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In an era of unprecedented

economic and financial

turmoil, we don’t pretend to

have all the answers.

Yet, this report would be

of little value without an

attempt to consider the

resilience Hayleys brings to

what is a battle for survival

in a time of extreme global

stress. This year, our aim is to

present to you in a clear and

unambiguous manner, some

key attributes that make

Hayleys’ enterprise unique.

CONTENTSChairman’s Statement 04

Enterprise Governance

Hayleys Governance 12

Board of Directors 24

Hayleys Group Management Committee 26

Remuneration Committee Report 27

Management Report

Operations Review 30

Global Markets & Manufacturing 32

Agriculture & Agri Business 41

Transportation & Infrastructure 48

Consumer & Leisure 55

Financial Review 60

Risk Management 69

Sustainability Report

Key Impacts, Risks & Opportunities 78

Awards & Accreditations 79

Report Parameters 82

Stakeholder Engagement 87

Economic Performance 88

Social Performance 92

Environmental Performance 103

GRI Compliance Index 109

UNGC principles - GRI indicators cross reference 111

Annual Report of the Board of

Directors on the affairs of the Company 114

Financial Reports

Financial Calendar 2008/09 121

Statement of Directors’ Responsibilities 123

Audit Committee Report 124

Independent Auditor’s Report 126

Income Statements 127

Balance Sheets 128

Statements of Changes in Equity 129

Cash Flow Statements 130

Accounting Policies 132

Notes to the Financial Statements 139

General Information

Value of Real Estate 175

Ten Year Summary 176

Country Report 178

Milestones 180

Glossary of Financial Terms 181

Notice of Meeting 182

Form of Proxy enclosed

Vision

To be Sri Lanka’s Corporate Inspiration at all Times.

Mission

Delivering superior shareholder value by unleashing

the full potential of our people and achieving

leadership in all our domestic and global businesses.

Values

Integrity - ethical and transparent in all our

dealings

Enduring Customer value - enhancing experiences

for every customer, from the rural farmer to the

global consumer

A Will to Win - exhibiting the will to win that which

is important to Hayleys and its shareholders

Respect for People - treating everyone with

respect and dignity, providing for the development

of our people and rewarding them for good

performance.

Good Citizenship - caring for the communities in

which we work, actively supporting their growth

and being environmentally responsible in all we do

Teamwork - working with each other and with our

partners across boundaries, to make things happen

Accountability - holding ourselves responsible to

deliver what we promise

HAYLEYS PLC ANNUAL REPORT 2008/09

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2008/09 2007/08 Change 2006/07Rs. mn Rs. mn % Rs. mn

Gross turnover* 32,418 30,955 5 26,430Group turnover including associates* 45,374 53,439 (15) 49,720

1,475 1,985 (26) 1,801903 1,521 (41) 1,369

803 1,090 (26) 1,089

of the Company 311 453 (31) 534Dividends 225 225 – 263Shareholders’ funds 12,356 12,222 1 11,700Company market capitalisation 6,750 7,331 (8) 10,650Group market capitalisation 17,753 23,430 (24) 27,480Group investments 1,385 1,628 (15) 1,530Group value addition 9,155 8,499 8 7,140Revenue to the Government (including associates) 1,239 2,909 (57) 3,062Group employment (persons) (including associates) 33,711 35,416 (5) 35,359

* Continuing Operations

Per shareEarnings (basic) (Rs.) 4.15 6.03 (31) 7.11Market value (year-end) (Rs.) 90.00 97.75 (8) 142.00Net assets (year-end) (Rs.) 164.74 162.96 1 156.00Dividend (Rs.) 3.00 3.00 – 3.50Price earnings (year-end) (times) 21.69 16.21 34 19.71

Ratio24.6 24.5 25.4

Interest cover (times)* 2.2 2.5 3.0Dividend yield (%) 3.3 3.1 2.5Current ratio (times) 1.3 1.3 1.3


Financial Benchmarks and Achievements

Objective Achievements2008/09 2007/08 2006/07

Return on average capital employed (R.O.C.E.) (%) > 20 10 11 11Gearing (%) 35 - 40 35.8 37.2 39.9Return on average shareholders’ funds (%) > 15 2.5 3.7 5.3

72.4 49.7 49.2Dividend to average shareholders’ funds (%) 1.8 1.9 2.6

Founded in 1878 as Charles P. Hayley & Company, Hayleys is today one of the largest Sri Lankan multinationals. It is a publicly quoted company with a portfolio of globally competitive core businesses in Global Markets & Manufacturing, Agriculture & Agri Business, Transportation & Infrastructure and Consumer Products & Leisure.

In the 57 years since its incorporation as Hayleys, it has a record of 26 scrip issues and 4 modestly-priced rights issues, together with dividend payouts averaging 25% in each of these years.

Hayleys today accounts for 2.34% of Sri Lanka’s export income and carries a AA-(lka) credit rating by Fitch Ratings.

4


CHAIRMAN’SSTATEMENT

CORPORATE RESULTSThe consolidated turnover of

the Group increased by 5% to

Rs. 32.4 bn from Rs. 31.0 bn last

Rs. 803 mn, 26% lower than in

attributable to shareholders was

Rs. 311 mn, 31% lower than previously.

This is not a result remotely

worthy of this Group. My

predecessor and I have alluded

in one way or the other over

some years to the fact that the

potential of the Group is at least

yet again last year. Shareholders

need to understand the reasons

for Hayleys’ underperformance

and what remedial measures,

where they are possible, are being

contemplated. This statement and

report attempts to address this

have in this Company.

The exit from the Consumer

Durables business in 2007/08

continued to impact our

charge of Rs. 107 mn spilling over

into this year. That there will be no

carry-over of losses from Consumer

year ending 31st March, 2009 is of

some comfort.

There were several causes

for the poor result. Hayleys,

like no other public quoted

company, is exposed to global

trade as our Manufacturing and

Plantation businesses account for

over 60% of revenues. We have

continuously drawn attention to

the fact that these businesses

are hugely affected and their

the exchange rate and we suffer

appreciation of the Rupee in real

terms. We witnessed a further

deterioration on this score which

was relieved marginally in recent

months. In our estimation we have

lost 5-7 percentage points from our

margin in our different businesses

since 2005, even after achieving

cost reductions and productivity

improvements that have been

essential survival measures.

Secondly, global trading conditions

during the year went through

unprecedented gyrations with a

quarters giving way to a virtual

collapse of the world economy

in late 2008. This was manifest

especially in the closing months

of the year with the negative

sentiment affecting our businesses

in Sri Lanka. Our response to these

challenges in most cases was

quite impressive which is why we

have some margin to show but

admittedly there were instances

where a better performance ought

to have been delivered.

SEGMENTAL RESULTSOur results this year, perhaps

as never before, have been

of businesses in our portfolio.

Some of our businesses made

strong contributions to our

results, some made commendable

returns in the face of unpropitious

business conditions, but yet others

performed well below potential.


5

CHAIRMAN’S STATEMENT

The Group’s Global Markets and

Manufacturing businesses for the

most part delivered commendable

performances taken in the context

of the remarks made earlier and

despite being faced with softening

demand and customer pressure

for lower prices. These export

businesses have received modest

relief from a slightly improved

exchange rate and lower energy

costs from the third quarter of

the year. Overall the result was

probably less than half of what

these businesses can deliver.

business achieved strong results,

with especially encouraging

performances from overseas

manufacturing and marketing

units. The success of our strategy

of taking our manufacturing and

technical competence offshore

is now evident. The sector’s

focus on product development

and new processes including

nanotechnology augurs well for

the future of this business.

Hand Protection was one of

the sectors most affected by

the global economic slowdown.

Order levels declined sharply,

and customers’ demands for ever

lower prices dealt it an additional

blow. However, the resilience and

stability of the business has been

amply demonstrated by the results

returned this year. Low rubber

prices in the last quarter as well

as the improvement in exchange

rate competitiveness helped

performance. DPL Thailand, our

medical glove production unit, has

a prolonged struggle to rectify

equipment related problems.

DPTL has performed strongly

from November up to the time of

contributor to the Hand Protection

sector’s success: again, a testament

to our capacity to transfer our

expertise to overseas locations.

The Textiles business produced

creditable results, though at a

markedly lower level than in the

fall off in orders. The sector is

exposed to the competitiveness

of the apparel industry and has of

necessity to shed margin to retain

reputed overseas customers.

The Fibre sector had a very

by export businesses with high

local value addition that operate in

unfavourable economic conditions.

Our Floor Coverings, and to a lesser

extent, our Brushware businesses in

affected by the global crisis that

sapped demand for their products,

eroded margins and also caused

exchange losses in Euro and British

Pound-denominated sales.

A strong performance was

turned in by Agri Inputs in the

Group’s Agriculture and Agri

Business sector, supported by

renewed attention to agriculture

on both international and national

scales and favourable cultivation

conditions.

Our Plantations sector turned

by high world prices for tea and

rubber. The dual misfortune of a

collapse in commodity prices and a

drop in crop yields on poor rainfall

Yet their contribution to the Group

is commendable, in an industry

where other equally seasoned

6



players have delivered less-than-

satisfactory results.

The Agri Products sector

declined sharply, due in part

export destinations and in part to

shortfalls in the Maha season fruit

and vegetable crop.

The Transportation sector,

a consistent contributor to

performance, was affected

by shrinkage of volumes and

withdrawal of shipping services

brought on by the slowdown

in international trade, and also

by overseas integrated logistics

to hit their stride during the year.

Our Industrial Inputs business

fared well despite lower demand

from export-oriented customers,

but the Projects sector’s

performance was seriously

impacted by delays on a project in

the Maldives.

Power & Energy also returned

disappointing results due to

underperformance of hydro

projects and a delay in the progress

of Recogen due to the scarcity of

coconut shells locally.

The business of Consumer

Goods fared poorly, due to the

decline in the average citizen’s

purchasing power.

The Resorts sector was badly

affected by inimical conditions,

both local and global, for tourism.

We are disappointed by the poor

return on our investments in

associate businesses such as AES

Kelanitissa, Hayleys AIG Insurance

and Resorts, and are currently

revisiting our business prospects in

some of these.

DIVIDENDThe Board proposes payment of

Rs. 3/- as dividend, of which

Rs. 1.50 is being paid in May 2009

dividend of Rs. 1.50 after the AGM.

STRATEGIC INITIATIVES‘I try to do the right thing at the

right time. They may just be little

things, but usually they make the

difference between winning and

losing.’ Kareem Abdul-Jabbar

(American Basketball Player)

As articulated in our long-term

strategic plan, we implemented

divestments from non-core areas of

business and generated cash from

assets. Great as was the eventual

cost, the residual effects of which

were carried into the year, the

decision to exit from the Consumer

Durables business could not have

been more opportune considering

the current economic climate.

28% holding in Dimo. A second

initiative during the year was

the disposal of assets of Kinetics

whose operations had been shut

down in the previous year. This was

followed by the sale by Volanka of

property it owned in Grandpass,

at the end of the third quarter.

We also shed our engagement

with Infocraft, a small software

development venture. These

actions have contributed

Our execution of these plans

placed us in a far more secure

challenges we faced in the second

crisis broke over us.

Much has already appeared in

the media concerning the global

the year behind us buffeted us

with such volatility that tough

decisions were the order of the

day. The sudden disappearance of

liquidity, not to mention demand

in long-standing destination

markets persuaded us to some

to working capital management

across the Group, so that costly

liquidity was put to optimal use.

We also created cash reserves in

some Group companies as part of

our contingency planning, in the

event liquidity in local markets

also evaporated, as we had

seen happen in more developed

countries.

The stressful conditions that

impacted on nearly all businesses

of the Group, perhaps the worst in

living memory, required our close

attention to current work and

compensation practices. Group

Management implemented some

policy changes after exploring

alternatives available. These include

closure of some functions deemed

closure of some manufacturing

facilities and lines, changes in

work hours and practices, as well

as restraints on remuneration

of executive and management

grades. We are also reviewing

our stance on wage increases

unconnected to productivity

improvements or performance.

Simply put such emolument

increases are unsustainable,

especially in the context of the

myriad other challenges faced by


7


our Group. The overarching goal

in all these measures has remained

the attainment of consistent,

The Group has continued with

raising its HR practices to a higher

plane in the areas of Performance

Management, Succession Planning

and Talent Management, so that

actions taken to improve the

correlation between performance

and compensation also recognise,

reward and thereby help retain our

best performers. The Management

succession gaps that have been

senior levels.

GOVERNMENT ANDFISCAL POLICYThe inescapable logic of the export-

led growth strategy of the country

is that we must retain our export

competitiveness. However, the

unfortunate reality is that policy

initiatives to support the export

sector have been inadequate at

best. The balance of economic

incentives does not support export-

led growth. An exchange rate that

differentials is a prerequisite. Our

major markets and competitors

have allowed their currencies to

reality of shrinking export earnings

arguably better equipped than

we are to face the challenges of

exchange rate in contrast barely

moved until a near - currency crisis

was upon us in October.

As a nation we have had to

contend with negative trade

balances that we have sought to

bridge through inward foreign

remittances and borrowings.

As a result, domestic capacity

building seems to have lost its

priority status to a consumption-

based economy, bringing with

it an increasing dependence on

migrant worker remittances and

expensive commercial borrowings,

and with them the question: Is this

sustainable? There is a frightening

parallel here, at least for the

most part of the year, to what

has happened in economies that

grew rapidly on consumption-led

growth, and the global fallout from

the implosion of that excessive

consumption. We would do well to

learn from their errors.

The extremely high local

monetary policy meant high

exporters were not able to pass

on through pricing to their buyers.

As a result, margins in many of

our export industries had shrunk

to virtually nothing even before

the advent of the global economic

crisis. I am sure all business leaders

are awaiting a sizeable reduction

interest rates in the year ahead,

dropped to single digits.

Personally, I have wasted

no opportunity to direct the

thinking of those in authority to

macroeconomic issues such as

and it is indeed gratifying that

at last there seems to be some

understanding of the critical need

for change in our thinking.

We await the full implementation

of the state relief programme

aimed at propping up the tea and

rubber industry. The Government’s

introduction of an export incentive

8



scheme to assist industrial exports

has received mixed reviews, mainly

because the eligibility criteria of

having to maintain both turnover

and workforce numbers are virtually

unachievable for the majority of

local export industries.

The delay in receiving VAT

refunds continues to impede

over Rs. 500 mn tied up due to

the Government’s inability to meet

its obligations. We experience

similar delays in receiving subsidies

under state-sponsored distribution

programmes.

For the greater part of the year

energy costs ran at very high levels

Group’s manufacturing businesses.

The high fossil fuel prices inspired

the Group to seek further, innovative

ways of diversifying energy sources

away from petroleum-based

products during the year. A slight

moderation in fuel costs in the 3rd

quarter of the year was welcome

given the many other challenges our

manufacturing businesses have had

to grapple with.

PROSPECTSDo we see green shoots of global

economic recovery? Certainly.

We have seen slight increases in

interest from our buyers in the

western hemisphere, and in trade

and shipping volumes. Will these

‘shoots’ grow fast enough to

sustain an economic rebound in

the year ahead? Credible forecasts

from agencies such as the World

Bank and the IMF are persistently

grim, many analysts seeing the

global economic slowdown

lingering for another 18-24 months.

At home, Sri Lanka’s GDP is

expected to grow at 2.5% in 2009,

after 6% growth in 2008.

No one can say with certainty

how soon economic conditions

will turn positive, but one

cannot successfully engage

in entrepreneurship without a

sense of optimism that things will

that we will succeed, regardless of

external factors.

I believe we have done the right

things at the right time. There are

no challenges we cannot overcome

if we continue doing that.

There will be huge opportunities

for growth of our businesses

serving the domestic market when

the civil war is at an end, and large

areas of the North and East of our

nation are again open to economic

activity. We await the resumption

of normal life in these areas, to

increase our engagement in the

agriculture and consumer products.

A pillar of our strategy for

the year ahead will be to acquire

renewable energy sources, and we

remain committed to the course of

local value addition that has been

an intrinsic feature of our success

this far.

SOCIAL RESPONSIBILITYWe cannot afford to neglect the

extreme distress of our citizens

affected by the hostilities, even

if there is a national acceptance

and understanding of the military

stages. The Group responded

quickly, with no fanfare, to the

major humanitarian need that

has emerged after civilians in

Government-controlled territory.

Assistance was given by way of

providing water and sanitation

facilities, as well as clothing and

provisions contributed by the

Group’s employees. The Group

also continues to support the

Primary School in Kathaluwa that

it re-constructed after the

2004 tsunami.

ACCREDITATIONS ANDRECOGNITIONOur involvement with the United

Nations Global Compact and

CEO Water Mandate has raised

the image of Hayleys in the

international business arena. I was

elected to the Leadership Group on

Water Security in Asia of the Asia

Society, New York, by invitation in

November 2008. The Leadership

Group consists of many eminent

persons and I consider the election

an honour.

After a lapse of some years,

the Hayleys PLC Annual Report

for 2007/08 was adjudged Joint

Overall Winner at the 2008 Annual

Report Awards organised by the

Institute of Chartered Accountants

of Sri Lanka. I am delighted that we

are back in the top spot, although

we have never really been out of

the awards list, having placed in

every competition.

Hayleys as we know it is the

result of a relentless driving effort,

a demonstration of integrity

that pervades every motive

and action, and perseverance


9


against all odds. The sheer size

and diversity of the Group that

makes it such a phenomenal

challenge to administer, is also

the source of the uniqueness of

Hayleys. We have a yet-untapped

strength in our brand, ‘The World

of Hayleys’ which embodies the

values of this great Company. The

powerful intrinsic value that it

generates is now becoming evident

in interactions with important

stakeholders such as the business

and diplomatic community alike,

who are greatly impressed by our

commitment to sustainability and

ethical practices.

DIRECTORATEShareholders will be aware of the

resignation of Mr. P.S.P.S. Perera,

Director since 2001, who served

the Group with dedication and

commitment over his tenure of

31 years of service within the Group.

I know, you will join me in wishing

Mr. Perera and his family well.

Mr. Dhammika Perera acquired

over 21% of the shareholding of the

Company in June 2008 and was

appointed to the Board as a

Non-Executive Director in August.

Mr. Perera is currently the Chairman

of the Board of Investment of

Sri Lanka, and is a member of the

Board of the Strategic Enterprise

Management Agency and the

Sri Lanka Export Development

Board, and has business

interests in many sectors. He has

brought a change to the Board’s

deliberations, which we expect

the future.

I retire from the Group on

30th June, 2009 after two years as

Chairman and thirty-eight years as a

member of the Hayleys family.

Mr. Mohan Pandithage succeeds me

as Chairman & Chief Executive. I wish

Mr. Pandithage and his Board all

success in steering Hayleys through

these most challenging times.

I thank my colleagues on the

Board and our employees and

business partners for their support

and guidance in a challenging year.

On the eve of my departure

from the Hayleys Group, I look back

on the remarkable development

of this Company and consider it

a privilege to have been able to

contribute to that growth.

It is inevitable and indeed

necessary that Hayleys will change,

but it is my most sincere hope that

the principles on which Hayleys has

built its positioning and reputation

will remain sacrosanct, and that we

will hold fast the heritage left to us

by our founders.

N.G. Wickremeratne

Chairman & Chief Executive

18th May, 2009

UNIQUELYINNOVATIVE

Recogen operates the world’s ‘greenest’ coconut shell charcoal production plant… we are pioneers of global marketing and value add capabilities…Logilink, our state-of-the-art Container Freight Station offers many ‘firsts’ to the apparel industry… Dipped Products was the first local Company to manufacture and market protective handwear for electricians… KVPL’s

ethical tea brand is endorsed by the UNGC...

12


HAYLEYS GOVERNANCE

ENTERPRISEGOVERNANCE REPORT

Hayleys is committed to and

acknowledged as a leader in sound

enterprise governance. We believe

means that every day we strive to

keep the trust of our stakeholders-

shareholders, customers,

employees, communities and

Government Authorities, by being

ethical, and behaving honestly and

transparently in the continuing

pursuit of our Vision and Mission

and practice of our Values.

The Group’s governance

framework covers both corporate

governance and business

governance. It includes corporate

governance processes that support

business governance, enabling

companies to focus on areas that

create value in their business.

We strive to achieve a balance

between accountability and

assurance (conformance) on the

one hand and value creation and

resource utilisation (performance)

on the other. Thus we believe our

business governance and corporate

governance complement each

other, as depicted below.


13

Conformance (corporate

governance) covers issues such

as Board structures, roles and

processes. Performance (business

governance) focuses on strategy

and value creation.

Hayleys Governance Guidelines

provide Directors and management

with a road map of their respective

responsibilities. These guidelines,

which will be updated periodically,

detail clearly those matters

requiring Board and Committee

approval, advice or review. The

Hayleys Governance Framework is

depicted in the following diagram.

In our framework of

importance of providing the Board

and Hayleys Group Management

Committee (HGMC) information

which is comprehensible, relevant,

reliable and timely. Critical

information needs to be presented

in such a way that it cannot be

ignored. The Strategic Business

Development Unit (SBDU) and

Corporate Affairs Unit (CAU)

satisfy various information needs of

the Board.

Business governance

Business governance provides

an integrated framework to help

the Group focus on both the

drivers of value that move the

business forward and the need

to ensure adequate control and

oversight. An overview of our

business governance is given in the

following diagram.

ENTERPRISE GOVERNANCE REPORT

HAYLEYS GOVERNANCE

14


Strategic direction

Group strategies are subjected to

a comprehensive annual review by

the Board and are discussed further

as necessary during the year.

The HGMC has been delegated

authority to formulate strategies

in respect of business units, seek

approval for such strategies and

implement them within the policy

framework established by the

Board.

The sectors are required to

align their strategies towards the

achievement of the Group and

Sector/Company Key Performance

Indicators (KPIs). The annual

budgeting process assists this and

documents sector strategies and

near-term objectives.

Strategic implementation

The main businesses of the Group

are incorporated into four clusters -

Global Markets & Manufacturing,

Agriculture & Agribusiness,

Transportation & Infrastructure

and Consumer & Leisure.

The achievement of targets

through implementation of

strategies formulated, current

performance and the short-term

outlook are reviewed at cluster

review meetings which are

held monthly. Further, focused

discussion takes place at monthly

HGMC meetings.

Strategic risk

The Board in understanding

current business performance

strives to ensure there is

risk exposures. It encourages a

culture where there is open debate

and discussion on the risks faced

in achieving business objectives

and on new projects and key

investment initiatives.

In providing strategic direction

the Board will obtain and review

all strategic options and initiatives

under consideration. This will

comprise an analysis of the

options, resource constraints and

related risk exposures to facilitate

informed decision making.

CORPORATEGOVERNANCE“We at Hayleys believe that

enhancing Corporate Governance

supports the creation of long-term

sustainable stakeholder value.

We consider the expression and

practice of Corporate Governance

principles as a continuing journey.”

Hayleys PLC is the Holding

Company of the Hayleys Group.

The Group consists of businesses

which are actively managed by

Hayleys and businesses in which

it has taken the role of a passive

investor.

The businesses of the Group

are given on pages 82 to 86 of

the Report.

We set out below the

Corporate Governance practices

adopted and practised by

Hayleys against the background

of the Code of Best Practice on

Corporate Governance issued

by the Institute of Chartered

Accountants of Sri Lanka and the

Rules set out in Section 7.10 of the

Colombo Stock Exchange’s New

Listing Rules.

The Board of Directors

The Board of Directors of Hayleys

PLC is responsible for governance

of all companies which Hayleys

actively manages.

Composition and attendance at meetings

Mr. K.D.D. Perera was appointed to

the Board on 1st August, 2008.


HAYLEYS GOVERNANCE

The process involved in

undertaking a new project is

outlined below:

Board papers will be prepared in

respect of all new projects and

businesses that a sector expects

to embark upon and these will

be tabled and approved by the

relevant Boards.

A project or business will be

referred to the SBDU for their

analysis and comments where

investment is expected to exceed

.

Projects exceeding these limits

would be referred to the Hayleys

Board with the comments/

recommendations of the SBDU,

into.

Where investments relate to

projects which are progressed in

phases, they will be approved in

principle prior to initiation and

each new phase will be sanctioned

before it commences.


15


HAYLEYS GOVERNANCE

The Board thereafter consisted

of twelve Directors - seven

Executive Directors including the

Chairman & Chief Executive and

Non-Executive Directors. These

Directors are named below

pages 24 and 25 of this Report.

Responsibilities of the Board

The Board is responsible to:

a. Enhance shareholder value.

b. Formulate and communicate

business policy and strategy to

assure sustained growth, and

monitor its implementation.

c. Approve any change in the

Group’s business portfolio and

sanction major investments and

disinvestments in accordance

with parameters set.

d. Ensure Executive Directors

have the skills/knowledge to

implement strategy effectively,

with proper succession

arrangements in focus.

j. Adopt annual and interim results

before these are published.

Inter alia, Directors:

a. Must bring independent

judgement to bear and consider

foremost the interests of the

Company as a whole.

b. Must stay abreast of

developments in management

practice, the world and domestic

economy and other matters

relevant to the Company.

c. May convey concerns to the

Chairman, or if that is not

appropriate to the Hayleys’

Director designated as Senior

Independent Director, or if that

is not appropriate to a Senior

Non-Executive Director, if and

when a need arises.

d. May, where necessary and

with the concurrence of the

Chairman or the Hayleys’ Senior

Independent Director, consult

and consider inputs from

‘experts’ in relevant areas.

e. Should declare their interests in

contracts under discussion at a

Board meeting, and refrain from

participating in such discussion.

f. Possessing ‘price-sensitive’

information concerning the

Company should not trade in

the Company’s shares until such

information has been adequately

disseminated in the market.

For strategy implementation

the Board has set up a two tier

management structure under which

the Hayleys Group Management

Committee operates at a level

below the Board and is responsible

for carrying out the policies and

strategies approved by the Board.

The Board met quarterly as a

matter of routine up to 31st August,

2008, and monthly thereafter.

Ad hoc meetings were also held as

necessary. During the year under

review the Board met on

12 occasions. The attendance at

these meetings was:

Name of Director Executive/Non-Executive Attendance

Mr. N.G. Wickremeratne

(Chairman & Chief Executive) Executive 12/12

Mr. A.M. Pandithage

(Deputy Chairman) Executive 12/12

Mr. R.A. Ebell Executive 12/12

Mr. L.K.B. Godamunne Non-Executive 12/12*

Mr. P.S.P.S. Perera Executive 12/12

Mr. J.D. Bandaranayake Non-Executive 10/12

Mr. A. Hettiarachchy Executive 12/12

Mr. M.R. Zaheed Executive 12/12

Mr. A.M. Senaratna Non-Executive 12/12**

Mr. J.A.G. Anandarajah Executive 12/12

Mr. T.L.F.W. Jayasekara Non-Executive 10/12Mr. K.D.D. Perera Non-Executive 9/9

(w.e.f. 01.08.2008)

* Mr. Godamunne participated in 1 of these meetings via conference call. ** Mr. Senaratna participated in 9 of these meetings via conference call.

e. Ensure effective remuneration,

reward and recognition policies

are in place to help employees

give of their best.

f. Set and communicate values/

standards, with adequate

attention being paid to

accounting policies/practices.

g. Ensure effective information,

control, risk management and

audit systems are in place.

h. Ensure compliance with

laws and ethical standards

established.

i. Approve annual budgets and

monitor performance against

these.

16



HAYLEYS GOVERNANCE

The Hayleys Group Management

Committee (HGMC) comprises

the Chairman & Chief Executive,

of subsidiary and associate

companies and the Heads of

Strategic Business Development

and Group Human Resources.

HGMC members are responsible

for the management of sectors

assigned to them. Their names

this Report.

Company Secretary

The services and advice of the

Company Secretary is made

available to Directors as necessary.

The Company Secretary keeps

the Board informed of new laws,

regulations and requirements

coming into effect which are

relevant to them as individual

Directors and collectively to

the Board.


Though the functions of Chairman

& Chief Executive are vested in

one person, the management

structure established within the

Group ensures this does not

compromise the effective practice

of Corporate Governance in the

Group. The Deputy Chairman and

other Executive Directors and


for the businesses conducted by

the Group and effectively function

as CEOs of these businesses.

Mr. L.K.B. Godamunne, Non-

Executive Director functioned

as Senior Independent Director

through the year. The Senior

Independent Director is the

Director to whom concerns can

be conveyed if a need arises.

The Group’s Governance

structure detailed above, together

with the composition of the Board

ensures effective segregation of

roles and that no one individual

has unfettered powers of decision

making and execution.

Chairman’s role

The Chairman is responsible for

meetings. The Chairman maintains

close contact with all Directors,

and holds informal meetings with

Non-Executive Directors where

necessary.

Board balance

The composition of the Executive

and Non-Executive Directors

(the latter are over one third of

the total number of Directors)

down in the Listing Rules of the

Colombo Stock Exchange. The

Board has determined that all

Non-Executive Directors except

for Mr. K.D.D. Perera satisfy the

criteria for ‘independence’ set out

in the Listing Rules. The Board

believes this independence is not

compromised by the shareholding

held by Mr. L.K.B. Godamunne and

his spouse (which they consider

period (10 years) for which he has

served on the Board (which the

Board believes has not affected his

objectivity in the role).

The balance of Executive

and Independent Non-Executive

Directors on the Board ensures no

individual Director or small group

of Directors dominates board

discussion and decision making.

Financial acumen

The Board includes two senior

Chartered Accountants, who

possess the necessary knowledge

and competence to offer the

Board guidance on matters of

Finance Director and the other as

Chairman of the Audit Committee.

Supply of information

Directors are provided with

monthly reports on performance,

minutes of review meetings

and such other reports and

documents as are necessary.

The Chairman ensures all Directors

are adequately briefed on issues

arising at meetings.

Appointments to the Board

New appointments are made

on the recommendation of

the Nomination Committee.

The Nomination Committee is

responsible for the nomination

of a Chairman & Chief Executive

and a Deputy Chairman, and

these appointments are subject to

approval by the Board.


17


HAYLEYS GOVERNANCE

The Board believes it is

appropriate for the Chairman

& Chief Executive to chair

this committee and that the

composition of the committee

ensures its balance.

Re-election of Directors

The provisions of the Company’s

Articles require a Director

appointed by the Board to hold

Meeting and seek re-appointment

by the shareholders at that meeting.

The Articles call for one third of

each Annual General Meeting. The

Directors who retire are those who

have served for the longest period

The Nomination Committee consists of:

Chairman: N.G. Wickremeratne

Name of Member

N.G. Wickremeratne - Chairman & Chief Executive

L.K.B. Godamunne - Independent Non-Executive Director

J.D. Bandaranayake - Independent Non-Executive Director

A.M. Senaratna - Independent Non-Executive Director

T.L.F.W. Jayasekara - Independent Non-Executive DirectorK.D.D. Perera - Non-Executive Director

(w.e.f. 06.11.2008)

after their appointment/

re-appointment. Retiring Directors

are generally eligible for re-election.

The Chief Executive does not

retire by rotation.

Directors’ RemunerationRemuneration procedure

The composition of the

the requirements laid down in the

Listing Rules of the Colombo Stock

Exchange.

The Remuneration Committee

decides on the remuneration

of Executive Directors and sets

guidelines for the remuneration

of the management staff within

The Remuneration Committee consists of:

Chairman: L.K.B. Godamunne

Name of Member


J.D. Bandaranayake - Independent Non-Executive Director

A.M. Senaratna - Independent Non-Executive Director

T.L.F.W. Jayasekara - Independent Non-Executive DirectorK.D.D. Perera - Non-Executive Director (w.e.f 06.11.2008)

the Group. This Committee is

chaired by the Senior Independent

Director, Mr. L.K.B. Godamunne.

Disclosure of Remuneration

The Remuneration Committee’s

Report appears on page 27.

The total of Directors’

Remuneration is reported in Note 10

to the Financial Statements.

Relations with Shareholders

The Notice of Meeting is included

in the Annual Report. The Notice

contains the Agenda for the AGM

as well as instructions on voting,

including appointment of proxies.

A Form of Proxy is enclosed with

the Annual Report. The period

of notice prescribed by the

Companies Act No. 7 of 2007

has been met.

Constructive use of the Annual General Meeting

The active participation of

shareholders at the Annual General

Meeting is encouraged. The Board

believes the AGM is a means of

continuing effective dialogue with

shareholders.

and responds to concerns

shareholders have over the content

of the Annual Report as well as

other matters which are important

to them. The AGM is also used to

adopt the Financial Statements for

the year.

Major transactions

There have been no transactions

during the year under review

‘Major Transactions’ in terms of the

Companies Act.

18



HAYLEYS GOVERNANCE

Communication with stakeholders

Shareholders are provided with

Quarterly Financial Statements

and the Annual Report, which the

Group considers as its principal

communication with them and

other stakeholders. These reports

are also made available on the

Group’s website and are provided

to the Colombo Stock Exchange.

Shareholders may bring up

concerns they have, either with

the Chairman & Chief Executive,

the Deputy Chairman or the

Group’s Secretarial Department

as appropriate.

The Hayleys PLC website and

websites of listed companies within

the Group serve to provide a wide

range of information on the Group.

Institutional shareholders

Discussions are held with

Institutional Investors, involving

the Chairman, Deputy Chairman

and other Executive Directors

where necessary. This process is

supported by the SBDU and the

CAU. During these meetings, the

Directors ensure protection of

share price sensitive information

that has not been made available

to the Company’s shareholders.

Price sensitive information

Due care is exercised with respect

to share price sensitive information.

Accountability and Audit

Financial reporting

The Board places great emphasis

within the bounds of commercial

reality, and on the adoption

of sound reporting practices.

Financial information is disclosed

in accordance with the Sri Lanka

Accounting Standards. Revisions

of existing Accounting Standards

and adoption of new standards are

carefully monitored and awareness

programmes are held covering

The Annual Report includes

through which an attempt is made

to provide stakeholders with

information to assist them make

more informed decisions.

The Statement of Directors’

Responsibilities for the Financial

Statements is given in page 123 of

this Report.

Management report

A comprehensive coverage of

key initiatives undertaken during

the year, external impacts, sector

performances, achievements and

future outlook, awards won and

in the Operations Review (page

30 to page 59 ) and Awards &

Accreditations (page 79) sections

of this Report.

The Financial Review (page 60 to

page 68) in this Report provides an

analysis of the Group’s performance

ongoing process for identifying,

risks. This process has been in place

through the year under review. The

potential risks, both internal and

external, faced by the Group and

actions instituted for mitigating

the same are reported in the Risk

Management section (page 69 to

page 75) of this Report.

Workplace practices and

ethical aspects are dealt with in the

Sustainability Report in pages 92

to 108. The Board strives to protect

shareholder value and provide a

return in keeping with the market.

The Sustainability Report Economic

Performance section on pages 88

to 91 gives further details on

these aspects.

Going concern

The Directors, after conducting

necessary inquiries and reviews

including reviews of the Group’s

budget for the ensuing year, capital

expenditure requirements, future

and borrowing facilities, have a

reasonable expectation that the

Company and the Group have

adequate resources to continue

in operational existence for the

foreseeable future. Therefore the

going concern basis has been

adopted in the preparation of

the Financial Statements.

Internal controls

The Board is responsible for the

Group’s internal control and its

effectiveness. Internal control

is established with emphasis

placed on safeguarding assets,

making available accurate and

timely information and imposing

greater discipline on decision

making. It covers all controls,

and compliance control and risk

management. It is important to

state, however that any system

can ensure only reasonable, and

not absolute, assurance that errors

and irregularities are prevented or

detected within a reasonable time.

The Group’s Management Audit

& System Review Department

role in assessing the effectiveness

and successful implementation of

existing controls and strengthening

these and establishing new controls

where necessary. The MA & SRD’s

reports are made available to the


19


HAYLEYS GOVERNANCE

Chairman & Chief Executive and the

Chairman of the Audit Committee.

The Group also obtains

the services of independent

than the statutory auditors to carry

out internal audits and reviews to

supplement the work done by the

MA & SRD.

The Board has reviewed the

effectiveness of the system of

to the date of signing the accounts.

Audit Committee

An Audit Committee was established

in 1992. The Committee consists

entirely of Non-Executive Directors

and is chaired by Mr. T.L.F.W.

Jayasekara. Mr. A.D.B.Talwatte,

former Chairman of the Audit

Committee served as a consultant

up to February 2008. The Group

Manager, MA & SRD, serves as its

Secretary. The Chairman & Chief

Executive and Finance Director

are invited to attend meetings, and

the Deputy Chairman and other

Executive Directors attend meetings

as required. The input of the

statutory auditors is obtained

where necessary.

The Audit Committee helps the

Group, achieve a balance between

conformance and performance.

During the year under review

the Committee met on 5 occasions,

the attendance at these meetings

are reported in ‘Audit Committee

Report’ in page 124 of this Report.

The Committee is empowered

to examine any matter relating to

the Financial Reporting systems

of the Group, and its external and

internal audits. Its duties include

the detailed review of Financial

Statements, internal control

procedures, accounting policies

and compliance with applicable

accounting standards.

It reviews the adequacy of

systems in place for compliance

with relevant legal, regulatory and

ethical requirements and Company

policies.

The Audit Committee

recommends the appointment and

fees of the external auditors, having

considered their independence.

The Audit Committee Report

appears on page 124 to page 125 of

this Report.

Corporate Governance Statement

The Board of Directors have

adopted a formal Corporate

Governance Statement. Aspects

covered in this statement include

the responsibilities of the Board and

the HGMC, governance processes

and the authority entrusted to the

HGMC. The Board will continue to

adopt best practices in Corporate

Governance and adopt them where

appropriate, to better safeguard

stakeholder interests.

IT governance

We continue to give attention to

shaping the Group’s IT systems to

meet its strategies and objectives.

Dedicated staff are deployed

Group-wide to support this need.

The Group’s investment in

IT resources covers resources

operated and managed centrally

Audit Committee consists of:

Chairman: T.L.F.W. Jayasekara

Name of Member

T.L.F.W. Jayasekara - Independent Non-Executive Director


J.D. Bandaranayake - Independent Non-Executive Director K.D.D. Perera - Non-Executive Director (w.e.f. 06.11.2008)

and resources deployed in the

various sectors. The former includes

an ERP system and internet and

e-mail services catering to most

sectors in the Group, and a

Group-wide data communication

system. The latter includes sector

management systems.

IT value and alignment

Investments in IT projects

and systems are made after

consideration is given to their

suitability for the related projects.

Further aspects such as cost

savings, improved customer

satisfaction, timely information

and the balance between cost of

investment and scale of operations

are also taken into account when

these decisions are taken.

IT risk management

Risks associated with Information

Technology are assessed in

the process of Enterprise Risk

Management. Use of licensed

software (commonly Microsoft

products), closer monitoring of

internet usage (for compliance with

the Group’s IT Use Policy) and mail

server operations and the use of

some of the practices in place.

20



HAYLEYS GOVERNANCE

Further insight into operational aspects of the Management Structure

Hayleys Group Management Committee (HGMC)

The Hayleys Board has delegated

to the HGMC authority to formulate

strategies in respect of business

units, seek approval for this

strategy and implement it within

the policy framework established

by the Board.


for developing strategies and action

plans in respect of the sectors

and/or business units they manage.

HGMC members in charge of

service units are responsible for the

formulation of policies and strategies

matters requiring the approval of

the Boards of those companies will

be tabled and considered.

Authority vested with the HGMC

The responsibilities of the HGMC

include -

Recruitment, remuneration and

discipline of all personnel

Training and succession planning

Negotiation with trade unions and

manual and clerical personnel

Approval of expenditure

Maintenance of safety and

ethical standards

Management of risk and

following implicit and explicit

guidelines set by the Group

Safeguarding assets and

avoiding deterioration of value

through aging or obsolescence

Providing support to the Board

and the HGMC in pursuing

Hayleys Group objectives and

standards

While Group Companies

are subject to coverage by the

Hayleys’ Audit Committee, HGMC

members are responsibile to review

Risk Management systems and

internal control systems designed

to protect assets, ensure proper

records are maintained and reliable

information is produced from time

to time.

All Financial Controllers of

sectors are required to report in

writing to the Finance Director on

a quarterly basis, bringing to his

or concern regarding the business

activities of their sector and the

Financial Statements submitted by

them. This reporting may be more

frequent if circumstances warrant it.


for the recruitment, training and

retention of senior management

staff and ensuring succession for

key functions. The Chairman and

HGMC, in consultation with the

Head of Group HR, have oversight

for ensuring that succession plans

are in place for all sectors.

The Group Management

Committee meets every month.

Copies of minutes of meetings

of the Group Management

Committee and of other Review

Meetings are sent to all Directors

including the Non-Executive

Directors.

Internal Communication

Functional Clusters

Finance, Corporate

Activity, IT & HR Clusters have

been established previously and

bring together representatives

from the different parts of the

Group. These Clusters serve as fora

to communicate relevant matters,

identify areas of special interest

and concern and discuss these, and

share and spread best practices.

CEO’s Forum

The CEO’s Forum chaired by

the Chairman & Chief Executive is

held quarterly. This Forum brings

together management staff of all

companies, in a setting in which

information is disseminated and

comments and questions relating

to the Group are made, asked

and answered. This Forum has

seen active participation from

all attending.

in respect of these units, which are

subject to approval by the Board.

Strategies in respect of sectors

are presented in the annual budget

planning process and are discussed

and approved by the HGMC before

submission to the Hayleys Board

for approval.

All capital expenditure of

business sectors are required to

be approved by the Boards of the

respective companies.

Companies falling within

each sector are required to hold

quarterly meetings at which all


21


HAYLEYS GOVERNANCE

Levels of compliance with the CSE’s New Listing Rules- Section 7.10, Rules on Corporate Governance are given in

the following table.

Rule No. Subject Applicable requirement Compliance

status

Details

7.10.(a) Non-Executive

Directors

At least one third of the total

number of Directors should be

Non-Executive Directors.

Compliant As at the conclusion of the

immediately preceding

AGM four out of eleven

Directors were Non-

Executive Directors. As at

twelve Directors are Non-

Executive Directors.

7.10.2(a) Independent

Directors

Two or one third of Non-Executive

Directors, whichever is higher,

should be Independent.

Compliant As at the conclusion of

the immediately preceding

AGM, all four

Non-Executive Directors

were independent. As

at 31st March, 2009 four

Directors are Independent.

7.10.2(b) Independent

Directors

Each Non-Executive Director

should submit a declaration of

independence/non-independence

in the prescribed format.

Compliant

7.10.3(a) Disclosure

relating to

Directors

The Board shall annually make

a determination as to the

independence or otherwise of

the Non-Executive Directors and

names of Independent Directors

should be disclosed in the

Annual Report.

Compliant Please refer page 16.

7.10.3(b) Disclosure

relating to

Directors

The basis for the Board

to determine a Director is

for Independence is not met.

Compliant Given in page 16 under the

heading of Board Balance.

7.10.3(c) Disclosure

relating to

Directors

A brief resume of each Director

should be included in the Annual

Report and should include the

Director’s areas of expertise.

Compliant Please refer page 24 to 25.

7.10.3(d) Disclosure

relating to

Directors

Forthwith provide a brief resume

of new Directors appointed to the

(a),(b) and (c) to the Exchange.

Compliant A brief resume of Mr. K.D.D.

Perera has been provided

to the Colombo Stock

Exchange.

22



HAYLEYS GOVERNANCE


status

Details

7.10.5 Remuneration

Committee

A listed company shall have a

Remuneration Committee.

Compliant Please refer page 17 of this

Report.

7.10.5(a) Composition of

Remuneration

Committee

Shall comprise of Non-Executive

Directors a majority of whom will

be Independent.

Compliant The Committee consists

Directors, four of whom are

Independent.

7.10.5(b) Functions of

Remuneration

Committee

The Remuneration Committee shall

recommend the remuneration of

Executive Directors.

Compliant Please refer ‘Remuneration

Procedure’ in page 17 of

this Report.

7.10.5(c) Disclosure in

the Annual

Report

relating to

Remuneration

Committee

The Annual Report should set out;

a. Names of Directors comprising

the Remuneration Committee

b. Statement of Remuneration

Policy

c. Aggregated remuneration paid

to Executive & Non-Executive

Directors

Compliant

Compliant

Compliant

Please refer page 17.



7.10.6 Audit

Committee

The Company shall have an Audit

Committee.

Compliant Names of the members of

the Audit Committee are

stated on page 19.

7.10.6(a) Composition

of Audit

Committee

Shall comprise of Non-Executive

Directors a majority of whom will

be Independent.

Compliant Audit Committee consists

of three Independent Non-

Executive Directors and one

Non-Executive Director.

A Non-Executive Director shall be

appointed as the Chairman of the

Committee.

Compliant Chairman of the

Audit Committee is

an Independent Non-

Executive Director.

