accounts Payable & Accrued ExpensesAccounts Payable 2,376,669 1,389,292 1,829,746 987,045Accrued Expenses 197,588 204,787 131,889 168,641VAT Payable 18,151 14,001 - 3,550Turnover Tax Payable 1,105 1,105 1,105 1,105WHT Payable 2,431 34,737 165 1,728Other Payables 338,251 237,178 37,476 12,438 2,934,195 1,881,100 2,000,381 1,174,507

38 Loans from Related Parties - Due within one yearIshara Traders (Pvt) Ltd. - 32,760 - -Lanka Orix Leasing Company PLC - 359 - -Browns Tours (Pvt) Ltd. - - - 5,000Browns Group Motels Ltd. - - 3,497 3,497Standard Finance (Pvt) Ltd. - - 213,673 765,802Browns Group Industries (Pvt) Ltd. - - 20,000 10,000Browns Investments PLC - - 85,821 507,219 - 33,119 322,991 1,291,518


Group Company

As at 31st March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

39 Amounts due to Related PartiesFree Lanka Trading Company Ltd. 630 545 - -Free Lanka Capital Holdings PLC 25,625 744 - -Cricket Club Café 2 2 - -Engineering Services (Pvt) Ltd. - 3,527 - -Galoya Plantations (Pvt) Ltd. 24,991 23,731 - -Perpetual Holdings (Pvt) Ltd. 165,363 165,363 - -Associated Battery Manufacturers (Cey) Ltd. 72,573 109,615 - -Masons Mixture Ltd. 764 764 - -Taprobane Securities (Pvt) Ltd. - 3 - -Taprobane Holdings PLC - 4,500 - -Taprobane Fund Management Ltd. - 245 - 245Sierra Civil Engineering (Pvt) Ltd. 328 - - -Ishara Traders (Pvt) Ltd. 18 - - -Taprobane Plantations Ltd. 7,198 - - -ARRC Capital ( Pvt) Ltd. 350 - - -The Hatton Transport & Agency Co. (Pvt) Ltd. - - 16,697 17,941Klevenberg (Pvt) Ltd. - - - 55,804Browns Group Motels Ltd. - - 5,721 5,682Browns Battery (Pvt) Ltd. - - - 66Browns Motors (Pvt) Ltd. - - 4,696 4,721Browns Capital (Pvt) Ltd. - - 49,742 50,000Browns Health Care (Pvt) Ltd. - - 155,614 175,000Browns Real Estates (Pvt) Ltd - - 50,000 - 297,842 309,039 282,470 309,459

40 Income Tax PayableBalance at the beginning of the year 158,148 36,100 103,316 129Provision for the year 264,590 240,818 131,414 129,386ESC Recoverable (14,755) (33,143) - (18,955)WHT Recoverable (2,701) (5,575) (90) (2,064)Under/ (Over) Provision during prior year (2,456) - 3,000 -Transfers (7,882) - - -Payments made during the year (258,980) (72,197) (178,077) (5,179)On Disposal of Joint Venture - (7,855) - -Balance at the end of the year 135,964 158,148 59,563 103,317

41 Net Assets per ShareEquity Attributable to Equity holders of the Company (Rs.000) 14,345,599 15,191,872 8,029,957 9,616,444Weighted Average Number of Ordinary Shares in Issue (‘000) 70,875 70,875 70,875 70,875Net Assets per Share (Rs.) 202.41 214.35 113.30 135.68



42 Related Party Disclosures42.1 The Directors of Brown & Company PLC are also the Directors of the following related companies:

Name of the

Director

Mrs. R.L Nanayakkara √ √ √ √ √ √ - √ √ √ - √ √ - √ √ √ √ √ √ √ √ - - - - √ √ - - - -Mr.N.M Prakash √ - √ √ √ √ √ √ √ √ √ √ √ - √ √ √ √ √ √ √ √ √ - √ √ √ √ - - - -Mr.R.N Asirwatham* √ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Mr.S.V Somasunderam √ - √ √ √ √ √ √ √ √ √ √ √ - √ - √ √ √ - √ √ √ - - - √ √ - - - -Mr.A.L Devasurendra √ - - - ++ - - - - - - - - - - - - - √ - - ++ √ - - - ++ ++ √ - - -Mr.I.C Nanayakkara √ √ + + + + + + + + + + + + + - - - √ - - + - - - - + + √ - - -Mr.H.P.J De Silva √ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -**Mr. W.D.K. Jayawardena √ √ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -**Mrs. K.U. Amarasinghe √ √ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - + Alternate Director to Mrs. R. N. A. Nanayakkara * (Resigned w.e.f. 10/05/2012)++ Alternate Director to Mr. R. T. Devasurendra ** appointed w.e.f 24/07/2012

Name of the Company Nature of the Relationship

Brown & Company PLC (BCPLC) Parent Lanka Orix Leasing Company PLC (LOLCPLC) Ultimate ParentBrowns Group Industries (Pvt) Ltd. (BGIPL) SubsidiaryBrowns Tours (Pvt) Ltd. (BTPL) SubsidiaryStandard Finance (Pvt) Ltd. (SFPL) SubsidiaryThe Hatton Transport & Agency Co. (Pvt) Ltd. (HTACPL) SubsidiarySnowcem Products Lanka (Pvt) Ltd. (SPLPL) SubsidiaryBrowns Group Motels Ltd. (BGML) SubsidiaryC.F.T Engineering Ltd. (CFTEL) SubsidiaryB.G Air Services (Pvt) Ltd. (BGASPL) SubsidiaryKlevenberg (Pvt) Ltd. (KPL) SubsidiarySifang Lanka (Pvt) Ltd. (SLPL) SubsidiarySifang Lanka Trading (Pvt) Ltd. (SLTPL) SubsidiaryBrowns Motors (Pvt) Ltd. (BMPL) SubsidiaryWalker & Greig (Pvt) Ltd. (WGPL) SubsidiaryBrowns Investments PLC (BIPLC) SubsidiaryBrowns Industrial Park Ltd.(Formerly known as East West Textiles Ltd.) (BIPL) SubsidiaryBrowns Health Care (Pvt) Ltd (BHCPL) SubsidiaryBrowns Capital (Pvt) Ltd (BCPL) SubsidiaryI.G. Browns Rubber Industries (Pvt) Ltd. (IGBRIPL) SubsidiaryBrowns Thermal Engineering (Pvt) Ltd. (BTEPL) SubsidiaryBrowns Real Estates (Pvt) Ltd. (BREPL) SubsidiaryAssociate Battery Manufacturers (Cey) Ltd. (ABM(C)L) AssociateGaloya Plantations (Pvt) Ltd. (GPPL) AssociateMelfort Green Teas (Pvt) Ltd. (MGTPL) AssociateLOLC Lesuire Ltd. (LOLCLPL) AssociateVirginia International Investments Ltd. (VIIL) AssociateTaprobane Plantations Ltd. (TPPL) AssociateRain Forest Eco Lodge (Pvt) Ltd. (RFELPL) AssociateGaloya Holdings (Pvt) Ltd. (GHPL) Joint VentureRoyal Fernwood Porcelain Ltd. (RFPL) Sub-SubsidiaryExcel Global Holdings (Pvt) Ltd. (EGHPL) Sub-SubsidiarySamudra Beach Resorts (Pvt) Ltd. (SBRPL) Sub-SubsidiaryAjax Engineers (Pvt) Ltd. (AEPL) Sub-SubsidiaryTaprobane Capital (Pvt) Ltd. (TCPL) Sub-SubsidiaryFree Lanka Capital Holdings PLC (FLCHPLC ) Sub-SubsidiaryFree Lanka Capital (Pvt) Ltd. (FLCPL ) Sub-SubsidiaryFree Lanka Trading Company (Pvt) Ltd. (FLTCPL) Sub-SubsidiaryFree Lanka Teas (Pvt) Ltd. (FLTPL) Sub-SubsidiaryMasons Mixture Ltd. (MML) Other AffiliateEngineering Services (Pvt) Ltd. (ESPL) Other AffiliateSeylan Bank PLC (SBPLC) Other AffiliateTaprobane Securities (Pvt) Ltd. (TSPL ) Other AffiliateTaprobane Fund Management Ltd. (TFML) Other AffiliateTaprobane Holdings PLC (THPLC) Other AffiliateCricket Club Café (CCC) Other Affiliate

BCP

LC

LOLC

PLC

BG

IPL

BTP

L

SFPL

HTA

CPL

SPLP

L

BG

ML

CFTE

L

BG

ASP

L

KPL

SLPL

SLTP

L

BM

PL

WG

PL

BIP

LC

BIP

L

BH

CPL

BCP

L

IGB

RIPL

BTE

PL

BRE

PL

AB

M(C

)L

GPP

L

GH

PL

RFPL

MM

L

ESPL

SBPL

C

TSPL

TFM

L

THPL

C


42.2 Related Party TransactionsThe Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard 30 “Related Party Disclosures (Revised 2005)”, the details of which are reported below. The pricing applicable to such transactions is based on the assessment of the Risk and Pricing model of the Company, and is comparable with what is applied to transactions between the Company and its unrelated customers.