Audit Committee Meetings.

Compliant

and Finance Director attend

meetings by invitation.

The Chairman of the Audit

Committee or one member should

be a member of a professional

accounting body.

Compliant Chairman of the Audit

Committee is a Chartered

Accountant.


23


HAYLEYS GOVERNANCE


status

Details

7.10.6(b) Audit

Committee

Functions

Functions shall include:

a. Overseeing of the preparation,

presentation and adequacy

statements in accordance with

Sri Lanka Accounting Standards.

b. Overseeing of the compliance

requirements, information

requirements of the Companies

reporting related regulations

and requirements.

c. Overseeing the processes

to ensure that the internal

controls and risk mangement

are adequate to meet the

requirements of the Sri Lanka

Auditing Standards.

d. Assessment of the

independence and performance

of the external auditors.

e. Make recommendations

to the Board pertaining to

appointment, re-appointment

and removal of external

auditors, and approve the

remuneration and terms of

engagement of the external

auditors.

Compliant

The terms of reference of

the Audit Committee have

been agreed by the Board

7.10.6(c) Disclosure in

the Annual

Report relating

to Audit

Committee

a. Names of Directors comprising

the Audit Committee

b. The Audit Committee shall

make a determination of the

independence of the Auditors

and disclose the basis for such

determination.

c. The Annual Report shall contain

a Report of the Audit Committee

setting out of the manner of

compliance with their functions.

Compliant

Compliant

Compliant


Please refer Audit

Committee Report on

page 124.

Please refer Audit

Committee Report on

page 124.

24



N.G. Wickremeratne

Chairman

Joined Hayleys in 1971. Appointed

Group Executive Director in 1983

and to the Board in 1986. Appointed

Deputy Chairman in July 2004 and

Chairman & Chief Executive in January

2007. Chief Executive of Dipped

Products from its inception. Holds a

B.Sc. Degree from the University of

Ceylon, Peradeniya. Chaired the Sri

Lanka Association of Manufacturers

and Exporters of Rubber Products.

Serves as a Committee Member of

the Ceylon Chamber of Commerce

and has been its representative on the

National Labour Advisory Council. Past

President of the Sri Lanka - France

Business Council. Elected to the

Leadership Group on Water Security in

Asia of the Asia Society, New York, by

invitation in November 2008.

A.M. Pandithage

Deputy Chairman



and to the Board in 1998. Appointed

Deputy Chairman in January 2007.

Chief Executive of Hayleys Advantis

since its inception. Fellow of the

Chartered Institute of Logistics

& Transport. Director, Sri Lanka

Port Management & Consultancy

Services. Former Chairman of the

Ceylon Association of Ships’ Agents.

Former Director of both the Sri Lanka

Ports Authority and Jaya Container

Terminals. Member of the Presidential

Committee on Maritime Matters.

R.A. Ebell



and to the Board in 1989. Fellow,


of Sri Lanka and Fellow, Chartered

Institute of Management Accountants

UK. Member, Chartered Institute

of Marketing UK. Past President,

CIMA Sri Lanka Division. Chairman,

Financial Reporting Faculty, ICASL.

Is responsible for the Group Finance

function and other Group services.

L.K.B. Godamunne

(Independent Non-Executive Director)

Appointed to the Board in 1998.

Director Haycarb and Hayleys

Exports. Currently serves as Chairman

of two other, unlisted companies.

Retired as Country Director, United

Nations World Food Programme in

1995. Former Secretary General and

Member, Board of Directors, Mahaweli

Authority of Sri Lanka.

P.S.P.S. Perera

(to 30th April, 2009)


Group Executive Director in 1997 and

to the Board in 2001. Holds a B.Sc.

(Hons.) Degree from the University

of Peradeniya. Had responsibility for

the Fibre Sector and for the Group

Export Shipping function.

J.D. Bandaranayake


Appointed to the Board in July

2004. Serves as the Chairman of

Ceylon Tobacco Company, Director

of Coca Cola Beverages Sri Lanka,

Sampath Bank, Finlays Colombo,

West Coast Power (Pvt) and the

Board of Investment, Sri Lanka. He is

a graduate of Law, a Fellow, Institute

of Personnel Management Sri Lanka,

Chairman of the Ceylon Chamber of

Commerce and Past Chairman of the

Employers’ Federation of Ceylon.

A. Hettiarachchy

Joined Haycarb in 1983. Appointed to

the Group Management Committee

in 2001. Appointed to the Board in

August 2004. Chartered Engineer,

Member of the Institution of

Engineering & Technology UK. Serves

as a Director of the Sri Lanka Institute

of Nanotechnology (SLINTech) and

the National Science Foundation. Has

and for Recogen in the Power &

Energy Sector.

M.R. Zaheed

Joined Hayleys in 1981. Appointed to


in 2001. Appointed to the Board in

August 2004. Holds a B.A. (Hons.)

Degree from the University of

Kelaniya and an MBA Degree from

the University of Colombo. Member

of the Agri Cluster of the National

Council for Economic Development.

Served as Vice Chairman of the

Imports Section, Ceylon Chamber

of Commerce. Has responsibility for

the Agri Inputs, Agri Products and

Consumer sectors.

BOARD OF DIRECTORS


25


A.M. Senaratna


Appointed to the Board in November

2005. Currently resides in Canada

and acts as a Consultant to

companies globally. Previously held

senior positions with Amsterdam

based TNT/TPG: as a member of

the Global Business Development

Board, as Vice President Acquisitions,

Vice President and General Manager

TNT Logistics North America and

President designate TNT Indonesia.

He has also been in senior/strategic

roles with Celestica (former IBM

Manufacturing), Ryder, Rockwell

International, Canada Steamship Lines

and Pepsi Cola. Holds a B.Sc. from the

University of Ceylon, Colombo, and is

(CMA Canada).

T.L.F.W. Jayasekara


Appointed to the Board in 2006. Group

Finance Director of Brandix Lanka.

Previously held positions including

Group Finance Director of Aitken

Spence & Co. and General Manager

Deutsche Bank. Fellow, Institute of

Chartered Accountants of Sri Lanka

and Associate, Chartered Institute

of Management Accountants UK.

Member of the Sri Lanka Accounting &

Auditing Standards Monitoring Board

as representative of CIMA. Serves as

Director of Lanka Ventures.

J.A.G. Anandarajah

Joined DPL in 1980. Director of DPL

since 1989. Appointed to the Hayleys

Group Management Committee in

2001 and to the Board in January

2007. Holds a B.Sc. (Hons.) Degree

in Chemistry from the University of

Peradeniya. Associate Member of the

Institute of Chemistry, Sri Lanka. Has

responsibility for the Hand Protection

Sector and for Kelani Valley

Plantations in the Plantations Sector.

K.D.D. Perera

(Non-Executive Director)

Appointed to the Board in 2008.

Chairman/Director-General, Board

of Investment of Sri Lanka. Member

of the Board of Directors of the

Strategic Enterprises Management

Agency and the Sri Lanka Export

Development Board. Member of the

Petroleum Resources Development

Committee. Serves as Chairman of

The Fortress Resorts, Vallibel Power

Erathna, Vallibel Finance and Vallibel

Holdings (Pvt). Deputy Chairman of

LB Finance, Amaya Leisure (formerly

Connaissance Holdings) and Royal

Ceramics Lanka. Director Sampath

Bank, Asian Alliance Insurance and

Hotel Reefcomber.

BOARD OF DIRECTORS

26


HAYLEYS GROUP MANAGEMENT COMMITTEE

M.M.M. De Silva



in 2001. Holds a B.Sc. Degree from

the University of Peradeniya. Fellow,


of Sri Lanka and Associate,

Chartered Institute of Management

Accountants UK. Has a Postgraduate

Diploma in Business Management

from the Postgraduate Institute

of Management, University of Sri

Jayawardenapura. Has responsibility

for the Industrial Solutions Sector,

for companies other than Recogen in

the Power & Energy Sector, for the

Fibre Sector and for Talawakelle Tea

Estates in the Plantation Sector.

M.O. Raban



in 2001 and Managing Director of

Hayleys Advantis in April 2007. Has

responsibility for the Transportation

Sector.

H.C.S. Mendis



in 2001. Holds a B.Sc. (Hons.) Degree

from the University of Colombo.

Fellow, Chartered Institute of

Management Accountants UK.

Member, Chartered Institute of

Marketing UK and a Chartered

Marketer. Has responsibilities within

the Fibre Sector.

G.K. Seneviratne

Joined DPL Plantations in 1992

and appointed to its Board in

1995. Director of DPL since 1998.

Appointed to the Group Management

Committee in 2007. Chief Executive

of Kelani Valley Plantations since

1994 and its Managing Director since

May 2004. Past Chairman of the

Planters’ Association of Ceylon and

former Director, Sri Lanka Tea Board,

Rubber Research Board, Plantations

Trust Board and the Tea Association

of Sri Lanka. Has responsibilities

within KVPL in the Plantation Sector.

D.B. Weerasinghe



in 2007. Structural Engineer. Holds

a B.Sc and an MBA Degree from

the University of Colombo and a

Post Graduate Diploma in Industrial

Engineering from the National

Institute of Business Management. Has

responsibility for the Textiles Sector.

S.C. Ganegoda

Rejoined Hayleys in March 2007.


Committee in July 2007. Fellow,


of Sri Lanka and Member,

Accountants of Australia . Holds

an MBA from the Postgraduate

Institute of Management, University

of Sri Jayewardenepura. Worked

for Hayleys and Diesel & Motor

Engineering Co. between 1987 and

2002, ultimately as an Executive

Director of the latter. Subsequently

held several senior management

positions in large private sector

entities in Sri Lanka and overseas.

Has responsibility for Strategic

Business Development in the Group.

S.P. Dissanayake

Joined Hayleys in July 2007.


Committee in the same month.

Graduate in Hotel Management and

awarded Honorary Membership of the

Institute of Personnel Management.

Prior to joining Hayleys held several

senior management positions in large

private sector entities in Sri Lanka

and overseas in Human Resources

and previously in Hotel Management.

and advisory positions in Human

Resources and the Hotel Industry. Has

responsibility for Human Resources

and other Group services.

Management Committee Members are:

Members

N.G. Wickremeratne (Chairman & Chief Executive), A.M. Pandithage (Deputy Chairman), R.A. Ebell,

P.S.P.S. Perera, A. Hettiarachchy, M.R. Zaheed, J.A.G. Anandarajah, M.M.M. De Silva, M.O. Raban, H.C.S. Mendis,

G.K. Seneviratne, D.B. Weerasinghe, S.C. Ganegoda, S.P. Dissanayake



27

REMUNERATION COMMITTEE REPORT


The Remuneration Committee

consists of the 5 Non-Executive

Directors, and is chaired by a Non-

Executive Director. The Chairman

& Chief Executive assists the

Committee by providing relevant

information and participating in its

analysis and deliberations, except

when his own compensation

package is reviewed.

The Committee is responsible

for determining the compensation

of the Chairman & Chief Executive,

Deputy Chairman, Executive

Directors and members of the

Group Management Committee.

In addition they lay down

guidelines and parameters for the

compensation structures of all

management staff within the Group.

A primary objective of

compensation packages is to

and experienced work force,

and reward performance. These

compensation packages should

provide compensation appropriate

for each business within the Group

and commensurate with each

employee’s level of expertise

and contribution, bearing in mind

the business’ performance and

shareholder returns.

In carrying out its tasks

the Committee reviewed data

concerning executive pay among

comparator companies. This

review encompassed subsidiary

and associate companies within

the Group. The Committee was

assisted in this respect by a

comprehensive remuneration

survey commissioned and

undertaken during the year.

The Committee will meet

from time to time and review the

Group’s compensation structures

to assure alignment with strategic

priorities and with compensation

offered by comparator companies.

Succession plans to which

remuneration can be aligned have

been taken to align pay more

closely with performance, based on

Performance Management Systems

within the Group, and to emphasise

the component of variable pay in

management staff remuneration.

L.K.B. Godamunne

Chairman

Remuneration Committee

18th May, 2009

Taking our technical and manufacturing excellence to the world… Haycarb is present in Thailand and Indonesia…

Dipped Products is operating in Thailand… technical expertise in plantation management nets highest sales

averages for high grown teas…

OUTSTANDING MANUFACTURIN

TECHNICAL & NG CAPABILITY

Haycarb generates its own energy from biomass and waste heat… Hayleys MGT was

handpicked for Electron Beam technology based effluent treatment…

30


FIBRE HAND PROTECTION

AGRI INPUTS AGRI PRODUCTS

INDUSTRY INPUTS POWER & ENERGY

MANAGEMENTREPORT


31

PURIFICATION PRODUCTS TEXTILES

PLANTATIONS CONSUMER PRODUCTS

TRANSPORTATION RESORTS


GLOBAL MARKETS &MANUFACTURING

* Share of Group Turnover including Associates.


33

The Fibre Sector at Hayleys is a global market leader in the coir fibre industry, manufacturing a diversified range of products including brushes, floor coverings, curled fibre, bedding

and cushioning, erosion control and horticultural products. Its coir-fibre pith business further adds to its range of environmentally friendly products, while its non-coir products include

cotton and semi-synthetic felt sheets made from recycled textile fibre. With more than 300 patents in its favour, Hayleys’ Fibre Sector is at the leading edge of customer demand,

both consumer and industrial.

Hayleys is the world’s largest producer

of natural fibre brushware, satisfying 22%

of global demand for coir and

palmyrah-fibre-based brushes.

Hayleys continues to be the world’s leading

provider of coir twine, supplying 70% of

the global demand in agriculture and

aquaculture.

It is also the world’s largest supplier of curled

fibre for the automobile upholstery.

The Company is well-known among

horticulturists for its innovative and

successful natural-fibre-based pots, weed

suppressers and evaporation-control discs.

MANAGEMENT REPORT

OPERATIONS REVIEW

Performance

This mainly export business,

whose domestic market is

with a strengthening of the

rupee against the currencies

of our Asian competitors, even

as the value of our European

customers’ currencies declined.

This has resulted in poor export

performance in brushware, door

matting and bedding. Falling US

demand in the latter part of the

year exacerbated the effect of

adverse exchange rates on sales

margins. These unfavourable

economic developments could

not have been predicted; that

our companies in the sector

managed to retain their customers

FIBRE

2009 2008

Return on capital employed 4% 5%

Avg. capital employed (Rs. mn) 2,949 3,095

Investment in property, plant & equipment (Rs. mn) 89 85

* Inclusive of Associates

34


MANAGEMENT REPORT

OPERATIONS REVIEW

speaks volumes for the efforts of

our marketing, production and

procurement teams.

One bright spot was the

Industrial Fibre segment, which

saw improved performance.

Though the global recession

impacted negatively on demand for

products such as machine-twisted

marketing helped maintain

turnover. The major contributors

to growth were sales of stitched

pith. A drastic fall in automobile

production worldwide slashed

for use in vehicle upholstery, one of

our major products. As anticipated,

outsourced from India grew. Tight

liquidity-control measures were

public spending this year.

The Brushware segment

maintained turnover, while export

volume increased slightly over last

year despite the world recession.

Margins, however, were drastically

affected by cost escalation during

currencies in Europe, where the

Company exports 65% of its

products, coupled with a rigid

Rupee-Dollar parity rate adversely

a net loss for the year. Measures

were taken to reduce costs

the year. Since we have succeeded

in retaining our customer base,

these measures, coupled with the

more realistic parity rates now

prevailing, will undoubtedly drive

Company also plans to enter the

industrial brushware market.

The Rubberised Coir segment

performed poorly. During the

by more than 70%; this was

followed by steep increases

in the prices of chemicals and

energy. An immediate price

revision in response to rising costs

was unfeasible due to existing

contracts. By the second half

of the year, a world recession,

coupled with rigid exchange

rates, had reduced demand and

from India and commissioned

during the last quarter. This

investment will reduce the

segment’s energy bills by 60%;

reductions in manpower and

overheads will be fully realised

during the current year. Improved

results from a strengthened

marketing department are also

expected in the current year.

The Fibre and Rubber-Based

Floor Coverings segment also

rapidly-escalating raw materials

prices and then by recession in

our important US and Canadian

markets. The segment is now

being restructured with emphasis

on marketing and new-product

development as core competencies.

More manufacturing will be

outsourced, while overheads are

business model.

The Needled Felt business is

beginning to recover and order

books are improving.


35

HAND PROTECTION

MANAGEMENT REPORT

OPERATIONS REVIEW

DPL is a global player enjoying approximately

5% world market share. Its products are sold

and used in at least 68 countries.

The Company operates six production

facilities in Sri Lanka and one in Thailand,

together with a marketing operation, ICO

Guanti SpA in Italy.

DPL markets its power brands, Palmrite,

DPL Occupational and DPL PalmPro, to

the consumer, industrial and healthcare

segments respectively.

Currently, the product portfolio consists of 69

categories comprising 290 different styles and

models made of natural or synthetic latex.

DPL is ISO 14001:2004 and ISO 9001:2000-

accredited and certified to the British Retail

Consortium Global Standard for Consumer

Products.

Performance

A sharp rise in oil prices and

consequent escalation in cost

of rubber and all other inputs

exerted unprecedented pressure

on performance. Actions initiated

in the previous year, when the

appear, could do no more than

to mitigate these developments,

whose intensity and speed of onset

made it impossible to cushion their

full impact. When oil and rubber

prices reached their peak in July

and August, direct costs alone

exceeded 50% on some products.

Despite being able to agree with

customers on unusually large

upward price adjustments, most

of this extra cost had to be met

by the Company over and above

what was similarly absorbed in the

previous year. Adding to these

problems, trade union action at

Venigros, lasting several months,

The manufacture of gloves - for domestic, industrial and medical use - is a technically demanding and specialised industry. In this field, Dipped Products PLC and its subsidiaries

enjoy international renown for quality and value, offering a comprehensive range of products that caters to a variety of applications. Dipped Products is a committed, market

and research-led developer with a constant stream of new products that anticipate changes in customer demand around the globe.

2009 2008




36


MANAGEMENT REPORT

OPERATIONS REVIEW

reduced output and adversely

High input prices pushed up

inventory values and consequently

the borrowings. The effect in

Sri Lanka was further exacerbated

by high interest rates and a

Rupee which stayed strong,

out of sync with steep local

considerably in the last quarter,

helped by a combination of factors

such as reductions in cost of

as the depreciation of the Rupee

since November. Closer monitoring

of overheads also contributed to

the turn around.

The last of the production plants

in Sri Lanka manufacturing patient

examination gloves at Hanwella

free gloves to meet the growing

demand for such products.

A production plant owned

by Neoprex began commercial

gloves in May. Concurrently,

a low-capacity line with

higher operational costs was

decommissioned.

The previous year’s focus

on reducing cost, particularly of

energy carried on into the year

under review. A new 5m kCal/hr.

biomass heater, commissioned at

Venigros in August, reaped savings

of over Rs. 78 mn within the year,

while dependence on LP gas was

reduced by over 95%. Several

steps were also taken to minimise

electricity and water consumption.

The turn around at Dipped

Products (Thailand) Ltd. stands

out as the most noteworthy

development of the period under

review. Though the Company

ended the year with a net loss, its

performance, particularly since

August, has been encouraging.

Operations broke even in the last

quarter of the current year that

of the Company’s fortunes is

problems with the thermal heaters,

improvements to plant and process

capabilities, favourable movement

of Thai Bhat and drop in rubber

prices. The introduction of new

product variants to the latex

examination glove range attracted

several new customers and also

contributed to the recovery.

Notwithstanding the plethora of

challenges, DPL developed 14 new

products and versions, broadening

its appeal to customers. At least

3 of the new products feature

innovative attributes or entails

unique manufacturing processes

and consequently the Company

has applied for patents in Sri Lanka

and overseas.

The launch of electricians’

gloves, was delayed after further

necessary to meet the stringent

statutory requirements of the

target markets. The products are

now being tested by independent

laboratories in the USA and Europe.

The upturn of Thailand

operation is timely and vindicates

our conviction to stay in this

business despite the initial

setbacks. The medical glove

business being less prone to

recession should survive the

downturn and create avenues for

growth. In contrast, the consumer

and industrial markets catered by

the Sri Lankan facilities are showing

signs of softening demand. In order

to sustain demand, DPL expects to

leverage on their newly developed

products by taking them actively to

the market.

While energy costs have eased

for the present, they are certain

to rise again. Energy conservation

and minimising reliance on fossil

fuels are clear priorities for the

future. Presently, however, the

primary focus is to conserve cash.

recovery are seen, no major

capital investments are proposed

in Sri Lanka.


37

PURIFICATION PRODUCTS

The world’s largest manufacturer of coconut-

shell-derived activated carbon.

Accounts for over 17% of global production.

A successful Sri Lankan multinational with

production and marketing operations both in

Sri Lanka and overseas.

MANAGEMENT REPORT

OPERATIONS REVIEW

The main business of this sector is the production and marketing of coconut-shell-based activated carbon. Hayleys’ subsidiary Haycarb PLC is a pioneer in the manufacture of this

product and markets standard, special washed and impregnated carbons in granular, pellet and powder form. Haycarb also has the capacity to regenerate spent carbons for

the chemical industries in which they are used.

Activated carbon is used widely for gas (including air) and water purification, as well as in solvent and gold recovery. The Company’s portfolio includes numerous high-value-added

products for use in vehicle cabin air filters, point-of-use water filters, military and industrial gas masks, cigarette filters and a variety of medical applications. Haycarb also manufacture

and market activated carbon utilising end products and offers turnkey solutions for air, water, effluent, sewage and solid waste treatment, as well as noise abatement. In addition,

the Company offers engineering services in thermal energy generation from biomass.

Performance

Haycarb had a successful year,

despite

supply constraints on its main

input due to adverse weather

conditions and increased

demand in Sri Lanka, which

compelled it to import charcoal

at higher cost;

further input cost pressure from

of the year, which continued in

Sri Lanka despite a fall in world

market prices; and

the unrealistic exchange rate

for the Sri Lanka Rupee, placing

our Sri Lankan products at

a disadvantage vis-à-vis our

competitors.

2009 2008





38


MANAGEMENT REPORT

OPERATIONS REVIEW

All these were worsened by the

global economic recession.

Haycarb’s response to these

challenges has been to seek out

opportunities that still present

themselves . It focused on the

added orders at our Sri Lankan

facilities, which has a unique process

capability in this respect, while

selectively distributing other orders

amongst our facilities in Thailand

and Indonesia thus optimising our

production capabilities.

Haycarb also embarked on a

consolidation process involving

all its operations, including the

UK and the US, building synergies

of autonomy. Better linkages,

communication, support services

and resource sharing resulted. The

initiative is evident in Haycarb’s

new globally integrated marketing

approach, where skills, information

and knowledge are shared across

the system.

Haycarb also continued to

focus attention on managing

improvements being seen in

the year. The search for greater

management. Haycarb designed

new processes to convert slow

moving by-products into attractive

new products, reducing cost and

making available storage space.

These re-engineered products

quality to generate adequate

disposed of at cost, they made a

positive contribution to results.

Finally, the sector completed its

exit from Kinetics during the year.

Future Plans and Projections

Haycarb will launch several

quality new products locally and

globally in the near future. Many

will be designed to leverage the

increased focus on environmental

protection and reduction of carbon

footprint of applications, a trend

now driven by public concern and

legislative action, particularly in the

developed world. The cleansing

properties of activated carbon

will be central to the development

and production of pollution-

control systems and devices of

all kinds, and Haycarb stands well

boom that results.

In order to exploit these

and competitively as it can,

Haycarb is moving to expand

its manufacturing capacity in

low-cost-base environments

abroad. This will provide relief

from high input costs in its main

manufacturing base, Sri Lanka,

but cost is not the only reason

for this expansion; opportunities

are available close to countries

with a substantial local market for

these products. Thus Haycarb is

looking closely at developments in

emerging economies such as India,

and in other countries like Russia,

the CIS, South America, Singapore

and the non-gold markets of Africa.


39

TEXTILES

HMGT has the capacity to produce a thousand

tonnes of fabric a month.

The Company’s high-tech plant is set on a

40-acre site at Neboda.

The plant is certified to ISO 9001:2000,

SA 8000 and ISO 14001 standards.

HMGT is accredited by renowned international

brands such as Marks & Spencer, Next, Bhs,

Tesco, Sainsbury, Adams, Woolworth and

Mothercare.

MANAGEMENT REPORT

OPERATIONS REVIEW

Hayleys MGT Knitting Mills (HMGT) pioneered knit fabric manufacturing for international markets when it commenced operations 15 years ago. The Company is a leader in this field, offering a wide range of products including 100% cotton (including ‘fair trade’ and organic cotton) and 100% polyester (including recycled polyester) fabric, cotton/polyester viscose, and ‘modal’

cotton (including Lycra®-based fabric). Varieties offered include single jersey, interlock, rib, piquet, fleece and polar fleece (microfleece), available in Teflon coaied, climate control, moisture

management and other finishes.

Performance

The global economic slowdown

has had a strong negative effect

consumer behaviour in Europe and

the USA, HMGT received fewer

orders from its buyers in those

countries in 2008-09. Even so, it

was able to maintain turnover on par

with the previous year due to the

higher value of the fabric produced.

Escalating furnace oil prices

and higher electricity tariffs

half, however, oil price reductions

helped restore our margins.

News that the GSP+ tariff

exemption extended to Sri Lanka

by the EU will continue for at

least another year helped reduce

uncertainty concerning orders

going forward from January 2009.

2009 2008




* Associate

40


MANAGEMENT REPORT

OPERATIONS REVIEW

On the marketing side, HMGT

saw orders of polyester fabric from

a growing number of European

football clubs. Demand for wool

fabric also increased during the

year.

Strategic relationships with its

suppliers helped HMGT reduce

production lead times through the

joint introduction of lean initiatives,

making it more competitive

amongst regional suppliers.

Unfortunately, the Company faced

quarter due to slowdowns caused

production decisions and take

delivery of ordered fabric -

consumer demand in their markets.

On the operations side, ‘lean

manufacturing’ initiatives were

adopted across the Company to

improve lead times and cut costs.

Other key initiatives include the

installation of Sri Lanka’s biggest

biomass steam generator, which

will help reduce energy costs, and

the establishment of a rotary and

digital fabric-printing facility to

improve value addition, production

minimising dependence on

external suppliers.

Future plans

HMGT is growing to be one of

the most versatile knit fabric

manufacturers in the region, with

the ability to supply rotary, digital

and sublimation-printed fabric as

well as Jacquard collars and cuffs,

and to undertake yarn dyeing

for all types of knit fabric. A key

initiative for the future will be to

target direct exports of polyester

Bangladesh. HMGT is also exploring

the possibility of setting up a

polyester-fabric manufacturing

facility outside Sri Lanka, in the

South Asian region.


41


AGRICULTURE &AGRI BUSINESS


42


AGRI INPUTS

The sector represents a portfolio of

world-famous principals such as Bayer

Crop Science, Monsanto, Nufarm, Dow

AgroSciences, Den Hartigh, Hipra, Detia

Degesch and Neolait among others.

Its distribution network covers 90% of the

country’s farm-supply retail outlets; despite

logistical issues created by the war, it

reaches over 350,000 farmers and growers

around Sri Lanka.

MANAGEMENT REPORT

OPERATIONS REVIEW

The sector comprises Hayleys Agro Products (HAPL), which supplies a variety of farm inputs: seed, crop protection chemicals, farm machinery and equipment, veterinary products and

micro-irrigation systems, and Hayleys Agro Fertilizers (HAFL), which supplies fertilizer.

Performance

under review, driven by increased crop

extents particularly in the paddy sector,

due to favourable weather conditions,

good paddy prices, Government

initiatives to promote and support

paddy farming and the growing

importance given to productivity in

agriculture.

In crop protection, the launch of

a new herbicide, Ricestar, during the

Maha growing season was a success.

With another recently-introduced

new-generation herbicide, Sunrice,

it provides a complete weed-control

solution for paddy farmers. The rice

fungicide Antracol, was established

successfully in the Yala 2008 and

following Maha season, gaining wide

acceptance through island-wide farmer

education and training programmes.

Consequent to the merger of the Crop

Protection and Agrocare division’s

several commodity brands were

discontinued, resulting in a reduction

2009 2008





43

MANAGEMENT REPORT

OPERATIONS REVIEW

in the number of SKUs and improving

product focus.

On the crop production side,

however, the division’s performance was

adversely affected by a decline in potato

cultivation, particularly in Nuwara-Eliya.

Hayleys Seed Paddy gained market share

during the year. The division introduced

several initiatives to ensure improved

quality control in this product area.

Though a squeeze on lease facilities

affected sales of two-wheeled tractors,

the Agricultural Equipment division

enjoyed a turnover increase driven by

sales of specialty machinery, mainly

combine threshers and harvesters. The

division continues to help farmers cut

labour costs through mechanisation.

A new rice reaper introduced during

the year performed exceptionally

well. In keeping with its vision of full

mechanisation for paddy cultivators, the

sector tested a new rice transplanter

during the Maha season. Initial trials have

shown promise.

The Animal Health division had

a good year. The specialty products

of Bayer Animal Health continue to

dominate the pet and companion animal

sector, while the introduction of several

innovative products manufactured

by two Indian principals, Vetcare and

to improving productivity in the national

poultry and livestock sectors. The

division strengthened its activities in

farmer education thus assisting farmers

to improve productivity by proper use

of inputs.

A new venture, Hayleys Agro

Biotech, commenced commercial export

of ornamental tissue culture plantlets

to Australia, the USA and Europe in the

year under review.

FertilizersThe industry as a whole performed

exceptionally up to August 2008.

However, sales declined from

September largely due to reduced

fertilizer applications in tea arising

from a decline in international demand

and prices for tea and a lack of rainfall

in tea-growing areas. This resulted in

high inventory and increased debt,

situation.

The declining trend in fertilizer use

ended in March 2009 when international

tea prices stabilised and the Government

offered a 70% subsidy on blends used by

tea smallholders. By this time, however,

gains recorded to mid-year had been

available to private sector fertilizer

companies shrank by almost 15%, to

200,000 tonnes. HAFL still performed

creditably the result of focusing tightly on

key market segments.

Hayleys Agro Farmer ClubThe Hayleys Agro Farmer Club was

inaugurated in the third quarter with 150

was set up in Welimada. The club will

offer regular training programmes,

farmers, helping them improve their

productivity while promoting Hayleys’

brands. Four more branches will be

established in the new year.

Future Plans and ProjectionsThe Crop Protection division has taken

necessary steps to introduce Provado

and Curbix, two new insecticides and the

fungicide, Belt from Bayer Crop Science,

that these products will further enhance

the sector’s leadership in the specialty

insecticide segment.

Several new (G1) varieties of seed

potato have been evaluated successfully

and will be introduced next season

alongside the leading variety, Granola.

Arrangements have been concluded to

import a wider range of hybrid vegetable

seeds from Namdhari Seeds, an Indian

principal, and some other R&D-based

seed companies. A new hybrid maize

variety, Sampath, developed by Sri

Lanka’s Department of Agriculture, will see

increased production in the current year.

Seed paddy production through

outgrowers will be expanded to the

Eastern Province, augmenting production

in the North-Central and Southern

Provinces with a view to gaining further

market share.

In animal health, a new canine vaccine

range from Hipra will be introduced in

2009-2010.

will create many opportunities in the

Northern and Eastern Provinces, to make

the best of them, HAPL will undertake

a range of initiatives in education and

training for farmers in these regions on

the use of agricultural inputs developed

and marketed by Hayleys Agro Sector.

44


AGRI PRODUCTS

MANAGEMENT REPORT

OPERATIONS REVIEW

HJS is Sri Lanka’s biggest fruit and vegetable

exporter with about 25% of the market.

Its products are FDA, HACCP, ISO and

kosher certified.

Among HJS’s major customers are

McDonald’s, Burger King, Unilever and Heinz.

It exports to 26 countries around the world

and holds a 50% share of the Japanese

bottled pickles market.

Quality Seed remains the only hybrid flower-

seed producer in Sri Lanka.

The Agricultural Products sector consists of two companies, HJS Condiments and Sunfrost, which export processed and semi-processed fruit and vegetable produce, and Quality Seed Co.,

a seed producer targeting the export market.

PerformanceHJS and Sunfrost

Performance fell sharply in the

year under review due to an

overvalued Rupee and high

factors made our agricultural

exports uncompetitive in the world

market. The division maintained

sales volumes and retained

overseas customers despite this,

but paid the price of greatly

reduced margins.

Input costs rose during the

half raised the costs of transport,

fertilizer and packaging. The prices

of glass jars produced in Sri Lanka

were affected by rising energy

costs also.

Heavy rain at the beginning

of 2008 resulted in a shortage of

salt across the country, doubling

salt prices.

2009 2008

Return on capital employed (4%) 14%

Avg. capital employed (Rs. mn) 704 737




45

MANAGEMENT REPORT

OPERATIONS REVIEW

Earnings were poor. Exports of

value-added pineapple products

were disappointing due to issues

with marketing, which have since

been addressed. Gherkin-in-jar

sales to Eastern Europe fell in value

due to depreciating currencies in

those countries, though sales of

sliced gherkins and relishes to our

fast-food-chain customers around

the world continued to grow

despite the global recession.

Gherkin production increased

to 7,250 tonnes during the year.

This could have been higher if not

for poor weather conditions. The

use of organic fertilizer resulted in

improved yields.

Greenhouse production

(36,000 sq. ft. in bell peppers and

20,000 sq. ft. in gherkins) with drip

irrigation and fertilization showed

promising results, with new hybrid

seed varieties introduced.

The Company concluded

successfully a pilot project with

USAID to grow cash crops such

as gherkins, Jalepeño peppers

and pineapples in the Ampara and

Moneragala Districts. As a result,

cultivation of crops in these districts

and Trincomalee District extended

to over 300 acres and is expected

to grow further in the coming year.

Given the prevailing uncertainty,

plans for the future are modest.

In the current year, we intend to

increase the extent we cultivate

and expand our outgrower

base. Production of Spanish and

Jalepeño peppers will be increased,

with dedicated staff allocated to

this project, while new land is to

be brought under cultivation in the

Eastern Province.

Quality Seed

The Company’s main business

continued to be the production

pelargonium, begonia, petunia and

antirrhinum) for the international

market. The development of other

products- hybrid gerberas, grafted

roses, root ball vegetable seedlings,

Bombay onion seeds, early-

generation seed potato, etc., for

the local market continued.

seed market shrank by about 20%

in 2008, forcing the company to

function below full production

capacity. The surplus greenhouse

space and human resources

resulting were effectively deployed

in development of other products.

To increase vegetable and cut-

facility, production of bell peppers,

increased, as was production of

Considering the demand for high-

market, a special programme was

launched to produce new hybrids

of different types.

Trials conducted for production

of early-generation seed potato

under controlled conditions were

successful. This is an important

step forward towards self-

generation seed potatoes.

Looking forward, we are

exploring new export opportunities,

even as the growing local market is

expanded and developed.

46


PLANTATIONS

MANAGEMENT REPORT

OPERATIONS REVIEW

Hayleys’ plantation companies produce 5% of

the country’s tea and 4% of its rubber output.

The companies together own and manage

44 tea and rubber estates, with a total extent

of nearly 20,000 Ha.

The Plantations sector consists of two plantation companies, Kelani Valley Plantations PLC (KVPL) and Talawakelle Tea Estates PLC (TTEL).

Performance

In keeping with general economic

trends, this often-challenged

This followed three relatively good

quarters for the industry, with

tea prices in particular remaining

steady at levels above those of

2007. Any gains from this were,

however, wiped out by dismal

performance from October

onwards, as sale prices declined

to a two-year low and unsold teas

remaining in the warehouses. The

picture was similar with rubber,

where low production due to

unconducive weather did nothing

to counteract a fall in prices from

October that seriously eroded

However, both KVPL and TTEL

the hard work and innovative spirit

of their managers and employees.

2009 2008






47

MANAGEMENT REPORT

OPERATIONS REVIEW

Kelani Valley Plantations

After a promising start and good

quarters, the Company suffered a

reversal from October. The onset of

the global economic crisis caused

demand for both black and green

tea to tumble. Recently, there have

been signs of a revival in black

tea, and a similar revival is hoped

for in the green tea market. The

Company’s instant tea factory

at Nuwara Eliya began limited

production; its products were well

received by customers and KVPL

is now negotiating commitments

from customers to take-up the

entire output of this facility.

Substantial capital expenditures

were incurred during the year,

mostly on investments in

replanting, plant and machinery

upgrades and the implementation

of energy-saving measures. New

installed at the Dunedin skim

rubber and Lavant scrap rubber

factories. Investments were

also made in worker housing

under KVPL’s ‘A Home for Every

Plantation Worker’ programme.

An audit of the Company’s

plantations by GLOBALG.A.P.,

which commenced in 2007,

was completed this year. All

19 plantations were accredited

as compliant. A biodiversity

assessment was also carried

out on all plantations by a team

of environmental scientists

commissioned by KVPL, resulting

in a comprehensive inventory

of biota that will enhance the

quality of its environmental-

management initiatives.

The Pedro Tea Centre was

refurbished and repositioned as an

‘ethical tea boutique’, showcasing

KVPL’s Single Garden range.

This range was also successfully

showcased at FoodEx 2008 in

Japan and SALIMA 2008 Exhibition

in the Czech Republic and has

since been picked up by exclusive

commodity outlets in both

countries and the TESCO chain in

the Czech Republic.

Talawakelle Tea Estates

Performance during the year at

TTEL followed a similar trend to

its estates declined, with larger

economic factors being worsened

high fertilizer prices during the

oil price boom. The reduction in

company’s ‘low-grown’ plantations;

the ‘high-grown’ estates actually

as their productivity.

The Company’s estates were

again price leaders at the Colombo

Tea Auctions, now for the eighth

consecutive year. TTE’s unwavering

focus on quality, consistency in

the value chain from harvesting

to manufacture and stringent

quality assurance processes paid

off, mitigating the impact of a

steep decline in tea prices in the

fourth quarter. During the year

the Company received ISO 22000

accreditation for three more estates.

The Company continued

its investment to develop

its agricultural potential,

manufacturing capability and

social/infrastructure facilities.

During the year TTEL

commissioned the two hydro power

plants namely, Palmerston and

Somerset with 2.0 MW of capacity.

This , marked a major milestone

thermal energy requirements for

high grown estates.

Looking forward

Inspite of the present unpredictable

economic outlook the industry

remains cautiously optimistic for

the future. The strategy remains its

commitment to produce the best-

quality tea and rubber KVPL and

TTEL can, at the most competitive

cost and to invest in technology to

moving up the value chain whilst

ensuring the natural and human

resources on which they depend

are nurtured and sustained.

48

HAYLEYS PLC ANNUAL REPORT 2008/09HAYLEYS PLC ANNUAL REPORT 2008/09

TRANSPORTATION &INFRASTRUCTURE



49

INDUSTRY INPUTS

The portfolio includes premium brands such

as Volvo, Perkins, Cummins, Stamford and

Tempest in power generation, Bayer Material

Science, Cabot, Symrise, Polymer Latex,

Lanxess, Elementis and Gelita and many more,

in industrial raw material supplies.

Customers include the manufacturing

sector in Sri Lanka and in power generation,

neighbouring countries such as the

Maldive Islands.

MANAGEMENT REPORT

OPERATIONS REVIEW

Hayleys Industrial Solutions is a key player in the supply of raw materials and auxiliaries to Sri Lankan manufacturers of paints, rubber products, flavours, fragrances and food ingredients. A significant part of its business lies in the supply of dyes and chemicals to the textile industry (this includes exports ). On the technology side, the Company is heavily engaged in supplying

and supporting diesel power generating units and electronic systems for the construction industry; in these fields, the division boasts some renowned principals. Its customers include

many large Sri Lankan companies, both domestic suppliers and exporters. Its overseas presence is mainly in Bangladesh and the Republic of Maldives.

Performance

The sector did good domestic

business in the year under review,

but a downturn in overseas

projects resulted in lower turnover

in Sri Lankan manufacturing

in the latter part of the year

resulted in lower demand; and

thus far, recovery in the national

manufacturing base has been very

slow. Falling raw material prices

in the world market are hurting

the sector by eroding margins

reduction in power-generator sales

and building electronics is due to a

fall in general construction activity.

The sector faces tough challenges

arising from economic uncertainty

and slack demand. 2009 2008




50


MANAGEMENT REPORT

OPERATIONS REVIEW

In the year under review, the

medical-equipment business of

the Consumer sector was hived

off and attached to the Industry

Inputs sector.

On the overseas front,

growth in the export of dyes

to Bangladesh continued.

Political unrest in the Maldives

adversely affected opportunities

for generator sales, and delays

were encountered in closing off

a project in the Maldives. It is

likely to be some time before this

contribution to results.


51

POWER & ENERGY

MANAGEMENT REPORT

OPERATIONS REVIEW

HHE represents ABB (Vietnam) for high voltage

switch gear, accessories and transformers

for hydro power projects. These are custom

designed to suit site requirements.

Hayleys Industrial Solutions (HISL) also

undertakes contracts to develop and construct

power houses and supply turbine generators

on a turn-key basis.

Recogen, a subsidiary of Haycarb Group is

engaged in producing electricity from waste

heat generated in the production of coconut

shell charcoal in an eco-friendly process.

Hayleys’ Hydro Energy sector has added 5.4Mw of generating capacity to Sri Lanka’s national grid. The annual energy output of these installations amounts to 22 Gw hr. An additional 5.5Mw project is under

development with financing from the Asian Development Bank (ADB) and has reached the final stage of approval; this will supply the grid with a further 23Gw hr/yr.

Turnkey projects thus far completed by the division supply a total of 9.5Mw and project-management contracts make a significant, further contribution. The division is local agent for the products, including transformers and electrical auxiliaries, of Global Hydro Energy, an Austrian company, and ABB Vietnam.

In addition, the sector has obtained planning approval for a 10Mw windpower instalation at Kalpitiya, supplying the national grid. The project is financed by the ADB and, once in operation, will be capable of delivering 32Gw hr/yr. This pioneering initiative is premised on the high suitability of windpower for Sri Lanka, which has an estimated potential of over 3Gw in easily accessible, commercially viable locations.

The best sites are along the west coast from Puttalam to Jaffna, where the flat terrain is conducive to the installation and use of heavy machinery. The new high-efficiency, wide sweep/low RPM turbines now coming on the market are well suited to the low average wind speeds (7m/sec) prevalent in Sri Lanka.

Performance

The sector did not perform well due

to low energy levels generated by

its 2.2Mw low-head Kaplan plant

on the Gin Ganga. The low-head

design, which is very sensitive

to tail-race water levels, proved

unsuited to the heavy rains and

the course of the year under review.

The power plant at Eheliyagoda

performed well, achieving its

projected output. It should

continue to do well if rainfall

continues at anticipated levels; 2009 2008





52


MANAGEMENT REPORT

OPERATIONS REVIEW

all power plants operated by

the sector are of the river (non-

reservoir) type, which reap no

heavy rains.

Much better returns are

expected in the current year,

with most of the start-up issues

associated with the 2.2Mw plant

commissioned in 2008 now

addressed.

Recogen project was registered

as a CDM project under the Kyoto

protocol of the UNFCC for trading

in carbon credits in the year under

review. The Company plans to

optimise capacity utilisation of this

project in the coming year.


53

TRANSPORTATION

MANAGEMENT REPORT

OPERATIONS REVIEW

A leading freight forwarding group and one of

the largest shipping houses in Sri Lanka.

Accounts for approximately 10% of container

throughput at the Port of Colombo.

Controls a global network of international

freight-management offices in strategic

markets including the US, Western Europe, the

Far East and the Indian subcontinent.

Leads the market in third-party logistics (3PL)

services in Sri Lanka.

Controls over 1.3 mn sq.ft. of warehousing and

distribution facilities around the world.

Operates the first container depot in Sri Lanka

to be ISO-accredited.

Hayleys’ transportation sector is the Hayleys Advantis Group. Its activities fall into five categories: integrated logistics, logistics support services, marine services, agency representation

and travel/aviation. Advantis is a comprehensive, integrated, end-to-end logistics solutions provider whose portfolio ranges from serving national infrastructural projects

and providing international cargo transportation. The Group counts over a half-century of experience in transportation and logistics.

Performance

Container volumes at the Port

of Colombo grew 9% over 2008

despite a drastic drop towards

year-end. The world recession has

stricken international shipping

business and prospects for the

coming year are not encouraging.

Integrated Logistics Services (ILS)

This service cluster, which offers

a spectrum of logistics services

to regional, multinational and

global clients, continued to grow.

Advantis extended its global reach

through its own and representative

network of key partners.

International supply-chain

management and 3PL services

also continued to grow. Advantis’

new Central Logistics Hub at MAS

Fabric Park, Thulhiriya, commenced

operation in October 2008 and is

2009 2008




54


MANAGEMENT REPORT

OPERATIONS REVIEW

inside Sri Lanka. 3PL capacity on

the Indian subcontinent also grew

during the year.