42.3 Transactions of Brown & Company PLC with Related Companies42.3.1 Share of Group OverheadsThe Company has incurred Group Expenses on behalf of the Related companies during the year on reimbursement basis as follows;

Group

Name of the Company Overheads

Rs. 000

Browns Group Industries (Pvt) Ltd. 10,494Sifang Lanka (Pvt) Ltd. 11,787Browns Health Care (Pvt) Ltd. 32,913Masons Mixture Ltd. 608Browns Thermal Engineering (Pvt) Ltd. 5,265Klevenberg (Pvt) Ltd. 7,412Engineering Services (Pvt) Ltd. 595Standard Finance (Pvt) Ltd. 453BG Air Services (Pvt) Ltd. 521Browns Group Motels Ltd. 171Browns Tours (Pvt) Ltd. 129Browns Investments PLC 1,777Free Lanka Capital Holdings PLC -Snowcem Products Lanka (Pvt) Ltd. 2,723Browns Motors (Pvt) Ltd. 25C.F.T. Engineering Ltd. 51Browns Industrial Park Ltd. 93Royal Fernwood Porcelain Ltd. 91The Hatton Transport & Agency Co. (Pvt) Ltd. 51Browns Capital (Pvt) Ltd. 8Galoya Holdings (Pvt) Ltd. 72Browns Real Estates (Pvt) Ltd. 300Samudra Beach Resorts (Pvt) Ltd. 5



42.3 Transactions of Brown & Company PLC with Related Companies Contd.42.3.2 Loans granted to Related CompaniesThe Company has granted and recovered the following Loan balances during the year:

Loan Interest Loan

Granted Charged Recovered

Name of the Company Rs. 000 Rs. 000 Rs. 000

Masons Mixture Ltd. 4,800 - 11,500Galoya Plantations (Pvt) Ltd. 100,000 42,426 -Browns Investments PLC 275,000 2,612 396,273BG Air Services (Pvt) Ltd. - - -Sifang Lanka (Pvt) Ltd. 50,000 317 50,000Engineering Services (Pvt) Ltd. 26,000 - -Royal Fernwood Porcelain Ltd. 40,000 - 13,200

42.3.3 Loans obtained from Related CompaniesThe Company has obtained and settled the following loan balances with the interest during the year.

Loan Interest Loan Interest

Obtained Charged Repaid Paid

Name of the Company Rs. 000 Rs. 000 Rs. 000 Rs. 000

Browns Group Motels Ltd. - 210 - -Standard Finance (Pvt) Ltd. 510,000 116,093 535,784 103,341Browns Tours (Pvt) Ltd. 5,000 916 5,000 -Browns Group Industries (Pvt) Ltd. 20,000 356 10,000 356Browns Investments PLC 520,000 11,500 945,625 7,274BG Air Services (Pvt) Ltd. - 2,105 - -Browns Thermal Engineering (Pvt) Ltd. 20,000 1,214 20,000 1,214

42.3.4 Trading TransactionsThe Company has engaged in the following trading transactions with Related Companies under the normal commercial terms and conditions:

2011/2012 2010/2011

Name of the Company Sales Purchases Sales Purchases

Rs. 000 Rs. 000 Rs. 000 Rs. 000

Associated Battery Manufacturers (Cey) Ltd. 153 1,538,385 17,737 1,639,867Browns Thermal Engineering (Pvt) Ltd. 38 1,619 430 13,189Engineering Services (Pvt) Ltd. - - 2,378 7,310Browns Group Industries (Pvt) Ltd. 1,407 3 649 137Browns Tours (Pvt) Ltd. - - 95 -B.G Air Services (Pvt) Ltd. 4,006 - 245 -Walker & Greig (Pvt) Ltd. - 14,631 - 1,297Standard Finance (Pvt) Ltd. 190 - - -Browns Industrial Park Ltd. 185 - - -Klevenberg (Pvt) Ltd. 3,995 310 - -Sifang Lanka (Pvt) Ltd. 15,743 53,401 - -


42.3.5 Management FeeThe Company has provided Management Consultation to its Related Companies and has charged Management Fees as follows:

2011/2012 2010/2011

Name of the Company Rs. 000 Rs. 000

Browns Group Industries (Pvt) Ltd. 7,000 7,000Sifang Lanka (Pvt) Ltd. 7,000 7,000Standard Finance (Pvt) Ltd. 5,000 5,000Browns Thermal Engineering (Pvt) Ltd. 5,000 5,000Browns Investments PLC 5,000 5,000

42.3.6 The Company has paid an interim dividend of Rs.1.32 per share to its shareholders during the year, including the following related companies:

2011/2012 2010/2011


Engineering Services (Pvt) Ltd. 21,897 21,897Masons Mixture Ltd. 18,127 18,127Lanka Orix Leasing Company PLC 4,160 4,160Mutugala Estates (Pvt) Ltd. 3,941 3,941Pathregalla Estates (Pvt) Ltd. 2,589 2,589Taprobane Holdings PLC 531 531

42.3.7 The Company recognised dividends Income from the following related companies during the year:

2011/2012 2010/2011


Standard Finance (Pvt) Ltd. 47,683 464,116Browns Group Industries (Pvt) Ltd. 5,031 4,072Seylan Bank PLC - 11,175B.G Air Services (Pvt) Ltd. 29 -

42.3.8 The Company has made the following new investments during the year:

No of % Holding Value of

Shares as at Investment

31.03.2012 Rs 000

Klevenberg (Pvt) Ltd. 2,736,000 16% 62,700Browns Investments PLC 27,616,400 0.76% 698,698Browns Real Estates (Pvt) Ltd. 5,000,000 100% 50,000



42.4 Transactions Between Related Companies42.4.1 Standard Finance (Pvt) Ltd. (SFPL) - Subsidiarya) SFPL has earned the following income from the Group Companies during the year:

Secretarial Fees Dividend Income Others Rs. 000 Rs. 000 Rs. 000

Browns Investments PLC - - 500Browns Group Industries (Pvt) Ltd. 65 700 -Browns Tours (Pvt) Ltd. 60 - -Browns Thermal Engineering (Pvt) Ltd. 75 - -Engineering Services (Pvt) Ltd. 60 - -Masons Mixture Ltd. 65 - -Browns Group Motels Ltd. 5 - -IG Browns Rubber Industries (Pvt) Ltd. 60 - 407The Hatton Transport & Agency Co. (Pvt) Ltd. 30 - -Snowcem Products Lanka (Pvt) Ltd. 10 - -Associated Battery Manufacturers (Cey) Ltd. 150 - -Browns Industrial Park Ltd. - - 34Browns Health Care (Pvt) Ltd. - - 125

b) SFPL has charged the following interest amounts from the Group Companies during the year. Loan Interest Rs. 000 Rs. 000

Browns Investments PLC - 61,159Engineering Services (Pvt) Ltd. - 776Klevenberg (Pvt) Ltd. - 9,726C.F.T. Engineering (Pvt) Ltd. - 8,021Taprobane Fund Management (Pvt) Ltd. - 510Taprobane Holdings PLC 125,000 8,095Lexinton Holdings (Pvt) Ltd. 260,000 6,737Royal Fernwood Porcelain Ltd. - 6,000

c) SFPL has made the following new investments in the Group Companies during the year.

No of Shares % Rs. 000

Browns Health Care (Pvt) Ltd. 2,500,000 12.5% 25,000IG Browns Rubber Industries (Pvt) Ltd. 30,000 6.66% 3,370

42.4.2 Browns Group Industries (Pvt) Ltd. (BGIL) - Subsidiarya) BGIL has earned the following income from group companies during the year.

Rent Management Dividend Overheads Others Fees Income Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Browns Thermal Engineering (Pvt) Ltd. 1,800 1,200 - 1,791 390BG Air Services (Pvt) Ltd. - - 29 - -

b) BGIL has obtained and fully settled a Rs. 10 Mn loan from Browns Thermal Engineering (Pvt) Ltd. during the year.

42.4.3 Browns Thermal Engineering (Pvt) Ltd. (BTEPL) - Subsidiarya) BTEPL has earned 1.1Ms hiring income from Browns Group Industries (Pvt) Ltd. during the year.

b) BTEPL has granted a Rs. 10 Mn loan to Browns Group Industries (Pvt) Ltd. and fully recovered this during the year.

42.4.4 Browns Tours (Pvt) Ltd. (BTPL) - SubsidiaryBTPL has earned the following income from the Group Companies during the year: Rent Dividend Income Rs. 000 Rs. 000

BG Air Services (Pvt) Ltd. 924 29

BTL has granted a loan amount of Rs. 7 Mn to BG air Services (Pvt) Ltd. and recovered Rs. 4.5 Mn during the year.


42.4 Transactions Between Related Companies Contd.42.4.5 Browns Investments PLC (BIPLC)- Subsidiary

Name of Related Company Relationship Description of Transaction

Free Lanka Capital Subsidiary of a BIPLC has fully settled share sell down expenses amounting to Holdings PLC (FLCHPLC) Joint Venture Rs.577,304 during the year.

BIPLC has earned Rs.600,000 Dividend income from FLCHPLC during the year.

Standard Finance (Pvt) Ltd.(SFPL) Subsidiary BIPLC has repaid the outstanding loan balance amounting to Rs.64,735,822 during the year.

BIPLC has incurred an interest expense of Rs.61,159,251 (2010/2011 - Rs.50,966,347) on loans obtained from SFPL.

BIPLC has received advances amounting to Rs.275,000,000 from SFPL and it has been settled in full during the year.

BIPLC has repaid outstanding Inter company balance amounting to Rs.45,046,253 to SFPL during the year.

Royal Fernwood Porcelain Ltd. Sub Subsidiary BIPLC has given a loan of Rs.56,200,000 to RFPL. (2010/2011- (RFPL) Rs. 10,000,000) and has earned an interest income of Rs.4,871,800 (2010/2011 - Rs.242,603) during the year.

Lexinton Holding Ltd.(LHL) Other Affiliate BIPLC has given a loan of Rs.1,156,260,273 to LHL and recovered Rs.818,946,115 during the year.

BIPLC has earned an interest income of Rs. 107,923,245 from LHL. (2010/2011 -Rs.328,762) during the year.

Excel Global Holdings Sub Subsidiary BIPLC has incurred expenses of Rs.147,325 on behalf of EGHPL during (Pvt) Ltd.(EGHPL) the year.

Millennium Development Sub-subsidiary BIPLC has incurred expenses of Rs.2,111,940 on behalf of MDPL during (Pvt) Ltd.(MDPL) the year.

BIPLC has granted a loan to MDPL amounting to Rs.20,830,000 and recovered Rs.5,963,766 during the year. The Interest income earned by BIPLC is Rs.963,766 for the current year.

Taprobane Capital (Pvt) Ltd. (TCPL) Sub Subsidiary BIPLC has given a loan to TCPL amounting to Rs.65,813,922 during the year and earned Interest income amounting to Rs.1,678,632.

Samudra Beach Resorts Sub Subsidiary BIPLC has incurred expenses of Rs. 34,642 on behalf of SBRPL during (Pvt) Ltd.(SBRPL) the year.



42.4.6 Free Lanka Capital Holdings PLC (FLCHPLC) - Joint Venture

Name of Group Company Relationship Description of Transaction Maturata Plantations Ltd.(MPL) Subsidiary of a FLCHPLC has granted a loan to MPL amounting to Rs.115,000,000 and Joint Venture has recovered Rs.31,573,200 during the year. FLCHPLC has earned Rs.9,791,809 of Interest income.

FLCHPLC has issued a Corporate Guarantee to Lanka Orix Leasing Co. PLC for a sum of Rs. 275 Mn for the facilities obtained by MPL and FLCHPLC has received a Counter Guarantee from MPL for Rs. 275 Mn with the same terms and conditions.

Free Lanka Management Subsidiary of a FLCHPLC has earned Dividend income amounting to Rs.63,205,674 Co. (Pvt) Ltd.(FLMCPL) Joint Venture (2010/2011 - Rs.59,721,750) from FLMCPL.

Free Lanka Capital Properties Subsidiary of a FLCHPLC has granted an advance amounting to Rs.290,000,000 (Pvt) Ltd.(FLCPL) Joint Venture (2010/2011 - Rs.56,674,000) to FLCPL.

FLCPL has issued 35,000,000 Ordinary Shares to FLCHPLC at Rs. 10 per share in the current year against the advances. (2010/2011- 10,000 Ordinary Shares at Rs. 10 each).

FLCHPLC has settled operational expenses and financial charges amounting to Rs.10,396,845 on behalf of the FLCPL (2010/2011 - Rs. 26,000).

Pussellawa Plantations Subsidiary of a FLCHPLC has settled a Short Term Loan amounting to Rs.125,000,000 Ltd. (PPL) Joint Venture to PPL on behalf of Free Lanka Capital Properties (Pvt) Ltd.

Free Lanka Power Subsidiary of a FLCHPLC has paid operational expenses amounting to Rs.450,729 to FLP2PL 2 Co.(Pvt) Ltd. (FLP2PL) Joint Venture during the year.

Free Lanka Power Subsidiary of a FLCHPLC has paid operational expenses amounting to Rs.10,895,778 to 3 Co.(Pvt) Ltd. (FLP3PL) Joint Venture FLP3PL during the year.

The Tea Leaf Resort Holdings Subsidiary of a FLCHPLC has granted an advance of Rs.2,500,000 to (Pvt) Ltd. (TTLRHPL) Joint Venture TLRHL during the year.

Lanka Orix Finance Co. PLC (LOFC) Other Affiliate FLCHPLC has earned a Gross interest income of Rs. 25,845,387 for the Short term deposits made in LOFC during the year.

Commercial Leasing & Other Affiliate FLCHPLC has earned a Gross interest income of Rs. 11,200,235 for the Short Finance Ltd. (CLFL) term deposits made in CLFL during the year.

Lanka Orix Leasing Co. PLC (LOLCPLC) Other Affiliate FLCHPLC has earned a Gross interest income of Rs.14,687,524 for the Short term deposits made in LOLCPLC during the year.

LOLC Factors Ltd. (LOLCFL) Other Affiliate FLCHPLC has earned a Gross interest income of Rs.10,430,340 for the Short term deposits made in LOLCFL during the year.


42.5 There are no related party transactions which need to be disclosed in accordance with the continuing listing requirements under the section 7 of Colombo Stock Exchange.

42.6 Compensation to Key Management PersonnelAccording to Sri Lanka Accounting Standard 30 (Revised 2005) “Related Party Disclosures”, Key management personnel are those having authority and responsibility for planning, directing and controlling activities of the entity. Accordingly, the Board of Directors (including executive and Non-executive Directors) have been classified as Key Management Personnel of the Company. Emoluments paid to Key Management Personnel have been disclosed in Note 4.

This note should be read in conjunction with Note 19, 23- Loan to Related Companies, Note 24- Amounts due from Related Companies, Note 36, 38- Loan from Related Companies and Note 39- Amounts due to Related Companies.

43 Capital Commitments and Contingent Liabilities43.1 Capital CommitmentsNo capital commitments that could have a material impact on the financial position of the company or which would lead to a disclosure in the Financial Statements for the year ended 31st March 2012.

43.2 Contingent LiabilitiesThe Company and the Group has entered in to the under mentioned arrangements for the Group Companies:a. A corporate guarantee has been issued to Hatton National Bank PLC for a sum of Rs. 55 Mn for the Banking facilities obtained by Masons

Mixture Ltd.b. A corporate guarantee has been issued to Hatton National Bank PLC for a sum of Rs. 10 Mn for the Banking facilities obtained by

Klevenberg (Pvt) Ltd.c. A corporate guarantee has been issued to Bank of Ceylon for a sum of Rs. 257.23 Mn for the Banking facilities obtained by Browns

Industrial Park Ltd.d. A corporate guarantee has been issued to The Hongkong & Shanghai Banking Corporation Ltd. for a sum of Rs. 24 Mn, for the Banking

facilities obtained by Associated Battery Manufactures (Cey) Ltd.e. A corporate guarantee has been issued to Lanka Orix Factors Ltd. for a sum of Rs. 50 Mn for the Banking facilities obtained by Galoya

Plantations (Pvt) Ltd.f. A corporate guarantee has been issued to Lanka Orix Leasing Company PLC for cheque discounting facilities obtained by Engineering

Services (Pvt) Ltd.g. Debenture issued by Maturata Plantations Ltd. on 19th June 1997 to the value of Rs. 150 Mn has been converted to ordinary shares on

22nd June 2002 as stipulated in the agreement. The basis and/or ratio of conversion has been contested by the Golden Shareholder in the year 2008.

h. Forest Department has imposed Rs. 50.8 Mn as the stumpage payable to the Government by Pussellawa Plantations Ltd. for harvesting of Forest Department’s Pinus Trees at Delta Estate by the Timber Lake Company. However, the Company has requested Forest Department to re-consider the stumpage calculation, as the said fee is more than the market value of the Timber and is not keeping in line with the Supreme Court judgement. Therefore, the amount of liability and the date of liability are uncertain and will depend on the response of the Forest Department.



43.3 Litigation and ClaimsThere are no material litigations or claims that could have a material impact on the financial position of the Company, or which would lead to a disclosure in the Financial Statements.