In international freight

management services, Advantis

marked an important milestone

in meeting US regulatory

requirements and is compliant

with the US Customs and Trade

Partnership Against Terrorism.

Logilink, Advantis’ customs-

bonded facility and container

freight station, commenced

operations in July 2008.

Opened in the fourth quarter

of the previous year, the Projects

division caters to large-scale, high-

value development projects and

has carried out some successful

operations already.

Logistics Support Services

The container depot performed

above expectations, though the

global recession impacted severely

in the last quarter.

Engineering, haulage and other

logistics services enjoyed success.

Nevertheless, the outlook for the

coming year is not positive, due

to domestic and international

economic conditions. Advantis

expects that the opening up of

the North and East of the country

consequent to the end of hostilities

would create opportunities that

will mitigate the slowdown.

Marine Services

In the Ship-Owning and

Management division, Advantis

will continue to seek opportunities

in regional trade thus far less

affected than long haul.

Advantis began its Sri Lankan

bunkering operation following

liberalisation of the industry late

in the year and rapidly gained

considerable market share.

The Charter division handled

cargoes for large infrastructure

projects and also chartered

tonnage for offshore projects.

Oil and Gas activity

commenced in late 2008 under

Hayleys Energy Services, which is

tasked with pursuing opportunities

from oil-exploration in Sri Lanka.

Agencies

Consolidated volumes for the lines

represented were 27,466 TEU

(exported) and 36,970 TEU

(imported), while feeder business

amounted to 171,423 TEU.

Transshipment volume for the

year was 80,235 TEU.

In freight forwarding, the

momentum of the previous year

but suffered a reversal in the

second half.

Air express transportation

the year followed by a decline

in the second. The severity of

the downturn in the US, the

largest contributor to air express

improvement over the previous

year’s performance.

Aviation and Travel

The Airline and Travel division

despite the reversal towards year-

end. Cargo sales performance to

the US remained stable despite

intense on-line competition.

Sales from the Far East showed a

marginal increase.

Global Holidays, Advantis’

travel and tourism operation,

completed the year with satisfying

Toward the Next Financial Year

The real impact of global recession

on the industry is expected to

and will almost certainly be very

severe; Advantis will have to

devise innovative solutions to keep

Advantis will also follow the

charter market for vessels closely,

seeking opportunities to return

to the ship-owning and operating

businesses that have reaped great

success in the past.


55


CONSUMER &LEISURE

* Share of Turnover including Associates.

56


CONSUMER PRODUCTS

MANAGEMENT REPORT

OPERATIONS REVIEW

Hayleys Consumer Products (HCPL) brings leading brands from around the world to the local consumer. Its portfolio covers an array of international brands such as Fujifilm, Philips Lighting and the leading consumer goods manufacturer P&G, among whose brands we offer Sri Lankan consumers such famous lines as Pampers, Pantene, Head & Shoulders, Pringles, Olay skincare

products and many others.

An extensive distribution network carries these products to consumers across the country, making a positive difference to their quality of life.

A divisional restructuring reduced staff numbers and brought greater focus, helping improve productivity and preparing the sector for opportunities and challenges ahead.

Performance

Consumer Lighting: With the

strengthening of the division in

year, distribution and sales of

and general-lighting (GLS) bulbs

now poised to regain market

leadership. With energy costs

rising and demand shifting towards

further growth is anticipated

in the professional lighting

segment, where Philips is already

the undisputed market leader.

Distribution was restructured in

the year under review, with more 2009 2008


Avg. capital employed (Rs. mn) 741 1,079




57

MANAGEMENT REPORT

OPERATIONS REVIEW

appointed. The sales team was also

strengthened and re-organised.

Going forward, a venture into

the area of energy management,

leveraging Philips’s leadership in

this segment, is planned.

Information & Imaging: The

photographic industry faced

severe challenges, due mainly to

the economic downturn and its

effects on local tourism. Digitisation

which formerly contributed around

30% to the division’s sales. Parallel

paper by individuals also impacted

the business of our authorised

agents. However, HCPL was able

to secure the major share of the

Future strategy involves the

sales by focusing on emerging

opportunities in the north and

east of the country and by

winning key accounts in the

graphic-arts business.

P&G Division: Sales of P&G brands

recorded 22% growth, as against

12% for the market segment as a

whole. In the laundry category,

Tide sales grew best, at a growth

rate of 59% year-on-year. New

products introduced during the

year were Olay skincare, Gillette

Vector Plus system razors and new

variants of existing brands such

as Head & Shoulders and Pantene

shampoos. The division plans to

expand the direct coverage of

half of 2009.

Healthcare Division: The

pharmaceutical industry is

estimated to have grown by 3%;

this division recorded a 27% growth

in turnover in the year. It seeks to

add new agencies to its portfolio in

the new year.

58


RESORTS

MANAGEMENT REPORT

OPERATIONS REVIEW

Through its investment vehicle, Carbotels, Hayleys has a strategic partnership with one of Sri Lanka’s leading hospitality groups, Jetwing, investing in six of that group’s operating hotels, which are managed by the jointly-owned company Jetwing Hotels. The portfolio reflects a sharp

focus on high-end niche markets, with an emphasis on eco-tourism. An inherently Sri Lankan ambience and approach to hospitality combined with international star-class quality have earned

Jetwing resorts a high rating in the global industry.

The ‘Lighthouse Hotel and Spa’ in Galle,

‘The Beach’ in Negombo and ‘Vil Uyana’ in

Sigiriya continue to enjoy membership in

the prestigious organisation, ‘Small Luxury

Hotels of the World’.

The ‘Lighthouse Hotel and Spa’ is also a

member of the ‘Great Spa Hotels of the World’.

Performance

The challenges of recent years

2008/09. Tourist arrivals over the

past calendar year dropped from

494,000 to 438,000. The industry

continued to be affected by public

apprehension concerning terrorist

attacks and the ongoing war

and consequent negative travel

advisories, low tourist arrivals and

high input costs. One positive factor

is the anticipated cessation of

hostilities, which will undoubtedly

boost tourist arrivals to Sri Lanka

in the short term. However, the

ongoing world economic crisis is

likely to have an additional negative

impact on arrivals.

Long-term prospects for the

sector seem more promising,

however, given the imminent end of

2009 2008




* Associates


59

MANAGEMENT REPORT

OPERATIONS REVIEW

and the likely recovery of the global

economy in the next two years.

Notable among major initiatives

during the year was Jetwing

Earth Day, a celebration held

at Hunas Falls Hotel on 27th

January, 2009 to commemorate

the Jetwing Eternal Earth Project

(JEEP). Jetwing Hunas Falls

reduce fuel usage, producing hot

water for guests’ use through an

environmentally-friendly process.

This initiative won a Merit Award

in the Best Installation category

Productivity Project awards in the

year under review.

Jetwing Lighthouse was

a Platinum Sponsor of the

internationally-praised Galle Literary

Festival for a third consecutive

year. This year’s festival was a great

success, featuring prominent writers

such as Germaine Greer, Thomas

Keneally and Edna O’Brien. Key

events of the programme were

held at the Lighthouse.

A youth development project

was initiated at Jetwing Vil Uyana,

which resulted in the hotel being

short-listed as one of ‘the world’s

most responsible hotels by Forbes

Traveller Magazine in 2008.

Future plans for the sector

include continued focus on growth

markets such as the Middle East,

Russia, India and China; outbound

tourism from the last two countries

named continues to grow rapidly.

These also include continuing to

strengthen Web marketing with the

introduction of payment gateways

enabling competitive rates to be

offered directly to customers, in

line with a worldwide trend (also

emerging in Sri Lanka) towards

offering specialised opportunities

to individual travellers (FITs).

60


MANAGEMENT REPORT

FINANCIAL REVIEW

been the most challenging year

for the Group in the recent past,

in many aspects. The impact of

of the year, volatility in exchange

rates, the upward trend in bank

lending rates and the effects of

the global economic slowdown

challenges faced. This section

performance of the Group for the

year under review in the context of

this challenging environment.

TURNOVERThe Group’s consolidated

turnover in 2008/09 grew by

4.7% to Rs. 32.4 bn.

The Group reported a

consolidated turnover of

Rs. 32.4 bn for the year under

review, an increase of 4.7% from

the previous year.

The export turnover

generated by the Group’s export

companies in Sri Lanka in the year

under review were impacted by

the global economic slowdown.

These experienced a decline in the

number of overseas orders.

The turnover generated during

the last quarter of the year, usually

a very promising quarter, was

consequently the lowest in the

last three years.

Price adjustments that were

needed in view of the increase in

costs of production arising from

escalations in energy costs and

raw material prices during the

implemented as desired, in view of

the need to retain customers. This

resulted in the erosion of margins.

The biggest contributor to the

Group’s turnover in the year under

review was the Hand Protection

sector, which accounted for

29% of Group turnover. Hand

Protection turnover increased by

7%, the major contributor being

Dipped Products Thailand Ltd.

(DPTL) with a turnover growth of

28%, followed by ICO Guanti SpA

with turnover growth of 12%. The

largest contributor to Group

turnover, accounting for 14%.

The Fibre sector’s contribution

declined to 10% from 12% in the

previous year. The Agri Inputs

sector’s contribution towards

Group turnover increased to 11%

from 10% in the previous year. The

Transportation sector accounted

for 12% of Group turnover.


61

MANAGEMENT REPORT

FINANCIAL REVIEW

EXPORT TURNOVERThe Group’s export turnover consists

of turnover generated by the Group’s

overseas companies and turnover

generated by the Group’s export

companies in Sri Lanka.

Despite the global recession

total export turnover increased

by 4.9%. The European market

continues to be the major overseas

market for the Group, with a

contribution of 43% of total export

turnover, followed by the United

States with 26% of turnover.

The dominant currency

for exports was the US Dollar,

accounting for 78% of total

exports, followed by the Euro. The

strength of the SL Rupee continued

to impact on the conversion of US

Dollar proceeds.

EARNINGS BEFOREINTEREST, TAX,DEPRECIATION ANDAMORTISATION (EBITDA)Group EBITDA for 2008/09 -

Rs. 3,487 mn

The Group’s earnings before

interest, tax, depreciation and

amortisation for the year under

review dipped by 12% from

Rs. 3,941 mn. The reduction in

continuing operations of the Group

has been the main contributor to

this decline. Depreciation declined

by Rs. 39 mn and dividends from

Associates declined by Rs. 35 mn.

compared with the previous year.

The highest contribution

to Group EBITDA is from the

Hand Protection sector. With a

contribution of Rs. 876 mn, the

sector’s contribution to Group

EBITDA increased to 26% from

18% in the previous year. The

next highest contribution of 19%

to Group EBITDA came from the

Transportation sector. This sector’s

contribution declined by 2% from

the previous year. The reduction

cost and tax, despite an increase in

dividends from associates, resulted

in a lower EBITDA.

Improvements in contributions

62


MANAGEMENT REPORT

FINANCIAL REVIEW

to Group EBITDA were seen in the

to 16%) and the Agri Inputs sector

(from 8% to 11%). The EBITDA

contributions from the Fibre,

Agri Products, Industry Inputs,

Plantations, Consumer Products,

Textiles and Resorts sectors to the

Group declined.

OTHER INCOMEOther income has increased by 28%

from Rs. 199 mn to Rs. 255 mn.

The main contributing factors were

the gains from disposal of Property

Plant & Equipment, the stake

in the Associate DIMO and the

partial disposal of the Subsidiary

PT Mapalus Makawanua Charcoal

Industry by Haycarb Holdings

Bitung Ltd. Income from unquoted

investments was boosted by the

dividend received from Hayleys’

investment in AES Kelanitissa

(Pvt) Ltd.

PROFIT FROMOPERATIONSThe Group achieved an operating

continuing operations dipped by

7.5% from Rs. 2.7 bn.

The Hand Protection sector’s

contribution to the Group’s

(Rs. mn) 2008/09 2007/08

Group EBITDA 3,487 3,941

Add: Amortisation of

- Government grants 12 9

Less: Depreciation (799) 838)

Amortisation of intangible assets (1) (1)

Dividend from associates (133) (168)

Exchange gain and interest income (53) (225)

2,513 2,718

by 70% compared with the

previous year. The achievement

by the sector is noteworthy as

it was affected by the global

economic slowdown, orders from

overseas buyers declining sharply

in the latter part of the year. In

the second half of the year, DPTL

turned around and sustained

that performance from then on.

Escalation of energy costs in most

of the year eroded margins and

this effect was negated only late in

the year with fuel price reductions.

The Agri Inputs sector’s

contribution increased to

Rs. 382 mn from Rs. 308 mn.

The improved performance is

attributable to increases in sales

and control of overheads. An

agricultural revival in the Eastern

Province enabled the sector to

widen its customer base.

sector’s contribution was

Rs. 447 mn compared with

Rs. 382 mn in the previous year.

Shortages of raw material resulted

in the importation of charcoal,

leading to an increase in input

The sector’s overseas companies

continued to contribute positively


63

MANAGEMENT REPORT

FINANCIAL REVIEW

to the bottom line. The sector

focused on marketing value added

products supported by its global

integrated marketing approach,

creating new opportunities in

existing markets and engaging

more actively in markets in which it

was not active in the past.

The Agri Products sector failed

to make a positive contribution

during the year compared to a

contribution of Rs. 77 mn in the

previous year. Erosion of operating

margins due to an increase in costs

of production coupled with the

global slowdown were the main

causes of this result.

2008 began as, and for the

most part was, a promising year for

the tea industry. Sri Lanka’s total

production for 2008 was an all time

record with 318.4 mn kg produced.

Talawakelle Tea Estates’ total

production amounted to 6.9 mn kg

compared with 6.2 mn kg in 2007

while, Kelani Valley Plantation’s

production increased to 6.7 mn kg

from 6.1 mn kg. The momentum was

disrupted in the last few months

of 2008 by the economic crisis.

The October-December quarter

is usually an excellent period for

the tea industry. 2008 was very

different, posing a major challenge

for plantation companies. Average

sales declined sharply resulting

in accumulation of unsold stocks.

Similarly, sales of rubber were

affected by the down turn in rubber

prices. The Plantation sector’s

contribution declined to Rs. 312 mn

from Rs. 435 mn in the previous year.

The Industry Inputs sector’s

contribution declined from

Rs. 154 mn to Rs. 102 mn. Problems

encountered on a project in the

Maldives adversely affected results.

The Power & Energy sector

failed to make a positive

contribution to the operating results

in the year under review, due to the

unfavourable weather conditions

that prevailed. Recogen Ltd., the

Haycarb subsidiary engaging in

the production of electricity in the

charcoaling process is yet to make a

positive contribution.

With the global economy in

recession, international movement

of cargo by sea and air saw a

the busiest sea routes declined.

The Group’s Companies in the

Transportation sector engaged

in freight forwarding, shipping

and logistics saw a reduction in

demand. Due to the challenges this

posed, the Transportation sector’s

contribution declined to 18% from

21% in the previous year.

The Consumer Products sector

continued to be affected by the

losses of its discontinued consumer

durables business. The sector’s

contribution to Group operating

results from its continuing

businesses further declined to 3%

from 7% in the previous year.

The Fibre sector’s contribution

dipped by 72%. A lack of orders

and an increase in overheads

negatively impacted on the

performance of this sector.

Reduction of electricity costs for

factories and revision of Furnace

Oil prices late in the year, following

substantial increases in earlier on,

countered the soaring costs of

production to some degree.

The Export Development

Reward Scheme introduced late

in the year will give some relief

to some export companies in the

Group. However, the qualifying

criteria for this scheme are very

onerous, given the current global

economic downturn and the

pressures they are under.

RETIREMENT BENEFITOBLIGATIONSThe year under review was the

required to base its assessment of

retiring gratuity obligations on the

Actuarial Valuation prescribed by

Sri Lanka Accounting Standard

No. 16 (Revised) - Employee

to establish the retiring liability

year. Due to the Group’s ‘stepped’

gratuity policy (refer page 137 of

this report) the actuarially assessed

liability tended to be higher than

the ‘drop dead’ legal liability. At

31st March, 2009 the gratuity

liability per actuarial valuation

was Rs. 1.9 bn compared with the

legal liability of Rs. 1.8 bn. The

outcomes of the valuation and the

assumptions on which it was based

are reported on pages 165 to 166 of

this report.

NET FINANCE COSTInterest cost on continuing

operations has reduced by 7%

from Rs. 1.3 bn to Rs. 1.2 bn.

the interest cost on borrowings

interest income and gains/losses

on exchange. Interest costs on

continuing operations declined

from Rs. 1,300 mn to Rs. 1,205 mn.

from continuing operations for the

year under review increased by 7%

to Rs. 1,155 mn (from Rs. 1,076 mn).

The Group was able to curtail this

increase by continuing to focus

64


MANAGEMENT REPORT

FINANCIAL REVIEW

on reducing its borrowings. Total

borrowings reduced by 4% from

Rs. 9.6 bn, in the previous year, to

Rs. 9.2 bn. Bank lending rates

were not conducive in the year

under review.

An exchange loss of Rs. 94 mn

in the year under review as against

an exchange gain of Rs. 114 mn in

the previous year impacted heavily

income increased by 31% from

Rs. 111 mn to Rs. 145 mn.

The Group’s average cost of

funds remained at 13%.

SHARE OF ASSOCIATES’RESULTS

Group’s 28% holding in Diesel &

Motor Engineering Company PLC

was divested.

The total contribution from

associate companies to the Group’s

bottom line decreased to Rs. 116 mn

from Rs. 344 mn. The biggest

contribution came from the Group’s

Textile sector - Rs. 143 mn. This

was lower by 45% than in the

previous year. Reduced orders for

Garment Manufacturers due to the

global slowdown impacted this

performance.

The contribution from the

Plantation sector’s associate

companies, Talawakelle Tea

Estates and Mabroc Teas dipped

to Rs. 26 mn from Rs. 54 mn.

The Agri Products sector’s

Associate Quality Seed Co’s share of

to Rs. 3 mn.

Hayleys AIG Insurance Co.

ceased to be an associate

consequent to an issue of new

shares at the end of year 2008, in

which Hayleys did not participate.

Hayleys’ shareholding fell from

20% to 14.5% and the Group

no longer considers it has a

this company. At 31st March, 2009

this investment (via AIG Hayleys

Investment Holdings (Pvt) Ltd.)

was not treated as an investment

in associates but included under

‘Other long-term investments’.

The Group’s Resorts sector

year under review. The situation in

the Northern part of the country

and global economic turmoil

impacted on tourist arrivals to

the country.

TAXATIONThe year under review saw a

considerable increase in the tax

charge from continuing operations.

This charge was Rs. 571 mn

compared to Rs. 465 mn in the

previous year. The increase was

23%. The effective tax rate for the

Group increased to 42% from 28%

in the previous year. The turnover

based tax - Economic Service

Charge (ESC) paid by losss making

companies in the Group contributed

to this increase.

Tax exempt companies of the

Group, and information on their tax

holidays, are stated in page 145.

As reported in the previous

year, the Group continues to carry

the cost arising from delays in VAT

refunds due to it.

DISPOSAL OFSUBSIDIARIES ANDASSETSThe Group continued to focus

on its core businesses and divest

idle assets.

The Group divested its non-

core investment in Infocraft Ltd.,

an Information Technology

Company, during the year.

Land belonging to Volanka

(Pvt) Ltd. was sold during the year

under review.

DISCONTINUEDOPERATIONSLosses reported under

‘Discontinued Operations’ consist

of losses of the discontinued

consumer durables business and

(Pvt) Ltd.

MINORITY INTEREST

after tax decreased by 23% to

Rs. 492 mn, compared with

Rs. 637 mn in the previous year.

The balance between minorities’

depends on the mix of companies

levels of minority interest in

each, and this varies from one

year to another.

DIVIDENDSThe Company proposes a tax free

A tax free interim dividend of

Rs. 1.50 per share was paid in

May 2009.

The dividend yield has risen

marginally, to 3.3% from 3.0%

last year, owing to changes in the

Company’s share price.


65

MANAGEMENT REPORT

FINANCIAL REVIEW

EXCHANGE RATESThere was volatility in the

exchange rates of the main

currencies in which the Group

transacts throughout the year

under review.

Between April 2008 and March

2009 the Rupee depreciated

against the US Dollar by around

6%. Late in the year, foreign

participation in Treasury Bills and

Bonds declined as foreign investors

withdrew their funds. Further

payment of high value import bills

put some pressure on the Rupee.

However, considering the rate of

against the US Dollar was low. This

impacts export companies as the

overvalued Rupee challenges the

competitiveness of their exports.

The Rupee appreciated against

the Pound Sterling by around 24%

and against the Euro by around

10%, during the year.

The REER Movements graph

shows the performance of the Real

Effective Exchange Rate (REER)

of the Sri Lanka Rupee in relation

to our major competitor countries

in the region. The REER is an index

which shows the performance of

a currency against a basket of

24 currencies in which a country

differential of a country relative to

The chart is based on a benchmark

of 100 in 2000 and shows that the

against the competitor currencies.

In our estimate, a 10% difference in

the REER would make our exports

3-4% less competitive.

The Group’s exchange risk

mitigation strategy for the year

under review was based on the

expectation that the interest

differential between funding in

US Dollars and the local currency

would remain higher than the rate of

depreciation of the Rupee versus the

Dollar. Our view was validated by

the outcomes: Rupee depreciation

during the year was less than

7%, while the interest differential

averaged well over 12% p.a.

The Rupee exchange rate

remained rock steady during the

in Treasury Bills and Bonds. The

unmoving exchange rate was in

stark contrast to rapidly escalating

June 2008. When the ripple effect

hit us in October 2008, short-term

foreign funds moved out as speedily

as they had moved into the market,

pushing the country to the brink of a

currency crisis in October 2008. All

the Rupee movement occurred in

year. Meanwhile, G7 currencies that

the year plummeted in the second,

causing some losses in Euro and

Pound Sterling export exposures that

were caught in the sharp declines in

currency rates. However, these were

66


MANAGEMENT REPORT

FINANCIAL REVIEW

offset to some extent by gains in

import liabilities across the Group.

We expected local interest

rates would remain high due

to the Central Bank reducing

reserve money growth targets

and maintaining a tight monetary

policy in a bid to combat rising

Dollar interest rates to decline

steadily, as the Federal Reserve

Bank of New York injected liquidity

and sharply reduced policy rates

to avert a recession in the world’s

largest economy. Therefore, the

single most evident opportunity

on interest rate risk management

was again the interest differential

between Dollar and Rupee

borrowing rates. Our views were

accurate here as well. In the third

quarter of the year, when we

expected the Rupee to depreciate

sharply, we made a shift to

Rupee funding from Dollar-based

to maximising returns from

exchange gains.

The strategies led to an optimal

trade-off of exchange gains for

lower interest costs. The Group’s

export-related foreign exchange

exposures were largely hedged

through forward exchange

the forward premium, while the

change in type and currency

companies led to a tightening

reduction in working capital,

though muted by the Rupee’s

depreciation in the second half.

CAPITAL STRUCTUREThe Group’s total borrowings

declined by 3.8% in 2008/09

An improvement in the Group’s

capital structure was seen, with

increases in equityholders’ and

minority components and a

reduction in overall borrowings.

With a continued upward trend

in domestic borrowing rates, the

Group cautiously determined

means to reduce the debt

burden of Group companies. The

strategies included utilisation of

proceeds from sale of idle assets

to settle existing loans.

Total borrowings reduced

during the year by 4%, from

Rs. 9.6 bn to Rs. 9.2 bn. The

reduction was on long-term

borrowings. These reduced by

Rs. 637 mn while short term

borrowings increased by 5%,

from Rs. 5.8 bn to Rs. 6.2 bn.

The Group has both local

currency borrowings and foreign

currency borrowings. Long-term

foreign currency borrowings are

mainly in USD and Thai Baht.

Short-term foreign currency

borrowings include borrowings

in USD, Thai Baht, Euro and

Bangladesh Taka. Foreign currency

borrowings by local companies

mainly support export operations.

Foreign currency borrowings

include the borrowings, both long

term and short term, made by the

Group’s overseas companies.

An improvement in gearing

levels can be seen with gearing

reducing from 37% to 36%. Return

on Average Capital Employed

declined to 10% from 11% in the

previous year.

(Liquid Fund - Sum of Cash & Cash equivalents, short-term deposits & Bills Receivables)


67

MANAGEMENT REPORT

FINANCIAL REVIEW

Cash & cash equivalents,

together with short-term deposits,

improved by 39% from Rs. 1.6 bn to

Rs. 2.3 bn.

Group subsidiaries have at their

disposal banking facilities including

long-term, short-term borrowings,

overdrafts and guarantees around

Rs. 14 bn.

The Group’s current ratio

remained at 1.3, as in the

previous year.

INVESTMENTSIn the year under review Hayleys

Advantis increased its portfolio

by investing in Hayleys Energy

Services, a company established

to offer services to overseas

companies that would engage in oil

drilling in Sri Lanka.

The Group’s total investment on

Property, Plant & Equipment was

Rs. 1.3 bn in the year under review.

CASH FLOWThe Group achieved a net increase

of Rs. 390 mn in cash & cash

equivalents for 2008/09

Cash generated from operating

activities amounted to Rs. 1.08 bn.

Cash generated from operations

declined by 23%. While trade

and other receivables decreased,

inventory increased by 12% and trade

and other payables declined by 3%.

gratuity by 64% also impacted on

cash generated from operations.

paid reduced by 14% and that on

income tax reduced by 7%.

Proceeds of Rs. 541 mn from the

sale of the Group’s stake in Diesel

& Motor Engineering Company PLC

and Rs. 737 mn from the disposal

of Property, Plant & Equipment

enabled the Group to achieve a

investing activities compared with

previous year.

Subscriptions to new loans

taken by Group companies

declined during the year, from

Rs. 820 mn to Rs. 496 mn. In the

year under review, the Group

achieved a net increase in cash &

cash equivalents of Rs. 390 mn,

compared with the previous year’s

increase of Rs. 418 mn.

PERFORMANCEMEASUREMENTEarnings per Share

The Group’s basic earnings per

share from continuing operations

decreased to Rs. 5.50 from

Rs. 11.54. Overall basic earnings per

share reduced from Rs. 6.03 to

from continuing operations caused

this decline.

Performance of the Share

The share price of the Company at

Rs. 90.00, a 8% drop compared with

the previous year’s closing price of

Rs. 97.75. The share price reached a

peak of Rs. 150.00 boosted mainly

by Mr. K.D.D. Perera’s acquisition of

a 21.4% stake in the Company. The

lowest reported price for the year

was Rs. 85.00. A total of 18,624,352

shares were traded during the year,

generating a market turnover of

Rs. 2,432.6 mn.

Overall market performance

during the year was not

encouraging. Late in the year,

foreign participation on the Colombo

Stock Exchange declined. Both

indices recorded losses compared

to the previous year’s close. The All

Share Price Index dipped from 2,550

to 1,638 and the Milanka Price Index

from 3,181 to 1,736.

The Total market capitalisation

of the Company at the end of the

68


MANAGEMENT REPORT

FINANCIAL REVIEW

FINANCIAL REPORTINGThe Group is committed to

reporting and maintains a close

watch on new developments in the

127 to 174 have been prepared

in compliance with Sri Lanka

Accounting Standards and every

attempt is made to provide

the reader with a clear and

comprehensive understanding of

OUR ACHIEVEMENTSOur Annual Report 2007/08 was

adjudged joint overall winner and

Group Companies category, and

the Management Commentary in

the same report was adjudged as

joint second by the Institute of

Chartered Accountants of

Sri Lanka at its 2008 Best Annual

Reports Awards Competition.

The Company continues to give

high priority to timely delivery of

both quarterly and annual Financial

Statements. Our comprehensive

reporting has enabled shareholders

and other stakeholders to make a

fair assessment of the company’s

performance.

FINANCIAL RISKMANAGEMENTThe Group is exposed to a variety

exchange risks, credit risks,

interest rate risks, liquidity risks

and investment risks. The Group’s

risk management programme

focuses on mitigating these risks.

The Risk Management Section of

this report deals with mitigating

action taken to address these.

As at As at As at Compound31.03.07 31.03.08 31.03.09 Growth/

(Reduction)

Total Borrowings (Rs. bn) 10.2 9.6 9.2 (5%)

Cash + Deposits (Rs. bn) 1.5 1.6 2.3 23%

Net Borrowings (Rs. bn) 8.7 7.9 6.9 (11%)

Gearing 40% 37% 36% (5%)

Financial Statements at a glance 2008/09 2007/08

(Rs. mn) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Turnover 7,847 16,662 24,766 32,418 30,955

Loss from

Discontinued Operations (36) (51) (76) (100) (431)

shareholders 108 110 184 311 453

Shareholders’ funds 12,102 12,121 12,211 12,356 12,222

Total Assets 34,430 34,260 34,296 33,630 33,358

MANAGING SOLVENCY RISK

HIGHLIGHTS

Note: The Group grew its volume while controlling its working capital


69

MANAGEMENT REPORT

RISK MANAGEMENT

Group with global operations,

is exposed to a great variety of

risks, both international and local,

in the course of its business.

It is our willingness to take an

entrepreneurial risk that enables

us to exploit opportunities as they

arise. We therefore calculatedly

take risks as long as they are

reasonable and can be managed

and controlled, and bear such risks

if they are expected to create value

for the Group.

In 2008/09, the impact of

the global macroeconomic

recession accompanied by

an environment in which risk

management processes have had

to adapt to changing dynamics.

Risk arises in all our business

activities and cannot be completely

eliminated; however, we work

to manage risk in our internal

control environment. Hayleys

recognises that risk remains as

an intrinsic component of doing

business; however, structured

and transparent enterprise risk

management processes help

management identify, manage and

prepare for risks in an informed,

controlled and transparent

manner. Hayleys’ enterprise risk

management systems are therefore

designed to identify principle key

strategic, operational, legal and

facing the Group.

An effective Risk Management

framework helps the Group in its

attempts to achieve the optimum

trade-off between risks and

returns. The Group recognises the

complexity and the diversity of

risks that surround its operational

activities and endeavours to

maximise opportunities and

minimise exposures to risk, while

being cognizant of the risk/reward

relationship and the limits of its

risk appetite. An effective Risk

Management framework can make

an immense contribution in the

efforts of the Group to optimise the

use of available capital.

The Group is using COSO

and Risk Management Industry

approaches as the conceptual

framework of ERM. The framework

measuring risk, determining

Group risk appetites, accepting/

transferring/eliminating/sharing

risk, measuring performance

execution of the process. It is about

directing scarce resources to the

opportunities that are expected to

generate the maximum return with

minimum risk.

The subgroups, service

companies and the units of the

holding Company have a process

documentation of risk areas in

their annual corporate planning

routine. The Corporate Audit

processes help to enhance the

Risk Management System by

monitoring its effectiveness at

regular intervals. In addition, during

the year-end audit, the External

Auditor issues a Management

Letter and informs the Group

Management Committee and the

Board of Directors of the outcomes

of their evaluations. These

outcomes are taken into account in

the continuing enhancement of our

Risk Management System.

70


MANAGEMENT REPORT

RISK MANAGEMENT

ENTERPRISE RISK MANAGEMENT PROCESS

Objective setting

Business units will continue to set

their goals and objectives annually

after evaluating and identifying

the risks associated with their

businesses. The Group’s tolerance

determine the objectives agreed.

The Group’s Management Audit

& Systems Review Department

operational risks relating to

SBUs/Sectors and deviations from

required Internal controls. Internal

audit reports produced monthly/

also reviewed to identify the risks.

Key elements of risk relating to

sectors are discussed at monthly

cluster meetings and at meetings

of the Hayleys Group Management

Committee (HGMC).

Risk assessment

Risk measures are based on

likelihood and impact. Any

tolerances will require management

responses. Risks mentioned in

the MA&SRD reports are ranked

as High, Moderate and Low Risk

events based on the product of

impact and likelihood. A higher

risk event requires a more urgent

management response.


71

MANAGEMENT REPORT

Risk response and mitigating activities

the risk to the sector in which the

entity operates, decisions are taken

to appropriately manage the risk

by accepting, reducing, sharing

or avoiding it. Such decisions are

appetite. The Sector Head together

with management team initiates

mitigatory action that is needed to

manage risks.

Enhancing the value of

shareholders’ investments and

safeguarding assets is the main

aim in having a proper system

of internal control and a Risk

Management governance structure.

Management has put in place a

number of key policies, processes

and independent controls to

provide assurance to the Board as

to the integrity of reporting and

effectiveness of systems of internal

control and Risk Management.

RISK MANAGEMENT

The governance assurance diagram

below highlights the relationship

between the Board of Directors

and the various controls in the

assurance process. Some of the

systems are provided by the

Audit Committee, Hayleys Group

Management Committee (HGMC),

Treasury Unit (TU), Strategic

Business Development Unit (SBDU)

and Management Audit & System

Review Unit (MA&SRD).

RISK MANAGEMENT GOVERNANCE STRUCTURE

Information and communication

Documentation and Reporting

plays a key role in monitoring

risk. Group MA&SRD Reports and

outsourced internal audit reports

are forwarded to the respective

Group Management Committee

member for action and direction.

The reports are also forwarded to

the relevant Audit Committees to

increase awareness of the risks in

each sector, and are reviewed at

Board meetings of companies not

having Audit Committees. Reports

are tabled by sectors at meetings

actions to overcome risk events.

The ultimate responsibility

for monitoring the process of

Risk Management lies with the

HGMC and Audit Committee. This

and effectiveness Group internal

controls.

72


SPECIFIC UNITS ESTABLISHED WITHIN THE GROUP TO MITIGATE RISKS

year 2008/09.

TREASURY UNIT

Type of Risk Foreign Exchange Risk

Effect Affects group results/pricing policy.

Strategies and Mitigatory

Action Taken the associated risk exposure measured.

Exchange rate movements are forecast and outlooks developed for

currencies in which the Group carries exposure.

Group-wide FX exposures are monitored, and appropriate action is

recommended to reduce inherent risks and minimise adverse impacts

of currency rate movements on assets and liabilities.

Measures are established to determine effectiveness of action taken.

Risk Rating High

Type of Risk Interest Rate Risk

Effect


Action Taken

Interest rates and socio-economic circumstances are monitored to

allow accurate and prudent forecasts to be built.

Advice is provided in respect of the relevant backdrop and in

managing existing and new borrowing facilities.

Risk Rating High

Type of Risk Liquidity Risk

Effect Inadequate funds would lead to postponement of investments and

resorting to costly funding alternatives.


Action Taken

Business models and working capital management are reviewed

minimise dependence on external lenders of liquidity.

Trade cycles are analysed with a view to generating liquidity from

operations and thereby mitigating liquidity risk.

The Group’s bank relationships are managed with involvement of

the Group Treasury to ensure access to essential credit and cash

management services.

is monitored to ensure that Group reserves and funding lines are

maintained at required levels.

Risk Rating High

RISK MANAGEMENT

MANAGEMENT REPORT


73

MANAGEMENT REPORT

STRATEGIC BUSINESS DEVELOPMENT UNIT

Type of Risk Investment Risk

Effect

realisation of expected earnings on investments.


Action Taken

The portfolio of ongoing activity is analysed so it is better managed

by the Group and necessary action (including divestiture) taken.

Proposals from business sectors on new investments are extensively

reviewed and improved and appropriate recommendations are made

to Group management.

Information on returns from business activity is aggregated each

quarter to form a risk early warning system.

Risk Rating High

OVERVIEW OF GENERAL RISKS

Type of Risk Due to Climate Changes

Effect Manufacturing companies of the Group that use indigenous raw

affected by shortages due to weather conditions.


Action Taken

Building adequate inventory levels when raw materials are available.

Sourcing from other countries as necessary and feasible.

Geographically diversifying risks by establishing manufacturing units

overseas.

Risk Rating Moderate

Type of Risk Dependence on Business Partners

Effect A major buyer discontinuing business will adversely affect sales

which are common place, can lead to the loss of agencies held.

The latter is particularly relevant for the Consumer, Agri Inputs,

Industrial Inputs, Transportation and Agro Products segments of

the Group’s business.


Action Taken

The presence of Group companies overseas and a valued network of

foreign and local business partners help identify the materialisation of

risks and actions in mitigation.

Good principal agent relationships reduce the risk of unexpected,

adverse events.

The Group remains alive to new market opportunities, to developing

new alliances and to acquiring distribution channels, which reduce the

impact of any losses that do arise.


RISK MANAGEMENT

74


Type of Risk Credit Risk

Effect The possibility of incurring bad debts and the prospect of protracted

legal proceedings without assurance of satisfaction.


Action Taken

Credit risks are assessed, credit limits are set and credit granted is

closely monitored.

Bank guarantees and cash deposits are obtained from frequent

customers to cover credit exposure, as far as is feasible.

Export credit is insured to minimise inherent risks.

Debtors are closely monitored and information regarding defaulting

customers are communicated within the Group.

Risk Rating Moderate/High

Type of Risk Product Risk

Effect Loss of markets for existing product range.


Action Taken

Accreditations are received from customers and international

standards - setting bodies on products marketed.

Product innovation is given high priority.

The highest priority is given to closeness to customers and

responsiveness to their needs.


Type of Risk IT Risk

Effect The Group depends on accurate, timely information from key

computer systems to enable decision making.


Action Taken

Implementation of sound IT policy throughout the Group is supported

by adequate systems and controls.

A contingency plan is in place to mitigate the risk of IT failures.

A central IT team is in place to support IT within the Group.


RISK MANAGEMENT

MANAGEMENT REPORT


75

MANAGEMENT REPORT

RISK MANAGEMENT

Type of Risk Socio-Economic Policies (Regulatory Risk)

Effect Loss of competitiveness of our products in the international market

place due to increased costs.


Action Taken

Relevant issues are addressed to regulatory and other authorities and

persistently canvassed with them.

Measures are taken to maximise productivity and reduce costs, for

example energy costs are mitigated by the use of alternative energy

sources.

Operations are established overseas to diversify risk.

Risk Rating Moderate/High

Type of Risk Macroeconomic Risk

Effect Loss of markets due to the global economic downturn.


Action Taken

Lean manufacturing systems being implemented.

Strong cost control measures adopted.

Customer relationships maintained though exposures are contained.

Risk Rating High

from a multitude of business uncertainties and risks. These arrangements are frequently re-examined and

adjusted as necessary.

76



77

WELL ROOTEDIN THE AGRICULTURAL

LANDSCAPE

Hayleys produces 5% of Sri Lanka’s total output of tea and 4% of rubber… we sponsor out grower systems to enhance vegetable

cultivation practices… we partner agriculturists and farmers through inputs of technology and materials and guarantee fair price for produce… we are at the forefront of the response to threats to

national agriculture such as plant disease…

78


KEY IMPACTS, RISKS AND OPPORTUNITIES

SUSTAINABILITYREPORT

ECONOMIC IMPACTIn 2008/09, the economy recorded

growth of 6%. This statistic belies the

enterprise during this period.

For most of 2008, the country

was beset by high energy costs,

were high. The exchange rate

policy followed meant the

Sri Lankan Rupee was overvalued.

The effects of global recession,

began to be felt well before the

year-end.

foreign capital, leading to a run

reserves. By end 2008, the

country’s reserves had depleted by

approximately 50%.

Growth of the economy was

driven by the Services sector

(57%), the Industry sector (28%)

and the Agricultural sector (15%).

However, in comparison with

the previous year, growth in the

Industry and Services sectors

decelerated to 5.9% and 5.6%

respectively from last year’s high

of 7%.

The Agricultural sector on

the other hand grew by 7.5%,

weather, the renewed plus the

emphasis on agriculture and the

reawakening of opportunity with

peace gradually returning to the

Eastern Province.

SOCIAL IMPACTThe scope and size of Hayleys

places us amidst diverse

communities both in Sri Lanka

and overseas.

The fundamental principles that

we espouse in determining Hayleys’

role in society requires that we

and improving the lives of people

through our enterprise.

We are guided by the principles

of the United Nations Global

Compact (UNGC). The UNGC seeks

to promote responsible corporate

citizenship to surmount the

challenges posed by globalisation.

The UNGC’s principles provide

focus to Hayleys in its social

engagement and the reporting of

these initiatives.

An account of our interaction

with society appears in the section

titled ‘Social Performance’.

ENVIRONMENTAL IMPACTThe impacts of our business

activities on the environment are

as varied as our portfolio.

Within our segment

‘Environmental Performance’, we

present a full account of the risks

we recognise and the impacts our

enterprise can and does have on

the environment and the mitigatory

steps we have taken.


79

SUSTAINABILITY REPORT

AWARDS AND ACCREDITATIONS

Institute of Chartered Accountants’ Annual Report Awards 2008Hayleys PLC

Joint Overall Winner

Subsidiaries Category

Joint First Runner-up for Management Commentary

Hayleys Advantis Ltd.

Second Runner-up in the Sector (Services)

SAFA Awards 2008Hayleys PLC

Silver Award - Hospitality, Health, Transport, Shipping and

Services Category

National Agri Biz Awards 2008, presented by the National Agri-business Council

Gold Award - Large Scale Category - Hayleys Agro Products Ltd.

for Agrochemicals and Fertilizers

Gold Award - Large Scale Category - in Livestock and

Veterinary Supplies - HAPL

Gold Award for Marketing (Large Category) - HJS Condiments Ltd.

Silver award - Large scale category for Extension Services -

HAPL

Bronze Award - (Large Scale Category for Farm Machinery,

Equipment and Tools) - HAPL

Bronze Award for Services Medium Category - HAPL

National Business Excellence Awards 2008, conducted by the National Chamber of Commerce

Gold Award - Agriculture and Plantations Sector Kelani Valley

Plantations PLC

Silver Award - Food & Beverage Sector - HJS Condiments Ltd.

Silver Award -Trading Sector Category - HJS Condiments Ltd.

National Chamber of Exporters - NEC Export Award for 2007 Awarded in 2008

Gold Award - Agriculture Sector, Value added Extra

Large Category - HJS Condiments Ltd.

Gold Award - Service Providers to Exporters Extra

Large Sector - Kelani Valley Plantations PLC

National Productivity Awards, awarded by National Productivity Secretariat

Merit Award, Kiruwanaganga Estate of TTE PLC

Presidential Export Awards 2006 (held in 2008)

Gold Award - Non-Traditional Products and services in the

Coconut and Coconut Product Category - Ravi Industries Ltd.

Merit Award - HJS Condiments Ltd.

Superfelt Ltd.

National Safety Award 2008

Merit Award for the Safest Work Place (Sectoral Category) -

HJS Condiments Ltd.

Industrial Safety Awards - Department of Labour

Merit Award - TTE’s Kiruwananganga Estate

The Institute of Chartered Shipbrokers Sri Lanka

Best Customer Service Award for Europe and North American

Trade - Hayleys Advantis Ltd. (For 7th Consecutive Year)

Annual Sri Lanka- Malaysia Business Awards Organised by the Sri Lanka-Malaysia Business Council

Bronze Award for Transport Category - Hayleys Advantis Ltd.

Outstanding Achievements in Electrical and Thermal Energy Savings presented by Ceylon Petroleum Corporation

Merit Award - HJS Condiments Ltd.

Corporate Accountability Rating by LMD - Inaugural Rating held in January 2009

Bronze Award - Hayleys Advantis Ltd.

Presidential Recognition via Ministry of Agriculture

in all 13 Black Tea Factories - Kelani Valley Plantations PLC

ISO 14001: Environment Management Systems - 8 companies

ISO 9001:2000 (Quality Assurance Systems) - 21 companies

updated their Quality Assurance Systems from ISO 9001:1994

ISO 13485:2003 (for Medical Products Suppliers) - DPL Thailand

for Consumer Products from European Food Safety Inspection

Service (EFSIS) UK

Hazards Analysis & Critical Control Points (HACCP)

SA 8000 - Social Accountability International (SAI) - Hayleys

OH-SAS 18000:2007 - 1 Company

80


GREATDIVERSIFICATION


81

The Hayleys Group’s enterprise spans 4 distinct sectors… 12 businesses… with a manufacturing presence in 4 countries…

a direct marketing presence in 9 countries… using 4 global currencies…

82



REPORT PARAMETERS

THE SCOPE ANDBOUNDARY OFTHIS REPORTThis Sustainability Report, which

is our second, has been compiled

with data and performance

indicators for the period 1st April,

2008 to 31st March, 2009, except

for the sections on Awards and

Accreditations, which include more

recent updates.

We have employed the

reporting principles and

methodology of the year 2006

version of the GRI guidelines - G3.

The relevant technical protocols

have been followed when reporting

various indicators.

our business, some data presented

may not cover the entire Group.

In ensuing years, we will strive to

improve our reporting to more

fully encompass the provisions

stipulated by the GRI. Where

required, data measurement

techniques have been described.