44 Comparative InformationComparative information has been reclassified to conform to the current year’s classification and presentation where necessary.

46 Number of EmployeesThe number of employees of the Group as at end of the year was 724 (2011 - 653 ). The number of employees of the Company at end of the year was 535 (2011 - 466).

47 Events after the Balance Sheet DateSubsequent to the Balance Sheet date, no circumstances have arisen which would require adjustments to or disclosure in the Financial Statements.


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222

5,25

5 7,

632

1,92

2 2,

618

1,00

4 6

1,20

7,08

3 1,

056,

785

4,61

1,03

7 6,

086,

893

Inta

ngib

le A

sset

s 14

,745

21

,825

29

8 39

4 18

3 30

5 -

- 48

,444

2,

863

- -

63,6

70

25,3

87Ca

pita

l Wor

k in

Pro

gres

s 64

,684

-

- -

- -

- -

63,7

05

20,3

37

- -

128,

389

20,3

37Ti

mbe

r an

d Ru

bber

Sto

ck

- -

- -

- -

- -

2,06

2,60

9 1,

714,

343

- -

2,06

2,60

9 1,

714,

343

Inte

r Co

mpa

ny L

endi

ng

512,

200

456,

183

- -

- -

753,

828

432,

098

- -

- -

1,26

6,02

8 88

8,28

1Se

gmen

t N

on-C

urre

nt A

sset

s 8,

777,

908

9,96

0,22

3 10

0,55

4 97

,438

10

,683

13

,308

1,

044,

306

538,

436

8,68

5,83

6 3,

538,

863

1,88

4,66

8 1,

415,

282

20,5

03,9

56

15,5

63,5

50

Inve

stm

ents

in E

quity

Acc

ount

ed In

vest

ees

- -

198,

441

191,

117

-

- -

205,

683

355,

008

1,20

5,02

0 89

7,17

3 1,

609,

145

1,44

3,29

8In

vest

men

ts in

Sub

sidi

arie

s

1,

534,

580

1,25

4,22

8In

vest

men

ts in

Join

t Ve

ntur

e

10

,000

10

,000

Def

erre

d Ta

x A

sset

18

3,61

1 24

5,51

8G

oodw

ill

104,

721

40,8

53El

imin

atio

ns/

Adj

ustm

ents

(2

,320

,941

) (1

,682

,811

)To

tal N

on-C

urre

nt A

sset

s

21

,625

,072

16

,874

,634

Inve

ntor

ies

1,92

9,49

1 69

0,95

2 41

7,19

8 32

7,59

8 -

- -

- 34

6,98

5 21

5,41

5 -

- 2,

693,

674

1,23

3,96

5Tr

ade

and

Oth

er R

ecei

vabl

e 1,

590,

980

1,19

1,09

5 25

0,36

2 16

6,52

0 35

,247

15

,279

41

,311

5,

197

197,

813

95,8

88

21,0

87

- 2,

136,

799

1,47

3,97

9In

ter

Com

pany

Len

ding

69

1,24

8 52

4,06

7 44

,531

17

,661

9,

339

11,6

56

1,45

5,89

7 1,

630,

356

(342

,082

) 17

9,52

3 1,

173,

474

617,

791

3,03

2,40

8 2,

981,

054

Dep

osits

and

Pre

paym

ents

13

4,51

6 18

2,23

4 2,

883

3,30

0 1,

578

1,54

8 2,

615

9,50

0 14

8,70

5 28

,905

-

96,3

11

290,

298

321,

797

Shor

t Te

rm In

vest

men

ts

1,71

9,67

2 1,

079,

354

15,0

00

21,9

78

37,9

93

39,4

16

48,4

36

328,

465

556,

005

78,3

12

2,01

1,99

0 4,

000,

539

4,38

9,09

5 5,

548,

065

Cash

at

Bank

and

in H

and

227,

811

749,

651

70,5

03

66,1

52

4,03

2 3,

989

50,8

46

7,96

4 10

0,25

8 53

3,00

0 38

,360

3,

734

491,

811

1,36

4,49

0Se

gmen

t Cu

rren

t A

sset

s 6,

293,

718

4,41

7,35

3 80

0,47

7 60

3,20

9 88

,189

71

,888

1,

599,

105

1,98

1,48

2 1,

007,

684

1,13

1,04

3 3,

244,

911

4,71

8,37

5 13

,034

,085

12

,923

,349

Tax

Reco

vera

ble

124

124

Elim

inat

ions

/ A

djus

tmen

ts

(1,7

11,0

42)

(2,6

07,9

41)

Tota

l Cur

rent

Ass

ets

11,3

23,1

67

10,3

15,5

32To

tal A

sset

s

32

,948

,239

27

,190

,166

Inte

rest

Bea

ring

Borr

owin

gs

1,65

0,76

9 88

6,43

6 -

- -

- -

- 56

8,30

6 25

3,63

6 12

8,00

0 -

2,34

7,07

5 1,

140,

072

Retir

emen

t Be

nefit

Obl

igat

ions

70

,766

49

,855

5,

968

3,54

8 2,

820

2,35

8 11

76

40

2,69

7 37

7,78

1 -

- 48

2,26

1 43

3,61

7D

efer

red

Inco

me

- -

- -

- -

- -

178,

883

157,

727

- -

178,

883

157,

727

Inte

r Co

mpa

ny B

orro

win

g 1,

138,

518

614,

705

- -

- -

- -

- 73

8,29

9 -

- 1,

138,

517

1,35

3,00

4Se

gmen

t N

on-C

urre

nt L

iabi

litie

s 2,

860,

053

1,55

0,99

6 5,

968

3,54

8 2,

820

2,35

8 11

76

1,

149,

886

1,52

7,44

3 12

8,00

0 -

4,14

6,73

6 3,

084,

420

Def

erre

d Ta

x Li

abili

ty

16,5

67

33,5

17El

imin

atio

ns/

Adj

ustm

ents

(1

,138

,517

) (1

,324

,339

)To

tal N

on-C

urre

nt L

iabi

litie

s

3,

024,

786

1,79

3,59

8

Acc

ount

s Pa

yabl

e an

d A

ccru

ed E

xpen

ses

2,03

3,20

1 1,

201,

190

398,

073

301,

477

26,1

87

15,5

44

9,56

4 61

,582

42

7,00

2 25

6,44

8 40

,168

44

,858

2,

934,

195

1,88

1,10

0In

tere

st B

earin

g Bo

rrow

ings

due

with

in o

ne y

ear

621,

292

353,

567

- -

- -

- -

110,

916

44,3

02

384,

000

- 1,

116,

208

397,

868

Oth

er P

ayab

les

770,

683

1,77

8,39

2 15

6,49

5 10

6,77

2 40

,824

35

,795

10

6,10

3 27

,682

17

0,47

6 28

4,58

9 61

8,41

1 -

1,86

2,99

3 2,

233,

230

Shor

t Te

rm In

tere

st B

earin

g Bo

rrow

ings

1,

514,

708

507,

390

- -

- -

- -

125,

603

16,3

80

- -

1,64

0,31

1 52

3,77

0Ba

nk O

verd

raft

19

6,63

1 54

,893

5

1 -

- -

- 81

,973

24

,554

-

- 27

8,60

9 79

,449

Segm

ent

Curr

ent

Liab

ilitie

s 5,

136,

515

3,89

5,43

2 55

4,57

3 40

8,25

0 67

,011

51

,339

11

5,66

7 89

,264

91

5,97

0 62

6,27

3 1,

042,

579

44,8

58

7,83

2,31

6 5,

115,

416

Inco

me

Tax

Paya

ble

135,

964

158,

148

Elim

inat

ions

/ A

djus

tmen

ts

(

1,53

2,00

1) (

1,86

8,68

4)To

tal C

urre

nt L

iabi

litie

s

6,

436,

279

3,40

4,88

0To

tal L

iabi

litie

s

9,

461,

065

5,19

8,47

8

Tota

l Seg

men

t A

sset

s 14

,380

,377

13

,853

,509

85

6,49

9 68

2,98

6 89

,533

73

,540

1,

187,

514

889,

562

10,0

35,6

02

4,49

0,38

3 3,

956,

105

5,51

5,86

6 33

,538

,040

28

,486

,899

Tota

l Seg

men

t Li

abili

ties

7,99

6,56

8 5,

446,

427

560,

541

411,

798

69,8

31

53,6

97

115,

677

89,3

40

2,06

5,85

6 2,

153,

716

1,17

0,57

9 44

,858

11

,979

,052

8,

199,

836



48

Segm

ent I

nfor

mat

ion

Cont

d.48

.2

Busi

ness

Seg

men

ts

Trad

ing

Man

ufac

turi

ng

Trav

el &

Tou

rs

Fina

nce

Plan

tati

on

Inve

stm

ents

G

roup

Tot

al

For

the

year

end

ed 3

1st

Mar

ch

2012

20

11

2012

20

11

2012

20

11

2012

20

11

2012

20

11

2012

20

11

2012

20

11

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Rs

. 000

Reve

nue

11,1

95,3

85

8,47

3,17

6 1,

232,

506

1,24

5,56

0 24

,530

20

,960

23

4,49

9 15

2,64

9 1,

809,

341

1,77

3,07

6 21

2,38

6 1,

243,

001

14,7

08,6

47

12,9

08,4

22In

ter

Segm

ent

Reve

nue

(36,

739)