Hayleys PLC is headquartered

at No. 400, Deans Road,

Colombo 10, Sri Lanka. For any

please write to the Corporate

Affairs Unit at the above address or

e-mail: [email protected].

EXPLAINING THEPROCESSESThis report covers the performance

of the businesses within the

Hayleys Group. Our businesses/

units proactively engage with the

respective stakeholders who have

a major interest or are substantially

affected by the performance of

these businesses.

A summary of such stakeholder

engagement appears elsewhere in

this report.

This ‘Triple Bottom Line’

performance is reported in

accordance with the criteria

pertaining to Level B of the GRI -

stakeholder engagement has been

purposes of sustainability reporting.

The report on Economic

Performance has been prepared

from data contained in the Group’s

year ended 31st March, 2009. The

Audited Accounts were prepared in

accordance with the provisions of

the Companies Act No. 7 of 2007

and the Sri Lankan Accounting

Standards, and have been audited

KPMG Ford, Rhodes, Thornton

& Company.

Data on the environment

and safety issues has been

compiled from actual operating

data maintained by the various

businesses, factories, hotels and

other units of the Group.

The data on social responsibility

was obtained on-site.


83


REPORT PARAMETERS

Sector Name of Company Nature of Business

GLOBAL MARKETS & MANUFACTURINGFibre Chas P. Hayley & Company (Pvt) Ltd. Coir and treated rubber

timber products

Volanka Exports Ltd. Coir based products and essential oils

Haylex BV Group Marketing

Ravi Industries Ltd. Industrial and household brushware

Hayleys Exports PLC Value added coir based products

Lignocell (Pvt) Ltd.

O E Techniques Ltd. Essential oil

Rileys (Pvt) Ltd. Cleaning devices

Haymat (Pvt) Ltd.

Toyo Cushion Lanka (Pvt) Ltd. Needled and rubberised coir products

Superfelt (Pvt) Ltd. Needled and thermo bonded

felt pads

Creative Polymats (Pvt) Ltd. Moulded rubber products

PT Tulus Lanka

products

Tianjing Shanglon Mattress Co. Ltd. Rubberised coir

Hand Protection Dipped Products Group General purpose and speciality

rubber gloves

Haycarb Group Activated Carbon

84


REPORT PARAMETERS



GLOBAL MARKETS & MANUFACTURINGTextiles Hayleys MGT Knitting Mills PLC Knitted fabric

AGRICULTURE & AGRI BUSINESSAgri Inputs Hayleys Agro Products Ltd. Crop production and protection

materials, agricultural equipment

and animal health products

Hayleys Agro Fertilizer (Pvt) Ltd. Fertilizer

Hayleys Agro Farms (Pvt) Ltd. Planting material

Haychem (Pvt) Ltd. Crop protection, household and

public health chemicals

Hayleys Agro Biotech (Pvt) Ltd. Phyto chemicals & horticultural

tissue culture products

Agro Technica Ltd. Agricultural machinery and

equipment

Haychem (Bangladesh) Ltd. Crop protection chemicals

Agri Products Quality Seed Company Ltd.

Sunfrost (Pvt) Ltd. Fresh/processed vegetables

HJS Condiments Ltd. Retail-packed, processed vegetables

Plantations DPL Plantations (Pvt) Ltd. Plantation management

Kelani Valley Plantations PLC Processed tea and rubber

Hayleys Plantation Services (Pvt) Ltd. Plantation management

Talawakelle Tea Estates PLC Processed black tea


85

REPORT PARAMETERS



TRANSPORTATION & INFRASTRUCTUREIndustry Inputs Hayleys Industrial Solutions (Pvt) Ltd. Engineering and projects, power

generation, pigments and industrial

raw material

Haycolour (Pvt) Ltd. Textile dyestuff and binders

Hayleys Lifesciences Ltd. Supplying health care equipments

Power & Energy Recogen (Pvt) Ltd. Charcoal and power generation

Bhagya Hydro (Pvt) Ltd. Hydro power

Neluwa Cascade Hydro Power

(Pvt) Ltd.

Hydro power

TTEL Hydro Power Company

(Pvt) Ltd.

Hydro power

Hayleys Hydro Energy (Pvt) Ltd. Hydro power

TTEL Somerset Hydro Power (Pvt) Ltd. Hydro power

Nirmalapura Wind Power (Pvt) Ltd. Wind power

Mawanana Power Company (Pvt) Ltd. Hydro power

Biofuels D Z (Pvt) Ltd. Bio fuels

Transportation Hayleys Advantis Group Travel, ticketing, shipping, airline

agencies/freight forwarding and

warehousing/ocean container

repairing and container yard

operations

CONSUMER & LEISUREConsumer Hayleys Consumer Products Ltd. Lighting, photo imaging, healthcare

Hayleys Consumer Marketing

(Pvt) Ltd.

FMCG

Hayleys Electronics Group Consumer durables

Hayleys Electronics Lighting

(Pvt) Ltd.

Lighting products

86


REPORT PARAMETERS



CONSUMER & LEISUREResorts The Lighthouse Hotel PLC Hoteliering

Hunas Falls Hotels PLC Hoteliering

Carbotels (Pvt) Ltd. Hotel investment

Tropical Villas (Pvt) Ltd. Hoteliering

The Royal Heritage Hotel (Pvt) Ltd. Hoteliering

Seashells Hotels Ltd. Hoteliering

Eastern Hotels Ltd. Hoteliering

Negombo Hotels Ltd. Hoteliering

Jetwing Hotels Ltd. Hoteliering

Investments & Services Hayleys Group Services (Pvt) Ltd. Secretarial services

Dean Foster (Pvt) Ltd. Investment

Volanka (Pvt) Ltd. Investment

Volanka Insurance Services (Pvt) Ltd. Insurance broking


87

Sustainability Issues & Concerns

Employees

Career progress

Work stimulation

Health and safety

Balance between professional and

personal life

Working facilities and environment

Customers

Product quality

Availability

Standard of after care

Availability of after care

Business Partners

Market share

After care

Process of Engagement

Annual General meeting, which provides an opportunity to review the past

year’s performance and engage in discussion with the management

during the year, as do simultaneous media releases

An open door policy, which enables shareholders to visit and obtain

information from the Company Secretaries and engage in dialogue

Web site, regularly updated

Meetings with fund managers, share brokers and investment analysts

Email address, provided for comments and suggestions

A performance management system is being implemented facilitating

transparent evaluation, dialogue and performance based remuneration and

reward

Formal meetings and less structured contact in the course of work

The CEO’s Forum quarterly provides an interactive forum with senior

management, discussing current performance and future prospects and

allowing a frank question and answer session

Monthly meetings of Clusters

Employee intranet, accessible to any employee

Quarterly news letter

Hayleys Group Recreation Club activity, which provides many opportunities

for interaction and fellowship across the Group, bringing employees together

regardless of rank or designation

A Customer Satisfaction Index is maintained by many of our companies

Customer Relationship Management (CRM) enables companies to keep in

touch with their customers on a regular basis

Regular customer visits and reviews help build and maintain rapport

Events such as Dealer and Distribution Conventions are held periodically

Visits from principals and to principals’ locations facilitate engagement

Conventions for partners, distributors and dealers are held once a year or at

regular intervals

Robust communication systems enable continuing dialogue on product

quality, marketing, customer satisfaction and problem solving

Corporate updates on important group activities via brochures, DVDs and

the like

Website, regularly updated

Participation at International Trade Fairs, with a view to expanding network

of business partners and reach of product distribution.

STAKEHOLDER ENGAGEMENT

Shareholders


88


ECONOMIC PERFORMANCE

Our Global Presence


Group turnover grew by nearly 5% despite the year 2008/09 being

one of the most challenging years for Hayleys in the recent time.

Group’s heavy exposure to manufacturing and to international

trade posed greater challenges for the Group in the year concluded.

Increases in cost of production as a result of high energy and other

input costs, high levels of domestic bank lending rates, stronger

Rupee against the Dollar and lately the global economic slowdown

created a rather hostile economic condition for the Group.

for 2008/09 stands at Rs. 2.5 bn.

the Group proposes a dividend of Rs. 3 per share (2007/08 -

to deliver resonable returns to shareholders even at times of

to work processes and rationalising its investments where possible,

to counter the challenges it faces.


89


GROUP VALUE ADDITION 2008/09 2007/08

Rs. mn Rs. mn

Turnover 32,443 31,327

Other Income – –

32,443 31,327

Cost of Materials and Services bought in (23,288) (22,861)

9,155 8,466

Share % Share %

To Employees as Remuneration 58 5,302 57 4,812

To Government Revenue 14 1,201 11 944

of Sri Lanka 1,061 848

Overseas 140 96

To Shareholders as Dividends 2 225 3 225

To Lenders of Capital 18 1,658 21 1,796

Interest on Borrowings 1,166 1,159

Minority Interest 492 637

Retained in the Business 8 769 8 722

Depreciation 799 838

(30) (116)

100 9,155 100 8,499


90




INVESTOR INFORMATIONHistory of Dividends and Scrip IssuesYear Issue Basis No. of Cum. no of Dividend Dividendended Shares Shares31st March, '000 '000 (%) Rs. '000

1952 Initial Capital 20 201953 First dividend 20 80 1601954 Rights (at Rs. 10/-) 1:02 10 30 55 1651955 30 50 1501956 Bonus 5:06 25 55 32.5 1791957 Bonus 3:11 15 70 37.5 3301958 Bonus 3:07 30 100 20 2001959 100 10 1001960 100 18 1801961 Bonus 1:02 50 150 7.5 2621962 Bonus 1:03 50 200 15 3001963 200 15 3001964 Bonus 1:04 50 250 15 3751965 250 20 5001966 250 18 4501967 250 15 3751968 250 12.5 3131969 250 15 3751970 250 15 3751971 250 15 3751972 250 11 2751973 250 11 2751974 Bonus 1:01 250 500 1 2751975 500 18 4501976 500 10 4421977 500 1 4601978 500 15 5841979 Bonus 1:02 250 750 15 8521980 750 16 9581981 Bonus 1:03 250 1,000 20 1,8631982 Bonus 1:04 250 1,250 21 2,3851983 Bonus 1:05 250 1,500 25 3,4511984 1,500 27 3,7741985 1,500 27.5 3,5251986 Bonus 1:03 500 2,000 33 6,6001987 Bonus 1:02 1,000 3,000 33 9,9001988 Bonus 1:03 1,000 4,000 33 13,2001989 Bonus 1:04 1,000 5,000 33 16,5001990 Bonus 1:05 1,000 6,000 33 19,8001991 Bonus 1:04 1,500 7,500 33 24,7501992 Bonus 1:05 1,500 9,000 33 29,7001993 Bonus 1:06 1,500 10,500 30 31,5001994 Bonus 4:21 2,000

Rights (at Rs. 160/-) 1:05 2,500 15,000 30 40,5001995 Bonus 1:05 3,000 18,000 30 54,0001996 Bonus 1:09 2,000 20,000 30 60,0001997 Bonus 1:10 2,000 22,000 30 66,0001998 Bonus 1:11 2,000 24,000

Share Trust(at Rs. 210/-) 2,400 26,400 30 79,200

1999 Bonus 1:06 4,400 30,800 30 92,4002000 Bonus 1:14 2,200 33,000 30 99,0002001 Rights (at Rs. 10/-) 1:11 3,000 36,000 35 126,0002002 Rights (at Rs. 15/-) 1:09 4,000 40,000 35 140,0002003 Rights (at Rs. 20/-) 1:08 5,000 45,000 35 157,5002004 Rights (at Rs. 20/-) 1:09 5,000 50,000 35 175,0002005 Rights (at Rs. 20/-) 1:10 5,000 55,000

Bonus 4:11 20,000 75,000 35 262,5002006 75,000 35 262,5002007 75,000 Rs. 3.50 p.s. 262,5002008 75,000 Rs. 3.00 p.s 225,0002009 75,000 Rs. 3.00 p.s 225,000

Total 75,000 75,000 2,504,083


91



STOCK EXCHANGEThe Audited Company and Consolidated Income Statements for the year ended 31st March, 2009 and the Audited

Balance Sheets of the Company and of the Group as at that date, have been submitted to the Colombo Stock Exchange

within three months of the Balance Sheet date.

MARKET VALUEThe market value of Hayleys PLC ordinary shares was:

2009 2008 2007Rs. Rs. Rs.

Highest 150.00 (on 28th July, 2008) 156.50 (on 19th April, 2007) 165.00 (on 13th February, 2007)

Lowest 85.00 (on 11th March, 2009) 95.00 (on 23rd January, 2008) 85.00 (on 20th June, 2006)

Year End 90.00 97.75 142.00

DIVIDEND PAYMENTS

dividend Rs. 1.50 per share to be declared on 29th June, 2009 and payable on 7th July, 2009 (2007/08 - Rs. 1.50 per share).

SHARE TRADING2009 2008 2007

No. of transactions 3,242 1,532 4,854

No. of shares traded 18,624,352 3,452,500 11,364,400

Value of shares traded (Rs.) 2,432,610,266 414,535,025 1,482,144,725

COMPOSITION OF THE 3,805 SHAREHOLDERS AS AT 31ST MARCH, 2009 (2008 - 4,102)No. of shares held Residents Non-Residents Total No. of No. of % No. of No. of % No. of No. of % share- shares share- shares share- shares holders holders holders

1 - 1,000 2,728 600,196 0.8 26 6,614 0.0 2,754 606,810 0.8

1,001 - 5,000 583 1,333,263 1.8 13 29,810 0.0 596 1,363,073 1.8

5,001 - 10,000 143 1,050,356 1.4 18 134,197 0.2 161 1,184,553 1.6

10,001 - 50,000 176 3,899,318 5.2 19 416,518 0.6 195 4,315,836 5.8

50,001 - 100,000 35 2,516,799 3.4 5 285,832 0.4 40 2,802,631 3.7

100,001 - 500,000 35 7,711,210 10.3 6 1,319,461 1.8 41 9,030,671 12.0

500,001 - 1,000,000 5 3,586,574 4.8 1 568,197 0.8 6 4,154,771 5.5

Over 1,000,000 11 49,290,536 65.7 1 2,251,119 3.0 12 51,541,655 68.7

3,716 69,988,252 93.3 89 5,011,748 6.7 3,805 75,000,000 100.0

Of the issued ordinary share capital, 93.3% is held by residents of Sri Lanka.

Categories of shareholders 31.03.2009 31.03.2008No. of No. of % No. of No. of %Share’ shares Share shares

holders holders

Individuals 3,496 46,248,076 61.7 3,741 32,049,685 42.7

Institutions 309 28,751,924 38.3 361 42,950,315 57.3

3,805 75,000,000 100.0 4,102 75,000,000 100.0

92


SOCIAL PERFORMANCE

HUMAN RESOURCE ANDLABOUROur Approach

Hayleys PLC is an equal opportunity

employer. We practice the policy

of non-discrimination across every

aspect of life in the Group.

We recognise and respect

our employees’ right to collective

bargaining and encourage free and

frank dialogue across all grades.

Companies within the Hayleys

Group maintain cordial relations

with Trade Unions.

that are fair and competitive and

all our operations pay above the

minimum wage.

Our infrastructure, plant and

equipment are set within an

environment that promotes and

protects the health and safety of all

our workers.

Helping every individual

who works for us reach their full

potential is a value we cherish.

The Company’s personal

development strategies are thus an

important component of corporate

strategy.

Transparency and fair play form

be they with our employees,

principals, customers, dealers,

business rivals or the community

at large.

The Group is also guided by

UNGC Principles as is explained

under the segment on Human

Rights which appear on pages 94 &

96 of the report.

Human Resources – A Core Strength

The success with which the

Company’s business proceeds from

drawing board to market, whilst

achieving business objectives, is

“We are committed to the development and well-being of the milieu within which we operate. Thus empowerment and enrichment of the lives of all our stakeholders, accomplished whilst upholding rights and espousing sound ethics, lie at the heart of the Group”

largely dependent on the quality

and strength of the people who

work within it.

Thus we begin by recruiting

the best. Hayleys then provides

the environment and resources

that enables every employee to

advance on merit as far as their

skills and talent will take them.

We pursue excellence in our

enterprise and recognise this

quality as being a necessity across

all HR applications in the Company

– from recruitment to reward,

retention and advancement of the

individual. Likewise, we seek this

quality in their performance and

reward outstanding achievement

whilst encouraging those who

strive but have yet to reach

required standards.

The Company’s Performance

Management System has been

developed to incorporate an

enlightened approach to goal

based performance appraisal

across executive and management

grades in the Company.

It features Group wide goal

setting and cascading to those

covered, an on-line monitoring

system that is being implemented

to display goal achievement and

progress against set targets,

the maintenance of a set of

competencies that develop the

capabilities of the Group and an

uniform approach to appraisal

of staff.

It is also a good medium in

terms of employee information

management.

The roll out of the new system

began last year and currently, 80%

of Group companies are on-line.

Succession Planning processes

are also in place across the Group.


HR 4 & 5No incidents of discrimination and no

operations were identified where the right to

exercise freedom was found to be at risk.

LA 14There is no disparity in the ratio of basic salary

of men to women by employee category in

Group companies.


93

SOCIAL PERFORMANCE

Manpower Strength As at 31st March, 2009

Clerical, Supervisory & Minor Staff 2,438

Manual Grades 29,376

Total 33,711

Professional/Academic

Agriculture 195

Engineering 87

Accountancy 92

Marketing 57

Business Management 61

Information Technology 47

Law 4

Shipping 20

Degree - Science 139

Degree - Humanities 5

Master’s in Business Administration 52

Others 114

Total 873

The Group’s HR Division

implements Corporate HR Policy

across all sectors of the Group with

the support of the HR Cluster. The

cluster includes representatives

from all sectors of the Group.

The key initiatives of the

Group’s HR Division focused on

issues pertaining to the executive

and management levels. They are:

Improvement of Recruitment

Processes.

PMS related training initiatives

at Hayleys MGT and HJS

Condiments.


A notable feature was that

Senior Management teams’

views on the PMS at Hayleys

PLC, Haycarb, Hayleys

Consumer, Hayleys Agro,

Hayleys Advantis and the

Fibre Cluster were sought and

feedback obtained. Suggestions

for improvements which were

thought to be required, were

also obtained.

Refresher training sessions were

held at Advantis, Hayleys Agro

and Hayleys Consumer where

changes that were suggested

and accepted at the performance

reviews were implemented.

Dipped Products, Hayleys Agro,

Hayleys Consumer, Advantis, HJS/

Sunfrost are some of the sectors

whose PMS went on-line during the

year, whilst Hayleys PLC, Haycarb

and Hayleys MGT are scheduled to

go on-line by May 2009.

The Succession Planning

Processes set in place within the

Group during the year resulted

in successors for the top 3 levels

Gender Breakdown for Executive, Clerical & Manual Categories

Female 56%

Male 44%(The above includes plantations and is not for the entire group. Statistics for most other Group companies are being compiled.)

LA 3Membership of HGRC

Household items under easy payment

schemes

Loans & advance facilities

EN 28No non-compliance with environmental laws

and regulations during the last financial year

and hence no fines were incurred by any of

the Group Companies.

94


SOCIAL PERFORMANCE

developments and emerging trends

in global business, whilst building

a cohesive team who meet and

communicate freely and openly on

matters relevant to the Group.

Proceedings take the form of a

forum where participants are often

addressed by eminent persons

whose expertise and insights in

valuable.

The Hayleys Group Recreation Club (HGRC)

This is a pivotal body for

employees where recreation,

welfare, social service and many

other aspects of work life, meet.

During the year under review,

the HGRC continued to organise

our employees as well as social

service programmes.

Captured in brief, some of the

main employee-oriented activities

Competition for employees and

their children conducted at all

locations of the Company, a Quiz

Night, children’s christmas party,

Vesak Bakthi Gee Programme,

cricket, netball, basketball, carrom

and draught tournaments and a

swimming meet, as well as a Sports

and Games day.

The HGRC is an informal but

vital channel for staff motivation,

which it fosters through its

considerable calendar of activity.

HUMAN RIGHTSOur Approach

Hayleys is guided by the 10

principles concerning human rights,

labour, environment and anti-

corruption, promulgated by the

United Nations Global Compact

(UNGC). The Company is a

signatory to these principles.

The solid framework provided

by these principles has been

espoused by Hayleys and

incorporated in every facet

of its activity.

Enshrining Human Rights in Our Ethos

Our interaction and engagement

with people across the spectrum

is characterised by respect,

accommodation and fairness.

(Excluding Associate Companies, including Subsidiaries).

Plan details for companies excluding plantations exceed statutory

requirements and are as follows:

Length of service No. of(Years) months salary

for each completedyear of service

Up to 20 1/2

20 up to 25 3/4

25 up to 30 1

30 up to 35 1 1/4

Over 35 1 1/2

Plantations pay retiring gratuities as required under the Payment of

Gratuity Act No. 12 of 1983 and the Indian Repatriate Act No. 34 of 1978.


Where it was not possible to

identify an internal successor who

could grow into a role within the

short term, decisions were made

to recruit successors externally as

appropriate.

During the year in review, the

Group launched Phase I of ‘Hayllo’ -

its new Intranet linking all divisions

invaluable tool for disseminating

information on a real time basis

and fostering dialogue across

the Group. Phase II which will be

launched next year, will bring us a

step closer in our journey towards

a paperless world.

HAYSTORM – Sustaining a Learning CultureHaystorm is an initiative that

focuses on sustaining a learning

orientation amongst the senior

management of the Hayleys Group.

The original intention was

to keep alive and cascade the

learning content from leadership

development programmes that our

senior managers had been exposed

to under the auspices of the Indian

School of Business.

The objectives have been

broadened from the original

concept to include providing

exposure to the senior management

team of Hayleys in respect of new

LA 8Dengue prevention programmes at factories

Educational programmes on reproductive

health & HIV prevention in conjunction with

The Family Planning Association and the ILO

Regular Educational programmes on

different health topics and diseases

EC 4No financial assistance was received from the

Government during the last financial year.


95

Firstlight… the Dawn of New Prosperity‘Firstlight - Tap Into Potential - A Path

to Sustainability’ - a statement that

encapsulates what our subsidiary Dipped

Products PLC is trying to achieve for 3,000

smallholder rubber farmers around the

country.

DPL counts a relationship spanning 30

years with many of these farmers, who

supply 70% of the Company’s requirements

of latex.

‘Firstlight’ seeks to help smallholder

rubber farmers realize their potential, offer

them fair prices for field latex, educate and

empower them and provide other inputs to

help them develop their business.

The ethically sourced natural rubber

latex that comes to us through the

‘Firstlight’ project takes an innovative

turn in the hands of DPL. For every pair

of natural rubber gloves, sold with

the ‘Firstlight’ logo on the packing, US$ 0.005

is set aside to sustain the projects undertaken

on behalf of the farmer.

DPL’s gloves have found their way onto

supermarket shelves in the UK. Under the

brand Traidcraft, which is UK’s leading fair

trade organization, the packaging carries the

legend ‘I’m washing Unfair Trade Away’.

The world is increasingly demanding

to know how ethically products are

manufactured and marketed. Personal

values rather than typical demographic

segmentation such as age, gender or income

distinguish FairTrade’s customer base. Here

is an interesting statistic from the UK -

leading supermarkets now stock fair trade

and ethical products and the UK market for

fair trade and ethical products and services

stands at an estimated £ 32 bn.

Hayleys has never been in doubt about

the benefits of ‘Firstlight’.

SOCIAL PERFORMANCE


96


SOCIAL PERFORMANCE

The UNGC PrinciplesHuman Rights

Principle 1 - Businesses should support and respect the protection of

internationally proclaimed human rights.

Principle 2 - Businesses should make sure that they are not complicit in

human rights abuses.

Labour

Principle 3 - Businesses should uphold the freedom of association and the

effective recognition of the right to collective bargaining.

Principle 4 - Businesses should uphold the elimination of all forms of forced

and compulsory labour.

Principle 5 - Businesses should uphold the effective abolition of child labour.

Principle 6 - Businesses should uphold the elimination of discrimination in

respect of employment and occupation.

Environment

Principle 7 - Advocates support for a precautionary approach to

environmental challenges.

Principle 8 - Calls for initiatives for greater environmental responsibility.

Principle 9 - Advocates development and diffusion of environmentally

friendly technologies.

Anti-Corruption

Principle 10 - Businesses should work against corruption in all its forms,

including extortion and bribery.

From recruitment policies,

working conditions and work

culture where our employees

are concerned, to the manner in

which we engage and interact with

stakeholders, respect for rights

As a responsible employer, we

totally abhorrent; there is no child

recruitment or employment of the

under-aged within our Group.

We are in business for gain;

gain achieved whilst upholding

integrity and ethics. This is why

Hayleys shuns the idea of ‘greasing

palms’ - we have not indulged in

such a practice in the past, even

though this has resulted in our

having to forego business, and we

will not in the future either.

SOCIETYOur Approach

The Hayleys Group is a multi-

national enterprise consisting of

140 companies representing a large

and diverse business and product

portfolio.

We operate in a multitude

of locations amidst different

communities, with whom we

have forged strong ties over a

130-year history of enterprise and

relationship.

Our approach to issues

pertaining to the societies we

operate within has been one of

empowerment, in which Hayleys

has sought to be a responsible and

productive partner in the welfare of

such communities.

The Group has a substantial

catalogue of endeavours that run

across a wide range of needs.

Hayleys in Society

The Group has an active and

visible presence in the community.

Beginning with our products and

well being to people from all

walks of life, through to staff and

corporate driven initiatives that

sustain the life of the community,

Hayleys has a substantial body of

work that stands testimony to our

commitment to society.

Our social activity runs the

gamut - from donating medical

equipment and supplies of activated

carbon to state hospitals - the latter

as an antidote for poisoning -

through renovating hospitals,

temples/places of worship and

schools around the country, to

involving ourselves in estate

community related issues such

as health education and medical

programmes and vocational training

for rural youth.


Indirect Quantity ValueEmployees (Rs. mn)

Charcoal Purchases - SL *200 Suppliers 16,436 MT 491

Charcoal Purchases -

Overseas *98 Suppliers 26,259 MT 490

Coconut Shell Suppliers *40 Suppliers 14,025 MT 96

Rubber Small Holders 3,090 3.3 mn Dry Kgs 613

Tea Small Holders - 2,231 6,888 MT 323

Gherkins 6,000 farmers 6,900 MT 173

Fibre Subcontractors 6,000 5,286 MT 141.4

Fruit and Vegetable 290 farmers 1,300 MT 62

Seed Paddy 196 farmers 873 MT 36


97

SOCIAL PERFORMANCE

Social activity at Hayleys covers

a wide spectrum across an equally

wide range of businesses.

The initiatives undertaken

by our Plantations illustrate well

the size, scope and depth of our

commitment to the community.

Kelani Valley Plantations PLC

runs the programme ‘A Home

for Every Plantation Worker’. It

provides our estate community

with housing, water, sanitation

and other facilities that go towards

building a home for the estate

worker. During the year 114 new

worker houses were constructed,

and 752 existing units were re-

roofed, whilst another 59 were

rehabilitated. 788 toilets were

constructed; 562 houses received

electricity and 49 km of roads

giving access to worker homes

were rehabilitated.

Talawakelle Tea Estates PLC

has its own initiatives such as the

Child Development Centre (CDC)

Programme and others that are

geared to nurture and educate

estate children. During the year 2

CDCs were set up with improved

facilities for child learning and

kind project in the plantations’

with substantial assistance for

the project coming from the MJF

Charitable Foundation. For 2008,

the Foundation has spent a sum of

Rs. 10.5 mn on this initiative.

In the year under review, the

community and the Group had the

satisfaction of seeing 7 students

from our estates enter Universities

for higher education - a culmination

of our joint efforts through out the

lives of these children, to educate and

uplift them towards a bright future.

Responding to IDP Needs… with Compassion and Speed

Hayleys Group in a speedy

response to the humanitarian

needs of thousands of Sri Lankans

North, launched its own relief effort

on 25th April, 2009. The assistance

was the result of a Group effort,

which mobilised many of the

Group’s resources to make an

effective response.

Recognising that speedy

delivery is critical for an effective

response, and as drinking water,

consignment of assistance from

Hayleys proceeded to Omanthai

on 25th April accompanied by two

of our managers. The consignment

included:

Infrastructure including two 20’

tanks with a capacity of 48,000

litres capable of delivering

150,000 litres a day.

Ten 2,000 litre drinking water

storage tanks along with two

water pumps.

Items of food.

The second co-ordinated relief

effort was similar to that which

Hayleys mounted in the aftermath

of the tsunami in 2004. Voluntary

contributions from employees

across Hayleys Group yielded

donations in kind.

A collection point was set up

donations of dry rations, clothes

and other items donated by

our employees were sorted by

volunteers, packed and transported

to Manik Farm in three 40-foot

containers provided by our

logistics arm. Containers also

included materials to build 100

temporary toilets such as 100

steel drums, squatting pans and

accessories, pvc tubes and cement

barrels with and without taps,

mattresses and rubber gloves.

In addition, a contribution of a

day’s pay by employees is underway.

The latter amount is to be matched

by Hayleys Group companies and

will be used at the next phase of

assistance for the displaced.


98


SOCIAL PERFORMANCE

The Group regards such

responses to National needs as

a responsibility a corporate

must discharge.

Social Initiatives of the Hayleys Group Recreation Club (HGRC)

Aid to Cancer Hospital

This year too the HGRC donated

to the Cancer Hospital to meet

expenses for several of their activity

programmes one of which was a

children’s concert staged by the

inmates of four children’s wards.

The programme coincided with

World Children’s Day.

This is an annual activity and

this year the Club’s contribution was

Rs. 285,000.

The Cancer Hospital and the

National Blood Bank have been

regular recipients of support from

the HGRC.

Projects of Other Group Companies

Several Group companies joined

of Myanmar.

Dipped Products PLC sent

rubber gloves, our Plantation

donated camping mattresses whilst

Hayleys MGT supplied bed spreads.

Hayleys Agro at ‘Future Minds of Jaffna’

Under the auspices of the Security

Forces in Jaffna, a 3-day Industrial

and Educational Exhibition themed

‘Future Minds of Jaffna’ was held

in Vembadi Girls High School

and Jaffna Central College, in

December 2008.

sold out

RELATIONSHIPS WITHPRINCIPALSName of Duration of Principal Relationship

Bayer CropScience 46 years

Symrise 46 years

Detia Degesch 36 years

Elementis 34 years

Lanxess Deutschland 34 years

Rheinchemie 34 years

Cabot 31 years

Philips Lighting 26 years

Allam Marine (generators) 21 years

Stamford (alternators) 21 years

Monsanto 21 years

Polymer Latex 16 years

Kerr McGee 16 years

Fuji Hunt Photographic

Chemicals 16 years

Dow AgroSciences 16 years

Den Hartigh 16 years

Nufarm 16 years

Durst Phototechnik 15 years

Blue Cross Laboratories 13 years

Sigma Pharmaceuticals 13 years

Fuji Film 12 years

Gujarat Reclaim Rubbers 10 years

Akzo Chemicala BV 10 years

Gelita 10 years

Shangdong Weicha 10 years

Laboratories Hipra, S.A. 10 years

Namdhari Seeds 07 years

ABB 06 years

Natraj Albums 06 years

Global Hydro Energy 05 years

Bayer Material Science 05 years

Supreme Petro Chemicals 05 years

S.P. Veterinaria, S.A. 05 years

Shimadzu 04 years

Procter & Gamble 04 years

GP Batteries 04 years

Neolait 04 years

Gillette 03 years

FedEx 03 years

ICI Pakistan 01< year


SO 4No incidents of corruption were reported by

Group Companies.


99

SOCIAL PERFORMANCE

Hayleys Agro participated

through a trade stall at which the

vast range of agri inputs, including

tissue-cultured plantlets displayed,

drew vast interest. Such was the

interest, that all goods taken by the

Company to Jaffna were sold out.

The event also combined

entertainment in the form of

musical shows and a carnival.

Hayleys Agro presented a two-

wheel tractor worth Rs. 200,000 as

‘North Star’ singing competition,

Kulendran Jagadisan, a visually

impaired musician. The Company

also sponsored the printing of

100,000 handbills for the event.

PRODUCTRESPONSIBILITYOur Approach

Hayleys PLC has a diverse portfolio

of products and services offered to

its customer base.

We report on some of our

initiatives in this area, such as

safeguarding the health and

their rights in terms of product

information and labelling and

quality assurance.

Product Responsibility in Practice

Our pursuit of responsibility

begins with responsible strategy,

building in safety, quality, social

and environmental consciousness,

ethics, ensuring human rights

across processes from manufacture

through marketing to consumption…

and more.

It is this approach that has

placed Hayleys amongst the world’s

top sources in its key export

market share for its domestic

products and has made its brands

synonymous with ‘quality’.

In the mutual interests of

customers and ourselves, we

sought and have obtained some

of the world’s most prestigious

accreditations - HACCP, TASL-SGS,

BRC (British Retail Consortium

for Consumer Products) and ISO

22000:2005.

We were pioneers in obtaining

HACCP accreditation for the

Group’s tea factories and BRC

export of gherkins by HJS

Condiments, a supplier of retail

packed, processed vegetables to

customers such as McDonalds,

Burger King and Unilever.

To cite an example, our

subsidiaries HJS Condiments and

TTE which are Hazards Analysis

& Critical Control Points (HACCP)

procedures as regards provision of

product information.

Advantis possesses C-TPAT.

C-TPAT recognises that US

Customs and Border Protection

(CBP) can provide the highest level

of cargo security only through

close cooperation with the ultimate

owners of the international supply

chain such as importers, carriers,

consolidators, licensed customs

brokers and manufacturers. It is

assure the integrity of their security

practices and communicate and

verify the security guidelines of

their business partners within their

supply chains.

Hayleys is Awarded B2B ‘Superbrand’ Status

Hayleys became a Business

Superbrand in 2007.

This globally renowned

accreditation is an endorsement

of the Hayleys brand’s exceptional

status. The Superbrands awards

stamp can be used by the Company

in its advertising, and promotional

activities, for a period of 3 years

from the date of signing up

The Business Superbrands

MAJOR OVERSEAS INVESTMENT PARTNERS IN SRI LANKAN PROJECTSPartner Partnership Duration

Syngenta Seeds B.V., Holland 49% equity in Quality Seed Company Ltd. 29 years

Toyo Cushion Co. Ltd., Japan 25% equity in Toyo Cushion Lanka (Pvt) Ltd. 19 years

Sanyo Food Products Co., Japan 25% equity in HJS Condiments Ltd. 16 years

Bonterra Weiland GmbH, Germany 50% equity in Bonterra Ltd. 15 years

Orlatrade, Monaco (Promar Overseas) 6% equity in Dipped Products PLC 15 years

Delta Plus Group, France 6% equity in Dipped Products PLC 15 years

American International Group, U.S.A 85.5% equity in AIG Hayleys Investment Holdings (Pvt) Ltd. 09 years

AES Corporation, U.S.A 90% equity in AES Kelanitissa (Pvt) Ltd. 08 years

Enkev BV, Holland 8% equity in Toyo Cushion Lanka (Pvt) Ltd. 06 years

Transworld Holdings Ltd, India 34% equity in Hayleylines Ltd. 06 years

Agricultural Resources & Investment Inc, BVI 49% equity in Hayleys Ago Fertilisers (Pvt) Ltd. 05 years


100


SOCIAL PERFORMANCE

The ‘Learning’ Child…Each day, the ‘baton’ changes hands… a child

becomes an adult… a student becomes a

professional…a young person takes over the

family business…

For those of us who can, it is a duty to

develop our youth to take charge.

Hayleys , v iews this as another

manifestation of ‘Succession Planning’ for

the wider society and we have had the

privilege of conducting several programmes

with youth at their core, this year.

G.V.S. De Silva Primary School,

Kathaluwa… the Legacy Continues…

This school was a tsunami affected institution

when Hayleys stepped in to rebuild it in

May 2006.

Hayleys has maintained continuing

interest in the school not only in

maintaining the infrastructure in pristine

condi t ion but a lso support ing the

academic progress of students. We

provide scholarships of Rs . 10 ,000

each to five students who score the

highest marks at the year-5 scholarship

examination.

The Company also provides financial

resources to meet the wages of three

teachers and some workers.

Career Planning…

Such is the world we live in, that young

people today have a surfeit of choice, when

it comes to selecting a career. This prompted

our subsidiary Haycarb to conduct a 5-day

educational-cum-recreational residential

workshop for 46 Grade 6 students who

had excelled at the Year 5 Scholarship

examination of 2007.

The initial aim was to support the

Ministry of Education in training and

developing selected students who were to

participate at the International Science and

Maths Olympiad Competition.

The objectives of the workshop were to

inculcate good values such as self discipline

and self learning, whilst absorbing skills

in presentation, planning and reading and

writing. It was also meant to assist the

students to plan their future careers.

Students who followed the workshop were

able to win 3 Bronze medals at the Olympiad

held in Indonesia in November 2008.

Haycarb plans to conduct a follow-up

workshop in August 2009.

Hayleys MGT’s Educational Programmes

for School Children

For the second successive year, Haylyes MGT

conducted an educational programme in

Maths and Psychology for a group of O’Level

students drawn from schools in proximity to

their factory.

130 students from 8 schools as well as

children of MGT employees participated in

the programme.


PR 9No incidents of non-compliance with laws and

regulations were reported.


101

SOCIAL PERFORMANCE

Product and Service Labelling

Group Companies abide by

requirements to convey as much

product information as possible

through product labelling. Here are

some examples:

HJS Condiments provides

information such as Net Content,

Storage Information, ‘Best Before’

Date and Shelf Life information,

Instructions for Use, Nutritional Value

and Energy Value.

The labelling on TTE’s products

carry the ISO Standards for Tea

accreditation, the Lion Logo which

indicates that the pack contains Pure

Ceylon Tea, Voluntary HACCP, ISO

Hayleys Advantis shows

customers’ and users’ rights/

obligations in transportation

documents such as Bills of Lading,

Waybills (Air and Sea), Goods

Received Notes and Combined

Transportation Documents

as governed by the relevant

conventions.

Hayleys Agro Products displays

poison warnings on pesticides, safe

storage instructions on pesticides and

fertilizer, safe application procedures

on veterinary products and pesticides,

information on antidotes in case of

contamination/consumption and

poison centre contact information

among other details.

Here’s our concluding thought as

we close this segment of our report:

We remember always that respect

for human dignity is fundamental to

our success.


High achievers were rewarded with

medals, certificates and gifts.

Hayleys’ Export Shipping Department

(ESD) Uplifts Rural Schools

The Export Shipping Department (ESD) of

Hayleys together with subsidiary Volanka

donated laboratory furniture and equipment

and computers to the Kimbissa Kanishta

Vidyalaya, an impoverished school set in a

remote area near Sigiriya.

This school which lacked basic infrastructure,

was the recipient of a building with laboratory

facilities aided by funding from Jetwing Hotels,

a Group’s associate Company.

ESD also initiated a scholarship scheme

for the first student of the school to pass

the Ordinary Level Examination with 7

distinctions. Her parents, being farmers,

found it diff icult to support her in

h i g h e r s t u d i e s . T h e r e q u e s t f o r

ass istance through the school was

met by another the Group subsidiary

Civaro Lanka and Rs. 2,500 a month is

awarded to her.

Personnel from our subsidiary HJS

Condiments introduced the 5S system to the

school as well.

publication, released on

12th August, 2008 at a tribute

event at which these brands

were felicitated provides the

right sophisticated environment

and media vehicle to enable the

essence of Hayleys to be captured.

Its highly targeted distribution

is expected to take the Hayleys

story to key stakeholders such

as prospective and existing

investment partners and clients,

government servants, students,

statutory bodies, banks and

the media.

Jetwing Receives Business Superbrand Status

Sri Lankan company in the tourism

industry to be voted a Business

Superbrand.

As a company that has been

at the forefront of the leisure

industry for over 30 years, owning

13 exclusive properties in unique

locations, Jetwing is honoured by

this accolade.

EC 2Our Agriculture sector was affected by crop losses

due to excessive rains in the case of Agri business

and by drought conditions in tea growing

areas. Transportation foresees possible risks of

declining air freight due to increased concern for

air pollution and sea freight due to inclement sea

conditions. The rubber sector could be affected

by price fluctuations due to adverse weather.

102


SOCIAL PERFORMANCE

A Strong Voice

Hayleys PLC plays an active and

public policy development. Ours is

also a clear voice when lobbying

issues of relevance.

Chairmanship, Financial Reporting

Faculty, ICASL

Presidency, Sri Lanka Airline Cargo

Association

Chairmanship, (SLAAR)

Sri Lanka Association of Air Line

Representatives

Vice Chairmanship, Agricultural

Machinery Manufacturers’

Association

Directorship, Coconut

Development Authority

Directorship, (SLPMCS)

Sri Lanka Port Management and

Consultancy Services Ltd.

Directorship, Sri Lanka Institute of

Nanotechnology (SLINTech)

Directorship, National Science

Foundation

Membership, Presidential

Committee on Maritime Matters

Membership, Agriculture Cluster of

the National Council for Economic

Development

Membership, Tax Committee of

the Ceylon Chamber of Commerce

Membership, Subcommittee

on Human Resources – Ceylon

Chamber of Commerce

Membership, CASA (Ceylon

Association of Ship Agents)


A Fillip for Farming…When our subsidiary Sunfrost, entered into a partnership with USAID to revitalise

farming in the Eastern and Uva Provinces of the island, not only was this a ground

breaking venture, but extremely topical in terms of the rehabilitation and resurgence

that will take place as peace returns to these regions.

The Sunfrost-USAID collaboration ran for six months from April to September 2008.

Its aim was to motivate farmers in the districts of Moneragala and Ampara, some of

whom had been affected by conflict, to embrace modern agricultural practices and

empower them to substantially improve their income, by switching to cash crops

that show demand.

Thus, 200 farmer families began to cultivate three potentially high revenue

generating cash crops – gherkins, pineapple and jalapeno peppers on 62 acres of land

that had either lain fallow, or had been utilized for subsistence farming.

The project enabled these farmers, by imparting the latest knowledge and

techniques and providing other inputs required to help them reap a bountiful harvest

in all respects.

Now, Sunfrost is joined by, HJS Condiments to take this project into Phase II,

which envisages reaching 2000 farmers in the Eastern Province, covering an area of

600 acres.

Sunfrost and Hayleys together provided varied inputs-such as soil testing, farmer

training on technical, growing and commercial aspects as well as seed, suckers,

fertilisers, agro chemicals, expertise on modern cultivation methods, transportation

and packaging methods and assistance to source markets, through their outgrower

arrangements.

Such inputs were made available on credit to the selected farmer families.

USAID provided matching support.

In selecting farmer families for the pilot project, we ensured that all ethnic

communities were represented.

We are looking to replicate the success of our pilot project in other areas of the

country as well.

EC 7When recruitment criteria is met, individuals

living in close proximity to an operation are

given preference by our Group companies.


103

ENVIRONMENTAL PERFORMANCE

Our Approach

‘To give as much to the world, as

we take out of it’

This is the guiding principle

that Hayleys adopts with regard to

environmental issues and it applies

across the Group’s businesses.

Hayleys takes a two pronged

approach in its Environmental

Policy. On the one hand,

we recognise the impacts

our businesses have on the

environment and seek to reduce or

eradicate negative aspects whilst

On the other, we actively seek to

place in the market, products and

services that help others to achieve

the same results in their businesses.

The Group’s approach is

captured in the following objectives:

Go beyond compliance and

deal with environmental issues

at source, or as close to it as

possible.

Design and develop products

with minimum environmental

impact in manufacture, use and

disposal.

Optimise usage of energy and

recycle where possible.

Cascade environmental best

practices to employees,

through training, education and

development.

In a world increasinglyconcerned about the impact dwindling natural resources exerts on life, the need of the hour is responsible consciousness.

Promote care for the

environment and raise standards

through lobbying and interaction

with industry bodies, regulators

and associates.

Remain responsive to emerging

issues, new knowledge and

public concerns.

Enterprise and the Environment

The environmental dimension

of sustainability concerns the

impact Hayleys’ enterprise has on

living and other natural systems,

including eco-systems and land,

water and air.

Hayleys PLC is a signatory to

the United Nations Global Compact

(UNGC) Principles, which seek to

promote responsible corporate

citizenship so business can

become part of the solution to the

challenges of globalisation.

The Group is also a pioneer

signatory to the CEO Water

Mandate of the UNGC, and the only

Sri Lankan entity to endorse this

strategic framework to make water

sustainability a corporate priority.

Hayleys has the distinction of being

appointed to the Global Steering

Committee for the Mandate.

In adhering to the provisions

under the Water Mandate, Hayleys

has improved the processes it

employs to measure water usage

and waste water discharge,

bringing them more in line with

GRI guidelines.

2009 2008

EN 8 Total water withdrawal by source 8,159 M3/Day 8,400 M3/Day

EN 9 Total water discharge 7,101 M3/Day 7,400 M3/Day

EN 10 Percentage and total volume of

water recycled and used for the year 8.33% 7.2%

EN 21

affected by withdrawal of water - Surface & Ground water bodies


104



In the global context, the

increasing concern caused by

climate change and its repercussions

were brought into focus when at the

UNGC’s Leaders Summit in 2007,

the UN Secretary General launched

‘Caring for Climate – the Business

Leadership Platform’.

‘Caring for Climate’ is a

voluntary global initiative that

seeks to mobilise the business

community to develop solutions

that reduce climate risk whilst at

the same time creating value for

individual companies.

The initiative was jointly

developed by the United Nations’

Global Compact (UNGC), the

United Nations Environment

Programme (UNEP) and the World

Business Council for Sustainable

Development (WBCSD).

Hayleys was honoured to have

its Chairman receive an invitation

from the United Nations’ Secretary

Private Sector Forum on ‘The

Millennium Development Goals and

Food Sustainability’ held in New

York in September 2008.

Hayleys’ Chairman was one of

private sector representatives,

invited to address the opening

plenary sessions.

He addressed the Forum on

‘Water Access and Management

with Respect to Food

Sustainability’, since the current

international food crisis is closely

linked with another crisis -

dwindling water resources.

The Chairman of Hayleys

was also invited to join an elite

Asia Society Leadership Group

concerned with water security in

the Asian region. This group has

formulated a comprehensive water

security strategy to help avoid

initiative stems from the position

that decreased access to a safe,

stable water supply in Asia will

have a profound impact on security

throughout the region, since

reduced access to fresh water

leads to impaired food production,

the loss of livelihood security,

large-scale migration within and

across borders, and increased

economic and geopolitical tensions

and instabilities.

Hayleys was one of nineteen

global business entities who

lobbied the ‘Group of Eight’ (G8)

on the emerging global crisis

concerning water and sanitation.

Approximately 1 billion people

lack access to safe drinking water

and 2.6 billion do not have access

to adequate sanitation. In a letter

companies called on G-8 leaders to

actively address the issue of water

during their Summit in Japan in

July 2008.

many thousands of inhabitants

have been displaced by war and

are crowding temporary camps.

Hayleys reacted within 24 hours

to the developing situation,

despatching treated water and

critically needed sanitation

equipment for these displaced

citizens. The Group also donated

drinking water storage tanks

and other equipment, as well as

provisions and clothing donated by

Group employees.

Agriculturally based as we still

are as a nation, the importance of

water cannot be overstated in the

country’s agricultural, industrial and

hydro power sectors. These are

sectors in which Hayleys has active

business involvement.

It is relevant here to examine

the Group’s initiatives vis-à-vis

three key principles of the UNGC.

UNGC Principle No. 7 advocates support for a precautionary approach to environmental challenges.

Hayleys’ large manufacturing

water. All users of large quantities

of water within the Group are ISO

14000 accredited and continuously

seek to reduce the impact of water

use and/or contamination of this

resource, often going beyond the

regulatory requirements stipulated

by environmental authorities.

Hayleys manages nearly 20,000

hectares of tea, rubber and forest

lands in the country. We deploy a

number of sustainable agricultural

practices across our plantations,

which honour not only the letter

but also the spirit of what is

expected from us under Principle 7.

Plantation companies follow a

comprehensive agricultural policy

that helps minimise adverse effects

on soil fertility, water, atmosphere/

air quality and bio diversity. Thus,

agricultural practices on any

Hayleys Plantation. These practices

include contour drainage systems,

adoption of Sloping Agriculture

Land Technology (SALT), planting

of shade and green manure belts,

live and stone terracing and

recycling green manure and tea

prunings back into the soil to

provide Nitrogen.



105


UNGC Principle No. 8 calls for initiatives for greater environmental responsibility.

As a leading supplier of crop

protection chemicals and fertilizers,

reaching both the organised

plantation sector and one in four

rural farmers, it is incumbent on

the Group that we impart training

on the correct and safe usage of

these products. This we do; we

also advise farmers on measures to

prevent excess water extraction and

contamination of water sources.

On the Group’s plantations,

on rubber estates and a systematic

and sustainable programme is

underway to incorporate compost

and organic matter to maintain

prescribed carbon levels, organic

activity and healthy microbial levels.

On our tea plantations,

Tea Research Institute parameters

on use of chemicals, pesticides

and weedicides are strictly

complied with.

Our manufacturing operations

and plantations have for years

moved to rely less on national

grid supplied electricity and fossil

fuel based energy and more on

alternate sources. A great deal

has been done to use waste heat

recovered from manufacturing

processes, to use biomass as fuel

and to use mini hydro energy

generated on location.

UNGC Principle No. 9 advocates development and diffusion of environmentally friendly technologies.

Hayleys is a pioneer manufacturer

of coconut shell derived activated

carbon. Our product begins life on

a ‘green’ renewable platform due to

its derivation from natural sources.

It is a premium grade product,

used extensively in water and air

The Group has also developed

and produced geotextile blankets

made from woven, bio-degradable

for soil stabilisation and erosion

which water plants are induced

to extract nitrates and other

contaminants from water bodies.

We also develop mini hydro

electricity projects which enable

our own operations and others

to reduce their reliance on grid

supplied electricity or replace it

altogether.

We believe these activities

are very well aligned to the focus

areas of the UNGC’s CEO Water

Mandate. It is particularly relevant

in the Mandate’s areas of Direct

Operations, Supply Chain and

Watershed Management.

Sectoral Initiatives

In many areas of the country,

particularly rural Sri Lanka, where

modern sewage disposal systems

are not a part of social infrastructure,

sewage treatment and disposal

involves the employment of septic

tanks and soakage pits.

The environmental implications

of such disposal methods,

particularly on ground water

systems, are only too well known.

Grossart, a subsidiary in the

DPL group situated in an area that

lacks modern sewage disposal

infrastructure installed its own

eco-friendly Sewage Treatment

Plant during the year.

The plant is designed to handle

sewage and wash water from

employee facilities catering to

around 300 persons. It incorporates

grease/oil traps at all outlets from

kitchens, canteens and lunchrooms.

It consists of an anaerobic/

aerobic biological treatment

system with no addition of

chemicals except for the use of

chlorine (Hypochlorite) for the

removal of pathogens.

Grossart is engaged in the

manufacture of gloves for the

household and industrial sectors

in export markets. The boilers

operated by this company used


106


approximately 5000 litres of Heavy

Furnace Oil a day to generate

steam for the production process.

Concerned with this substantial

usage of a fossil fuel, the Company

With this change, the Company

began to incentivise the growth

of sustainable fuelwood, choosing

easily grown and plentiful varieties

such as Glyricidia and Rubberwood

as alternate fuel sources. The

project provided livelihoods for fuel

wood growers and suppliers.

Grossart also pays close

attention to the replanting and

management of forest areas to

avoid adverse effects such as

deforestation and indiscriminate

felling of trees. Dipped Products

itself along with its subsidiary

Kelani Valley Plantations actively

on a sustainable basis.

Talawakelle Tea Estates PLC

commissioned two hydro power

projects on their Somerset and

Palmerston Estates, producing

a combined capacity of 2 MW.

When deployed at full capacity, the

plants will meet the total energy

requirement of the Company’s high

grown tea estates.

In our Fibre sector, Ravi

Industries Ltd. used a drying

and electrically powered kilns.

With energy costs rising and

environmental concerns growing,

the company innovated a solution

by building a greenhouse which

uses sunlight for drying. Apart

cost savings from this initiative are

estimated at around Rs. 50,000

per month.

Daylight Harvesting is another

initiative we have pursued actively

over the year, to save energy

costs and reduce dependency on

electricity.

Hayleys MGT initiated a daylight

harvesting programme during

the year which has provided

illumination for the daytime

operations of its Finishing and

Dyeing plants which earlier

depended on electrical power

for lighting.

strategically laid allowed the

company to capture sunlight all

day, providing the light needed.

This initiative is estimated

to have yielded a cost saving of

approximately Rs. 500,000 for

the year.

Similarly, the Hayleys Advantis

subsidiary Logiwiz’s Central

Logistics Hub at Thulhiriya has

also maximised the use of natural

The use of glasswool insulation

the dock doors enables the facility

to cut heat generated, without

resorting to electrically powered

cooling mechanisms.

Other Environmental Initiatives

Over the past year, our associate

Jetwing Hotels has carried on

the Jetwing Eternal Earth Project

(JEEP) culminating with Jetwing

Earth Day in January 2009.

JEEP is Jetwing’s contribution

towards minimising the effects of

global warming. It began a year

ago, with a model re-forestation

project on 100 acres of land

adjacent to Hunas Falls Hotel in

Elkaduwa. To date, 8 acres have

been planted with 1,200 trees,

following analog forestry and

forest garden concepts. Jetwing

have been innovative in promoting

the project amongst the guests in

Hunas Falls who have responded

generously by sponsoring the

planting of 1000 trees of the total

planted to date.




107



The company is actively

promoting community involvement,

including the participation of

children, who are educated on

global warming, bio-diversity,

home/school gardening and good

earth saving practices.

In response to the ‘Mealy Bug’

(Piti Makuna) menace, a virulent

species of fruit and foliage plants,

Hayleys Agro has set up a Help

company are contactable round

the clock and offer guidance

and advice on combating the

menace. In addition to the support

offered through this Help Desk,

Hayleys Agro has also deployed

teams of extension staff to

conduct educational campaigns

via mobile units and has mobilised

control measures such as spraying

programmes in 12 areas in the

Colombo and Gampaha Districts.

The company is also working closely

with the Department of Agriculture

Kelani Valley Plantations (KVPL)

PLC commissioned a team of

environmental scientists to

conduct a bio-diversity assessment

on all its plantations identifying

freshwater reserves and resident and

endangered species of fauna. The

resultant comprehensive bio-diversity

inventory will be a strong base

for the Company’s environmental

management strategy.

Environmental Accreditation

Many of the Group’s subsidiaries

have earned accreditation and

recognition for responsible

environmental practices.

The Group’s rubber plantations

managed forests by the Forest

Stewardship Council (FSC) of the

UK. The FSC accreditation provides

conform to their parameters of

environmentally sound management.

The 19-tea estates of DPL’s

subsidiary KVPL PLC have been

accredited by SGS - New Zealand

as being GLOBALG.A.P. compliant.

GLOBALG.A.P. (EUREPGAP)

is a private sector body that

sets voluntary standards for the

around the globe. The GLOBALGAP

standard is primarily designed to

reassure consumers about how food

is produced on a farm by minimising

the detrimental environmental

impacts of farming operations,

reducing the use of chemical

inputs and ensuring a responsible

approach to worker health.

EN 26Crop Protection business introduced low

volume and low toxic products to replace high

toxic and high volume chemicals.

108




SectorType of Energy Quantity Units

- Sri Lanka

Furnace Oil 1,526,926 Litres

Diesel 127,674 Litres

Industrial Kerosene Oil 617,593 Litres

Electricity 6,505,842 KWh units

- Overseas

Furnace oil 1,137,210 Litres


Electricity 3,771,684 KWh units

Hand Protection

Biomass 28,500,000 Kg

Furnace oil 4,950,000 Litres

Gas 191,000 Kg

Electricity 11,900,000 KWH

Plantations

Electricity 12,702,078 kWh


Firewood 52,130 Cubic metres

Agri Inputs

Electricity 255,042 KWh


Agri Products

Electricity 801,600 KWh

Furnace Oil 7,836 Giga joules

Fire wood/Dendro 6,492 Giga joules

MATERIAL CONSUMPTION IN YEAR 2008/09

Land owned in areas of high biodiversity value

Hanford Estate 45 hectares

Kiruwanaganga Estate 7 hectares

Moragolla Estate 100 acres

Great Western Estate 5 hectares

Radella Estate 10 hectares

Kivul Kela in Deniyaya 30 hectares

KVPL PLC estates 1,110 hectares

Hunas Falls Hotel PLC 8 hectares

The Royal Heritage Hotel

(Pvt) Ltd. (Vil uyana) 10.2 hectares

Raw Materials Quantity Units

Charcoal Local Purchases

and Imports 28,780 MT

Charcoal Purchases overseas 26,259 MT

Coconut Shells 14,025 MT

Natural Latex 8,203,275 Kg

Synthetic Latex 1,913,162 Kg

Skim Rubber 263,000 Kg

Bought Leaf 7,567,488 Kg

Fibre 21,040 MT

3

Fibre Pith 564 MT

Timber 2,500,000 Sq ft

Gherkin 6,900 MT

Pineapple 670 MT

Papaya 83 MT

Mango 98 MT

Bell Peppers 58 MT

Twine 425 MT

Palmyrah 261 MT

Wire 501 MT

Salt 1,821 MT

Sugar 360 MT

Vinegar 344,727 Litres

Associated Process Materials Quantity Units

Chemicals 4,722,013 Kg

Iso Propyle Alcohol 420 Litres

Dolomite 1,200 MT

PVC 150 MT

Brass Scrap 50 MT

Packing Materials 1,075,189 Kg

Caps 5,112,000 Nos.

Glass jars 5,112,000 Nos.

Glass Bottles 1,221,555 Nos.

Pouches 1,560,000 Nos.

Cartons 482,000 Nos.

Poly Bags 1.7 MT

Plastic tubs 60,000 Tubs

Styrofoam boxes 400 Boxes

Cost of yarn consumed 25,307,641 USD

Cost of dyes and

chemicals consumed 6,399,026 USD


109


Chapter Page No.

1. STRATEGY AND ANALYSIS

1.1 CEO Statement Chairman’s Statement 041.2 Description of key impacts, risks and opportunities -do- 78

2. ORGANISATIONAL PROFILE

2.1 Name of the organisation Corporate Information Inner Back Cover2.2 Primary brands, products and/or services Operations Review 302.3 Operational structure of the organisation Sustainability Report 82, 832.4 Location of organisation’s headquarters Corporate Information Inner Back Cover2.5 Countries where the organisation operates Sustainability Report 882.6 Nature of ownership; legal form Corporate Information Inner Back Cover2.7 Markets served Operations Review 302.8 Scale of organisation -do- 30

2.10 Awards received Sustainability Report 79

3. REPORT PARAMETERS

3.1 Reporting period Sustainability Report 823.2 Date of most recent previous report -do- 823.3 Reporting cycle -do-3.4 Point(s) of contact for the report -do- 823.5 Report Scope and Boundary -do- 82

3.8 Basis for reporting on joint ventures and other entities -do- 823.9 Data measurement techniques and basis of calculations -do- 823.10 Restatements of information provided in earlier reports N/A*

3.12 GRI Compliance Index Sustainability Report 109

4. GOVERNANCE, COMMITMENTS AND ENGAGEMENT

GOVERNANCE4.1 Governance structure of the organisation Enterprise Governance 13

4.3 Independence of Board -do- 164.4 Mechanisms for shareholders to provide recommendations -do- 18, 874.5 Performance-linked executive compensation Enterprise Governance/

Sustainability Report 27, 92, 93

4.7 Determination of expertise of Board members -do- 264.8 Statements and implementation of mission or values, codes of conduct Enterprise Governance/

Chairman’s Statement 2, 4, 15 4.9 Risk management and internal controls for Supervisory Board

(Management of Performance) Risk Management 694.10 Processes in place to evaluate the Supervisory Board (Evaluating the Performance) N/A*

COMMITMENTS - EXTERNAL INITIATIVES4.11 Precautionary approach or principle Sustainability Report 1034.12 Externally developed voluntary initiatives -do- 96, 1034.13 Memberships in industry/business associations -do- 102

ENGAGEMENTS - EXTERNAL INITIATIVES4.14 List of stakeholder groups engaged by the organisation -do- 87

4.16 Approaches to stakeholder engagement -do- 874.17 Key topics and concerns that have been raised -do- 87

5. ECONOMIC PERFORMANCE INDICATORS

EC.1 Direct economic value generated -do- 89EC.2 Financial implications and other risks & opportunities for the

organization’s activities due to climate change -do- 101, 103, 104, 105, 106

EC.5 Range of ratios of standard entry level wage compared to local

EC.6 Policy and spending regarding locally-based suppliers -do- 96EC.7 Procedure for local hiring and proportion of senior management hired

including the extent of impacts -do- 95, 96, 97, 102

GRI COMPLIANCE INDEX

* N/A- Not Applicable

110



Chapter Page No.

6. ENVIRONMENTAL PERFORMANCE INDICATORSEN.1 Materials used by weight or volume Sustainability Report 108EN.3 Direct energy use by primary energy source -do- 108

products and services, and reductions in energy requirements as a result of these initiatives -do- 105, 106

EN.8 Total water withdrawal by source -do- 103

EN.10 Percentage and total volume of water recycled and reused -do- 103EN.11 Land owned in areas of high biodiversity value -do- 108EN.14 Strategies, current actions, and future plans for managing impacts of biodiversity -do- 104, 107EN.21 Total water discharge by quality and destination -do- 103EN.26 Initiatives to mitigate environmental impacts of products and services,

and extent of impact mitigation -do- 105

for non-compliance with environmental laws and regulations -do- 93

7. SOCIAL PERFORMANCE INDICATORS

LABOUR PRACTICES AND DECENT WORKLA.1 Total workforce by employment type and employment contract -do- 93LA.2 Total number and rate of employee turnover by age group, gender and region. -do- 93

temporary or part-time employees, by major operations -do- 93LA.5 Minimum notice period(s) regarding operational changes -do- 94LA.8 Education, training, counseling, prevention, and risk-control programs

in place to assist workforce members, their families, or community members regarding serious diseases. -do- 94

LA.10 Average hours of training per year -do- 94LA.11 Programs for skills management and lifelong learning that support the Continued

employability of employees and assist them in managing career endings. -do- 93, 94LA.12 Percentage of employees receiving regular performance and career

development reviews -do- 92, 93LA.13 Employees according to diversity -do- 93LA.14 Ratio of basic salary of men to women by employee category -do- 92

HUMAN RIGHTS

NON-DISCRIMINATION

HR.4 Number of incidents of discrimination -do- 92

FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING 93, 96

CHILD LABOR

HR.7 Forced and Compulsory Labour -do- 92, 96

8. SOCIETY

CORRUPTIONSO.4 Actions taken in response to corruption -do- 96, 98

PUBLIC POLICYSO.5 Public policy positions, participations and lobbying -do- 102

politicians and related institutions by country -do- 96

ANTI-COMPETITIVE BEHAVIOURSO.7 Total number of legal actions for anti-competitive behavior,

anti-trust and monopoly practices and their outcomes -do- 92

COMPLIANCESO.8 Fines and sanctions for non-compliance with laws and regulations -do- 100

PRODUCT RESPONSIBILITY

CUSTOMER HEALTH AND SAFETYProduct and Service Labelling -do-PR.3 Type of product and service information (labelling) -do- 95, 99, 101

CUSTOMER PRIVACYPR.9 -do- 100

GRI COMPLIANCE INDEX


111


Issue Areas GC Principles Relevant GRI Indicators

Human Rights Principle 1

Businesses should support and respect the protection of

internationally proclaimed human rights LA4, LA9, LA13, HR4, HR5, HR6, SO5

Principle 2

Businesses should make sure that they are not complicit in

human rights abuses HR4, HR5, HR6, SO5

Labour Principle 3

Businesses should uphold the freedom of association and the

effective recognition of the right to collective bargaining LA4, LA5, HR5, SO5

Principle 4

Businesses should uphold the elimination of all forms of

forced and compulsory labor SO5, HR7

Principle 5

Businesses should uphold the effective abolition of child labour HR6, SO5

Principle 6

Businesses should uphold the elimination of discrimination in

respect of employment and occupation LA2, LA13, LA 14, HR4, SO5, EC5, EC7

Environment Principle 7

Businesses should support a precautionary approach to

environmental challenges EN26, SO5, EN9, EN14

Principle 8

Businesses should undertake initiatives to promote greater EN1, EN3, EN4, EN5, EN6, EN8, EN10, EN11,

environmental responsibility EN21, EN26, EN28, SO5, PR3

Principle 9

Businesses should encourage the development and diffusion

of environmentally friendly technologies EN5, EN6, EN10, EN26, SO5

Anti-Corruption Principle 10

Businesses should work against corruption in all its forms,

including extortion and bribery SO4, SO5, SO6

UNGC PRINCIPLES - GRI INDICATORS CROSS REFERENCE

CREDENTIALSOF INTEGRITY

We are a signatory to the UNGC and adhere strictly to its values and principles… we are a strong lobbying voice for local industry… Hayleys holds multiple Fair

Trade and other relevant accreditations…

114


ANNUAL REPORT OF THE BOARD OFDIRECTORS ON THE AFFAIRS

OF THE COMPANYThe Board of Directors of Hayleys

PLC have pleasure in presenting

their Report on the affairs of the

Company together with the audited

Consolidated Financial Statements

for the year ended 31st March

2009. The details set out herein

provide the pertinent information

required by the Companies Act

No. 7 of 2007 and the Colombo

Stock Exchange Listing Rules and

are guided by recommended best

reporting practices.

PRINCIPAL ACTIVITIESHayleys PLC is a holding company

that owns, directly or indirectly,

investments in the numerous

companies constituting the Hayleys

Group and provides services to

Group companies. The Group

consists of a portfolio of diverse

business operations. The main

Subsidiaries and Associates of

Hayleys PLC are listed on pages 82

to 86.

The principal activities of

the Group are categorised into

4 main business groupings i.e.

Global Markets & Manufacturing,

Agriculture & Agribusiness,

Transportation & Infrastructure and

Consumer & Leisure. Each grouping

consists of a number of sectors.

The main activities of the sectors

are described in the Management

Discussion & Analysis section

(pages 30 to 59) of this Report.

BUSINESS REVIEW/FUTURE DEVELOPMENTSA review of the Group’s business

and its performance during the

results and future strategic

developments, is contained in the

Chairman’s Statement (pages 4 to

9) and Management Discussion &

Analysis (pages 30 to 59) sections

of this Annual Report. These

reports together with the Financial

of the Company and the Group.

The Group divested the stake

it held in its Associate, Diesel &

Motor Engineering Co. Ltd. in

June 2008. The discontinued

business of Kinetics, which was

sold during the year, and costs

incurred in the current year on

the exited business of Consumer

Durables (Electronics) continued

Financial Statements as discontinued

operations. There were no material

changes in the nature of businesses

of the Company and the Group other

than those referred to above.

The Directors, to the best of

that the Group has not engaged in

any activities that contravene laws

and regulations.

FINANCIAL STATEMENTSThe Financial Statements of the

Company and the Group are given

on pages 127 to 174.

AUDITOR’S REPORTThe Auditor’s Report on the

Financial Statements of the

Company and the Group is given

on page 126.

ACCOUNTING POLICIESThe accounting policies adopted

in the preparation of the Financial

Statements are given on pages 132

to 138. Changes in Group accounting

policies made during the accounting

period are described under Note 3 of

the Accounting Policies.

GROUP TURNOVER/INTERNATIONAL TRADEThe turnover of the Group,

excluding Associates, was

Rs. 32.4. bn (Rs. 30.9 bn), in

the year under review while

turnover including Associates was

Rs. 45.3 bn (Rs. 53.4 bn). A detailed

analysis of the Group’s turnover,

to different segments of the

Group’s business is given in Note 39

to the Financial Statements.

The Group’s exports from

Sri Lanka, inclusive of Associates’

exports, amounted to Rs. 20.6 bn

(Rs. 22.3 bn) at f.o.b. value in the

year under review.

The Group’s turnover from

International Trade, which

includes the turnover of overseas

Subsidiaries and Associates in

addition to exports from Sri Lanka,

amounted to Rs. 29.7 bn (Rs. 26.6 bn)

in the year under review.

Trade between Group

Companies is conducted at fair

market prices.

RESULTS AND DIVIDENDS

operations, excluding its share of

to Rs. 1,359 mn (Rs. 1,642 mn) in

the year under review. With its

operations before taxation

amounted to Rs. 1,475 mn

(Rs. 1,985 mn). After deducting

Rs. 571 mn (Rs. 465 mn) for

operations was Rs. 903 mn

(Rs. 1,520 mn). When the loss

for the period from discontinued

operations of Rs. 100 mn

(Rs. 431 mn) and an amount of


115

ANNUAL REPORT OF THE BOARD OF DIRECTORS ONTHE AFFAIRS OF THE COMPANY

Rs. 492 mn (Rs. 637 mn) for

minority interests are deducted, the

holders of the Company for the

year was Rs. 311 mn (Rs. 453 mn).

A sum of Rs. 225 mn (Rs. 225 mn)

has been set aside for dividends.

The Consolidated Income

Statement along with the Company’s

Income Statement for the year

are given on page 127 Details of

transfers to/from reserves in respect

of the Group and the Company are

shown in the Statement of Changes

in Equity on page 129.

solvency test requirement under

section 56 of the Companies Act

No.7 of 2007 for both the interim

dividend to be paid in May 2009

from the Auditors in respect of

the interim dividend and one has

dividend of Rs. 1.50 (Rs. 1.50) per

share proposed to be paid to the

holders of issued ordinary shares

of the Company as at the close of

business on 29th June 2009. This

dividend together with the interim

dividend of Rs. 1.50 (Rs. 1.50) per

share result in a total dividend of

Rs. 3.00 (Rs. 3.00) per share. The

dividends represent a redistribution

of dividends received by the

Company and therefore will not be

subject to the 10% tax deduction

otherwise applicable.

GROUP INVESTMENTGroup capital expenditure during

the year on Property, Plant &

Equipment and investments, other

than investments in Subsidiaries,

amounted to Rs. 1,385 mn

(Rs. 1,628 mn).

PROPERTY, PLANT & EQUIPMENTCapital expenditure during

the year, on Property, Plant &

Equipment by the Group and

by the Company amounted to

Rs. 1,304 mn (Rs. 1,592 mn) and

Rs. 14 mn (Rs. 29 mn) respectively.

Information relating to

movements in Property, Plant &

Equipment is given in Note 14 to


MARKET VALUE OF PROPERTIESThe freehold land of the Group

has in general been subjected to

routine revaluation by independent

revaluations were carried out as

at 31st March 2007. Small extents

book values as their appreciation is

Details of revaluations, carrying

values and market values are

provided in Note 14 to the Financial

Statements. The statement on

Value of Real Estate on page 175

gives details of freehold land held

by the Group.

The Group, as at 31st March, 2009

does not carry any property that

Property in accordance with

SLAS 40.

STATED CAPITAL ANDRESERVESThe stated capital of the Company,

consisting of 75,000,000 Ordinary

shares, amounts to Rs. 1,575 mn.

There was no change in stated

capital during the year.

Total Group Reserves at 31st

March, 2009 amount to Rs. 10.8 bn

(Rs. 10.6 bn) comprising Capital

Reserves of Rs. 5.7 bn (Rs. 5.9 bn)

and Revenue Reserves of Rs. 5.1 bn

(Rs. 4.7 bn). The composition of

reserves is shown in the Statement

of Changes in Equity in the

Financial Statements.

INTERESTS REGISTERThe Company, in compliance

with the Companies Act No. 7

of 2007, maintains an Interests

Register. Particulars of entries in

the Interests Register and in the

Interests Registers of Subsidiaries

who maintain such Registers are

detailed below.

transactions: The Directors of the

Company and its Subsidiaries

have made the general disclosures

provided for in section 192(2)

of the Companies Act No. 7 of

2007. Note 37 to the Financial

Statements dealing with related

party disclosures includes details of

their interests in transactions.

:

Directors of the Company and its

Subsidiaries who have relevant

interests in the shares of the

respective Companies have

disclosed their shareholdings and

any acquisitions/disposals to their

Boards, in compliance with section

200 of the Companies Act.

116



Details of Directors’

shareholdings in the Company are

given later in this report. There

were no changes in holdings during

the period other than the following:

Mr. K.D.D. Perera became a

Director of the Company on 1st

August 2008 and disclosed to the

Board of his relevant interest in

shares of the Company.

- 16,071,828 shares held by

Mr. K.D.D Perera

- 177,190 shares by Royal Ceramics

Lanka PLC and 1,666 shares by

LB Finance PLC. Mr. K.D.D. Perera

has controlling interests in respect

of both companies.

There were no share transactions

by Directors, in terms of section 200

of the Companies Act in respect of

the Subsidiaries.

Insurance and Indemnity: The

Company has obtained a Corporate

Guard insurance policy from

Hayleys AIG Insurance Company

Ltd. providing worldwide cover

to indemnify all past, present

(D & O) of Hayleys PLC and its

Subsidiaries. The limit on liability

of the cover was enhanced to

US$ 5 mn from US$ 1 mn, effective

1st July 2008, at an additional

premium of Rs. 1.3 mn. The policy

is being renewed for a further year,

from 1st June 2009 to 31st May,

2010 at a cost of Rs. 4.0 mn.

Payment of remuneration to

Directors: Executive Directors’

remuneration is established within

an established framework by the

Board’s Remuneration Committee,

to whom this task has been

entrusted. The Directors are of the

opinion that the framework assures

appropriateness of remuneration and

fairness for the Company. The total

remuneration of Executive Directors

for the year ended 31st March, 2009

is Rs 72,226,165/- which includes the

value of perquisites granted to them

as part of their terms of service. The

total remuneration of Non-Executive

Directors for the year ended

31st March, 2009 is Rs. 2,790,000/-,

determined according to scales of

payment decided upon by the Board

that the payment of remuneration is

fair to the Company.

DIRECTORS’REMUNERATIONDirectors’ remuneration, in respect

year 2008/09 is Rs. 75 mn.

(Rs. 70.0 mn).

Directors’ remuneration

in respect of the Company’s

2008/9 is Rs. 154 mn (Rs. 145 mn).

CORPORATE DONATIONSDonations by the Company

amounted to Rs. 247,000/-

(Rs. 268,000/-) which include

a sum of Rs. 175,000/-.

(Rs. 108,000/-) made to

Government approved charities.

Donations by the Subsidiaries

amounted to Rs. 4.1 mn (Rs. 3.8 mn).

No donations were made for

political purposes.

DIRECTORATEThe names of the Directors who

year are given below and their brief

during the period under review.

Executive Directors

Mr. N.G. Wickremeratne

(Chairman & Chief Executive)

Mr. A.M. Pandithage

Mr. R.A. Ebell

Mr. P.S.P.S. Perera

(Resigned. 30th April, 2009)

Mr. A. Hettiarachchy

Mr. M.R. Zaheed

Mr. J.A.G. Anandarajah

Independent Non-Executive Directors

Mr. L.K.B. Godamunne

Mr. J.D. Bandaranayake

Mr. A.M. Senaratna

Mr. T.L.F.W. Jayasekara

Non-Executive Director

Mr. K.D.D. Perera

(Appointed 1st August, 2008)

The basis on which Directors

Executive Directors is discussed

in the Corporate Governance

statement.

Mr. K.D.D. Perera was appointed

to the Board since the last Annual

General Meeting and in terms of

the Article 27 (2) of the Articles

of Association of the Company,

shareholders will be requested to

re-elect him at the Annual General

Meeting.

Messrs A.M. Pandithage, T.L.F.W.

Jayasekara and J.A.G. Anandarajah

retire by rotation and being eligible

offer themselves for re-election.

Notice has been given pursuant

to section 211 of the Companies

Act No. 7 of 2007 of the intention

to propose an ordinary resolution


117


for re-election of Mr. L.K.B.

Godamunne, notwithstanding the

age limit of 70 years stipulated by

section 210 of the Companies Act.

The names of Directors holding

year in respect of Subsidiaries,

grouped under sectors, are given

below. Names of Directors who

year are given within brackets.

Fibre

N.G. Wickremeratne, P.S.P.S Perera,

I. Piyasena, F.R. Alles,

M.N. Fernando, L.K.B. Godamunne,

H.C.S Mendis, A.M. Pandithage,

R.A. Ebell, Dr. S.A.B. Ekanayake,

J.C.A. Dahanayake, R.R.I. Fonseka,

J.W.T. Vermunt, Dr. P.C. Vermunt,

A. Venugopal, H.P.l. Fernando,

H.E. Wickremasooriya,

J.P. Ratnayake, Ms. M. Hirai,

J. Schoemaker, Ms. M. Shiraishi,

B.R.M. Mendis, Ms. I. Weiland,

C.D. Weiland, T.J. Otten,

A.T.A. Kuruppu, T.D.S.H. Gunasena,

(A.W.W. Dharmawardhana)

Hand Protection

N.G. Wickremeratne,

J.A.G. Anandarajah,

Dr. W.S.E. Fernando,

G.K. Seneviratne, N.Y. Fernando,

N.B. Weerasekera, R.K. Witanachchi,

A.M. Pandithage, R. Seevaratnam,

F. Mohideen, L.G.S. Gunawardena,

N.A.R.R.S. Nanayakkara, J. Benoit,

M. Orlando, J.P. Coudert, M. Bottino,

R.A. Ebell, V. Rocchetti,

K.A.L.S. Fernando, B.A. Mahipala,

(R.W. Soysa), (H.A. Pieris)

N.G. Wickremeratne,

A. Hettiarachchy, R.P. Peris,

L.K.B. Godamunne, A.M. Senaratna,

A.M. Pandithage, R. Seevaratnam,

P.S.P.S. Perera, J.D. Naylor,

D.J. Perera, P. Karnchanabatr,

B. Karnchanabatr, K. Karnchanabatr,

Dr. Y.M. Weerasuriya,

Y.P.A.S. Pathiratna,

A.A.M. Caderbhoy, A.H.Djafar,

S. Sopian, R.A. Ebell,

J.T.D. Ratnatunga, R.O. Connelly,

(M.E. Edwards)

Agri Inputs

N.G. Wickremeratne, M.R. Zaheed,

R.A. Ebell, M.M.M. De Silva,

U.E.R. Gangoda, Ms. J. Dharmasena,

A.M. Pandithage, N.K.A.E. De Silva,

H.P. Lin, K.S. Soh, C.M. Thomas,

J. Behncke, A.N.K. Perera

(D.J. Chapman)

Agri Products


M.N. Fernando,

A.C. Wikramanayake,

T.D.S.H. Gunasena, G. Olbrechts,

M. Symons, S. Kodama,

A.C. Pathirage, S. Yamada,

(P.S.P.S. Perera), (M. Inage)

Plantations

N.G. Wickremeratne,

J.A.G. Anandarajah,

G.K. Seneviratne,

Dr. W.S.E. Fernando,

S. Siriwardana,

A. Gunasekera,

A.M. Pandithage, B.P.W. Jayasekera,

R. Seevaratnam, F. Mohideen,

R.J. Perera, Dr. R.D. Bandaranaike,

D.J. Ambani, S. Balasubramaniam,

R.A. Ebell

Pandithage), (R.W. Soysa)

Industry Inputs

N.G. Wickremeratne, M.M.M De Silva,

R.A. Ebell, M.R. Zaheed,

M.H. Zainudeen, A.M. Pandithage,

N.K.A.D. De Silva, P.T.S. De Silva

Power & Energy

N.G. Wickremeratne,

A. Hettiarachchy, R.P. Peris,

M.M.M. De Silva,

R.P.S. Wickramasinghe,

D.D.W. Siriwardene,

A.M. Pandithage, R.A. Ebell,

D.S. Arangala

Consumer Products


R.A. Ebell, M.M.M. De Silva,

A.F. Saibukandu, H.J.O. Silva,

A.M. Pandithage, N.K.A.D. De Silva,

(T.G. Reckerman)

Resorts

N.G. Wickremeratne,

A. Hettiarachchy, R.A. Ebell

Investments & Services

N.G. Wickremeratne, R.A. Ebell,

D.D.W. Siriwardene,

Ms. L.Y. Pararasasegaram,

S.C. Ganegoda, M.N. Fernando,

A.C. Wikramanayake, I. Piyasena,

H.C.S. Mendis, M.M.M. De Silva,

P.T.S. De Silva, S.T. Gunatilleke,

R.R.I. Fonseka, A.M. Pandithage,

S. Balasubramaniam,

(P.S.P.S. Perera)

118



Transportation

N.G. Wickremeratne,

A.M. Pandithage, M.O. Raban,

R.A. Ebell, S.R. Sadanandan,

C.H. Pieres, L.R.V. Waidyaratne,

A.M. Senaratna, N.P. Kodikara,

I. Saleem, Ms. V. Jayasundera,

Ms. K.M.A.T. Ganegoda,

Ms. E.M.C.S. Gamage, T.U.K. Peiris,

P.L. Cumaratunga, Q.B. Williams,

M. Niruttan, K. Amarasekera,

F.T. Salem, C.D. La Ferriere,

H.S. Bourdillon, E. Silhol,

B. De P. Arnaud, A.B. Ratnayake,

H. Maniwa, T. Nakai, S. Sugishima,

M.G. Gomez, S.I. Ramakrishnan,

L.B. Culas, P.S. Gunawardena,

S.N. Wickremesooriya,

K.L.C. Fernando, R.W.P. Polonowita,

S.J. Wijesinghe, C.N. Allis,

B.P.R. Liyanage, R. Samaratunga,

Ms. Y.N. Perera, M.D.D. Pieris,

K. Balasundaram,

Ms. M.R.P. Balendra, R.S. Rajah,

D.D.W. Siriwardene, D.A. Molligoda,

C. Perera, M. Masri, C.I.J. Charles,

A.H. Kulasinghe, (T.S. Amendra),

(A.S.B. Paranavitane), (M.I.S. Sabar),

(L. Wanigasekera), (T. Kikuchi),

(A.H. Hafeel)

CORPORATEGOVERNANCEThe Company has complied with

the Corporate Governance rules

laid down under the listing rules of

the Colombo Stock Exchange. The

Corporate Governance section on

pages 12 to 27 discusses this further.

AUDITORSMessrs KPMG Ford, Rhodes,

Thornton & Co, Chartered

Accountants, are deemed re-

appointed, in terms of section 158

of the Companies Act No. 7 of

2007, as Auditors of the Company.

A resolution proposing the

Directors be authorised to determine

their remuneration will be submitted

at the Annual General Meeting.

The Auditors, Messrs KPMG

Ford, Rhodes, Thornton & Co.,

were paid Rs. 0.6 mn (Rs. 0.5.mn),

and Rs. 13.5 mn (Rs 12.9 mn) as

audit fees by the Company and

its Subsidiaries, respectively. In

addition, they were paid Rs. 0.7 mn

(Rs. 0.9 mn) and Rs. 6.1 mn

(Rs. 5.3 mn), by the Company

and its Subsidiaries respectively,

for non-audit related work,

which consisted mainly of tax

consultancy services.

In addition to the above,

Group companies, both local and

Audit fees and payments relating

to non- audit work in respect of

(Rs. 8.4 mn) and Rs. 0.7 mn

(Rs. 1.5 mn), respectively.

The Auditors of the Company

and its Subsidiaries, have

any relationships (other than that

of Auditor) with, or interests in, the

Company or any of its Subsidiaries

other than those disclosed above.

SHARE INFORMATIONInformation relating to earnings,

dividend, net assets, market value

per share and share trading is given

on pages 3 and 91.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATENo circumstances have arisen since

the Balance Sheet date that would

require adjustment, other than

those disclosed in Note 33 to the

Financial Statements on page 167.

EMPLOYMENTThe number of persons employed

by the Company and its

Subsidiaries at year-end was 20,173

(20,912). The number of people

employed by Associate companies

at year-end was 13,538 (14,504).

EMPLOYEE SHARE OWNERSHIPThe Group has introduced a number

of broad- based share purchase

schemes for its employees.

The Group does not operate

any share option schemes.

STATUTORY PAYMENTSThe declaration relating to

statutory payments is made

in the Statement of Directors’

Responsibilities on page 123.

ENVIRONMENTALPROTECTIONThe Group’s efforts to conserve

scarce and non-renewable

resources, as well as its

environmental objectives and key

initiatives, are described in the

Environment Issues section of the

Sustainability Report on page 103.

INTERNAL CONTROLSThe Directors acknowledge their

responsibility for the Group’s

system of internal control. The

system is designed to give

assurance, inter alia, regarding

the safeguarding of assets, the

maintenance of proper accounting

records and the reliability of

However, any system can only

ensure reasonable and not

absolute assurance that errors and

irregularities are either prevented

or detected within a reasonable

time period.


119


The Board, having reviewed

the system of internal controls, is

the period up to the date of signing


GOING CONCERNThe Directors, after making

necessary inquiries and reviews

including reviews of the Group’s

budget for the ensuing year, capital

expenditure requirements, future

and borrowing facilities, have a

reasonable expectation that the

Company and the Group have

adequate resources to continue

in operational existence for the

foreseeable future. Therefore,

the going concern basis has been

adopted in the preparation of the


DIRECTORS’SHAREHOLDINGS

Colombo Stock Exchange rules, of

ordinary shares in the Company

and listed companies, other than

Associates, are given below.

Directors’ ShareholdingsAs at 31/3/09 As at 31/3/08

HAYLEYS PLC

N.G. Wickremeratne 50,370 50,370

A.M. Pandithage 2,338 2,338

R.A. Ebell 15,349 15,349

L.K.B. Godamunne 1,191,237 1,191,237

P.S.P.S. Perera 10,390 10,390

J.D. Bandaranayake 27,261 27,261

A. Hettiarachchy 10,464 10,464

M.R. Zaheed 1,881 1,881

A.M. Senaratna 100 100

J.A.G. Anandarajah 908 908

K.D.D. Perera 16,250,684 –

HAYLEYS EXPORTS PLC

L.K.B. Godamunne 1,200 1,200

A.M. Pandithage 320 320

A. Hettiarachchy 320 320

DIPPED PRODUCTS PLC


R.A. Ebell 42,208 42,208

J.A.G. Anandarajah 219,474 219,474

HAYCARB PLC


A.M. Pandithage 2,379 2,379

R.A. Ebell 9,937 9,937

L.K.B. Godamunne 11,331 11,331

J.D. Bandaranayake 1,049 1,049

A. Hettiarachchy 64,835 64,835

120



As at 31st March, 2009 there

were 3,805 (4,102) registered

shareholders. The percentage of

shares held by the public, as per

the Colombo Stock Exchange rules,

at 31st March, 2009 was 55.82%

(76.77.%)

ANNUAL GENERAL MEETINGThe Annual General Meeting will

be held at The Auditorium, The


of Sri Lanka, No. 30A, Malalasekera

Mawatha, Colombo 7, at 3.00 p.m.

on Monday 29th June, 2009. The

Notice of the Annual General

Meeting appears on page 182.

For and on behalf of the Board

N.G. Wickremeratne


R.A. Ebell

Finance Director

Hayleys Group Services (Pvt) Ltd.

Secretaries

18th May, 2009

in brackets.

MAJOR SHAREHOLDINGSFirst Twenty Shareholders as at 31st March, 2009

Name of the Shareholder No. of No.of Shares as at Shares as at 31.03.2009 % 31.03.2008 %

1. Mr. K.D.D. Perera 16,071,828 21.43 – –

2. Trustees of the

D.S. Jayasundera Trust 8,698,017 11.60 8,698,017 11.60

3. Trustees of the Hayleys PLC -

Employees’ Share Trust 6,855,735 9.14 6,824,735 9.10

4. Sri Lanka Insurance

Corporation Ltd - Life Fund 4,651,700 6.20 4,631,700 6.18

5. Dipped Products PLC 3,536,159 4.71 3,536,159 4.71

6. Dean Foster (Pvt) Ltd. 2,922,413 3.90 2,922,413 3.90

7. Promar Overseas SA 2,251,119 3.00 2,227,719 2.97

8. Mr. M.S. Jayasundera 1,915,098 2.55 1,915,098 2.55

9. Hayleys Group Services

(Pvt) Ltd.