(4

,907

) (5

9,07

1)

(17,

211)

(4

,257

) (2

,331

) (1

93,8

95)

(135

,522

) -

- -

(653

,349

) (2

93,9

62)

(813

,321

)

Segm

ent

Reve

nue

11,1

58,6

46

8,46

8,26

9 1,

173,

435

1,22

8,34

9 20

,273

18

,629

40

,604

17

,127

1,

809,

341

1,77

3,07

6 21

2,38

6 58

9,65

2 14

,414

,685

12

,095

,101

Segm

ent

Resu

lts

1,03

1,07

8 99

2,13

4 10

5,41

9 67

,326

3,

208

4,41

0 18

7,36

6 1,

222,

544

163,

675

782,

702

(128

,100

) 1,

348,

289

1,36

2,64

6 4,

417,

405

Elim

inat

ions

/ U

nallo

cate

d (1

02,5

78)

141,

140

(43,

908)

(2

3,17

4)

(157

) (2

,332

) (1

93,8

96)

(135

,522

) -

- (1

1,50

0)

(653

,350

) (3

52,0

39)

(673

,236

)Fi

nanc

e Co

st

(257

,877

) (1

52,7

67)

(5,8

67)

(7,1

47)

(2,3

39)

(904

) -

- (1

05,6

48)

(52,

753)

(8

4,73

0)

(78,

034)

(4

56,4

61)

(291

,605

)Ch

ange

in F

air

Valu

e of

Inve

stm

ent

Prop

ertie

s 1,

224

1,71

5 -

- -

- -

- 25

0,00

0 -

- -

251,

224

1,71

5Sh

are

of P

rofit

of

Equi

ty A

ccou

nted

Inve

stee

s 51

,233

18

,488

-

- -

- -

- (1

48,7

82)

131,

059

- -

(97,

549)

14

9,54

7N

egat

ive

Goo

dwill

-

- -

- -

- -

- -

- 2,

671,

483

- 2,

671,

483

-Pr

ofit

befo

re T

axat

ion

723,

080

1,00

0,71

0 55

,644

37

,005

71

2 1,

174

(6,5

30)

1,08

7,02

3 15

9,24

5 86

1,00

9 2,

447,

153

616,

905

3,37

9,30

4 3,

603,

826

Taxa

tion

(184

,261

) (2

68,3

57)

(23,

070)

(4

6,88

1)

(404

) (1

,609

) (3

2,33

4)

26,1

40

(30,

800)

(2

9,88

6)

(48,

808)

(1

,645

) (3

19,6

77)

(322

,238

)Pr

ofit

for

the

Year

53

8,81

9 73

2,35

3 32

,574

(9

,876

) 30

8 (4

35)

(38,

864)

1,

113,

163

128,

445

831,

122

2,39

8,34

5 61

5,26

0 3,

059,

627

3,28

1,58

8

Att

ribut

able

to:

Equi

ty h

olde

rs o

f th

e Co

mpa

ny

530,

377

758,

570

14,8

26

(16,

965)

30

8 (4

35)

(38,

864)

1,

113,

163

207

166,

536

670,

337

167,

351

1,17

7,19

2 2,

188,

219

Min

ority

Inte

rest

8,

442

(26,

217)

17

,748

7,

089

- -

- -

128,

238

664,

586

1,72

8,00

8 44

7,90

9 1,

882,

435

1,09

3,36

9

538,

819

732,

353

32,5

74

(9,8

76)

308

(435

) (3

8,86

4)

1,11

3,16

3 12

8,44

5 83

1,12

2 2,

398,

345

615,

260

3,05

9,62

7 3,

281,

588

Dep

reci

atio

n fo

r th

e Ye

ar

111,

448

74,9

86

8,10

6 11

,596

93

7 90

9 28

,563

1,

995

88,8

48

68,8

38

- -

237,

902

158,

324

Purc

hase

of

Prop

erty

, Pla

nt a

nd E

quip

men

t 32

8,62

8 82

,953

6,

642

4,58

4 81

1 58

6 20

0,79

7 41

,430

27

7,10

8 17

4,86

3 31

9,08

8 31

3,49

7 1,

133,

073

617,

912

Prov

isio

n fo

r G

ratu

ity a

nd r

elat

ed E

xpen

ses

23,1

05

21,3

64

1,16

2 5,

070

603

427

10

233

39,0

75

84,3

00

- -

63,9

54

111,

393


Economic Value Statement

Trad

ing

Man

ufac

turi

ng

Trav

els

& T

ours

Fi

nanc

e Pl

anat

ion

Inve

stm

ent

Elim

inat

ions

G

roup

Tot

al

For

the

year

end

ed 3

1st

2012

20

11

2012

20

11

2012

20

11

2012

20

11

2012

20

11

2012

20

11

2012

20

11

2012

20

11

Mar

ch

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Rs.0

00

Dire

ct E

cono

mic

Val

ue

G

ener

ated

Reve

nue

11,1

95,3

85

8,47

3,17

6 1,

232,

506

1,24

5,56

0 24

,530

20

,960

23

4,49

9 15

2,64

9 1,

809,

341

1,77

3,07

6 21

2,38

6 1,

243,

001

(293

,962

) (8

13,3

21) 1

4,41

4,68

5 12

,095

,101

Inte

rest

Inco

me

46,3

44

62,2

44

2,81

7 4,

148

4,19

7 3,

019

- -

51,8

57

8,23

6 12

8,57

7 18

,081

(1

3,97

4)

(22,

915)

21

9,81

9 72

,814

Div

iden

d In

com

e 21

6,20

7 56

6,87

3 95

4 -

29

- 44

,949

23

,174

-

- -

- (1

56,2

74)

(528

,086

) 10

5,86

5 61

,961

Shar

e of

Res

ults

of

Ass

ocia

tes

51,2

33

18,4

88

- -

- -

- -

(148

,782

) 13

1,05

9 -

- -

- (9

7,54

9)

149,

547

Prof

it on

Sal

e of

Ass

ets

and

Oth

er In

com

e 43

,559

21

0,00

8 22

,452

20

,661

77

1 3,

066

1,00

6 1,

103,

748

2,75

7,66

9 50

5,85

7 50

,507

12

8,12

0 (3

1,40

5)

321,

485

2,84

4,56

0 2,

292,

944

Valu

atio

n ga

in o

n IP

1,

224

1,71

5 -

- -

- -

- 25

0,00

0 -

- -

- -

251,

224

1,71

5

11,5

53,9

53

9,33

2,50

4 1,

258,

729

1,27

0,36

9 29

,527

27

,045

28

0,45

3 1,

279,

571

4,72

0,08

6 2,

418,

228

391,

470

1,38

9,20

2 (4

95,6

15) (

1,04

2,83

8) 17

,738

,603

14,

674,

081

Econ

omic

Val

ue D

istr

ibut

edO

pera

ting

Cost

s 10

,121

,937

8,

175,

994

1,09

5,92

1 1,

144,

368

13,9

02

13,2

83

83,5

92

3,36

8 79

0,07

9 62

2,70

2 52

4,66

6 63

,933

(1

43,5

76)

(369

,602

) 12,

486,

520

9,65

4,04

7Em

ploy

ee W

ages

and

Ben

efits

28

2,43

9 21

2,42

6 48

,954

50

,188

10

,824

8,

564

451

745

891,

028

784,

655

1,67

1 -

- -

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Ten Year Summary

31st March 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Group revenue 14,414,685 12,095,101 8,952,613 6,815,976 5,796,748 5,085,390 4,513,164 3,791,168 3,344,808 3,389,543

EBIT 3,835,766 3,895,430 1,741,717 882,064 693,118 589,397 495,590 445,337 560,090 198,106

Finance Expenses (456,461) (291,605) (473,551) (418,116) (429,157) (185,160) (151,905) (163,919) (207,064) (327,724)

Share of results of Associates (97,549) 149,547 44,274 24,006 19,782 21,381 (11,217) 148,851 352,344 133,086

Profit before Tax 3,379,304 3,603,826 1,268,166 463,948 263,961 404,237 343,685 281,418 353,026 (129,618)

Tax Expense (319,677) (322,238) (120,203) (50,710) 146,189 119,542 (44,205) (50,485) (27,993) (24,423)

Profit for the year 3,059,627 3,281,588 1,147,963 413,238 410,150 523,779 299,480 230,933 325,033 (154,041)

Attributable to:

Equity holders of the Parent 1,177,192 2,188,219 1,013,665 425,597 419,237 526,258 297,592 230,197 324,388 (154,792)

Minority Interest 1,882,435 1,093,369 134,298 (12,359) (9,087) (2,479) 1,888 736 645 751

3,059,627 3,281,588 1,147,963 413,238 410,150 523,779 299,480 230,933 325,033 (154,041)

CAPITAL EMPLOYED

Stated Capital 2,005,601 2,005,601 2,005,601 2,005,601 21,101 21,101 21,000 21,000 21,000 21,000

Capital Reserves 4,159,335 6,088,023 4,495,526 2,715,232 907,023 4,733,031 2,590,534 1,322,519 1,179,448 1,215,029

Revenue Reserves 8,180,663 7,098,248 3,103,269 1,329,875 6,154,142 528,023 (153,424) 211,908 256,135 (123,834)

Share holders Fund 14,345,599 15,191,872 9,604,396 6,050,708 7,082,266 5,282,155 2,458,110 1,555,427 1,456,583 1,112,195

Minority Interest 9,141,575 6,799,816 3,853,502 3,280,220 5,611 16,265 12,807 9,733 5,784 5,139

Total Equity 23,487,174 21,991,688 13,457,898 9,330,928 7,087,877 5,298,420 2,470,917 1,565,160 1,462,367 1,117,334

Total Debt 5,388,192 2,209,243 2,372,992 3,473,014 2,245,283 1,936,774 1,344,877 1,382,588 1,623,828 2,005,287

28,875,366 24,200,931 15,830,890 12,803,942 9,333,160 7,235,194 3,815,794 2,947,748 3,086,195 3,122,621

ASSETS EMPLOYED

Property, Plant and Equipment (PP&E) 8,383,003 6,645,128 7,041,027 5,982,663 3,247,298 2,476,543 1,634,157 950,261 867,274 905,976

Non-Current Assets other than PP&E 13,242,068 10,229,505 8,347,073 6,366,473 4,425,766 3,311,798 1,424,220 1,369,475 1,495,172 1,301,707

Current Assets 11,323,167 10,315,532 3,203,089 3,357,331 3,093,472 2,743,307 1,444,521 1,104,205 1,232,084 1,327,727

Liabilities net of Debt (4,072,872) (2,989,234) (2,760,298) (2,902,525) (1,433,376) (1,296,454) (687,104) (476,193) (508,335) (412,789)

28,875,366 24,200,931 15,830,890 12,803,942 9,333,160 7,235,194 3,815,794 2,947,748 3,086,195 3,122,621

CASH FLOW

Net cash flows from

Operating activities (278,741) 1,092,451 (297,565) 734,453 (251,184) (519,410) 90,161 166,128 149,980 (284,513)

Net cash flows from / (used in)

Investing activities (4,441,286) (2,075,835) 841,490 (541,611) (46,017) 64,005 (92,232) 91,261 213,652 26,538

Net cashflows from / (used in)

Financing activities 1,861,648 4,539,133 (48,303) (376,572) 275,722 353,637 (9,617) (114,376) (68,912) (23,942)

Net increase / (decrease) in

Cash and Cash Equivalents (2,858,379) 3,555,749 495,623 (183,730) (21,479) (101,768) (11,688) 143,013 294,720 (281,916)

KEY INDICATORS

Earnings per Share (Rs.)* 16.61 30.87 14.30 6.00 5.92 7.43 4.20 3.25 4.58 (2.18)

Net Assets per Share (Rs.)** 202.41 214.35 135.51 85.37 99.93 74.53 34.68 21.95 20.55 15.69

Market Price per Share (Rs.) 155.10 289.80 87.75 18.00 925.50 630.00 530.00 251.00 150.00 201.00

Market Capitalization 10,992,713 20,539,575 6,219,281 1,275,750 2,429,438 1,653,750 1,391,250 658,875 393,750 527,625

Return on Shareholders’ funds (%) 8.21 14.40 10.55 7.03 5.92 9.96 12.11 14.80 22.27 (13.92)

Return on Capital Employed (%) 13.28 16.10 11.00 6.89 7.43 8.15 12.99 15.11 18.15 6.34

Price Earnings Ratio (times) 9.34 9.39 6.14 3.00 156.46 84.85 126.23 77.28 32.77 (92.03)

Interest Cover (times covered) 8.40 13.36 3.68 2.11 1.62 3.18 3.26 2.72 2.70 0.60

Current Ratio (times) 1.76 3.03 1.12 0.79 1.13 1.08 1.01 0.91 0.89 0.86

Debt to Equity Ratio (%) 22.94 10.05 17.63 37.22 31.68 36.55 54.43 88.34 111.04 179.47

Dividend per Share 1.32 1.32 - - 17.20 1.60 1.60 0.80 - -

Number of Employees 724 653 824 888 881 877 813 955 988 1,041

Number of Shares 70,875 70,875 70,875 70,875 2,625 2,625 2,625 2,625 2,625 2,625

* Earnings per share has been adjusted for weighted average number of shares outstanding during the year (has been adjusted for previous years).

** Net Assets per share has been computed for the total number of shares issued as at 31st March 2012.


Share Information

Share Price Information on ordinary shares of the Company

2011/2012 2010/2011 2009/2010 2008/2009 2007/2008

Share InformationHigh 404.90 308.00 103.00 1200.00* 1,300.00Low 149.00 86.00 17.00 17.50 525.00Close 155.10 289.80 87.75 18.00 925.50

* During the year 2008/09, the Company has subdivided ordinary shares in the ratio of nine for one and also has capitalized reserves in the ratio of two for one.

Distribution of shareholders

31.03.2012

Number of Number of %

shareholders shares held

Less than or equal to 1,000 1,455 487,322 0.69 1,001 to 10,000 586 2,338,244 3.30 10,001 to 100,000 351 9,734,345 13.73 100,001 to 1,000,000 19 5,278,281 7.45 Over 1,000,001 11 53,036,808 74.83Grand total 2,422 70,875,000 100

CategoryIndividuals 2,260 17,417,561 24.58Institutions 162 53,457,439 75.42Total 2,422 70,875,000 100

Resident 2,169 64,249,964 90.64Non Resident 253 6,625,036 9.36Total 2,422 70,875,000 100

Directors’ share holdings

31.03.2012 31.03.2011

Number of shares Number of sharesMrs. R. L. Nanayakkara Nil NilMr. A. L. Devasurendra 1,098,900 1,098,900Mr. N. M. Prakash Margin Trading 35,100 35,100Mr. I. C. Nanayakkara 99,900 99,900Mr. S. V. Somasunderam Individual 2,877,400 2,310,800 Margin Trading 150,000 3,027,400 500,000 2,810,800Mr. R. N. Asirwatham Nil NilMr. H. P. J. De Silva Nil NilMr. W. D. K. Jayawardena (appointed on 24/07/12) Nil NilMrs. K. U. Amarasinghe (appointed on 24/07/12 Nil Nil


Twenty largest shareholders of the Company

31.03.2012 31.03.2011

Number of Number of

shares (%) shares (%)

1 Engineering Services (Pvt) Ltd. 16,588,962 23.41 1 Engineering Services (Pvt) Ltd. 16,588,962 23.412 Masons Mixture Ltd. 13,732,632 19.38 2 Masons Mixture Ltd. 13,732,632 19.383 Employees Provident Fund 6,427,435 9.07 3 Lanka Orix Leasing Company PLC 4,519,200 6.384 Lanka Orix Leasing Company PLC 3,382,800 4.77 4 Mutugala Estates (Pvt) Ltd. 2,986,524 4.215 Muthugala Estates (Pvt) Limited 2,986,524 4.21 5 Mr. Shanker Varadananda Somasunderam 2,310,800 3.266 Mr. Shanker Varadananda Somasunderam 2,877,400 4.06 6 Pathregalla Estates (Pvt) Ltd. 1,961,658 2.777 Pathregalla Estates (Pvt) Ltd. 1,961,658 2.77 7 ACE Bonus Investments Ltd. 1,755,000 2.488 ACE Bonus Investments Ltd. 1,755,000 2.48 8 Vyjayanthi & Company Ltd. 1,155,897 1.639 Vyjayanthi & Company Ltd. 1,155,897 1.63 9 Mr. Ajith Lasantha Devasurendra 1,098,900 1.5510 Mr. Ajith Lasantha Devasurendra 1,098,900 1.55 10 Commercial Bank of Ceylon PLC/ S.H.M.Rishan 810,700 1.1411 Sri Lanka Insurance Corporation Ltd -Life Fund 1,069,600 1.51 11 Aviva NDB Insurance PLC A/C No.07 625,700 0.8812 National Savings Bank 1,000,000 1.41 12 Pan Asia Banking Corporation PLC/Mr.Shabbir Abbas Gulamhusein 613,346 0.8613 Pan Asia Banking Corporation PLC/ 13 Mr. Mariapillai Radhakrishnan 575,640 0.81 Mr.Shabbir Abbas Gulamhusein 781,646 1.10 14 Mr. Mariapillai Radhakrishnan 575,640 0.81 14 Mrs. Pamela Christine Cooray 506,408 0.7115 Mrs. Pamela Christine Cooray 506,408 0.71 15 Seylan Bank Ltd./Shanker Varadananda Somasunderam 500,000 0.7116 Employees Trust Fund Board 478,500 0.68 16 Waldock Mackenzie Ltd./ Hi-Line Trading (Pvt) Ltd. 450,900 0.6417 Bank Of Ceylon No1 Account 189,700 0.27 17 NDB Aviva Wealth Management Ltd. /A Hatton National Bank PLC 371,900 0.5218 First Capital Limited 161,600 0.23 18 Pan Asia Banking Corporation PLC/ Mr. H.N.De. Silva 320,500 0.4519 Dr. Iam David Gilchrist Donaldson 160,380 0.23 19 Merchant Bank of Sri Lanka PLC/ S.H.M. Rishan 289,400 0.4120 Mr. Paul Carter 160,380 0.23 20 Employees Trust Fund Board. 276,800 0.39Total 57,051,062 80.50 Total 51,450,867 72.59