Number 2 Account 1,328,790 1.77 1,328,790 1.77

10. Employees’ Provident Fund 1,185,873 1.58 1,585,773 2.11

11. Mrs. P.M. Godamunne 1,107,447 1.48 1,107,447 1.48

12. Mrs. V. Jayasundera 1,017,476 1.36 1,017,476 1.36

13. Sri Lanka Insurance

Corporation Ltd -

General Fund 919,651 1.23 919,200 1.23

14. Mrs. M.L. Johnpulle (Deceased) 907,165 1.21 907,165 1.21

15. Ceylon Desiccated

Coconut & Oil Company Ltd. 719,813 0.96 719,813 0.96

16. Mr. G.M. Spittel 568,197 0.76 568,197 0.76

17. Mrs. R.N. Ponnambalam 537,815 0.72 544,815 0.73

18. Mr. A.C. Wikramanayake 502,130 0.67 502,130 0.67

19. Est. of N.K.A. De Silva

(Deceased) 487,005 0.65 487,005 0.65

20. Mrs. F.C. Phillips and

Mr. R.H.S. Phillips 482,304 0.64 482,304 0.64

Total 56,665,735 75.55 40,925,956 54.57

FINANCIALREPORTS

Financial Calendar 2008/09

1st Quarter Report 7th August, 2008

2nd Quarter Report 6th November, 2008

3rd Quarter Report 5th February, 2009

Interim Dividend 2008/09 21st May, 2009

Annual Report 2008/09 29th May, 2009

58th Annual General Meeting 29th June, 2009

Final Dividend Proposed 29th June, 2009

Final Dividend Payable 7th July, 2009

Statement of Directors' Responsibility 123

Audit Committee Report 124

Independent Auditor’s Report 126

Income Statements 127

Balance Sheets 128

Statements of Changes in Equity 129

Cash Flow Statements 130

Accounting Policies 132

Notes to the Financial Statements 139


123

STATEMENT OF DIRECTORS'RESPONSIBILITY

The Directors are responsible, under section 150

(1), 151, 152 (1), 153 (1) & 153 (2) of the Companies

Act No. 7 of 2007, to ensure compliance with

the requirements set out therein to prepare

financial statements for each financial year

giving a true and fair view of the state of affairs

of the Company and the Group as at the end of

the financial year and of the profit & loss of the

Company and the Group for the financial year.

The Directors are also responsible, under section

148 for ensuring that proper accounting records

are kept to disclose, with reasonable accuracy,

the financial position and enable preparation of


The Board accepts responsibility for

the integrity and objectivity of the Financial

Statements presented. The Directors confirm

that in preparing the Financial Statements,

appropriate accounting policies have been

selected and applied consistently while

reasonable and prudent judgments have

been made so that the form and substance of

transactions are properly reflected.

They also confirm that the Financial

Statements have been prepared and presented

in accordance with the Sri Lanka Accounting

standards. The Financial Statements provide the

information required by the Companies Act and

the listing rules of the Colombo Stock Exchange.

The Directors have taken reasonable

measures to safeguard the assets of the Group

and, in that context, have instituted appropriate

systems of internal control with a view to

preventing and detecting fraud and other

irregularities.

As required by section 56 (2) of the

Companies Act, the Board of Directors has

authorised distribution of the dividends paid

and now proposed, being satisfied based on

information available to it that the Company

would satisfy the solvency test after such

distributions in accordance with section 57

of the Companies Act, and have obtained in

respect of dividends paid and sought in respect

of the dividend now proposed, certificates of

solvency from its Auditors.

The external Auditors, Messrs KPMG Ford,

Rhodes, Thornton & Co., re-appointed in terms

of Section 158 of the Companies Act were

provided with every opportunity to undertake

the inspections they considered appropriate

to enable them to form their opinion on the

Financial Statements. The report of the Auditors,

shown on page 126 sets out their responsibilities

in relation to the Financial Statements.

COMPLIANCE REPORT

The Directors confirm that to the best of their

knowledge, all statutory payments relating to

employees and the Government that were due

in respect of the Company and its Subsidiaries

as at the Balance Sheet date have been paid or

where relevant, provided for.

By order of the Board

HAYLEYS GROUP SERVICES (PVT) LTD

Secretaries

18th May, 2009

124


AUDIT COMMITTEE REPORT

ROLE OF THE AUDIT COMMITTEE

The role of the Committee, which has specific

terms of reference, is described in the Enterprise

Governance Report on page 19.

COMPOSITION OF THE AUDIT COMMITTEE

The Audit Committee, appointed by and

responsible to the Board of Directors, comprises

four Non-Executive Directors with three being

Independent Non-Executive Directors. The

Group Manager - Management Audit & Systems

Review acts as Secretary. The Chairman & Chief

Executive and the Finance Director attend

meetings of the Committee by invitation. The

Chairman of the Audit Committee is a senior

Chartered Accountant. Mr. K.D.D. Perera, Non-

Executive Director was appointed to the Audit

Committee with effect from 6th November

2008. Mr. A.D.B. Talwatte, former Chairman of

the Audit Committee served as a consultant

to the Audit Committee till he relinquished

his duties in February 2009. The names of the

members and brief profiles of each member

are given on pages 24 & 25 of this report. Their

individual and collective financial knowledge

and business acumen and the independence

of the Committee, are brought to bear on their

deliberations and judgments on matters that

come within the Committee’s purview.

MEETINGS

The Committee met 5 times during the year. The

attendance of the members at these meetings

is as follows:

Mr. T.L.F.W. Jayasekara 5/5

Mr. L.K.B. Godamunne 4/5

Mr. J.D. Bandaranayake 4/5

Mr. K.D.D. Perera 1/1

Other members of the Board and the Group

Management Committee, as well as the External

Auditors were present at discussions where this

was appropriate. The proceedings of the Audit

Committee are regularly reported to the Board

of Directors.

TASKS OF THE AUDIT COMMITTEE

Financial Reporting System

The Committee reviewed the financial

reporting system adopted by the Group in the

preparation of its quarterly and annual Financial

Statements to ensure reliability of the processes

and consistency of the accounting policies

and methods adopted and their compliance

with the Sri Lanka Accounting Standards. The

methodology included obtaining statements

of compliance from Heads of Finance and

Directors-in-charge of operating units. The

presentation and adequacy of disclosure in

the published Financial Statements were also

reviewed. The Committee recommended

the Financial Statements to the Board for Its

deliberations and issuance. The Committee, in

its evaluation of the financial reporting system,

also recognised the adequacy of the content

and quality of routine management information

reports forwarded to its members.

Internal Audits

The Committee reviewed the process to assess

the effectiveness of the Internal Financial

Controls that have been designed to provide

reasonable assurance to the Directors that

assets are safeguarded and that the financial

reporting system can be relied upon in

preparation and presentation of Financial

Statements. The Group Management Audit

& Systems Review Department reports on

key control elements and procedure in Group

companies that are selected according to an

annual plan were reviewed.

Internal Audits are outsourced to leading

audit firms in line with an agreed annual

audit plan. Follow up reviews are scheduled

to ascertain that audit recommendations are

being acted upon. The Committee appraised

the independence of the Group MA&SRD and

other internal auditors, in the conduct of their

assignments.

The Committee obtained and reviewed

statements from the heads of business sectors

identifying their respective major business risks

and mitigatory action taken or contemplated for

management of these risks. The COSO Enterprise

Risk Reporting Process is being implemented

within the Group.

The Committee obtained representations

from Group Companies on the adequacy of

provisions made for possible liabilities and

reviewed reports tabled by Group Companies

certifying their compliance with relevant

statutory requirements.

Subsidiary Company Audit Committees

Certain listed subsidiaries have appointed their

own Audit Committees comprising Independent

Directors. These Audit Committees function

independently of the Audit Committee of Hayleys

PLC but have similar terms of reference. The

minutes of their meeting are made available to

Hayleys Audit Committee.

External Audits

The Committee held meetings with the External

Auditors to review the nature, approach and

scope of audit and the Audit Management

Letters of Group Companies. Actions taken by the

management in response to the issues raised, as

well as the effectiveness of the internal controls in

place, were discussed with the heads of business

units. Remedial action was recommended

wherever necessary.


125

The Audit Committee has reviewed the

other services provided by the External Auditors

to the Group to ensure that their independence

as Auditors has not been compromised.

Appointment of External Auditors

The Audit Committee has recommended to the

Board of Directors that Messrs KPMG Ford, Rhodes,

Thornton & Co., be continued as Auditors for the

financial year ending 31st March, 2010.

SUPPORT TO THE COMMITTEE

The Committee received information and support

from management during the year to enable it to

carry out its duties and responsibilities effectively.

CONCLUSION

The Audit Committee is satisfied that the

Group’s accounting policies and operational

controls provide reasonable assurance that the

affairs of the Group are managed in accordance

with Group policies and that Group assets

are properly accounted for and adequately

safeguarded.

T.L.F.W. Jayasekara

Chairman

Audit Committee

18th May, 2009

AUDIT COMMITTEE REPORT

126


TO THE SHAREHOLDERS OF HAYLEYS PLC

Report on the Financial Statements

We have audited the accompanying financial

statements of Hayleys PLC, the consolidated

financial statements of the Company and its

subsidiaries as at that date which comprise the

balance sheet as at 31st March, 2009 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 out on

pages 132 to 174 of the Annual Report.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation

and fair presentation of these financial

statements in accordance with Sri Lanka

Accounting Standards. This responsibility

includes: designing, implementing and

maintaining internal control relevant to the

preparation and fair presentation of financial

statements that are free from material

misstatement, whether due to fraud or error;

selecting and applying appropriate accounting

policies; and making accounting estimates that

are reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on

these financial statements based on our audit.

We conducted our audit in accordance with

Sri Lanka Auditing Standards. Those standards

require that we plan and perform the audit

to obtain reasonable assurance whether the

financial statements are free from material

misstatement.

An audit includes examining, on a test

basis, evidence supporting the amounts and

disclosures in the financial statements. An audit

also includes assessing the accounting principles

used and significant estimates made by

management, as well as evaluating the overall

financial statement presentation.

INDEPENDENT AUDITOR’SREPORT

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 - Company

In our opinion, so far as appears from our

examination, the Company maintained proper

accounting records for the year ended

31st March, 2009 and the financial statements

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

of affairs as at 31st March, 2009 and its profit and

cash flows for the year then ended in accordance

with Sri Lanka Accounting Standards.

Opinion - Group

In our opinion, the consolidated financial

statements give a true and fair view of the

state of affairs as at 31st March, 2009 and the

profit and cash flows for the year then ended,

in accordance with Sri Lanka Accounting

Standards, of the Company and its subsidiaries

dealt with thereby, so far as concerns the

members of the Company.

Report on Other Legal and Regulatory Requirements

These financial statements also comply with the

requirements of Section 153 (2) to 153 (7) of the

Companies Act No. 7 of 2007.

KPMG Ford, Rhodes, Thornton & Co.

Chartered Accountants

Colombo

18th May, 2009


127

INCOME STATEMENTS

Consolidated Company

For the year ended 31st March, 2009 2008 2009 2008 Notes Rs. '000 Rs. '000 Rs. '000 Rs. '000

Continuing operations

Gross turnover 6 32,417,520 30,955,302 312,745 606,155

Turnover tax (36,646) (32,671) – –

Net turnover 32,380,874 30,922,631 312,745 606,155

Cost of sales (24,408,044) (23,344,156) (109,281) (92,771)

Gross profit 7,972,830 7,578,475 203,464 513,384

Other income 7 254,745 199,281 502,198 (213)

Distribution expenses (1,261,014) (1,076,823) – –

Administrative expenses (4,452,494) (3,982,806) (40,371) (20,424)

Other expenses 8 (793) (618) (34,453) (76,115)

Net finance cost 9 (1,154,740) (1,075,930) (116,429) (166,723)

Share of profit of associates (net of tax) 116,088 343,599 – –

Profit before tax 10 1,474,622 1,985,178 514,409 249,909

Tax (expense)/reversal 11 (571,236) (464,662) 799 (4,795)

Profit for the year from continuing operations 903,386 1,520,516 515,208 245,114

Discontinued operations

Loss for the year from

discontinued operations (net of tax) 38 (99,984) (430,742) – –

Profit for the year 803,402 1,089,774 515,208 245,114

Attributable to:

Equityholders of the Company 310,938 452,623

Minority interest 492,464 637,151

Profit for the year 803,402 1,089,774

Earnings per share

Basic earnings per share (Rs.) 12 4.15 6.03

Diluted earnings per share (Rs.) 12 4.15 6.03

Earnings per share from continuing operations

Basic earnings per share (Rs.) 12 5.50 11.54

Diluted earnings per share (Rs.) 12 5.50 11.54

Dividend per share (Rs.) 13 3.00 3.00

Notes from pages 132 to 174 form an integral part of these Financial Statements.

Figures in brackets indicate deductions.

128


BALANCE SHEETS


As at 31st March, 2009 2008 2009 2008 Notes Rs. '000 Rs. '000 Rs. '000 Rs. '000

AssetsNon-Current AssetsProperty, plant & equipment 14 13,105,861 13,221,254 3,114,182 3,122,692Intangible assets 15 305,066 305,618 – – Investments in subsidiaries 16 – – 1,954,307 1,938,401Investments in associates 16 2,387,656 2,844,067 282,722 366,128Other long-term investments 16 767,741 660,903 296,192 249,406Employees' share trust loan 17 495,346 496,828 495,346 496,828Deferred tax assets 25 154,036 96,999 27,775 26,350Total non-current assets 17,215,706 17,625,669 6,170,524 6,199,805

Current AssetsInventories 18 5,548,510 4,954,932 3,253 2,778Amounts due from subsidiaries 37 – – 444,062 423,624Amounts due from associates 37 82,114 46,712 28,137 11,536Trade and other receivables 19 8,224,209 8,784,504 38,859 33,154Short-term investments 20 4,856 5,583 4,623 5,195Assets classified as held for sale 38 8,000 84,895 – – Income tax recoverable 27 258,432 206,647 3,768 573Short-term deposits 1,381,334 591,436 69,826 – Cash and cash equivalents 906,867 1,057,668 18,007 24,702Total current assets 16,414,322 15,732,377 610,535 501,562Total assets 33,630,028 33,358,046 6,781,059 6,701,367

Equity and LiabilitiesStated capital 21 1,575,000 1,575,000 1,575,000 1,575,000Capital reserves 5,697,166 5,954,623 2,967,249 2,967,249Revenue reserves 5,083,473 4,692,428 1,123,272 833,064Total equity attributable to equityholders of the company 12,355,639 12,222,051 5,665,521 5,375,313Minority interest 4,220,619 3,986,239 – – Total Equity 16,576,258 16,208,290 5,665,521 5,375,313

Non-Current LiabilitiesInterest bearing borrowings 23 2,281,769 2,979,130 260,000 720,000Deferred income 24 349,759 251,044 – - Deferred tax liability 25 236,843 205,250 27,775 26,350Retirement benefit obligations 26 1,916,401 1,701,345 313,808 266,078Total non-current liabilities 4,784,772 5,136,769 601,583 1,012,428

Current LiabilitiesTrade and other payables 27 5,081,882 5,215,328 87,339 83,232Amounts due to subsidiaries – – 139,535 142,796Amounts due to associates 37 27,710 41,246 – – Liabilities directly associated with assets classified as held for sale 38 – 7,938 – – Income tax payable 28 208,399 130,014 – – Current portion of long-term interest-bearing borrowings 23 785,248 724,826 80,000 80,000Short-term interest-bearing borrowings 29 6,165,759 5,893,635 207,081 7,598Total current liabilities 12,268,998 12,012,987 513,955 313,626Total liabilities 17,053,770 17,149,756 1,115,538 1,326,054Total equity and liabilities 33,630,028 33,358,046 6,781,059 6,701,367

It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 7 of 2007.

D.D.W. Siriwardene General Manager - Finance

The Directors are responsible for the preparation and presentation of these Financial Statements.

Signed for and on behalf of the Board,

N.G. Wickremeratne R.A. EbellChairman & Chief Executive Finance Director

18th May, 2009



129

STATEMENTS OFCHANGES IN EQUITY

For the period ended 31st March, 2009

CONSOLIDATED Attributable to equityholders of the Company

Stated Reserve Revalu- Other Exchange General Retained Total Minority Total

Capital on scrip ation capital fluctuation reserve earnings Interest equity

issue reserve reserve reserve

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

Balance as at 1st April, 2007 1,575,000 970,027 4,366,531 120,918 479,803 1,700,538 2,487,651 11,700,468 3,704,926 15,405,394

Revaluation of assets – – 288,931 – – – – 288,931 23,446 312,377

Adjustment due to changes in holding – 3,577 965 (8,483) – 1,058 2,646 (237) 2,067 1,830

Translation of foreign entities – – – – 42,766 – – 42,766 53,622 96,388

Net gains/(losses) not recognised

in the Income Statement – 3,577 289,896 (8,483) 42,766 1,058 2,646 331,460 79,135 410,595

Issue of shares – – – – – – – – 21,688 21,688

Transfers – – (48,571) 260,728 – – (212,157) – – –

Profit for the period – – – – – – 452,623 452,623 637,151 1,089,774

Dividends – – – – – – (262,500) (262,500) (456,661) (719,161)

Reserved during the year – – – – – 32,457 (32,457) – – –

Balance as at 31st March, 2008 1,575,000 973,604 4,607,856 373,163 522,569 1,734,053 2,435,806 12,222,051 3,986,239 16,208,290

Revaluation of assets – – 3,960 – – – – 3,960 85 4,045

Adjustment due to changes in holding – (7,484) 3,852 2,566 – 3,661 (4,395) (1,800) (9,600) (11,400)

Disposal of subsidiary – – – – – – – – (149) (149)

Translation of foreign entities – – – – 45,490 – – 45,490 (5,406) 40,084

Net gains/(losses) not recognised

in the income statement – (7,484) 7,812 2,566 45,490 3,661 (4,395) 47,650 (15,070) 32,580

Issue of shares – – – – – – – – 13,621 13,621

Scrip issues – 1,407 – – – – (1,407) – – –

Transfers – (9,100) (286,649) 33,991 – – 261,758 – – –

Profit for the period – – – – – – 310,938 310,938 492,464 803,402

Dividends – – – – – – (225,000) (225,000) (256,635) (481,635)

Reserved during the year – – – – – 188,355 (188,355) – – –

Balance as at 31st March, 2009 1,575,000 958,427 4,329,019 409,720 568,059 1,926,069 2,589,345 12,355,639 4,220,619 16,576,258

COMPANYStated Revaluation Other General Retained Total

capital reserve capital reserve earnings

reserve

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

Balance as at 1st April, 2007 1,575,000 2,954,023 13,226 382,087 468,363 5,392,699

Profit for the year – – – – 245,114 245,114

Dividends – – – – (262,500) (262,500)

Balance as at 31st March, 2008 1,575,000 2,954,023 13,226 382,087 450,977 5,375,313

Profit for the period – – – – 515,208 515,208

Dividends – – – – (225,000) (225,000)

Balance as at 31st March, 2009 1,575,000 2,954,023 13,226 382,087 741,185 5,665,521

1. Descriptions of specific reserves are given below:

Reserve on Scrip Issue represents bonus issues made by subsidiaries and associates.

Revaluation Reserve relates to the revaluation of property, plant & equipment.

Details of the Capital Reserves are given in note 22 to the Financial Statements.

Exchange Fluctuation Reserve comprises all foreign currency differences arising from the translation of the Financial Statements of foreign operations.

2. Scrip issues were made during the year by Volanka Insurance Services (Pvt) Ltd.



130


CASH FLOW STATEMENTS


For the year ended 31st March, 2009 2008 2009 2008 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Cash flows from operating activities

Cash generated from operations (Note A) 3,034,311 3,957,521 197,540 635,502

Retiring gratuity paid (166,602) (101,875) (6,703) (12,395)

Interest paid (including interest capitalised) (1,216,841) (1,409,363) (133,114) (187,692)

Income taxes paid (568,771) (612,292) (2,396) (3,044)

Net cash inflow/(outflow) from operating activities 1,082,097 1,833,991 55,327 432,371

Cash flows from investing activities

Purchase and construction of property, plant & equipment (1,303,823) (1,560,309) (14,016) (28,774)

Government grants received - capital 111,266 55,139 – –

Proceeds from disposal of property, plant & equipment 737,383 805,335 68 422

On acquisition of right to generate hydro power (9,006) (11,852) – –

Proceeds from the sale of investments – 203,868 – –

Proceeds from the sale of associate 540,900 – 540,900 –

Disposal of subsidiary 6,041 – 4,865 –

Partial disposal of subsidiary 56,660 – – –

Proceeds from the sale of assets held for sale 92,811 – – –

Proceeds from disposal of short-term investments – 924 – 924

Long-term investments in Group companies and others (80,957) (68,125) (82,691) (213,742)

Interest received 145,060 111,006 16,685 20,975

Dividends received from associate companies 132,655 167,798 – –

Dividends received from non-group companies 26,794 1,375 26,028 312

Recovery of employee share trust loan 1,482 1,367 1,482 1,367

Net payments to minority shareholders (256,635) (434,973) – –

Net cash used in investing activities 200,631 (728,447) 493,321 (218,516)

Net cash inflow/(outflow) before financing activities 1,282,728 1,105,544 548,648 213,855

Cash flows from financing activities

Capital payment on finance lease (14,120) (13,413) – –

Issue of debentures 40,000 – – –

Proceeds from interest-bearing borrowings 496,467 820,664 – 155,000

Repayment of interest-bearing borrowings (1,190,181) (1,232,339) (460,000) –

Dividends paid (225,000) (262,500) (225,000) (262,500)

Net cash inflow/(outflow) from financing activities (892,834) (687,588) (685,000) (107,500)

Net increase/(decrease) in cash and cash equivalents 389,894 417,956 (136,352) 106,355

Cash and cash equivalents at beginning of the year (4,267,452) (4,665,312) 17,104 (89,251)

Cash and cash equivalents at end of the year (Note B) (3,877,558) (4,247,356) (119,248) 17,104



Net cash flows related to discontinued operations, shown in Note 38 - Discontinued Operations.


131


For the year ended 31st March, 2009 2008 2009 2008 Rs. '000 Rs. '000 Rs. '000 Rs. '000

A. Cash generated from operations

Profit before tax from continuing operations 1,474,622 1,985,178 514,409 249,909

Loss before tax from discontinued operations (99,984) (430,458) – –

1,374,638 1,554,720 514,409 249,909

Adjustments for:

Net finance cost 1,165,677 1,159,347 116,429 166,723

Share of profits from associates (116,088) (343,599) – –

Depreciation on property, plant & equipment 799,340 838,483 22,387 19,009

(Gain)/loss on the disposal of property, plant & equipment (139,600) (100,090) 71 (351)

(Gain)/loss on the disposal of long-term investments – (94,334) – –

(Gain)/loss on the disposal of short-term investments – 876 – 876

Amortisation of intangible assets 794 618 – –

Dividend income (26,794) (1,375) (26,028) (312)

Net gains/(loss) on translation of foreign currency (93,897) 113,560 – (6)

Differences of exchange on translation of foreign entities 17,366 99,674 – –

Provision for bad and doubtful debts 108,933 171,059 – –

Provision for unrealised profit and write-down of inventories 4,644 42,126 – –

(Gain)/loss on the disposal of subsidiaries and associates (97,556) 4,820 (476,813) –

Provision for retiring gratuity 382,973 403,507 54,433 62,994

Government grants amortised (12,551) (9,264) – –

Provision for fall in value of investment 727 86 35,025 76,115

3,368,606 3,840,214 239,913 574,957

(Increase)/decrease in trade and other receivables 404,161 (458,813) (42,744) 59,220

(Increase)/decrease in inventories (598,585) (8,289) (475) (1,875)

Increase/(decrease) in trade and other payables (139,871) 584,409 846 3,200

3,034,311 3,957,521 197,540 635,502

B. Analysis of cash and cash equivalents

Cash & cash equivalents 906,867 1,057,668 18,007 24,702

Short-term deposits 1,381,334 591,436 69,826 –

2,288,201 1,649,104 87,833 24,702

Short-term interest bearing borrowings (6,165,759) (5,896,460) (207,081) (7,598)

Cash and cash equivalents previously reported (3,877,558) (4,247,356) (119,248) 17,104

Effect of exchange rate change – (20,096) – –

Cash and cash equivalents as restated (3,877,558) (4,267,452) (119,248) 17,104

C. During the year the Group acquired property, plant & equipment with an aggregate cost of Rs. 1,329 mn of which Rs. 25 mn was acquired by means of

finance leases.

CASH FLOW STATEMENTS

132


ACCOUNTING POLICIES

1. REPORTING ENTITY

Hayleys PLC, is a Company incorporated and

domiciled in Sri Lanka. The ordinary shares of

the company are listed on the Colombo Stock

Exchange of Sri Lanka. The address of the

Company’s registered office is given on inner

back cover.

The Consolidated Financial Statements

of Hayleys PLC, as at and for the year ended

31st March, 2009 comprise the Company and

its Subsidiaries (together referred to as the

'Group') and the Group's interest in Associates.

Descriptions of the nature of the operations

and principal activities of the Company, its

Subsidiary and Associates are given on pages

82 to 86.

Hayleys PLC, does not have an identifiable

parent of its own.

The Financial Statements of all companies

in the Group other than those mentioned

in note 34 to the Financial Statements are

prepared for a common financial year, which

ends on 31st March.

2. BASIS OF PREPARATION

2.1 Statement of Compliance

The Financial Statements have been prepared in

accordance with Sri Lanka Accounting Standards

(SLAS’s) promulgated by the Institute of

Chartered Accountants of Sri Lanka (ICASL), and

with the requirements of the Companies Act

No. 7 of 2007.

The Financial Statements were authorised

for issue by the Directors on 18th May, 2009.

2.2 Basis of Measurement

The Financial Statements have been prepared

on the historical cost basis except that certain

holdings of land and short-term investments are

measured/stated at fair value as explained in

notes 14 and 20 to the Financial Statements.

2.3 Functional and Presentation Currency

The Financial Statements are presented in

Sri Lankan Rupee, which is the Group’s

functional and presentation currency, except

for certain subsidiaries and associates whose

functional currency is different as they operate

in different economic environments (see

note 32). All financial information presented in

Sri Lankan Rupees has been given to the

nearest thousand, unless stated otherwise.

2.4 Use of Estimates and Judgements

The preparation of Financial Statements in

conformity with SLAS requires management to

make judgements, estimates and assumptions

that influence the application of accounting

policies and the reported amounts of assets,

liabilities, income and expenses. Judgements

and estimates are based on historical

experience and other factors, including

expectations that are believed to be reasonable

under the circumstances. Hence actual

experience and results may differ from these

judgements and 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 if the

revision affects only that period, or in the period

of the revision and future periods if the revision

affects both current and future periods.

Information about significant areas of

estimation uncertainty and critical judgements

in applying accounting policies that have

the most significant effect on the amounts

recognised in the financial statements is

included in the following notes:

Note 15 - measurement of the cash-

generating units containing goodwill

Note 26 - measurement of the defined

benefit obligations

3. SIGNIFICANT ACCOUNTINGPOLICIES

Subject to the implication flowing from the

application of SLAS 16, Employee Benefits

(Revised 2006), which is applicable for financial

year 2008/09, the accounting policies set

out below are consistent with those used

in the previous year. Accounting policies of

subsidiaries and associate have been changed

where necessary to ensure consistency with the

policies adopted by the Group.

Comparative information has where

necessary been reclassified to conform with the

current year’s presentation.

The Directors have made an assessment

of the Group's ability to continue as a going

concern in the foreseeable future, and they do

not foresee a need for liquidation or cessation

of trading.

3.1 Basis of Consolidation3.1.1 Subsidiaries

Subsidiaries are those entities controlled by the

Group. Control exists when the Group has the

power to govern the financial and operating

policies of an entity so as to obtain benefits

from its activities. In assessing control, potential

voting rights that are currently exercisable

are also taken into account. The Financial

Statements of subsidiaries are included in the

Consolidated Financial Statements from the

date that control commences until the date that

control ceases.

3.1.3 Transactions with Minority Interests

The profit or loss and net assets of a subsidiary

attributable to equity interests that are not

owned by the parent, directly or indirectly

through subsidiaries, is disclosed separately

under the heading “Minority Interest”.

The Group applies a policy of treating

transactions with minority interests as

transactions with parties external to the Group.

Disposals to minority interests result in gains

and losses for the Group and are recorded

in the income statement. Purchases from

minority interests result in Goodwill, being the

difference between any consideration paid and

the relevant share of the carrying value of net

assets of the subsidiary acquired.

3.1.2 Associates

Associates are those entities in which the Group

has significant influence, but not control, over

financial and operating policies. Significant

influence is presumed to exist when the Group

holds between 20 and 50 per cent of the voting

power of the entity. Associates are accounted

for using the equity method (equity accounted

investees) and are initially recognised at cost.

The Consolidated Financial Statements include

the Group's share of income and expenses

and equity movements of equity accounted

investees, from the date that significant

influence commences until the date significant

influence ceases. When the Group's share of

losses exceeds its investment in an equity


133

ACCOUNTING POLICIES

accounted investee, the carrying amount of that

interest is reduced to nil and the recognition

of further losses is discontinued except to the

extent that the Group has incurred obligations

or has made payments on behalf of the investee.

3.1.4 Transactions Eliminated on Consolidation

Intra-group balances, transactions and any

unrealised income and expenses arising

from intra-group transactions, are eliminated

in preparing the Consolidated Financial

Statements. Unrealised gains arising from

transactions with equity accounted investees

are eliminated against the investment to the

extent of the Group’s interest in the investee.

Unrealised losses are eliminated in the same

way as unrealised gains, but only to the extent

that there is no evidence of impairment.

3.2 Foreign Currency3.2.1 Foreign Currency Transactions

Transactions in foreign currencies are translated

into the respective functional currencies of

Group entities at exchange rates applicable on

the dates of the transactions. Monetary assets

and liabilities denominated in foreign currencies

at the reporting date are retranslated to the

functional currency at the exchange rate ruling

at that date. Foreign currency differences

arising on retranslation are recognised in profit

and loss.

3.2.2 Financial Statements of Foreign Entities

The results and financial position of all Group

entities that have a functional currency other

than the Sri Lanka Rupee are translated into

Sri Lanka Rupees as follows:

- assets and liabilities for each Balance Sheet

presented, including goodwill and fair value

adjustments arising on the acquisition of a

foreign entity, are translated at the closing

rate at the date of the Balance Sheet;

- income and expenses are translated at the

average exchange rate for the period.

All resulting exchange differences are

recognised in the foreign currency translation

reserve within equity. When a foreign entity is

disposed of, the relevant amount in the foreign

currency translation reserve is translated to

profit and loss.

3.3 Assets and Bases of their Valuation

Assets classified as current assets on the

Balance Sheet are cash and bank balances and

those which are expected to be realised in cash

during the normal operating cycle or within one

year from the Balance Sheet date, whichever

is shorter.

3.3.1 Property, Plant & Equipment

3.3.1.1 Recognition and measurement

Items of property, plant & equipment are

measured at cost (or at fair value in the case

of land) less accumulated depreciation and

accumulated impairment losses.

3.3.1.2 Owned Assets

The cost of property, plant & equipment

includes expenditures that are directly

attributable to the acquisition of the asset. The

cost of self-constructed assets includes the cost

of materials and direct labour, any other costs

directly attributable to bringing the asset to

a working condition for its intended use, and

the costs of dismantling and removing the

items and restoring the site on which they are

located. Purchased software that is integral to

the functionality of the related equipment is

capitalised as a part of that equipment.

When parts (major components) of an item

of property, plant & equipment have different

useful lives, they are accounted for as separate

items of property, plant & equipment.

A revaluation of land is done when there is

a substantial difference between the fair value

and the carrying amount of the land, and is

undertaken by professionally qualified valuers.

Increases in the carrying amount on

revaluation are credited to the revaluation

reserve in shareholders’ equity. Decreases that

offset previous increases of the same individual

asset are charged against revaluation reserve

directly in equity. All other decreases are

expensed in profit and loss.

3.3.1.3 Leased Assets

Leases 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

measured 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 and accumulated

impairment losses.

3.3.1.4 Subsequent Costs

The cost of replacing part of an item of property,

plant & equipment is recognised in the carrying

amount of the item if it is probable that the

future economic benefits embodied within

the part will flow to the Group and its cost can

be measured reliably. The carrying amount of

those parts that are replaced is derecognised

in accordance with the derecognition policy

given below.

The costs of the day-to-day servicing of

property, plant & equipment are recognised in

profit or loss as incurred.

3.3.1.5 Derecognition

The carrying amount of an item of property,

plant & equipment is derecognised on disposal

or when no future economic benefits are

expected from its use or disposal. Gains or

losses on derecognition are recognised in profit

or loss and gains are not classified as revenue.

3.3.1.6 Depreciation

Depreciation is recognised in profit and loss on

a straight-line basis over the estimated useful

lives of each part of an item of property, plant &

equipment. Assets held under finance leases are

depreciated over the shorter of the lease term

and the useful lives of equivalent owned assets.

Freehold land is not depreciated.

The estimated useful lives for the current

and comparative periods are as follows:

Leasehold right to land - Over the lease

period

Buildings - 20 - 40 years

Software - 03 - 05 years

Plant & machinery - 05 - 20 years

Vessels - 04 - 06 years

Stores equipment - 05 - 10 years

Motor vehicles - 04 - 05 years

Furniture, fittings &

office equipment - 03 - 13 years

134


Depreciation of an asset begins when it is

available for use and ceases at the earlier of the

dates on which the asset is classified as held for

sale or is derecognised.

Depreciation methods, useful lives and

residual values are reassessed at the reporting

date.

3.3.2 Intangible Assets

An intangible asset is recognised if it is

probable that future economic benefits that

are attributable to the asset will flow to the

enterprise and the cost of the asset can be

measured reliably in accordance with SLAS 37

on Intangible Assets. Accordingly, these assets

are stated in the Balance Sheet at cost less

accumulated amortisation and accumulated

impairment losses.

3.3.2.1 Goodwill

Goodwill arising on an acquisition represents

the excess of the cost of the acquisition over

the Group’s interest in the net fair value of the

identifiable assets and liabilities acquired entity.

Negative goodwill arising on an acquisition

represents the excess of the Group’s interest

in the fair value of the assets and liabilities

acquired over the cost of acquisition. Negative

goodwill is recognised immediately in profit

or loss.

Goodwill arising on an acquisition of a

minority interest in a subsidiary represents the

excess of the cost of the additional investment

over the carrying amount of the interest in the

net assets acquired at the date of exchange.

Goodwill is tested annually for impairment

and is measured at cost less accumulated

impairment losses. In respect of equity

accounted investees, the carrying amount of

goodwill is included in the carrying amount of

the investment.

3.3.2.2 Research and Development

Expenditure on research activities, undertaken

with the prospect of gaining new scientific or

technical knowledge and understanding, is

recognised in profit or loss when incurred.

Development activities involve a plan

or design for the production of new or

substantially improved products and processes.

Development expenditure is capitalised only if

development costs can be measured reliably,

the product or process is technically and

commercially feasible, future economic benefits

are probable, and the Group intends to and has

sufficient resources to complete development

and to use or sell the asset. The expenditure

capitalised includes the cost of materials, direct

labour and overhead costs that are directly

attributable to preparing the asset for its

intended use. Other development expenditure

is recognised in profit or loss when incurred.

Capitalised development expenditure is

measured at cost less accumulated amortisation

and accumulated impairment losses.

3.3.2.3 Other Intangible Assets

Other intangible assets that are acquired by

the Group, which have finite useful lives, are

measured at cost less accumulated amortisation

and accumulated impairment losses.

3.3.2.4 Subsequent Expenditure

Subsequent expenditure is capitalised only

when it increases the future economic benefits

embodied in the specific asset to which it relates.

All other expenditure, including expenditure

on internally generated goodwill and brands, is

recognised in profit and loss as incurred.

3.3.2.5 Amortisation

Amortisation is recognised in profit or loss on

a straight-line basis over the estimated useful

lives of intangible assets, other than goodwill,

from the date on which they are available for

use. The estimated useful lives for the current

and comparative periods are as follows:

Right to generate hydro power - 15 years

3.3.3 Investments

3.3.3.1 Investment property

Investment property, comprising freehold

land and buildings, is property held to earn

rental income or for capital appreciation or

both, is not occupied substantially for the

production or supply of goods or services or for

administrative purposes, and is not intended

for sale in the ordinary course of business.

Investment property is initially measured at

its cost including related transaction costs

and is therefore carried at its cost less any

accumulated depreciation and any accumulated

impairment losses.

3.3.3.2 Long-term Investments

Quoted and unquoted investments in shares

held on long term basis are measured at cost

less impairment losses.

In the parent company's Financial

Statements, investments in subsidiaries and

associates are carried at cost less impairment

losses under the parent company’s accounting

policy for long term investments.

Provision for impairment is made when

in the opinion of the Directors there has been

a decline which is other than temporary in the

value of the investment.

3.3.3.3 Short-term Investments

Short-term investments are measured at the

lower of cost and market value on an aggregate

portfolio basis, with any resultant gain or loss

recognised in profit or loss.

3.3.4 Inventories

Inventories are measured at the lower of cost

and net realisable value. The general basis on

which cost is determined is:

All inventory items, except manufactured

inventories and work-in-progress are

measured at weighted average directly

attributable cost.

Manufactured inventories and work-

in-progress are measured at weighted

average factory cost which includes all

direct expenditure and an appropriate share

of production overhead based on normal

operating capacity.

Net realisable value is the estimated selling

price in the ordinary course of business less the

estimated cost of completion and selling expenses.

3.3.5 Trade and Other Receivables

Trade and other receivables are stated at their

estimated realisable amounts.

ACCOUNTING POLICIES


135

3.3.6 Cash and Cash Equivalents

Cash and cash equivalents comprise cash

balances and short-term deposits. Bank

overdrafts that are repayable on demand

form an integral part of the Group's cash

management and are included as a component

of cash and cash equivalents for the purpose of

the Statement of Cash Flows.

3.3.7 Impairment

The carrying amounts of the Group’s assets are

reviewed at each reporting date to determine

whether there is any indication of impairment.

If any such indication exists then the asset’s

recoverable amount is estimated. For goodwill

and intangible assets that have indefinite lives

or that are not yet available for use, recoverable

amounts are estimated at each reporting

date or more frequently, if events or changes

in circumstances indicate that they might be

impaired.

The recoverable amount of an asset or

cash-generating unit is the greater of its value

in use and its fair value less costs to sell. In

assessing value in use, 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. A cash-

generating unit is the smallest identifiable asset

group that generates cash flows that largely are

independent from other assets and groups.

An impairment loss is recognised if the

carrying amount of an asset or its cash-

generating unit exceeds its recoverable amount.

Impairment losses are recognised in profit or

loss. Impairment losses recognised in respect

of cash-generating units are allocated first to

reduce the carrying amount of any goodwill

allocated to the units and then to reduce the

carrying amount of the group of other assets in

the unit on a pro rata basis.

An impairment loss in respect of goodwill

is not reversed. In respect of other assets,

impairment losses recognised in prior periods

are assessed at each reporting date for any

indications that the loss has decreased or no

longer exists. An impairment loss is reversed

if there has been a change in the estimates

used to determine the recoverable amount.

An impairment loss is reversed only to the

extent that the asset’s carrying amount does

not exceed the carrying amount that would

have been determined, net of depreciation or

amortisation, if no impairment loss had been

recognised.

3.3.8 Non-Current Assets held for Sale

Non-current assets (or disposal groups

comprising assets and liabilities) that are

expected to be recovered primarily through

sale rather than continuing use are classified

as assets held for sale. Immediately before

classification as assets held for sale, the

assets (or components of a disposal group)

are measured in accordance with the Group’s

accounting policies. Thereafter the assets (or

disposal group) are generally measured at the

lower of their carrying amount and fair value

less costs to sell.

Impairment losses on initial classification

as assets held for sale and subsequent gains

and losses on remeasurement are recognised

in profit and loss. Gains in excess of any

cumulative impairment loss are not recognised.

3.3.9 Discontinued Operations

A discontinued operation is a component of

the Group’s business that represents a separate

major line of business or geographical area of

operations that has been disposed of or is held

for sale, or is a subsidiary acquired exclusively

with a view to resale. Classification as a

discontinued operation occurs upon disposal

or when the operation meets the criteria to

be classified as held for sale, if earlier. When

an operation is classified as a discontinued

operation, the comparative income statement

is represented as if the operation had

been discontinued from the start of the

comparative period.

3.4 Liabilities and Provisions

Liabilities 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. Non-current liabilities are

those balances that fall due for payment later

than one year from the Balance Sheet date.

All known liabilities have been accounted

for in preparing the Financial Statements.

ACCOUNTING POLICIES

3.4.1 Employee Benefits

3.4.1.1 Defined Contribution Plans

A defined contribution plan is a post-

employment benefit plan under which an

entity pays fixed contributions into a separate

entity and will have no legal or constructive

obligation to pay further amounts. Obligations

for contributions to Provident and Trust Funds

covering all employees are recognised as an

expense in profit and loss as incurred.

3.4.1.2 Defined Benefit Plans

A defined benefit plan is a post-employment

benefit plan other than a defined contribution

plan. The liability recognised in the balance

sheet in respect of defined benefit plans is the

present value of the defined benefit obligation

at the balance sheet date. The defined benefit

obligation is calculated annually using the

projected unit credit method. The present value

of the defined benefit obligation is determined

by discounting the estimated future cash

outflows using interest rates that apply to the

currency in which the benefits will be paid, and

that have terms to maturity approximating to

the terms of the related liability.

Provision has been made for retirement

gratuities from the first year of service for all

employees, in conformity with SLAS 16 (Revised

2006) on Retirement Benefit Costs. However,

under the Payment of Gratuity Act No. 12 of

1983, the liability to an employee arises only on

completion of 5 years of continued service.

The liability is not externally funded. This

liability is computed on the following basis:

Length of service No. of months salary for each completed

(Years) years of service

up to 20 1/2

20 up to 25 3/4

25 up to 30 1

30 up to 35 1 1/4

over 35 1 1/2

Short-Term Benefits

Short-term employee benefit obligations are

measured on an undiscounted basis and are

expensed as the related service is provided.

136


3.4.2 Provisions

A provision is recognised if, as a result of a

past event, the Group has a present legal or

constructive obligation that can be estimated

reliably, and it is probable that an outflow of

economic benefits will be required to settle the

obligation.

3.4.3 Warranties

A provision for warranties is recognised when

the underlying products or services are sold. The

provision is based on historical warranty data

and a weighing of all possible outcomes against

their associated probabilities.

3.4.4 Re-structuring

A provision for re-structuring is recognised

when the Group has approved a detailed

and formal re-structuring plan and the re-

structuring has either commenced or has been

publicly announced. Future operating costs are

not provided for.

3.4.5 Trade and Other Payables

Trade and other payables are stated at their

cost.

3.4.6 Capital Commitments and Contingencies

Capital commitments and contingent liabilities

of the Group are disclosed in the respective

Notes to the Financial Statements.

3.5 Income Statements

For the purpose of presentation of the Income

Statement, the function of expenses method is

adopted, as it represents fairly the elements of

Company performance.

3.5.1 Turnover

Hayleys PLC's gross turnover comprises

dividends received from Group companies,

commission and rent income. The net Group

turnover excludes turnover taxes and trade

discounts. The gross turnover represents

the invoiced value of goods and services to

customers outside the Group.

3.5.2 Revenue

Revenue from the sale of goods is measured

at the fair value of the consideration received

or receivable, net of returns and allowances,

trade discounts and volume rebates. Revenue

is recognised when the significant risks and

rewards of ownership have been transferred

to the buyer, recovery of the consideration is

probable, the associated costs and possible

return of goods can be estimated reliably, there

is no continuing management involvement with

the goods, and the amount of revenue can be

measured reliably.

Revenue from services rendered is recognised

in profit and loss 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 is recognised in profit and loss

as it accrues.

Dividend income is recognised in profit

and loss on the date the entity’s right to receive

payment is established, which in the case of quoted

securities is the ex-dividend date.

When the Group acts in the capacity of

an agent rather than as the principal in a

transaction, the revenue recognised is the

commission made by the Group.

Grants are initially recognised as deferred

income when there is a reasonable assurance that

they will be received and that the Group will comply

with the conditions associated with the grant. Grants

that compensate the Group for expenses incurred

are recognised in profit and loss on a systematic

basis in the periods in which the expenses are

recognised. Grants that compensate the Group for

the cost of an asset are recognised in profit and

loss on a systematic basis over the useful life of

the asset.

Gains and losses on the disposal of

investments held by the Group are recognised

in profit and loss.

Gains and losses on disposal of an item of

property, plant & equipment are determined

by comparing the net sales proceeds with

the carrying amounts of property, plant

& equipment and are recognised within

"other operating income" in profit and loss.

When revalued assets are sold, the amounts

included in the revaluation surplus reserve are

transferred to retained earnings.

3.5.3 Expenses

All expenditure incurred in the running of the

business has been charged to income in arriving

at the profit for the year.

ACCOUNTING POLICIES

Repairs and renewals are charged to profit

and loss in the year in which the expenditure is

incurred.

3.5.3.1 Operating Leases

Leases where the lessor effectively retains

substantially all the risks and rewards of

ownership over the lease term are classified

as operating leases. Payments made under

operating leases are recognised in profit and

loss on a straight-line basis over the term of

the lease.

3.5.3.2 Borrowing Costs

Borrowing costs are recognised as an expense

in the period in which they are incurred, except

to the extent that they are directly attributable

to the acquisition, construction or production

of a qualifying asset, in which case they are

capitalised as part of the cost of that asset.

3.5.3.3 Financing Income and Expenses

Finance income comprises interest income on

funds invested, and gains on translation of

foreign currency. Interest income is recognised

in profit and loss as it accrues.

Finance expenses comprise interest

payable on borrowings and losses on translation

of foreign currency. The interest expense

component of finance lease payments is allocated

to each period during the lease term so as to

produce a constant periodic rate of interest on the

remaining balance of the liability.

3.5.3.4 Income Tax Expense

Income tax expense comprises current and

deferred tax. Income tax expense is recognised

in profit or loss except to the extent that it

relates to items recognised directly in equity,

when it is recognised in equity.

Current tax is the expected tax payable

on the taxable income for the year, using

tax rates enacted at the reporting date and

any adjustments to tax payable in respect of

previous years.

Deferred tax is recognised using the

Balance Sheet method, providing for temporary

differences between the carrying amounts

of assets and liabilities for financial reporting

purposes and the amounts used for taxation

purposes. Deferred tax is not recognised for


137

the following temporary differences: the

initial recognition of assets or liabilities in a

transaction that is not a business combination

and that affects neither accounting nor taxable

profit, and differences relating to investments

in subsidiaries to the extent that they probably

will not reverse in the foreseeable future. In

addition, deferred tax is not recognised for

taxable temporary differences arising on the

initial recognition of goodwill. Deferred tax is

measured at the tax rates that are expected to

be applied to the temporary differences when

they reverse, based on the laws that have

been enacted or substantively enacted by the

reporting date.

A deferred tax asset is recognised only to

the extent that it is probable that future taxable

profits will be available against which the

temporary difference can be utilised. Deferred

tax assets are reviewed at each reporting date

and are reduced to the extent that it is no

longer probable that the related tax benefit will

be realised.

Tax withheld on dividend income from

subsidiaries and associates is recognised as an

expense in the Consolidated Income Statement

at the same time as the liability to pay the

related dividend is recognised.

3.6 General3.6.1 Events Occurring after the Balance Sheet Date

All material post Balance Sheet events have

been considered and where appropriate

adjustments or disclosures have been made

in the respective notes to the Financial

Statements.

3.6.2 Earnings Per Share

The Group presents basic and diluted earnings

per share (EPS) 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 adjusting

the profit or loss attributable to ordinary

shareholders and the weighted average

number of ordinary shares outstanding for the

effects of all dilutive potential ordinary shares.

3.7 Plantations

The plantation companies in the Group adopt

certain Accounting Policies, which differ

from that of the Group, since their nature of

operations is significantly different from that of

the rest of the Group. The accounting policies

adopted are in accordance with SLAS 32 on

Plantations.

Those Accounting Policies that significantly

vary from the rest of the Group are given below.

Where material, the impact of the different

Accounting Policies has been quantified.

3.7.1 Property, Plant & Equipment

3.7.1.1 Permanent Land Development Costs

Permanent land development costs are

those costs incurred in major infrastructure

development and building new access roads on

leased lands. The costs have been capitalised

and amortised over the shorter of useful lives or

remaining lease periods.

3.7.1.2 Immature/Mature Plantations

The cost of land preparation, rehabilitation,

new planting, replanting, crop diversification,

interplanting and fertilisation etc., incurred

between the times of planting and harvesting,

is classified as immature plantations. These

immature plantations are shown at direct cost

plus attributable overheads, including interest

attributable to borrowings utilised to finance

immature plantations.

The expenditure incurred on perennial crop

(Tea/Rubber) fields which come into bearing

during the year, has been transferred to mature

plantations.

3.7.1.3 Infilling Cost

The land development cost incurred for infilling

has been capitalised with the relevant mature

field only when it increases the expected

economic future benefits from that field. Infilling

costs that are not capitalised are recognised in

profit and loss as an expense as incurred.

3.7.1.4 Depreciation

Depreciation is recognised in profit and loss

on a straight-line basis over the estimated

ACCOUNTING POLICIES

useful lives of each item of property, plant &

equipment as follows:

Years

Mature plantations - tea 33

- rubber 20

Sanitation, water &

electricity supply 20

3.7.1.5 Leased Assets

Leasehold rights are amortised in equal annual

amounts over the following periods:

Years

Bare land 53

Mature plantations 30

Buildings 25

Machinery 15

3.7.2 Borrowing Costs

Borrowing costs on funds specifically obtained

for utilisation on immature plantations have

been capitalised and included in the carrying

amount of property, plant & equipment.

3.7.3 Inventories

3.7.3.1 Nurseries

Growing crop nurseries are measured/valued

at the directly attributable costs less provisions

for overgrown plants.

3.7.3.2 Produce Inventories

Produce inventories are measured/valued at

since-realised prices with the balance stocks

being valued at estimated selling price. The

prices are net of all attributable expenses at the

point of sale.

3.7.4 Grants

A grant is recognised in the Balance Sheet initially

as deferred income when there is a reasonable

assurance that it will be received and the

conditions attached to it are complied with.

Grants that compensate the Group for

expenses incurred are recognised as revenue

in profit and loss on a systematic basis in the

periods in which the expenses are recognised.

Grants that compensate the Group for the cost

of an asset are recognised in profit and loss as

revenue on a systematic basis over the useful

life of the related asset.

138


3.8 Cash Flow Statement

The Cash Flow Statement has been prepared

using the "indirect method".

Interest paid is classified as an operating

cash flow. Grants received, which are related

to purchase and construction of property,

plant & 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. Dividends received by Hayleys

PLC, which is an investment company, are

classified as operating cash flows and are not

disclosed separately in the Company Cash Flow

Statement.

4. SEGMENT REPORTING

A segment is a distinguishable component of

the Group that is engaged either in providing

products or services (business segment), or

in providing products or services within a

particular economic environment (geographical

segment), which is subject to risks and rewards

that are different from those of other segments.

Segmental information is presented

in respect of the Group's business and

geographical segments. The Group’s primary

format for segment reporting is based on

business segments. The business segments are

determined based on the Group's management

and internal reporting structure.

The activities of the segments are

described on pages 30 to 59 in the Hayleys

Management Reports section. Segmentation has

been determined based on the activities of the

companies or the sector into which the products

or services are sold (e.g. activated carbon is

segmented as Purification Products).

The Group transfers products from one

geographic region for re-sale to another. The

geographical analysis of turnover is by location

of customer and of profits by location of the

office in which the business is recorded.

Inter-segment transfers are based on fair

market prices. Segment results, assets and

liabilities include items directly attributable to a

segment as well as those that can be allocated

on a reasonable basis.

Segment capital expenditure is the total

cost incurred during the period to acquire

property, plant & equipment, and intangible

assets other than goodwill.

5. CRITICAL ACCOUNTINGESTIMATES AND JUDGEMENTS

The Group makes estimates and assumptions

concerning the future. The resulting accounting

estimates will, by definition, seldom equal

the related actual results. The estimates and

assumptions which carry a significant risk of

causing misstatement to the carrying amounts

of assets and liabilities within the next financial

year are addressed below.

ACCOUNTING POLICIES

5.1. Estimated Impairment of Goodwill

The Group tests annually whether goodwill has

suffered any impairment, in accordance with

the accounting policy stated in note 3.3.7. The

basis of determining the recoverable amounts

of cash generating units and key assumptions

used are given in note 15.

5.2. Income Taxes

The Group is subject to income taxes in

numerous jurisdictions. The Group recognises

liabilities for anticipated tax based on estimates

of taxable income. Where the final tax outcome

of these matters is different from the amounts

that were initially recorded, such differences

will impact the current and deferred income tax

assets and liabilities in the period in which such

determination is made.

The present value of the retirement benefit

obligations depends on a number of factors

that are determined on an actuarial basis using

a number of assumptions. Key assumptions

used in determining the retirement benefit

obligations are given in note 26. Any changes

in these assumptions will impact the carrying

amount of retirement benefit obligations.


139

6. TURNOVER

A. Industry Segment TurnoverConsolidated

2008/09 2007/08 Rs. '000 Rs. '000

Fibre 3,251,759 3,677,605

Hand Protection 9,462,829 8,845,503

Purification Products 4,503,794 4,177,948

Agri Inputs 3,678,175 3,213,533

Agri Products 1,090,063 1,022,676

Plantations 2,433,156 2,307,392

Industry Inputs 946,109 1,369,705

Power & Energy 99,434 47,155

Transportation 3,799,598 3,446,861

Consumer Products 3,118,178 2,799,147

Investments & Services 34,425 47,777

32,417,520 30,955,302

B. Geographical Segment TurnoverConsolidated

2008/09 2007/08 Rs. '000 Rs. '000

Asia (excluding Sri Lanka) 3,342,528 3,036,154

Australia 726,622 1,006,900

Europe 8,997,464 8,741,827

United States of America 5,424,370 4,905,493

Africa 294,104 299,689

Indirect Exports 2,223,220 2,029,197

Sri Lanka (i) 11,409,212 10,936,043

32,417,520 30,955,302

(i) Includes turnover of ship owning and chartering business.

C. Gross TurnoverCompany

2008/09 2007/08 Rs. '000 Rs. '000

Dividend Income 186,841 484,951

Rent Income 125,904 116,892

Commission Income – 2,902

Technical Fee – 1,410

312,745 606,155

NOTES TO THE FINANCIAL STATEMENTS

140


7. OTHER INCOMEConsolidated Company

2008/09 2007/08 2008/09 2007/08 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Government grants amortised 12,551 9,264 – –

Income from investments - quoted - short-term 154 331 134 312

- unquoted - long-term 26,640 1,044 25,894 –

Change in fair value of short-term investments (727) (86) (572) –

Gain/(loss) on disposal of property, plant & equipment 118,571 100,090 (71) 351

Gain/(loss) on disposal of investments - long-term – 94,334 – –

- short-term – (876) – (876)

Gain/(loss) on disposal of - subsidiary 32,952 – 2,908 –

- associates 64,604 (4,820) 473,905 –

254,745 199,281 502,198 (213)

8. OTHER EXPENSESConsolidated Company

2008/09 2007/08 2008/09 2007/08 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Impairment in value of long-term investments – – 34,453 161,115

Amortisation of intangible assets 793 618 – –

(Reversal)/provision on balance

due from subsidiaries – – – (85,000)

793 618 34,453 76,115

9. NET FINANCE COSTConsolidated Company

2008/09 2007/08 2008/09 2007/08 Rs. '000 Rs. '000 Rs. '000 Rs. '000

A. Finance Income

Interest income (145,060) (111,006) (16,685) (20,975)

B. Finance Cost

Interest on long-term loans 396,549 390,835 107,914 112,573

Interest on short-term loans 777,848 886,219 25,200 75,119

Interest on finance leases 31,506 23,442 – –

Net losses/(gains) on translation of

foreign currency 93,897 (113,560) – 6

Total finance costs 1,299,800 1,186,936 133,114 187,698

Net finance costs 1,154,740 1,075,930 116,429 166,723



141

10. PROFIT BEFORE TAX FROM CONTINUING OPERATIONS

Profit before tax from continuing operations is stated after charging all expenses including the following:


2008/09 2007/08 2008/09 2007/08 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Directors' emoluments 228,887 215,232 75,016 69,930

Auditors' fees (includes overseas subsidiaries)

Audit services 24,680 21,802 600 525

Non-audit services 7,528 7,783 654 898

Depreciation on property, plant & equipment 799,340 838,483 22,387 19,009

Donations 4,371 4,066 247 268

Provision for bad and

doubtful debts & bad debts written off 62,464 46,751 – –

Staff cost (i)

Defined contribution plan cost 416,698 341,340 23,011 16,909

Defined benefit plan cost 382,973 399,816 54,433 62,994

Other staff cost

(excluding defined contributions

& defined benefits) 4,237,599 3,786,319 270,487 258,344

Staff training & development 18,678 36,869 4,251 8,500

Legal fees 12,722 19,938 – –

Operating leases 85,758 75,119 – –

(i) The number of employees employed is given on page 93.

11. TAXATION

A. Tax Expense Consolidated

2008/09 2007/08 Rs. '000 Rs. '000

Income tax on current year profits

Hayleys PLC 4,795 4,795

Subsidiaries 517,624 414,713

522,419 419,508

(Over)/under provision in respect of previous years 686 (14,390)

Write back of ESC previously written down – (19,008)

Irrecoverable ESC 12,405

535,510 386,110

Deferred tax charge/(credit)

Hayleys PLC – –

Subsidiaries (24,901) 13,505

(24,901) 13,505

Tax on dividend income 60,627 65,047

60,627 65,047

Tax expense 571,236 464,662


142



2008/09 2007/08 2008/09 2007/08 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Profit before tax 1,474,622 1,985,178 514,409 249,909

Share of profit of associates (116,088) (343,599) – –

Intra-group adjustments 1,549,471 1,353,877 – –

2,908,005 2,995,456 514,409 249,909

Disallowable expenses 1,435,312 1,645,564 68,011 163,018

Tax deductible expenses (1,335,902) (942,877) (29,570) (33,432)

Tax exempt income (2,270,936) (2,566,810) (633,259) (485,184)

Tax loss b/f (2,113,320) (1,349,640) (436,084) (313,032)

Adjustment of tax loss b/f (166,385) (200,743) 1,403 (3,797)

Tax loss c/f 3,268,484 2,113,320 525,760 436,084

Taxable income 1,725,258 1,694,270 10,670 13,566

Income tax @ 35% 332,788 269,951 3,735 4,748

Income tax @ 15% 54,815 51,961 – –

Income tax at other tax rates 130,813 95,406 – –

Social Responsibility Levy 4,003 2,190 56 47

Income tax on current year profit 522,419 419,508 3,791 4,795

(Over)/under provision in respect of previous years 686 (14,390) (4,590) –

Write back of ESC previously written down – (19,008) – –

Irrecoverable ESC 12,405 – – –

535,510 386,110 (799) 4,795

Deferred tax credit (24,901) 13,505 – –

Tax on dividend income 60,627 65,047 – –

Tax expense 571,236 464,662 (799) 4,795

Effective tax rate (%) 42 28 (0.2) 2

C. Corporate Income Taxes of companies resident in Sri Lanka have been computed in accordance with the Inland Revenue Act No. 10 of 2006

as amended, whilst Corporate Taxes of non-resident companies in the Group have been computed in keeping with the domestic statutes in their

respective countries.

Irrecoverable Economic Service Charge has been charged in the Income Statements.

Resident companies in the Group, excluding those which enjoy a tax holiday or concessionary rate of taxation, are liable to income tax at 35%.

1. Tax Exemptions

1 A. In terms of the Inland Revenue Act

The following companies are eligible to five-year tax holidays ending 31st March 2011 in terms of Section 16 of the Inland Revenue Act No. 10 of

2006 as amended, on profits from agriculture.

Hayleys Exports PLC

Chas P. Hayley & Co. (Pvt) Ltd.

Lingnocell (Pvt) Ltd.

Kelani Valley Plantation PLC

Thalawakelle Tea Estate PLC

Quality Seed Ltd.

Sunfrost (Pvt) Ltd.

Income earned by Hayleys Industrial Solutions (Pvt) Ltd. from projects undertaken outside Sri Lanka is exempt from income tax under Section 13 of

the Inland Revenue Act No. 10 of 2006

Foreign dividends received have been exempted from income tax in terms of Section 10 of the Inland Revenue Act.



143

1 B. In terms of BOI Agreements

Companies enjoying Tax Holidays under BOI Law can be enumerated as follows:

HJS Condiments Ltd. - 10 year tax holiday ended 31st March, 2009

Dipped Products PLC - 10 year tax holiday ended 31st March, 2009

Venigros (Pvt) Ltd. - 10 year tax holiday ended 31st March, 2009

Grossart (Pvt) Ltd. - 10 year tax holiday ending 31st March, 2010

Feltex (Pvt) Ltd. - 5 year tax holiday ending 31st March, 2010

Hayleylines Ltd. - 5 year tax holiday ending 31st March, 2010

Hayleys MGT Knitting Mills PLC - 15 year tax holiday ending 31st March, 2011

Kelani Valley Green Tea (Pvt) Ltd. - 5 year tax holiday ending 31st March, 2011

Recogen (Pvt) Ltd. - 10 year tax holiday ending 19th December, 2011

Bhagya Hydro Power (Pvt) Ltd. - 5 year tax holiday ending 31st March, 2012

Kalupahana Power Company (Pvt) Ltd. - 5 year tax holiday ending 31st March, 2012

Neluwa Cascade Hydro Power (Pvt) Ltd. - 5 year tax holiday ending in December 2012

Logiwiz NW (Pvt) Ltd. - 5 year tax holiday ending 31st March, 2013

TTEL Somerset Hydro Power (Pvt) Ltd. - 5 year tax holiday ending in October 2013

TTEL Hydro Power Company (Pvt) Ltd. - 5 year tax holiday ending in October 2013

Texnil (Pvt) Ltd. - 10 year tax holiday ending 31st March, 2014

Hayleys Agro Biotech (Pvt) Ltd. - 8 year tax holiday ending in 31st March, 2018

2. Concessionary Tax Rates

2 A. In terms of the Inland Revenue Act

In terms of Sections 46, 51, 56 and 59 of the Inland Revenue Act No 10 of 2006 as amended, the following profits of companies listed below enjoy a

concessionary tax rate of 15%:

Haycarb PLC Profits from qualifying exports

Hanwella Rubber Products Ltd. Profits from qualifying exports

Haycolour (Pvt) Ltd. Profits from qualifying exports

Super Felt (Pvt) Ltd. Profits from qualifying exports

Bonterra Ltd. Profits from qualifying exports

Creative Polymat (Pvt) Ltd. Profits from qualifying exports & indirect exports

Ravi Industries Ltd. Profits from qualifying exports & indirect exports

Rileys (Pvt) Ltd. Profits from qualifying exports & indirect exports

Haymat (Pvt) Ltd. Profits from qualifying exports & indirect exports

Toyo Cushion Lanka (Pvt) Ltd. Profits from qualifying exports & indirect exports

Logiventures (Pvt) Ltd. Profits from qualifying exports

Lanka Orient Express Lines Ltd. Profits from transshipment

DPL Plantations (Pvt) Ltd. Profits from agriculture

Hayleys Plantation Services (Pvt) Ltd. Profits from agriculture

Global Holidays (Pvt) Ltd. Profits from promotion of tourism

CMA - CGM Lanka (Pvt) Ltd. Profits from transshipment

Clarion Shipping (Pvt) Ltd. Profits from transshipment

2 B. In terms of BOI Agreements

As per agreements signed with the Board of Investment, the business income of the companies listed below are subjected to a concessionary tax rate

for the period indicated below, after the lapse of the tax holidays they enjoyed.

Logiwiz Ltd. 10% for a period of 2 years from 1st April, 2008 and 20% thereafter

Neoprex (Pvt) Ltd. 15% for a period of 10 years from 1st April, 2008

Logistics International Ltd. 15% for a period of 20 years from 1st April, 1997

Hayleys MGT Knitting Mills PLC has the option of paying income tax at a concessionary rate of 2% of turnover for 15 years after the expiration of their

tax exemption period.


144


3. Non Resident Companies

Corporate Income Taxes of non-resident companies are:

Company Income tax rate

Haychem (Bangladesh) Ltd. 37.5%

PT Mapalus Makawanua Charcoal Industry 35%

Haymark Inc. 34%

Logiwiz Logistics India (Pvt) Ltd. 34%

Civaro Freight India (Pvt) Ltd. 34%

ICO Guanti SpA. 27.5%

Logiwiz Fiji (Pvt) Ltd. 31%

Eurocarb Products Ltd. 30%

Haycarb Holding Australia (Pty) Ltd. 30%

Magic Soil (Pty) Ltd. 30%

Carbokarn Co. Ltd. 30%

CK Regen Systems Co. Ltd. 30%

Tianjin Shenglong Rubberised Mattress Co. Ltd. 17%

Haycarb Holdings Bitung Ltd., is not liable to tax. Companies in the Haylex BV Group are liable to corporate tax at rates ranging from 25.5% to 36% in

their respective countries. Taxable income of ICO Guanti SpA is liable to a regional tax of 3.9%. Dipped Products (Thailand ) Ltd., would be exempt from

income tax for a period of 8 years up to 31st December, 2012 and would be taxed at 50% of the Thai income tax rate for a further period of five years.

12. EARNINGS PER SHARE

Basic Earning per Share

The 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.

Diluted Earning per Share

The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders and the weighted average number of

ordinary shares outstanding after adjustment for the effect of all dilutive potential ordinary shares.

There were no potentially dilutive ordinary shares outstanding at any time during the year/previous year.

Basic/diluted earnings per share are calculated as follows:Consolidated

2008/09 2007/08

Profit attributable to equityholders of the Company (Rs. '000) 310,938 452,623

Weighted average number of ordinary shares (i) 75,000,000 75,000,000

Basic/diluted earnings per share (Rs.) 4.15 6.03

Continuing Operations

Profit attributable to ordinary shareholders (Rs. '000) 412,368 865,271


Basic/diluted earnings per share (Rs.) 5.50 11.54

Discontinued Operations

Profit attributable to ordinary shareholders (Rs. '000) (101,430) (412,648)


Basic/diluted earnings per share (Rs.) (1.35) (5.51)

(i) Qualifying ordinary shares at beginning of the year 75,000,000 75,000,000

Qualifying ordinary shares at the end of the year 75,000,000 75,000,000



145

14. PROPERTY, PLANT & EQUIPMENTA. Consolidated

Land Mature/ Buildings Machinery Vessels Motor Furniture, 2008/09 2007/08 immature & stores vehicles fittings & Total Total plantations equipment office equipment Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Cost or Valuation:Gross book value

At the beginning of the year 5,700,977 1,657,105 2,705,913 5,837,105 432,956 412,857 1,144,098 17,891,011 17,375,551Revaluation 4,047 – – – – – – 4,047 – On disposal of subsidiary – – – – – – (10,858) (10,858) – Additions 29,057 217,891 471,718 722,519 – 90,484 110,332 1,642,001 1,659,088Transfers to assets held for sale (8,000) – – – – – – (8,000) – Disposals (419,853) – (17,060) (53,285) (432,956) (54,458) (98,415) (1,076,027) (1,253,093)Effect of movements in foreign exchange rates 473 – (4,877) (30,247) – 1,253 (3,754) (37,152) 109,465 At the end of the year 5,306,701 1,874,996 3,155,694 6,476,092 – 450,136 1,141,403 18,405,022 17,891,011

Depreciation:At the beginning of the year 105,169 351,423 559,742 2,859,501 285,322 256,403 847,926 5,265,486 4,949,979On disposal of subsidiary – – – – – – (6,538) (6,538) – Charge for the year 7,519 46,456 86,445 488,269 – 64,091 106,560 799,340 838,483Transfer to assets held for sale – – – – – – – – – On disposals – – (3,849) (33,573) (285,322) (41,803) (92,668) (457,215) (547,849)Effect of movements in

foreign exchange rates – – (3,426) (14,428) – 709 (1,572) (18,717) 24,872 At the end of the year 112,688 397,879 638,912 3,299,769 – 279,400 853,708 5,582,356 5,265,486

Net book value at 31st March 5,194,013 1,477,117 2,516,782 3,176,323 – 170,736 287,695 12,822,666 12,625,525Capital work-in-progress – – – – – – – 283,195 595,729Carrying amount – – – – – – – 13,105,861 13,221,254


13. DIVIDENDSCompany

2008/09 2007/08 Rs. '000 Rs. '000

Interim payable Rs. 1.50 per share (2007/08 - Rs. 1.50 per share) 112,500 112,500

Final proposed Rs. 1.50 per share (2007/08 - Rs. 1.50 per share) 112,500 112,500

Total dividend 225,000 225,000

Dividend per ordinary share (Rs.) 3.00 3.00

(i) The interim dividend was paid on 21st May 2009.

(ii) The dividends represent redistribution of dividends received by the Company and are therefore not subject to the 10% tax deduction.

146


B. Company Freehold Buildings Machinery Motor Furniture, 2008/09 2007/08 Land & stores vehicles fittings & Total Total equipment office equipment

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

Cost or Valuation:

Gross book value

At the beginning of the year 2,961,000 128,053 41,535 21,410 164,070 3,316,068 3,279,407

Additions – – 172 – 10,103 10,275 39,851

Disposals – – – – (28,989) (28,989) (3,190)

At the end of the year 2,961,000 128,053 41,707 21,410 145,184 3,297,354 3,316,068

Depreciation:

At the beginning of the year – 39,077 32,273 8,933 115,360 195,643 179,755

Charge for the year – 1,854 1,738 3,459 15,336 22,387 19,009

On disposals – – – – (28,850) (28,850) (3,121)

At the end of the year – 40,931 34,011 12,392 101,846 189,180 195,643

Net book value at 31st March 2,961,000 87,122 7,696 9,018 43,338 3,108,174 3,120,425

Capital work-in-progress – – – – – 6,008 2,267

Carrying amount – – – – – 3,114,182 3,122,692


C. Carrying ValueConsolidated Company

As at 31st March, 2009 2008 2009 2008 Rs. '000 Rs. '000 Rs. '000 Rs. '000

At cost 6,440,767 6,385,028 153,182 161,692

At valuation 4,723,516 5,133,169 2,961,000 2,961,000

On finance leases 1,941,578 1,703,057 – –

13,105,861 13,221,254 3,114,182 3,122,692

(i) No borrowing cost was capitalised during the year. Total borrowing cost capitalised to date amounts to Rs. 162.6 mn (2007/08 - Rs. 162.6 mn).

(ii) Group property, plant & equipment includes capitalised finance leases and leasehold rights on land. The carrying amount of these assets is:

Consolidated

Cost Accumulated Carrying Carrying depreciation/ value value

As at 31st March, amortisation 2009 2008 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Land 382,791 112,688 270,103 277,309

Mature/immature plantations 1,874,996 397,879 1,477,117 1,305,682

Buildings 213,015 73,032 139,983 90,173

Machinery & stores equipment 85,589 48,295 37,294 20,548

Motor vehicles 44,169 27,088 17,081 9,345

Total 2,600,560 658,982 1,941,578 1,703,057

(iii) Unexpired lease periods of land:

Kelani Valley Plantations PLC - 37 years

HJS Condiments Ltd. - 91 years/84 years/ 26 years


147

(iv) Amounts by which value has been written up in respect of land revalued by independent qualified valuers are indicated below, together with the

last date of revaluation: Written up by

As at 31st March, 2009 2008Company Location Rs. '000 Rs. '000

Hayleys PLC Deans Road and Foster Lane, Colombo 10 2,954,023 2,954,023

(31.03.2007)

Volanka (Pvt) Ltd. Grandpass (disposed - 2008/09) and

Ekala (31.03.2007) 166,316 578,939

Chas P. Hayley & Co. (Pvt) Ltd. Galle (31.03.2007) 109,538 109,538

Dipped Products PLC Kottawa (31.03.2007) 52,682 52,682

Weliveriya (31.03.2007) 46,721 46,721

Venigros (Pvt) Ltd. Weliveriya (31.03.2007) 28,224 28,224

Palma Ltd. Gonawala (31.03.2007) 17,782 17,782

145,409 145,409

Haycarb PLC Badalgama and Madampe (31.03.2007) 52,263 52,263

Wewelduwa (31.03.2007) 22,895 22,895

Recogen (Pvt) Ltd. Badalgama (31.03.2007) 12,481 12,481

87,639 87,639

Lignocell (Pvt) Ltd. Madampe (31.03.2007) 1,430 1,430

Kuliyapitiya (31.03.2007) 10,187 10,187

Carbotels (Pvt) Ltd. Elkaduwa (31.03.2007) 93,422 93,422

Haychem (Pvt) Ltd. Kottawa (31.03.2007) 18,914 18,914

Haycolour (Pvt) Ltd. Kalutara (31.03.2007) 8,171 8,171

Hayleys Electronics Ltd. Malabe (31.03.2007) 39,586 39,586

Hayleys Exports PLC Ekala (31.03.2007) 98,803 98,803

Hayleys Advantis Group Welisara and Kelaniya (31.03.2007) 378,216 378,216

Ravi Industries Ltd. Ekala (31.03.2007) 74,663 74,663

Volanka Exports Ltd. Welipenna (31.03.2007) 4,755 4,755

Rileys (Pvt) Ltd. Galle (31.03.2007) 51,069 51,069

Toyo Cushion Lanka (Pvt) Ltd. Katana (31.03.2007) 44,005 44,005

Sunfrost (Pvt) Ltd. Alawwa (31.03.2007) 7,678 7,678

Hayleys Electronics Lighting (Pvt) Ltd. Hokandara (31.03.2009) 4,047 –

4,297,871 4,706,447

Revaluation reserve attributable to minority shareholders (337,789) (464,641)

Share of revaluation reserves of associate companies 365,085 365,085

4,325,167 4,606,891

Adjustment due to change in holding 3,852 965

4,329,019 4,607,856

(v) Land owned by the Group other than that mentioned above has been stated at cost as the appreciation in value is insignificant. Further,

information is provided on page 175 There are no tax implications or tax liabilities pertaining to revaluation of land.

(vi) There has been no permanent impairment of property, plant & equipment which requires a provision.

(vii) Property, plant & equipment with a carrying value of Rs. 3,797 mn and Rs. Nil have been pledged as security for term loans obtained by the Group

and Company respectively. The details are shown in Note 23.


148


(viii) The carrying value of revalued land given above, had the said land been included at cost, would amount to Rs. 426 mn (Rs. 427 mn -

31st March, 2008) for the Group and Rs. 7 mn (Rs. 7 mn - 31st March, 2008) to the Company.

D. Capital Expenditure Commitments

The approximate amounts of capital expenditure approved by the Directors as at 31st March, 2007 were: Capital expenditure contracted for which

no provision is made in the Financial Statements - Rs. 51 mn (Rs. 135 mn - 31st March, 2008). Capital expenditure approved by the Directors but not

contracted for - Rs. 880 mn (Rs. 2,135 mn - 31st March, 2008).

15. INTANGIBLE ASSETSConsolidated

Right to Goodwill Total Generate Hydro Power Rs. ’000 Rs. ’000 Rs. ’000

Cost

At beginning of the year 23,752 419,047 442,799

Partial disposal of subsidiary (8,764) (8,764)

Addition (i) 9,006 9,006

At end of the year 32,758 410,283 443,041

Amortisation

At beginning of the year 1,085 136,096 137,181

Amortisation charge for the year 794 794

At end of the year 1,879 136,096 137,975

Carrying Amount

31st March 2009 (ii) 30,879 274,187 305,066

31st March 2008 22,667 282,951 305,618

(i) Additions represent the amounts paid to purchase exclusive rights to generate hydro power.

(ii) The aggregate carrying amount of goodwill allocated to each unit is as follows:

Dipped Products PLC - Rs. 97 mn

Dipped Products Group Companies - Rs. 16 mn

Advantis Group Companies - Rs. 98 mn

Haycarb Group Companies - Rs. 63 mn

(iii) There has been no permanent impairment of intangible assets that requires a provision. Methods used in estimating recoverable amount are

given below:

The recoverable value of the Dipped Products PLC unit was based on fair value less cost to sell and the others was based on value in use. Value in use

was determined by discounting the future cash flows generated from the continuing use of the unit. Key assumptions used are given below:

Business growth - Based on historical growth rate and business plan

Inflation - Based on the current inflation rate

Discount rate - Average market borrowing rate adjusted for risk premium

Margin - Based on current margin and business plan

(iv) Remaining amortisation periods of Rights to Generate Hydro Power are:

Carrying Amount (Rs. ’000) Remaining amortisation period

6,813 146 months

3,208 165 months

17,734 180 months

3,124 180 months

30,879



149

16. INVESTMENTS

A. The Group consolidates as subsidiaries, its investments in Dipped Products Group, Volanka Group, Toyo Cushion Lanka (Pvt) Ltd., HJS Condiments Ltd.,

Carbokarn Ltd. and Dean Foster (Pvt) Ltd. in terms of Paragraph 13 (b) of SLAS 26, on Consolidated Financial Statements and Accounting for investments

in subsidiaries, as in the opinion of the Directors the Group is able to govern the financial and operating policies of the said companies.

B. Company Investment in Subsidiaries% Holding No. of Shares Value Rs. '000

As at 31st March, 2009 2008 2009 Movement 2008 2009 Movement 2008

Investee

Quoted Investments

Haycarb PLC (Rs. 936 mn) 68 68 20,125,103 – 20,125,103 47,203 – 47,203

Hayleys Exports PLC (Rs. 73 mn) 65 65 5,200,000 – 5,200,000 3,575 – 3,575

Dipped Products PLC (Rs. 1,369 mn) 41 41 24,776,080 – 24,776,080 363,612 – 363,612

414,390 – 414,390

Unquoted Investments

Hayleys Photoprint Ltd. 100 100 4,000,000 – 4,000,000 39,869 – 39,869

Haytech Marketing Ltd. 100 100 2,500,000 – 2,500,000 24,701 – 24,701

Haylex BV 100 100 1,000 – 1,000 25,733 – 25,733

Hayleys Textile Services Ltd. 100 100 300,000 – 300,000 3,000 – 3,000

Chas P. Hayley & Co. Ltd. 100 100 999,790 – 999,790 673 – 673

Ravi Industries Ltd. 84 84 10,603,304 13,115 10,590,189 10,368 401 9,967

Hayleys Agrocare Ltd. 100 100 104,338 (195,662) 300,000 1,043 (1,957) 3,000

Hayleys Group Services Ltd. 100 100 10,000 – 10,000 100 – 100

Hayleys Electronics Ltd. 98 98 951,850 – 951,850 95,687 – 95,687

Dean Foster (Pvt) Ltd. 49 49 5,882,353 – 5,882,353 9,904 – 9,904

Hayleys Advantis Ltd. 91 90 33,020,906 371,672 32,649,234 300,510 15,074 285,436

Volanka Exports Ltd. 2 2 73,051 2,497 70,554 1,045 97 948

Sunfrost (Pvt) Ltd. 5 5 423,300 – 423,300 4,233 – 4,233

Rileys (Pvt) Ltd. 11 11 2,500,000 – 2,500,000 10,334 – 10,334

XIL Industry Ltd. 99 99 2,662,601 – 2,662,601 53,818 – 53,818

Volanka (Pvt) Ltd. 46 46 6,440 – 6,440 23,107 – 23,107

Toyo Cushion Lanka (Pvt) Ltd. 16 16 1,086,281 13,903 1,072,378 9,370 376 8,994

Hayleys Engineering Ltd. 100 100 1,400,000 – 1,400,000 14,000 – 14,000

Hayleys Produce Marketing Ltd. 100 100 250,000 – 250,000 2,532 – 2,532

Carbotels (Pvt) Ltd. 70 70 29,111,207 – 29,111,207 311,112 – 311,112

HJS Condiments Ltd. 7 6 860,376 4,996 855,380 8,807 70 8,737

Infocraft Ltd. – 94 – (5,642,757) 5,642,757 – (56,428) 56,428

Hayleys Agro Products Ltd. 96 96 18,683,102 27,057 18,656,045 239,773 635 239,138

Hayleys Consumer Products Ltd. 98 97 19,158,817 105,463 19,053,354 248,598 1,210 247,388

Hayleys Industrial Solutions (Pvt) Ltd. 100 100 19,728,700 – 19,728,700 197,287 – 197,287

1,635,604 (40,522) 1,676,126

Company investment in

subsidiaries (at cost) 2,049,994 (40,522) 2,090,516

Provision for fall in value of

investment made by the Company

Hayleys Electronics Ltd. (95,687) – (95,687)

Inforcraft Ltd. – 56,428 (56,428)

Company investment in subsidiary 1,954,307 15,906 1,938,401

(i) Countries of incorporation of overseas subsidiaries are given in Note 16 F.


150


C. Company/Group Investment in Associates % Holding No. of Shares Value Rs. '000

As at 31st March, 2009 2008 2009 Movement 2008 2009 Movement 2008

Investor Investee

Quoted Investments

Hayleys PLC Diesel & Motor Engineering Co. PLC – 28 – (3,397,611) 3,397,611 – (66,995) 66,995

Hayleys MGT Knitting Mills PLC

(Rs. 509 mn) 36 34 18,181,242 888,422 17,292,820 213,762 48,828 164,934

– – – – – 213,762 (18,167) 231,929


Hayleys PLC AIG Hayleys Investment

Holdings (Pvt) Ltd. 15 20 19,082,878 – 19,082,878 65,239 – 65,239

Quality Seed Co. Ltd. 23 23 588,000 – 588,000 1,960 – 1,960

Hayleys Plantation Services Ltd. 33 33 6,700,000 – 6,700,000 67,000 – 67,000

World Call Telecommunications

Lanka (Pvt) Ltd. 26 26 2,700,000 – 2,700,000 27,000 – 27,000

161,199 – 161,199

Company Investment in associates (at cost) 374,961 (18,167) 393,128

Provision for fall in value of investments

AIG Hayleys Investment Holdings (Pvt) Ltd. (34,453) (34,453) –

World Call Telecommunications Lanka (Pvt) Ltd. (27,000) – (27,000)

313,508 (52,620) 366,128

Transfer of net investment in AIG Hayleys Investment

Holdings (Pvt) Ltd. to other long-term investments (30,786) (30,786) –

Carrying value of Company investment in associates 282,722 (83,406) 366,128

Quoted Investments

Carbotels (Pvt) Ltd. Hunas Falls Hotels PLC (Rs. 89 mn) 47 47 2,637,624 – 2,637,624 42,345 – 42,345

Lighthouse Hotels PLC (Rs. 723 mn) 27 27 12,581,699 – 12,581,699 136,607 – 136,607

Haychem (Pvt) Ltd. Hayleys MGT Knitting Mills PLC (Rs. 24 mn) 2 2 848,774 – 848,774 5,900 – 5,900

Hayleys Advantis Group Hayleys MGT Knitting – –

Mills PLC (Rs. 34 mn) 2 4 1,231,230 (802,106) 2,033,336 7,700 (4,600) 12,300

– – – – – 192,552 (4,600) 197,152


Haycarb PLC Quality Seed Co. Ltd. 6 6 147,000 – 147,000 490 – 490

Carbotels (Pvt) Ltd. Seashells Hotels Ltd. 49 49 24,500 – 24,500 20,365 – 20,365

Jetwing Hotels Ltd. 40 40 20,000 – 20,000 21,217 – 21,217

Tropical Villas (Pvt) Ltd. 40 40 4,137,720 – 4,137,720 41,805 – 41,805

Royal Heritage Hotel (Pvt) Ltd. 50 50 12,500,001 – 12,500,001 125,000 – 125,000

Eastern Hotels (Pvt) Ltd. 47 47 186,744 – 186,744 26,117 – 26,117

Negombo Hotels Ltd. 30 30 60,000 – 60,000 127,794 – 127,794

Haychem (Pvt) Ltd. Quality Seed Co. Ltd. 20 20 500,000 – 500,000 5,000 – 5,000

Hayleys Photoprint Ltd. World Call Telecommunications

Lanka (Pvt) Ltd. 3 3 300,000 – 300,000 3,000 – 3,000

Hayleys Advantis Group Logiwiz Fiji (Pvt) Ltd. 49 49 88,199 – 88,199 6,532 137 6,395

NYK Logistics & Kusuhara

Lanka (Pvt) Ltd. 30 30 195,000 – 195,000 1,950 – 1,950

Mountain Hawk Investment Company Ltd. 50 50 750,000 – 750,000 7,500 – 7,500

Kelani Valley

Plantations PLC Mabroc Teas (Pvt) Ltd. 40 40 3,600,000 – 3,600,000 48,000 – 48,000

Toyo Cushion Tianjing Shenglong Mattress

Lanka (Pvt) Ltd. Co. Ltd. 24 24 181,391 – 181,391 18,647 – 18,647

Volanka Exports Ltd. Tianjing Shenglong Mattress

Co. Ltd. 10 10 78,000 – 78,000 8,064 – 8,064

PT Tulus Lanka Coir Industries 45 45 164,250 – 164,250 17,776 – 17,776

Hayleys Exports PLC Tianjing Shenglong Mattress

Co. Ltd. 10 10 78,000 – 78,000 7,941 – 7,941

Hayleys Industrial

Solutions (Pvt) Ltd. TTEL Hydro Power Company (Pvt) Ltd. 49 49 3,366,300 – 3,366,300 33,663 – 33,663

TTEL Somerset Hydro Power (Pvt) Ltd. 49 49 2,940,000 – 2,940,000 29,400 – 29,400

550,261 137 550,124

Group company investment in associates (at cost) 742,813 (4,463) 747,276

1,117,774 (22,630) 1,140,404

Adjustments (i) (104,720) (104,720) –

Group investments in

associates (at cost) 1,013,054 (127,350) 1,140,404

(i) Includes transfer of investment in AIG Hayleys Investment Holding (Pvt) Ltd. to Other Long-Term Investments and elimination of unrealised profit on

intra-group share sales.



151

C. Company/Group Investment in AssociatesConsolidated

Investment at Cost Share of Post Acquisition Net Assets

Profit/(Loss) & MI Adj.

As at 31st March, 2009 2008 2009 2008 2009 2008

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

Hayleys Plantation Services (Pvt) Ltd. 67,000 67,000 209,455 197,069 276,455 264,069

Hayleys MGT Knitting Mills PLC 187,881 183,134 948,755 808,095 1,136,636 991,229

Diesel & Motor Engineering Co. PLC 66,995 66,995 422,280 427,671 489,275 494,666

Quality Seed Co. Ltd. 7,450 7,450 62,660 59,181 70,110 66,631

Carbotel's Associates 541,250 541,250 149,738 214,134 690,988 755,384

AIG Hayleys Investment Holdings (Pvt) Ltd. 65,239 65,239 (47,432) (31,316) 17,807 33,923

World Call Telecommunications Lanka (Pvt) Ltd. 30,000 30,000 (30,000) (30,000) – –

NYK Logistics & Kusuhara Lanka (Pvt) Ltd. 1,950 1,950 13,273 14,604 15,223 16,554

Mabroc Teas (Pvt) Ltd. 48,000 48,000 42,297 50,609 90,297 98,609

Logiwiz Fiji (Pvt) Ltd. 6,532 6,395 7,608 5,134 14,140 11,529

Mountain Hawk Investment Company Ltd. 7,500 7,500 – – 7,500 7,500

Tianjing Shenglong Mattress Co. Ltd. - China 34,652 34,652 (13,690) (14,083) 20,962 20,569

TTEL Hydro Power Company (Pvt) Ltd. 33,663 33,663 (10,654) 296 23,009 33,959

TTEL Somerset Hydro Power (Pvt) Ltd. 29,400 29,400 (839) 4,473 28,561 33,873

PT Tulus Lanka Coir Industries 17,776 17,776 (4,001) (2,204) 13,775 15,572

1,145,288 1,140,404 1,749,450 1,703,663 2,894,738 2,844,067

Disposal/deemed disposal of associates (132,234) – (374,848) – (507,082) –

Group Investment in associates (equity basis) 1,013,054 – 1,374,602 – 2,387,656 2,844,067

(ii) Summarised financial information of associates.

The following information has not been adjusted to reflect Group's share.

Consolidated

As at 31st March, 2009 2008 Rs. '000 Rs. '000

Assets and liabilities

Total assets 13,579,524 18,633,649

Total liabilities (7,198,076) (10,662,845)

Net assets 6,381,448 7,970,804

Consolidated

For the year ended 31st March, 2009 2008 Rs. '000 Rs. '000

Revenue and profit

Total revenue 12,931,317 22,657,589

Total profit after tax 201,969 975,787

(iii) The Company has neither contingent liabilities nor capital commitments in respect of its associates.


152


(iv) The Group has not recognised the following shares of its losses in respect of its equity investments, since it has no obligation in respect of losses

beyond its investments.

Cumulative For the year

As at 31st March, 2009 2008 2008/09 2007/08 Rs. '000 Rs. '000 Rs. '000 Rs. '000

World Call Telecommunications Lanka (Pvt) Ltd. (22,065) (8,000) (14,065) (8,000)

Royal Heritage Hotel (Pvt) Ltd. (29,902) – (29,902) –

Eastern Hotels (Pvt) Ltd. (9,035) – (9,035) –

(61,002) (8,000) (53,002) (8,000)

(v) Countries of incorporation of overseas associates are given in Note 16F.