No. of shares held by public 36,292,106Percentage of shared held by public 51.20%


Subsidiaries & Associates

SUBSIDIARIES & ASSOCIATES DIRECTORS

Browns Group Industries (Pvt) Ltd Mrs. R. L. Nanayakkara Reg No. PV 1917 N. M. Prakash S. V. Somasunderam Mrs. R.N.A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara) W. M. N. Canisius Fernando Browns Tours (Pvt) Ltd Mrs.R. L. Nanayakkara Reg No. PV 1242 N. M. Prakash S.V. Somasunderam R. B. Seneviratne Mrs. R.N.A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara) P. Weerasinghe

Standard Finance (Pvt) Ltd Mrs. R. L. NanayakkaraReg No. PV 1463 N. M. Prakash S. V. Somasunderam R. T. Devasurendra Mrs. R. N. A. Nanayakkara A. L. Devasurendra (Alternate Director to Mr. R.T. Devasurendra) I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara)

The Hatton Transport & Agency Mrs R. L. Nanayakkara Company (Pvt) Ltd N. M. Prakash Reg No. PV 2833 S.V. Somasunderam(is not operational) Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara)

Snowcem Products Lanka (Pvt) Ltd S. V. SomasunderamReg. No. PV 5900 N. M. Prakash Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara)

Browns Group Motels Ltd Mrs. R. L. Nanayakkara Reg No. PB 167 N. M. Prakash (is not operational) S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara) *C.F.T. Engineering Ltd Mrs. R. L. Nanayakkara. Reg No. PB 318 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara)

BG. Air Services (Pvt) Ltd Mrs. R. L. Nanayakkara Reg No. PV 1807 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara) P. Weerasinghe



*Klevenberg (Pvt) Ltd M. BalasubramaniamReg. No. PV 5697 P. Balasubramaniam N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara) M. Wijemanne (appointed w.e.f. 1st June 2012) * Associated Battery P. K. Kataky Manufacturers (Ceylon) Ltd W. Wong, Reg No. PB 240 A. K. Mukherjee K. Ganesan Saha Arnab N. M. Prakash S. V. Somasunderam A. L. Devasurendra

I.G.Browns Rubber Industries (Pvt) Ltd Mrs R. L. Nanayakkara Reg. No. PV 11481 N. M. Prakash Browns Thermal Engineering (Pvt) Ltd Mrs. R. L. NanayakkaraReg No. PV 5001 N. M. Prakash K. D. P. Fernando A. K. D. Munidasa, S. V. Somasunderam W. M. N. Canisius Fernando

Browns Motors (Pvt) Ltd R. M. NanayakkaraReg. No. PV 65726 Mrs. Indra Nanayakkara Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara)

*Browns Investments PLC Mrs. R. L. Nanayakkara Reg No. PV 66136 PB/PQ P. R. Saldin N. M. Prakash D. S. K. Amarasekera R. P. Sugathadasa N. Fernando S. Furkhan A. G. Weerasinghe S.V. Somasunderam (appointed w.e.f. 28th June 2012)

*Sifang Lanka (Pvt) Ltd Zhou HaifengReg No. PV 7481 Huang Yilin Mrs R.L. Nanayakkara N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara Mr. I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara) C. Ediriwickrema


Subsidiaries & Associates


*Sifang Lanka Trading (Pvt) Ltd Mrs R. L. NanayakkaraReg No. PV 7363 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) C. Ediriwickrema

*Browns Industrial Park Ltd Mrs. R. L. Nanayakkara*(formerly known as East West Textiles Lanka Ltd) N. M. Prakash Reg. No. PB 1100 W. M. N. Canisius Fernando S. V. Somasunderam *Walker & Greig (Pvt) Ltd Mrs. R. L. Nanayakkara Reg. No. PV 66042 N. M. Prakash S. V. Somasunderam Mrs. R. N. A. Nanayakkara I. C. Nanayakkara (Alternate Director to Mrs. R.N.A. Nanayakkara

*Gal Oya Holdings(Pvt) Ltd N. M. PrakashReg. No. PV 1782 W. G. L. Dharmakeerthi N. T. K. A. Adikarama P. R. Saldin R. M. G. K. B. Ratnanayake Ms. M. Anoma Nandani

*Gal Oya Plantations (Pvt) Ltd Dr. W. GamageReg. No. PV 7601 P. R. Saldin W. G. L. Dharmakeerthi N. T. K. A. Adikarama G. K. A. Kithsiri Perera S. G. Senarathna R. A. S. Kolitha De Alwis T. P. G. Neil De Alwis Ms. M. Anoma Nandani

Browns Health Care (Pvt) Ltd Mr. R. L. NanayakkaraReg No. PV 77421 N. M. Prakash S. V. Somasunderam Dr. K. S. Narangoda

Browns Real Estates (Pvt) Ltd Mrs. R. L. Nanayakkara(Formerly known as Browns Properties (Pvt) Ltd) N. M. Prakash Reg. No. PV 79609 S. V. Somasunderam R. T. Devasurendra Mrs. R. N. A. Nanayakkara A. L. Devasurendra (Alternate Director to Mr. R. T. Devasurendra) I. C. Nanayakkara (Alternate Director to Mrs. R. N. A. Nanayakkara) P. Weerasinghe

*Indicate the Companies whose Accounts are audited by Auditors other than KPMG, who are the Auditors of Brown & Company PLC


Glossary

Accrual Basis Recognizing the effects of transactions and other events when they occur without waiting for receipt or payment of cash or cash equivalent. Cash Equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Foreign Currency TransactionThe realized gain recorded when assets or liabilities denominated in foreign currencies are translated into Sri Lankan Rupees on the balance sheet date at prevailing rates which differ from those rates in force at inception or on the previous balance sheet date. Impairment This occurs when recoverable amount of an asset is less than its carrying amount. Group A group is a parent and all its subsidiaries. Parent A parent is an entity that has one or more subsidiaries. Subsidiary A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent). Joint Control Joint control is the contractually agreed sharing of the control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. Joint Venture A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

Associate An associate is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

Cost Method Cost method is a method of accounting for an investment whereby the investment is recognised at cost. The investor recognizes income from the investment only to the extent that the investor receives distributions from accumulated profits of the investee arising after the date of acquisition. Distributions received in excess of such profits are regarded as a recovery of investment and are recognised as a reduction of the cost of the investment. Equity Method Equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition changes in the investor’s share of net assets of the investee. The profit or loss of the investor includes the investor’s share of the profit or loss of the investee. Significant Accounting PoliciesThe specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting Financial Statements. Market Capitalisation Number of ordinary shares in issue multiplied by the market value of each share at the year end. Net Assets Total assets minus current liabilities minus long term liabilities minus minority interest. Net Asset Value Per Share Shareholders’ Funds divided by the number of ordinary shares in issue. Capital Employed Shareholders’ funds plus minority interest and debt.

Market Value Added Market capitalization minus shareholder’s funds. Net Profit Margin Profit after tax divided by turnover inclusive of share of associate Company turnover.

Shareholders’ Fund Total of issued and fully paid share capital, capital reserves and revenue reserves. Total Debt Long term loans plus short term loans and overdrafts. EBITDA Abbreviation for Earnings before Interest, Tax, Depreciation and Amortization. Return on average Equity (ROE) Net income, less preferred share dividends if any, expressed as a percentage of average ordinary shareholders’ equity. Return on average Assets (ROA)Net income expressed as a percentage of average total assets, used along with ROE, as a measure of profitability and as a basis of intra-industry performance comparison. Earnings per Share (EPS) Profits attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period. Price Earnings Ratio (P/E Ratio)Market price of an ordinary share divided by earnings per share (EPS). Total Equity Shareholders’ funds plus minority interest. Capital Reserves Reserves identified for specific purposes and considered not available for distribution. Revenue Reserves Reserves considered as being available for distributions and investments.


Working Capital Capital required financing day to day operations computed as the excess of current assets over current liabilities. Interest Cover Profit before tax plus net finance cost divided by net finance cost. Measure of an entity’s debt service ability.

Deferred Tax Sum set aside in the financial statements for taxation that may become payable/ receivable in a financial year other than the current financial year. Effective Tax Rate Provision for taxation excluding deferred taxation divided by the profit before tax. Intangible Asset An identifiable non-monetary asset without physical substance held for use in the production / supply of goods / services or for rental to others or for administrative purposes. Amortization The systematic allocation of the depreciable amount of an intangible asset over its useful life. Fair Value Fair Value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction. General Provisions General provisions are established for Trading transactions and others for anticipated losses. Provision for Bad and Doubtful DebtsProvisions are established to reduce the book value of specific assets (primarily debtors) to estimated realizable values. Key Management Personnel Key Management Personnel are those

persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. Related Parties Parties who could control or significantly influence the financial and operating policies of the business.

Value Addition The quantum of wealth generated by the activities of the Group measured as the difference between turnover and the cost of materials and services bought in. Retirement Benefits Present value of a defined benefit obligation Is the present value of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. Current Service Cost Is the increase in the present value of the defined benefit obligation resulting from employee service in the current period. Interest Cost Is the increase during a period in the present value of a defined benefit obligation which arises because of the benefits are one period closer to settlement. Actuarial Gains and Losses Is the effects of difference between the previous actuarial assumptions and what has actually occurred and the effects of changes in actuarial assumptions. Market Risk This refers to the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates, credit spreads and other asset prices. Segment Reporting Segment reporting indicates the contribution to the revenue derived from business segments such as Trading, Manufacturing, Travel & Tours, Finance and Plantation.

Contingent Liability A possible obligation that arises from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.

Glossary


Notice of the Annual General Meeting

NOTICE IS HEREBY GIVEN that the One Hundred and Twentieth ANNUAL GENERAL MEETING of the Company will be held at Park Premier, Excel World, No. 338, T. B. Jayah Mawatha, Colombo 10 on 25th September 2012 at 10.30 a.m. The business to be brought before the meeting will be: To receive and consider the Report

of the Directors and Statement of Accounts and the Balance Sheet of the Company for the Financial Year ended 31st March 2012 with the Auditors’ Report thereon.

To re-elect Mr. W. D. K. Jayawardena as a Non-Executive Director of the Company in accordance with Article 24(2) of the Articles of Association of the Company.

To re-elect Mrs. K U. Amarasinghe as a Non-Executive Director of the Company in accordance with Article 24(2) of the Articles of Association of the Company.

To re-elect Mr. A. L. Devasurendra as a Non-Executive Director, who retires by rotation in accordance with Article 24(6) of the Articles of Association of the Company.

To re-elect Mrs. Rohini Nanayakkara as a Non-Executive Director in terms of Section 210 of the Companies Act No. 7 of 2007. Special notice has been received from a shareholder, pursuant to Sections 145 and 211 ,of the Companies Act No. 7 of 2007, of the intention to propose the following resolution as an ordinary resolution

Resolution “That Mrs. Rohini Nanayakkara who

reached the age of 76 years on 12th April 2012 be and is hereby re-elected as a Non-Executive 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. 7 of 2007 shall not apply to the said Director

To re-appoint M/s. KPMG, Chartered Accountants, as Auditors of the Company for the ensuing year.

To authorize the Directors to fix the remuneration of the Auditors.

BY ORDER OF THE BOARD

STANDARD FINANCE (PVT) LTD.SECRETARIES Colombo, 16th August 2012

Notes: 1 A member entitled to attend and vote

at the Meeting may appoint a proxy to attend and vote in his stead

2 A proxy need not be a member of the Company. A Form of Proxy is found at the end of this Annual Report.

3 The instrument appointing such a proxy must be deposited at the Business office of the Company on or before 23rd September 2012 at 10.30 a.m.

Brown and Company PLC - Reg. No. PQ 25


Notes


Form of ProxyBrown and Company PLC - Reg. No. PQ 25

I/We………………………………………………….........................................................................................................................……………………....………………of ………………………………………...........................................………………………………………………………being a member/members of the above named Company hereby appoint.

Mrs. Rohini Lettitia Nanayakkara or failing her, Ajith Lasantha Devasurendra or failing him,Nadarajah Murali Prakash or failing him, Shanker Varadananda Somasunderam or failing him,Ishara Chinthaka Nanayakkara or failing him Herbert Poshitha Janaka de Silva or failing himWaduthanthri Darshan Kapila Jayawardena or failing him Mrs. Kalsha Upekha Amarasinghe or failing her

Mr/ Mrs/Miss……………………………………......................................................................................................................………………………………………… of ……………………………...............…………………………………………….....................................................................................................................……………….. as my/our proxy to represent me/us and to vote for me/us and on my/our behalf at the One Hundred and Twentieth Annual General Meeting of the Company to be held on the Twenty Fifth (25th) day of September 2012 and at 10.30 a.m. any adjournment thereof and at every poll which may be taken in consequence thereof.

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

……………………........………........................………… Signature/s

Please provide the following details :

Shareholder’s NIC No. :……………………………........................

No. of shares held :……………………………........................

Proxy holder’s NIC No. :……………………………........................(if not a Director of this Company)


Notes:1 The full name and the registered address of the shareholder

appointing the proxy should be legibly entered in the form of proxy

2 If the Form of Proxy is signed by an Attorney, the relative Power of Attorney should accompany the Form of Proxy for registration, if such Power of Attorney has not been registered with the Company.

3 In the case of a Company/corporation, the proxy must be under its common seal which should be affixed and attested in the manner prescribed by its Articles of Association.

4 In the case of joint-holders, the senior should sign this form. Seniority shall be determined by the order in which names stand in the Register of Members in respect of the joint holding.

5 Every alteration or addition to the form of proxy must be duly authenticated by the full signature of the person signing on the form of proxy.

6 To be valid the completed Form of Proxy should be deposited with the Secretaries at No.34, Sir Mohamed Macan Markar Mawatha, Colombo 3, not less than 48 hours before the time appointed for the holding of the meeting.

Form of Proxy

10 Our history 12 The Browns Group 14 Sector overview 16 Financial highlights 18 Chairperson’s review 20 Group Managing Director/ Chief Executive Officer’s Review24 The Board of Directors 28 Corporate Senior Management

30 Investing in Brands 32 Sector Reviews57 Information and Communications Technology 58 Corporate Social Responsibility 60 Human Resources 62 Corporate Governance 67 Audit Committee Report 68 Business Operations Committee Report 68 Remuneration Committee Report

70 Directors’ Report 74 Statement of Directors’ Responsibilities 75 Independent Auditors’ Report 76 Income Statement 77 Balance Sheet 78 Statement of Changes in Equity 79 Cash Flow Statement 80 Significant Accounting Policies 90 Notes to the Financial Statements

Corporate Information

Brown & Company PLC Legal FormA Public Limited Liability Company quoted on the Colombo Stock Exchange on 25th April 1991 and incorporated in Sri Lanka on 17th August 1892

Company No.PQ 25 DirectorsMrs. R. L. NanayakkaraNon-Executive Chairperson

A. L. DevasurendraDeputy Chairman / Non-Executive Director

N. M. PrakashExecutive Group Managing Director/CEO

S. V. SomasunderamNon-Executive Director

I. C. NanayakkaraNon- Executive Director

H. P. J. de SilvaIndependant Non-Executive Director

R. N. AsirwathamIndependant Non-Executive Director (resigned w.e.f. 10/5/2012)

W. D. K. JayawardenaNon-Executive Director (Appointed on 24/7/2012)

Mrs. K. U. AmarasingheNon-Executive Director (Appointed on 24/7/2012)

SecretariesStandard Finance (Pvt) Limited481, T. B. Jayah Mawatha,Colombo 10.

Registered Office481, T. B. Jayah Mawatha, (Darley Road),P O Box 200, Colombo 10.Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsgroup.com

Business OfficeNo. 34, Sir Mohamed Macan Markar Mawatha, Colombo 3Fax No. 2698489Tel. 2697111, 2663000 & 2698411Website: www.brownsgroup.com

Auditors Messrs KPMGChartered Accountants32A, Sir Mohamed Macan Markar MawathaColombo 3.

BankersCommercial Bank of Ceylon PLC Hatton National Bank PLCHongkong & Shanghai Banking Corporation NDB BankPeoples BankStandard Chartered Bank PLCSampath Bank PLCSeylan Bank PLCDFCC Varadhana Bank

Annual Report 2011/2012

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