D. Other Long-Term InvestmentsConsolidated

As at 31st March, 2009 2008

Investor Investment Rs. '000 Rs. '000

Hayleys PLC Unquoted Investments

4,215,000 shares in Prudentia Investment Corporation Ltd. (31.03.08 - 4,215,000) 42,150 42,150

Provision for impairment of investment (42,150) (42,150)

24,940,613 shares in AES Kelanitissa (Pvt) Ltd. (31.03.08 - 24,940,613) 249,406 249,406

1,600,000 shares in Sri Lanka Institute of Nanotechnology 16,000 –

19,082,878 shares in AIG Hayleys Investment Holdings (Pvt) Ltd. (31.03.08 - 19,082,878) 65,239 –

Provision for impairment of investment (34,453) –

Company investments in other long-term investments 296,192 249,406

Quoted Investments

Dipped Products PLC 3,536,159 shares in Hayleys PLC (31.03.08 - 3,536,159) (Rs. 318 mn) 156,101 156,101

Hanwella Rubber Products Ltd. 1,100 shares in Royal Ceramics (Rs. 0.03 mn) 3 3

Dean Foster (Pvt) Ltd. 2,922,413 shares in Hayleys PLC (31.03.08 - 2,922,413) (Rs. 263 mn) 214,000 214,000

Toyo Cushion Lanka (Pvt) Ltd. 232,737 shares in Hayleys PLC (31.03.08 - 232,737) (Rs. 21 mn) 11,370 11,370

Volanka Exports Ltd. 183,275 shares in Hayleys PLC (31.03.08 - 183,275) (Rs. 16 mn) 17,431 17,431

398,905 398,905


DPL Plantations Ltd. 255,000 shares in Wellassa Rubber Company Ltd. (31.03.08 - 255,000) 2,550 2,550

Hayleys Advantis Group 600,000 shares in Unit Trust (Rs. 6 mn) (31.03.08 - 600,000) 6,000 6,000

26,071 shares in SLAFFA Cargo Services Ltd. (31.03.08 - 26,071) 357 357

Haycarb Group 1,000 shares in Placer Pacific (Pty) Ltd. - Aus. $ 5 each (31.03.08 - 1,000) 126 126

2,000 shares in Ariadne Australia Ltd. - Aus. $0.50 each 6 6

Bonds 32 32

Mutual Fund 1,030,691 Units (Rs. 60 mn) 60,073 –

Infocraft Ltd. SLIIT Computing (Pvt) Ltd. (31.03.08 - 2,130 ) – 21

Hayleys Industrial Solutions (Pvt) Ltd. 350,000 shares in Hydro Trust Lanka (Pvt) Ltd. (31.03.08 - 350,000) 3,500 3,500

Rileys (Pvt) Ltd 15,101,498 shares in Onril (Pvt) Ltd. (31.03.08 - 15,101,498) 45,645 45,645

Impairment in value of long-term investment (45,645) (45,645)

72,644 12,592

471,549 411,497

Group investments in other long-term investments 767,741 660,903

AIG Hayleys Investment Holdings (Pvt) Ltd. was previously incorporated in the Financial Statements as an associate. Subsequent to an issue of new shares at the end of year 2008, the

Group’s holding in the Company reduced from 20% to 14.5%.

The Group no longer considers it has any 'significant influence' in respect of this Company. The investment in the Company is therefore not treated as an investment in Associates but

under the category of Other Long-Term Investments in the Consolidated Financial Statements.

(i) In the opinion of the Directors the net realisable value of unquoted investments other than those investments for which provisions have been made are higher than their cost.

(ii) Amounts stated within brackets correspond to fair values as at 31st March, 2009, of quoted investments, investments in unit trust and mutual funds. In the opinion of the Directors

any reduction in fair value below cost is considered to be of temporary nature.



153

E. Inter-Company Shareholdings % Holding No. of Shares

As at 31st March, 2009 2008 2009 2008

Investor Investee

Agro Technica Ltd. Sunfrost (Pvt) Ltd. 1 1 75,000 75,000

Chas P. Hayley & Co. (Pvt) Ltd. Toyo Cushion Lanka (Pvt) Ltd. 2 2 169,267 169,267

Hayleys Electronics Ltd. 2 2 14,975 14,975

Lignocell (Pvt) Ltd. 100 100 12,000,000 12,000,000

Dean Foster (Pvt) Ltd. Volanka (Pvt) Ltd. 28 28 3,920 3,920

Hayleys Advantis Ltd. 1 1 488,369 488,369

Chas P. Hayley & Co. (Pvt) Ltd. – – 80 80

Dipped Products PLC Palma Ltd. 100 100 4,000,000 4,000,000

Grossart (Pvt) Ltd. 100 100 4,200,000 4,200,000

Venigros (Pvt) Ltd. 100 100 8,000,000 8,000,000

Feltex (Pvt) Ltd. 100 100 1,500,000 1,500,000

DPL Plantations (Pvt) Ltd. 100 100 10,100,000 10,100,000

Neoprex (Pvt) Ltd. 100 100 4,000,000 4,000,000

Dipped Products (Thailand) Ltd. 98 98 1,351,250 1,351,250

Texnil (Pvt) Ltd. 100 100 7,500,000 7,500,000

ICO Guanti SpA (Italy) (€ 1- each) 55 55 1,100,000 671,000

Hanwella Rubber Products Ltd. 70 70 6,090,000 6,090,000

DPL Plantations (Pvt) Ltd. Kelani Valley Plantations PLC 71 71 24,200,000 24,200,000

Haycarb PLC Dipped Products PLC 7 7 4,068,746 4,068,746

Eurocarb Products Ltd. (UK) (£ 1-each) 100 100 100,000 100,000

Haycarb Holdings Australia (Pty.) Ltd.

(Aus $ 1 - each) 100 100 150,000 150,000

Carbotels (Pvt) Ltd. 25 25 10,440,000 10,440,000

Carbokarn Co. Ltd. (100 Baht, 72% paid-up) 50 50 250,000 250,000

Puritas (Pvt) Ltd. 100 100 450,000 450,000

Recogen (Pvt) Ltd. 100 100 15,000,000 15,000,000

Kinetics (Pvt) Ltd. 100 100 4,088,367 4,088,367

Haymark Inc. (Texas, USA) 100 100 Stock Stock

Super Felt (Pvt) Ltd. 17 17 780,000 780,000

Haycarb Holdings Bitung Ltd. ($ 1-each) 100 100 1,400,000 1,400,000

PT Mapalus Makawanua

Charcoal Industry (IDR 1,000,000) 2 2 707 707

Haycarb Holdings Bitung Ltd. PT Mapalus Makawanua

Charcoal Industry (IDR 1,000,000) 83 98 30,830 36,395

Haychem (Pvt) Ltd. Haychem Bangladesh Ltd. (100 Taka) 100 100 10,000 10,000

Haylex B.V. HJS Condiments Ltd. 2 2 309,374 309,374

Hayleys Agro Products Ltd. Agro Technica Ltd. 93 93 2,329,900 2,329,900

Haychem (Pvt) Ltd. 100 100 4,400,000 4,400,000

Hayleys Agro Fertilizers (Pvt) Ltd. 51 51 2,549,999 2,549,999

Hayleys Agro Farms (Pvt) Ltd. 100 100 1,500,000 1,500,000

Hayleys Agro Bio-tech (Pvt) Ltd. 100 100 7,500,000 5,000,000

Hayleys Electronics Ltd. Hayleys Electronics Manufacturing (Pvt) Ltd. 100 100 500,000 500,000

Hayleys Electronics Retailing (Pvt) Ltd. 100 100 17,600,000 17,600,000

Hayleys Electronics Lighting (Pvt) Ltd. – 100 – 600,000

XIL Industries Ltd. – – 5,898 5,898

Hayleys Exports PLC Sunfrost (Pvt) Ltd. 6 6 500,000 500,000

Eco Fibres (Pvt) Ltd. 100 100 1,500,000 1,500,000

Toyo Cushion Lanka (Pvt) Ltd. 15 15 1,015,602 1,015,602

Bonterra Lanka Ltd. 50 50 803,400 803,400

Rileys (Pvt) Ltd. 34 34 7,750,000 7,750,000

HJS Condiments Ltd. 12 12 1,561,607 1,561,607


Hayleys Industrial Solutions (Pvt) Ltd. Haycolour (Pvt) Ltd. 100 100 60,000 60,000

Bhagya Hydro (Pvt) Ltd. 100 100 3,500,000 3,500,000

Hayleys Hydro Energy (Pvt) Ltd. 51 51 6,120,000 6,120,000

Biofuels D Z (Pvt.) Ltd. 100 100 20,002 2


154


E. Inter-Company Shareholdings % Holding No. of Shares

As at 31st March, 2009 2008 2009 2008

Investor Investee

Hayleys Industrial Solutions (Pvt) Ltd. Hayleys Lifesciences Ltd. 100 100 3,000,002 2

Mawanana Power Company (Pvt.) Ltd. 100 100 320,002 2

Nirmalapura Wind Power (Pvt) Ltd. 100 100 920,002 2

Hayleys Hydro Energy (Pvt) Ltd. Neluwa Cascade Hydro (Pvt) Ltd. 100 100 11,910,002 11,910,002

Hayleys Photoprint Ltd. Hayleys Docsolutions Ltd. 100 100 1,000,000 1,000,000

Hayleys Plantation Services (Pvt) Ltd. Talawakelle Tea Estates PLC 75 75 17,750,000 17,750,000

Hayleys Advantis Group Sunfrost (Pvt) Ltd. 1 1 50,000 50,000

Quality Seed Co. Ltd. Hayleys MGT Knitting Mills PLC – – – 86,316

Ravi Industries Ltd. Rileys (Pvt) Ltd. 54 54 12,250,000 12,250,000

Dipped Products PLC 1 1 567,000 567,000

Ravi Marketing Services Ltd. 100 100 10,000 10,000


Rileys (Pvt) Ltd. Haymat (Pvt) Ltd. 54 54 216,000 216,000

Carbotels (Pvt) Ltd. 5 5 1,880,357 1,880,357


Creative Polymats (Pvt) Ltd. 100 100 5,000,000 5,000,000

Toyo Cushion Lanka (Pvt) Ltd. Dean Foster (Pvt) Ltd. 2 2 235,294 235,294


Volanka (Pvt) Ltd. Dipped Products PLC 8 8 4,873,640 4,873,640

Sunfrost (Pvt) Ltd. 87 87 6,945,000 6,945,000

Toyo Cushion Lanka (Pvt) Ltd. 21 21 1,455,832 1,455,832

HJS Condiments Ltd. 42 42 5,528,362 5,528,362

Dean Foster (Pvt) Ltd. 49 49 5,882,353 5,882,353

Volanka Exports Ltd. 95 95 2,900,000 2,900,000

Volanka Insurance Services (Pvt) Ltd. 100 100 59,000 50,000

Volanka Exports Ltd. OE Techniques Ltd. 100 100 10,000 10,000


Kelani Valley Plantations PLC Kalupahana Power Co. (Pvt) Ltd. 60 60 1,800,000 1,800,000

Kelani Valley Green Tea (Pvt) Ltd. 51 51 1,020,000 1,020,000

Kelani Valley Instant Tea (Pvt) Ltd. 75 50 2,250,000 1

Hayleys Consumer Products Ltd. Hayleys Consumer Marketing (Pvt) Ltd. 100 100 3,500,000 3,500,000

Hayleys Electronics Lighting (Pvt) Ltd. 100 – 600,000 –

F. Countries of Incorporation of Overseas Subsidiaries and Associates

Countries of incorporation of companies incorporated outside Sri Lanka are stated in brackets against the Company names.

Haychem (Bangladesh) Ltd. (Bangladesh), PT Mapalus Makawanua Charcoal Industry (Indonesia), Haycarb Holdings Bitung Ltd. (BVI), Eurocarb Products

Ltd. (UK), Haycarb Holdings Australia (Pty) Ltd. (Australia), Magic Soils (Pty) Ltd. (Australia), Haymark Inc. (USA), Carbokarn Ltd. (Thailand), Haylex BV

Group (Netherlands, Japan & UK), Dipped Products (Thailand) Ltd. (Thailand), CK Regen Systems Co. Ltd. (Thailand), ICO Guanti SpA (Italy), Tianjing

Shenglong Mattress Co. Ltd. (China), PT Tulus Lanka Coir Industries (Indonesia), Logiwiz Logistics India (Pvt) Ltd. (India), Civaro Freight India (Pvt) Ltd.

(India) and Logiwiz Fiji (Pvt) Ltd. (Fiji).

17. EMPLOYEES’ SHARE TRUST LOAN

The Hayleys PLC Employees’ Share Trust (administered by the Senior Partner of Messrs Julius & Creasy, Attorneys-at-Law, the Senior Partner of Messrs

Ernst & Young, Chartered Accountants and a Non-Executive Director of Hayleys PLC) was set up by a special resolution adopted by the shareholders

at an Extraordinary General Meeting of the Company. The Trust was allotted 2,400,000 ordinary shares of Rs. 10/- each on 9th February, 1998 at the

market price of Rs. 210/- per share, payment for the shares being made by the Trustees from the proceeds of an interest-free loan of Rs. 504 mn,

granted by the Company. This loan is repayable by the Trustees utilising part of the net income of the Trust.

Consolidated/Company


At beginning of the year 496,828 498,195

Recovery during the year (1,482) (1,367)

At end of the year 495,346 496,828

The market value of the shares held by the Trust as at 31st March, 2009 was Rs. 617 mn (31st March, 2008 - Rs. 667 mn).



155

18. INVENTORIES Consolidated Company


Raw materials & consumables 1,579,251 1,810,355 3,253 2,778

Produce stocks 363,561 321,531 – –

Work-in-progress 978,320 751,153 – –

Finished goods 2,764,955 2,217,390 – –

Goods-in-transit 114,847 102,283 – –

5,800,934 5,202,712 3,253 2,778

Provision for unrealised profit and write-down

of inventories (252,424) (247,780) – –

5,548,510 4,954,932 3,253 2,778

(i) The cost of inventories recognised as expenses during the year amounted to Rs. 24,438 mn (2007/08 - Rs. 23,356 mn).

(ii) The carrying amount of inventories pledged as security for bank facilities obtained amounted to Rs. 757 mn (31st March, 2008 - Rs. 404 mn).

(iii) Inventory carried at net realisable value as at 31st March, 2009 amounted Rs. 246.7 mn (31st March, 2008 - Nil).

19. TRADE AND OTHER RECEIVABLES Consolidated Company


Trade receivables 4,861,168 5,304,336 – –

Provision for bad and doubtful debts (539,048) (430,115) – –

4,322,120 4,874,221 – –

Bills receivable 2,467,913 2,090,222 – –

Advances made under employee share

ownership schemes 8,629 20,134 – –

Other debtors, payments in advance, deposits

and employee loans (i) 1,425,547 1,799,927 38,859 33,154

8,224,209 8,784,504 38,859 33,154

(i) No loans have been given to the Directors of the Company.



(ii) Currency-wise analysis of trade and other receivables

Rupees 3,629,011 4,705,895 38,859 33,154

Australian Dollars 62,958 35,933 – –

Pounds Sterling 187,870 215,293 – –

United States Dollars 2,082,739 1,585,646 – –

Euro 1,938,799 1,959,697 – –

Thai Baht 153,300 163,101 – –

Indian Rupees 96,853 87,433 – –

Other 72,679 31,506 – –

8,224,209 8,784,504 38,859 33,154


156


20. SHORT-TERM INVESTMENTSAs at 31st March, 2009 2009 2008

Rs. '000 Rs. '000 Rs. '000Investor Investee No. of Shares Fair Value Cost Cost

Hayleys PLC Aitken Spence Hotel Holdings PLC 16 1 1 1

ACL Cables PLC 127,260 3,086 2,088 2,088

Asiri Hospitals PLC 127 7 1 1

Blue Diamond Jewellery Worldwide PLC 60 0 2 2

Central Industries PLC 3,000 225 321 321

Ceylinco Insurance Co. PLC 76 11 2 2

Ceylon Cold Stores PLC 84 6 2 2

Eagle Insurance Co. PLC 49 5 2 2

DFCC Bank PLC 169 11 18 18

Kelani Tyres PLC 8,600 209 214 214

Lanka Orix Leasing Co. PLC 152 11 8 8

Lanka Tiles PLC 14 0.4 – –

National Development Bank PLC 10,365 922 1,691 1,691

Seylan Bank PLC 90 3.2 3 3

Three Acre Farms PLC 18,100 122 841 841

Union Assurance PLC 37 3 1 1

4,623 5,195 5,195

Provision for fall in value of investment – (572)

Company short-term investments 4,623 4,623 5,195

Dean Foster (Pvt.) Ltd.

ACL Cables PLC 4,120 100 24 24

Asiri Hospital PLC 27 1 – –

Bairaha Farms PLC 900 8 18 18

Blue Diamond Jewellery Worldwide PLC 13 – – –

Central Industries PLC 300 23 24 24

Ceylinco Securities & Financial Services PLC 1,300 11 12 12

Eagle Insurance Co. PLC 30 3 1 1

Kelani Tyres PLC 1,000 24 11 11

Lanka Orix Leasing Co. PLC 328 23 10 10

Three Acre Farms PLC 2,000 14 91 91

Vanik Incorporation PLC - Voting 7,500 6 124 124

- Non-voting 5,000 4 50 50

- Debentures 4,000 16 400 400

233 765 765

Provision for fall in value of investments – (532) (377)

233 233 388

Group short-term investments 4,856 4,856 5,583

21. STATED CAPITAL Company


Issued & fully-paid - ordinary shares of Rs. 10/- each

At beginning of the year - 75,000,000 (1st April, 2007 - 75,000,000) 1,575,000 1,575,000

At end of the year - 75,000,000 (31st March, 2008 - 75,000,000) 1,575,000 1,575,000

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of

the Company.



157

22. OTHER CAPITAL RESERVES & RETAINED EARNINGS

A. Other Capital Reserves

Consolidated

Capital Fixed asset Capital Capital Debenture Reserve on Legal Total

profit on replacement reserve on redemption redemption amalgamation reserve

redemption reserve sale of reserve reserve

of debentures property, fund fund

plant &

equipment

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

Balance as at 1st April, 2007 109 11,578 57,249 38,853 1,049 5,249 6,831 120,918

Changes in equity holding – – 1 (8,874) – 390 – (8,483)

Transfers – – – – – 259,733 995 260,728

Balance as at 31st March, 2008 109 11,578 57,250 29,979 1,049 265,372 7,826 373,163

Changes in equity holdings – – – – – 2,566 – 2,566

Transfers – – – – – 32,834 1,157 33,991

Balance as at 31st March, 2009 109 11,578 57,250 29,979 1,049 300,772 8,983 409,720

Company

Balance as at 1st April, 2007 109 11,750 320 – 1,047 – – 13,226

Balance as at 31st March, 2008 109 11,750 320 – 1,047 – – 13,226

Balance as at 31st March, 2009 109 11,750 320 – 1,047 – – 13,226

B. Retained Earnings Consolidated Company


Holding Company 741,185 450,977 741,185 450,977

Subsidiaries 1,391,290 1,450,397 – –

Associates 456,870 534,432 – –

2,589,345 2,435,806 741,185 450,977

23. INTEREST-BEARING BORROWINGS Consolidated Company


A. Total Non-Current Interest-Bearing Borrowings

Finance lease obligations 389,997 385,375 – –

Debentures 40,000 – – –

Long-term loans 1,851,772 2,593,755 260,000 720,000

Total Non-current interest-bearing borrowings 2,281,769 2,979,130 260,000 720,000


As at 31st March, 2009 2008 2009 2008

Rs. '000 Rs. '000 Rs. '000 Rs. '000B.

B. Current Portion of Interest-Bearing Borrowings

Finance lease obligations 20,077 13,175 – –

Debentures – – – –

Long-term loans 765,171 711,651 80,000 80,000

Total current portion of interest-bearing borrowings 785,248 724,826 80,000 80,000

The amount of borrowing facilities that may be available for future operations and capital commitments are given in page 66 and 148 to the

Financial Statements respectively.


158


Consolidated


C. Finance Lease Obligations


New leases obtained 47,369 8,368

812,825 802,311

On acquisition of subsidiary

Repayments (45,623) (36,855)


Finance charges unamortised (357,128) (366,906)

New lease obligations (i) 410,074 398,550

Consolidated


D. Currency wise Analysis of Finance Lease Obligations

Rupees 396,559 390,528

Thai Baht – 5,935

Bangladesh Taka 13,515 2,087

410,074 398,550

Consolidated


Analysis of Finance Lease Obligations by year of Repayment

Finance lease obligations repayable within 1 year from year-end

Gross liability 40,503 34,132


Net lease obligations repayable within 1 year from year-end (i) 20,077 13,175

Finance lease obligations repayable between 1 and 5 years from year-end



Net lease obligations (i) 43,264 33,144

Finance lease obligations repayable after 5 years from year-end



Net lease obligations (i) 346,733 352,231

Net lease liability repayable later than 1 year from year-end 389,997 385,375



159

(i) Includes the basic rental payable under the revised basis of Rs. 19,598,000/- per annum by Kelani Valley Plantations PLC in respect of their

plantations. This amount is to be inflated annually by the gross domestic product (GDP) deflator in the form of contingent rent.

This lease agreement was further amended on 1st August, 2002, freezing annual lease rental at Rs. 25,839,041/- for a period of six years commencing

from 18th June, 2002. Hence, the GDP deflator adjustment has been frozen at Rs. 6,241,041/- per annum until 17th June, 2008.

According to the ruling given by the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka, the amounts stated in the

Financial Statements have been adjusted to reflect the following:

a. Further liability on the annual lease payment of Rs. 19,598,000/- will continue until the year 2045. The net present value of this liability at a 4%

discounting rate (as recommended by the UITF) would result in a liability of Rs. 372,579,090/-.

b. The net present value of Rs. 372,579,090/- is represented by a gross liability of Rs. 715,327,000/- (Rs. 19,958,000/- x 36 1/2 years) and interest in

suspense of Rs. 342,747,910/-.

c. The charge to the Income Statement during the current period is Rs. 21.2 mn (2007/08 - Rs. 21.4 mn).



E. Debentures

At beginning of the year – – – –

Issue of debentures (ii) 40,000 – – –

At end of the year 40,000 – – –

Transferred to current liabilities (repayable within one year) – – – –

Repayable after one year 40,000 – – –

(ii) 4,000,000 (par value Rs. 10/-) unquoted debentures, were issued to LVL Energy Fund (Pvt) Ltd. at 15%, by Neluwa Cascade Hydro Energy (Pvt) Ltd. to

finance its Hydro Power project capital requirements. These debentures are redeemable/convertible to preference shares on or after 31st March, 2011. Consolidated Company


F. Analysis of Debentures by year of Repayment Long-term loans repayable between 2 and 5 years from year-end 40,000 – – –

40,000 – – –



G. Long-Term Borrowings

At beginning of the year 3,305,406 3,663,143 800,000 645,000

Exchange difference 5,251 53,938 – –

New loans obtained (iii) 496,467 820,664 – 155,000

3,807,124 4,537,745 800,000 800,000

Repayments (1,190,181) (1,232,339) (460,000) –

At end of the year 2,616,943 3,305,406 340,000 800,000

Transferred to current liabilities (repayable within one year) (765,171) (711,651) (80,000) (80,000)

Repayable after one year 1,851,772 2,593,755 260,000 720,000

(iii) Toyo Cushion Lanka (Pvt) Ltd., DPL Group, HJS Condiments Ltd., Advantis Group have obtained loans during the year amounting to Rs. 25 mn,

Rs. 169 mn, Rs. 137 mn and Rs. 165 mn, respectively.


160




H. Currency-wise Analysis of Long-Term Borrowings

Rupees 1,914,989 2,493,155 340,000 800,000


United States Dollars 256,149 171,114 – –

Thai Baht 352,748 550,279 – –

Other 88,500 81,000 – –

2,616,943 3,305,406 340,000 800,000



I. Analysis of Long-Term Borrowings by year of Repayment

Long-term loans repayable between 1 and 2 years from year-end 778,176 751,485 80,000 160,000

Long-term loans repayable between 2 and 5 years from year-end 830,254 1,591,153 180,000 560,000

Long-term loans repayable later than 5 years from year-end 243,342 251,117 – –

1,851,772 2,593,755 260,000 720,000

J. Long-Term Borrowings Repayable after one year

Company Lender/rate 31.03.2009 31.03.2008 Repayment Security

of interest (p.a.) Rs. '000 Rs. '000

Hayleys PLC DFCC (AWPR +2%) 260,000 720,000 Repayable in 20 quarterly

instalments commencing

from September 2008 None

Company Total 260,000 720,000

HJS Condiments Ltd. DFCC (11%) – 3,758 Equal monthly instalments over Mortgage over land

4 years, from October 2005 and building

Sanyo Food (5%) – 81,000 Equal quarterly instalments over Mortgage over

4 years, from August 2005 plant and machinery

NDB (8.5%) – 14,100 Equal monthly instalments over Mortgage over

2 years, from January 2008 plant and machinery

NDB (8.79%) 10,500 – Equal monthly instalments over Mortgage over land,

3 years, from April 2010 building and

plant & machinery

BOC (10.14%) 8,830 – Equal monthly instalments over Mortgage over plant &

3 3/4 years, from April 2010 machinery

BOC (6.5%) 5,993 – Equal 20 monthly instalments starting Mortgage over plant &

from April 2010 machinery

Sanyo Food (5%) 115,480 – Equal quarterly instalments starting None

from May 2010

Venigros (Pvt) Ltd. People’s Bank (10.5%) 20,839 58,339 Monthly instalments ending, Mortgage over plant

October 2009 and machinery at

Weliveriya

NDB (6.5%) 28,250 – Monthly instalments ending, Mortgage over heater at

August 2012 Weliveriya



161



Kalupahana Power NDB - (AWDR + 4%) 55,906 68,968 Quarterly instalments ending, Primary mortgage over

Co. (Pvt) Ltd. March 2013 sub lease hold rights of

Kalupahana Power

Co. (Pvt) Ltd.,

Machinery and equipment

of the company

ICO Guanti SpA BNL (6.5%) – 2,562 Monthly instalments ending None

(Euro 100,000) July 2009

Dipped Products Thai Military Bank 280,898 421,725 Monthly instalments ending, Mortgage over land,

(Thailand) Ltd. Public Company Limited June 2011 building and machinery

(MLR - 1% - 2 Yrs)

(MLR - next 3 Yrs)

HSBC - Thailand (4.78%) 71,850 128,554 Monthly instalments ending March 2011 Corporate guarantee for

THB 47.2 Mn. from

Dipped Products PLC.

Kelani Valley NDB (11.51%) 16,534 21,042 Monthly instalments ending Primary mortgage over the

Plantations PLC August 2013 leasehold rights of

NDB (11.51%) 19,641 24,088 Monthly instalments ending Panawatta and Pedro

May 2014 estates. Letter of

NDB (6.5%) 15,375 – Monthly instalments ending undertaking from

May 2013 DPL Plantations (Pvt.) Ltd.

to subordinate

management fee and

dividends in a default

situation

Seylan Bank (12%) 27,798 32,634 Monthly instalments Primary mortgage over

ending October 2015 leasehold rights of

Robgill and Fordyce estates

DFCC Bank (9.42%) 81,200 84,000 Monthly instalments ending Primary mortgage over the

March 2017 leasehold rights of

DFCC Bank (6.5%) 22,335 26,878 Monthly instalments ending Halgolla, We Oya,

November 2014 Polatagama and Enderapola

DFCC Bank (11.64%) 80,000 80,000 Monthly instalments ending estates. Letter of

July 2017 undertaking from

DPL Plantations (Pvt.) Ltd.

DFCC Bank (6.5%) 27,987 33,076 Monthly instalments ending to subordinate

June 2015 management fee and

DFCC Bank (14.47%) 83,802 – Monthly instalments ending dividends in a default

May 2014 situation

DFCC Bank (6.5%) 10,005 – Monthly instalments ending

December 2015

DFCC Bank (6.5%) 8,840 – Monthly installments ending

March 2014

Hanwella Rubber Bank of Ceylon – 5,250 Monthly instalments ending, Mortgage over property at

Products Ltd. (AWPLR + 1.5%) August 2009 village of Thunnana,

Hanwella

Toyo Cushion NDB (13.5%) 3,167 3,094 Monthly instalments over 4 years, Mortgage over

Lanka (Pvt) Ltd commencing July 2006 land & buildings

NDB (13.5%) – 2,436 Monthly instalments over 4 years, Mortgage over

commencing March 2007 land & machinery

NDB (18.5%) 4,866 – Monthly instalments over 3 years, Mortgage over

commencing March 2009 stock and debtors

NDB (6.5%) 875 – Monthly instalments over 5 years, Mortgage over

commencing July 2006 land & buildings

Haycarb PLC Commercial Bank 48,825 75,643 Monthly instalments over 5 years, Concurrent negative

(LIBOR + 4%) commencing September 2006 pledge

Haycarb Holding ANZ Grindlays - 2,514 7,358 Equal monthly instalments Floating charge over

Australia (Pty.) Ltd. (Index rate + 1.55%) payable over 15 years commencing 1998/99 assets of the Company

Haycarb Holding Commercial Bank 31,835 47,883 Monthly instalments over 5 years, Corporate guarantee

Bitung Ltd. (LIBOR + 4%) commencing 2006/07 given by Haycarb PLC


162




Recogen (Pvt) Ltd. NDB (8.5%) 2,084 10,417 Equal monthly instalments over Negative pledge

6 years, from September 2004 over plant & machinery

Recogen (Pvt) Ltd. DFCC (6.5%) 32,500 42,500 Equal monthly instalments over Corporate guarantee

5 years, commencing 2008/09 given by Haycarb PLC

Haycarb PLC DFCC – 65,335 Monthly instalments over 5 years, after one Negative pledge over

(AWPLR + 1%) year grace from August 2006 land, plant and machinery

Rileys (Pvt) Ltd. NDB (12.5%) 5,000 20,000 Monthly instalments over 5 years, Mortgage over land

from August 2005 and building

Hayleys Agro DFCC (9.75%) 485 6,305 Monthly instalments over 5 years Mortgage over plant

Products Ltd. ending April 2010 and machinery

Sunfrost (Pvt) Ltd. NDB (12.3%) 600 3,000 Monthly instalments over 5 years Mortgage over land

from July 2005 Corporate guarantee from

Volanka Ltd.

NDB (6.5%) 3,250 6,250 Equal monthly instalments Mortgage over land

over 4 years from May 2007 Corporate guarantee from

Volanka Ltd.

Hayleys Advantis Group BOC - (AWPLR + 4%) 110,700 – Repayment over 6 years commencing from Mortgage over land

May 2009, as per agreed schedule

HNB - (AWPLR 1.5%) 16,900 – Repayment over 2 years commencing from Mortgage over land

June 2008, as per agreed schedule

BOC - (AWPLR + 1%) 110,500 146,234 Repayment over 6 years commencing from Mortgage over land

May 2008, as per agreed schedule

Pramuka + 17% 936 936 Corporate guarantee

Volanka (Pvt) Ltd. NDB (12.5%) 2,000 6,000 Monthly instalments over 5 years None

from September 2010

DFCC - (LIBOR + 1.5%) – 46,666 Monthly instalments over 5 years 1,702,000 shares of DPL

from July 2004

DFCC - (LIBOR + 1.75%) – 51,250 Monthly instalments over 5 years Mortgage over land

ending August 2012

Neluwa Cascade Hydro NTB - (3m TB + 1.3%) 157,500 165,000 Agreed 28 quarterly instalments Corporate guarantee for

Power (Pvt) Ltd. commencing from March 2009 Rs. 180 mn from HISL.

Mortgage for Rs. 180 mn

over project land & assets

Hayleys Industrial Sampath Bank (17.18%) – 2,082 35 monthly instalments commencing Primary mortgage over

Solutions (Pvt) Ltd. February 2007 leasehold properties

Bhagya Hydro power Sampath Bank 27,605 30,075 96 monthly instalments Mortgage over

(Pvt) Ltd. (AWDR + 5%) commencing September 2007 project assets

Seylan Bank 27,941 35,239 96 instalments commencing Mortgage over

(AWDR + 5%) September 2007 project assets

Hayleys Agro Biotech Sampath Bank 9,626 14,078 54 monthly instalments ending Corporate guarantee

(Pvt) Ltd. (AWPLR + 2%) June 2013

1,851,772 2,593,755

24. DEFERRED INCOME Consolidated


A. Grants (i)


Grants received during the year (i) 111,266 55,139

Amortised during the year (12,551) (9,264)


(i) Grants were received by the Plantation Sector from the Plantation Reform Project, Plantation Human Development Trust and Ministry of

Community Development for workers’ welfare facilities, reforestation of watersheds and other infrastructure facilities and by the Purification Products

Sector through the Ceylon Chamber of Commerce, under the Promotion of Eco-Efficient Productivity Project.



163

25. DEFERRED TAXATION Consolidated Company


A. Deferred Tax AssetAt the end of the year (see Note 25.B) 154,036 96,999 27,775 26,350

B. Deferred Tax LiabilityAt beginning of the year (net) 108,251 94,746 – – Acquisition/(disposal) of subsidiaries (526) – – – Exchange gain/(loss) (17) – – – Transfer from Income Statement (net) (24,901) 13,505 – – At end of the year 82,807 108,251 – – Deferred tax asset 154,036 96,999 27,775 26,350

236,843 205,250 27,775 26,350

26. RETIREMENT BENEFIT OBLIGATIONS Consolidated Company


Present value of unfunded gratuity 2,085,049 – 324,349 –

Total present value of the obligation 2,085,049 – 324,349 –



Provision for Retiring Gratuity

At beginning of the year 1,701,345 1,394,439 266,078 215,479

Amortisation of transitional liability 34,944 – 2,635 –

On acquisition of subsidiary – – –

On disposal of subsidiary (1,315) – –

Exchange difference – 7,421 –

Transfer to assets held for sale – (2,147) –

Current service costs 124,663 – 11,994 –

Interest cost 285,647 – 41,888 –

Actuarial (gains) losses (62,281) – (2,084) –

Provision for the year – 403,507 – 62,994

2,083,003 1,803,220 320,511 278,473

Benefits paid by the plan (166,602) (101,875) (6,703) (12,395)

At end of the year (i) 1,916,401 1,701,345 313,808 266,078


2008/09 2008/09 Rs. '000 Rs. '000

The expense is recognised in the following line items in the Income statement

Cost of sales 10,803 1,034

Administrative expenses 372,170 53,399

382,973 54,433



Amortisation of Transitional Liability

Amortisation for the year 42,162 2,635

Credit for the year (7,218) –

34,944 2,635

Amounts to be amortised in the future 168,648 10,541


164


(i) The Group has adopted SLAS 16 (Revised 2006) - Employee Benefits, which applies prospectively for the financial periods beginning on or after 1st July,

2007 and is therefore applicable for the financial year 2008/09. Comparative figures which reflected the requirements of the previous SLAS - 16, have not

been adjusted.

SLAS 16 (Revised 2006) requires the use of actuarial techniques to make a reliable estimate of the amount of retirement benefit that employees

have earned in return for their service in the current and prior periods and discount that benefit using the Projected Unit Credit Method in order to

determine the present value of the retirement benefit obligation and the current service cost. This requires an entity to determine how much benefit

is attributable to the current and prior periods and to make estimates about demographic variables and financial variables that will influence the cost

of the benefit. The following key assumptions were made in arriving at the above figure:

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9+

Rate of discount 15% 15% 15% 14% 13% 12% 11% 10% 10%

Salary increase 14% 14% 14% 13% 12% 11% 10% 9% 9%

Assumptions regarding future mortality are based on a 67/70 mortality table, issued by the Institute of Actuaries, London.

The demographic assumptions underlying the valuation are with respect to retirement age, early withdrawal from service and retirement on medical

grounds.

According to the transitional provisions of SLAS 16 (Revised 2006) the Group can recognise the difference between the liability at transition and the

liability that would have been recognised at the date of transition under the Group’s new accounting policy over five years on a straight line basis.

The Group’s and Company's retirement benefit obligation would have been Rs. 1,822 mn and Rs. 304 mn respectively as at the Balance Sheet date

had their retirement benefit obligation been calculated as per the requirements of the Payment of Gratuity Act No. 12 of 1983, applying the basis of

computation given in pages 135, or the Indian Repatriate Act No. 34 of 1978.

27. TRADE AND OTHER PAYABLES Consolidated Company


Trade payables 2,006,485 2,162,386 – –

Bills payable 439,712 680,687 – –

Other payables including accrued expenses (i) 2,599,654 2,296,768 58,518 57,575

Unclaimed dividends 36,031 75,487 28,821 25,657

5,081,882 5,215,328 87,339 83,232

(i) Includes provision for warranties amounting to Rs. 16.2 mn (31.03.08 - Rs. 3 mn).



(ii) Currency-wise analysis of trade and other payables

Rupees 3,256,392 3,068,137 87,339 83,232



United States Dollars 893,422 1,082,480 – –

Euro 568,341 680,985 – –

Thai Baht 199,538 166,833 – –

Indian Rupees 31,828 39,453 – –

Other 29,666 12,170 – –

5,081,882 5,215,328 87,339 83,232



165

28. INCOME TAX Consolidated Company


A. Income Tax Recoverable

At the end of the year (See Note B) 258,432 206,647 3,768 573



B. Income Tax Payable

At beginning of the year (76,633) 84,218 (573) (2,324)

Subsidiaries’/parent taxation on current year’s profit 522,419 419,508 3,791 4,795

Tax on discontinued operations’ current year’s profit – 284 – –

Write back of ESC previously written down – (19,008) – –

Irrecoverable ESC 12,405 – – –

(Over)/under provision in respect of previous years 686 (14,390) (4,590) –

Tax on dividend 60,627 65,047 – –

Disposal of subsidiary (38) – – –

Exchange gain/(loss) (728) – – –

Payments made during the year (568,771) (612,292) (2,396) (3,044)

Net income tax payable/(recoverable) (50,033) (76,633) (3,768) (573)

Income tax recoverable 258,432 206,647 3,768 573

At the end of the year 208,399 130,014 – –

29. SHORT-TERM INTEREST BEARING BORROWINGS Consolidated Company


Rupees 3,001,339 3,153,734 207,081 7,598



United States Dollars 1,945,866 1,937,144 – –

Euro 950,586 554,308 – –

Thai Baht 210,939 220,506 – –

Others 34,408 5,592 – –

6,165,759 5,893,635 207,081 7,598

30. CONTINGENT LIABILITIES AND COMMITMENTSA. Contingent Liabilities and Commitment

Contingent liabilities as at 31st March, 2009 on account of bills discounted amounted to Rs. 2 mn (31st March, 2008 - Rs. 7 mn) in respect of Sunfrost Ltd.

and Rs. 10 mn (31st March, 2008 - Rs. Nil) in respect of HJS Condiments Ltd.

The contingent liability as at 31st March, 2009 on guarantees given by Hayleys PLC, to third parties amounted to Rs. 139.7 mn (2007/08 - Rs. 197.6 mn).

Of this sum Rs. 139.7 mn (2007/08 - Rs. 197.6 mn) and Rs. nil (2007/08 - Rs. nil) relate to facilities obtained by subsidiaries and associates respectively.

Details of other guarantees are given in Note 23 to the Financial Statements.


166


B. Commitments

(i) In terms of the ‘Equity Support Agreement’ entered into in respect of the AES Power Project, Hayleys PLC has provided:

A Standby Letter of Credit of US$ 60,000 for the guarantee fees payable by AES Kelanitissa (Pvt.) Ltd., under an agreement with the Asian

Development Bank.

(ii) In terms of the operating lease agreement entered into, minimum future lease payments payable over the next financial year are Rs. 19 mn and

Rs. nil for the Group and Company respectively.

31. FOREIGN CURRENCY TRANSLATION

The principal exchange rates used for translation purposes were: Average As at 31st March

2008/09 2007/08 2009 2008

United States Dollar 110.44 110.37 115.48 107.78

Australian Dollar 86.67 96.51 79.31 98.82

Pound Sterling 187.50 222.22 165.19 215.06

Thai Baht 3.22 3.28 3.24 3.42

Bangladesh Taka 1.61 1.61 1.67 1.57

Euro 156.39 157.95 152.94 170.24

Indian Rupee 2.40 2.77 2.25 2.72

32. FUNCTIONAL CURRENCY

The Group’s functional currency is Sri Lanka Rupee, except in the following subsidiaries and associates where the functional currency is different as

they operate in different economic environments.

Company Functional Currency

Hayleys MGT Knitting Mills PLC USD

Haychem (Bangladesh) Ltd. Taka

PT Mapalus Makawanua Charcoal Industry Rupiah

Haycarb Holdings Bitung Ltd. USD

Eurocarb Products Ltd. Pounds Sterling

Haycarb Holdings Australia (Pty) Ltd. Australian Dollars

Magic Soils (Pty) Ltd. Australian Dollars

Haymark Inc. USD

Carbokarn Co. Ltd. Thai Baht

Haylex BV Group Euro & Yen

Dipped Products (Thailand) Ltd. Thai Baht

CK Regen Systems Co. Ltd. Thai Baht

ICO Guanti SpA Euro

Tianjing Shenglong Mattress Co. Ltd. Yuan

PT Tulus Lanka Care Inustries Rupiah

Logiwiz Fiji (Pvt) Ltd. Fiji Dollars

Civaro Freight India (Pvt) Ltd. Indian Ruppes

Hayleylines Ltd. USD

Logiwiz Logistics India (Pvt) Ltd. Indian Rupees

33. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

(a) No circumstances have arisen since the Balance Sheet date which would require adjustments to or disclosure in the Financial Statements.



167

34. COMPANIES WITH DIFFERENT ACCOUNTING YEARS

The Financial Statements of AIG Hayleys Investment Holdings (Pvt) Ltd., Tianjing Shenglong Mattress Co. Ltd., Hayleys Plantation Services Ltd., Haylex BV, Volanka

Insurance Services (Pvt) Ltd., Talawakelle Tea Estates PLC, Haychem Bangladesh Ltd., Kelani Valley Plantations Group, Carbokarn Co. Ltd., Haycarb Holdings

Australia Group, Haymark Inc, PT Mapalus Makawanua Charcoal Industry, Haycarb Holdings Bitung Ltd., CK Regen Systems Co. Ltd., ICO Guanti SpA and Dipped

Products (Thailand) Ltd. which have been drawn up to 31st December as per their reporting requirements, have been consolidated.

The financial year of Worldcall Telecommunications Lanka (Pvt) Ltd., ends in June as per their requirements.

These Companies have been consolidated based on the Financial Statements drawn up to 31st December in compliance with SLAS 26 on Consolidated Financial

Statements and Accounting for Investments in Subsidiaries.

35. ACQUISITION AND DISPOSAL OF SUBSIDIARIES

A. Disposal of Subsidiaries 2008/09 2007/08 Disposals Disposals Rs. '000 Rs. '000

Property, plant & equipment 4,320 –

Investment 21 –

Inventories 363 –

Trade and other receivables 11,799 –

Net cash and cash equivalents (5,040) –

Deferred tax (526) –

Retirement benefits obligation (1,315) –

Income tax (38) –

Trade and other payables (7,111) –

Net identifiable assets and liabilities 2,473 –

Minority shareholders’ interests (149) –

Profit/(loss) on disposal of subsidiary (1,323) –

1,001 –

Satisfied by :

Cash consideration 1,001 –

Analysis of cash and cash equivalents on disposal of subsidiary


Short-term interest-bearing borrowings disposed 5,040 –

Net cash (outflow)/inflow 6,041 –

There was no acquisition of subsidiaries during the current financial year and previous year.

B. Partial Disposal of Subsidiary 2008/09 2007/08 Rs. '000 Rs. '000

Issue of shares to minority interests 13,621 –

Goodwill write off 8,764 –

Profit on disposal 34,275 –

56,660 –

Satisfied by :


56,660 –

Partial disposal of subsidiary reflects the disposal of a 15% stake in PT Mapalus Makawanua Charcoal Industry by Haycarb Holdings Bitung Ltd.

The current holding in PT Mapalus Makawanua Charcoal Industry is given in Note 16 to the Financial Statements.


168


36. ACQUISITION AND DISPOSAL OF ASSOCIATES

The disposal had the following effect on the Group’s assets and liabilities. The associate disposed of was Diesel & Motor Engineering Co. PLC (last year

Haytrans Ltd.). Details of shareholdings are given in Note 16 to the Financial Statements.

AIG Hayleys Investment Holdings (Pvt) Ltd. ceased to be an associate, at the financial year end. Details of the change are given in Note 16 to the


2008/09 2008/09 2007/08 Deemed Disposal Disposal Disposal Rs. '000 Rs. '000 Rs. '000

Share of net assets disposed 17,807 489,275 4,820

Profit/(loss) on disposal 12,979 51,625 (4,820)

30,786 540,900 –

Satisfied by :

Cash consideration 30,786 540,900 –

30,786 540,900 –

There was no acquisition of associates during the financial year.

37. RELATED PARTY TRANSACTIONS

A. Parent and Ultimate Controlling Party

The Company does not have an identifiable parent of its own.

B. Transactions with Key Management Personnel(i) Loans to Directors

No loans have been given to the Directors of the Company.

(ii) Key Management Personnel Compensation

Key management personnel comprises the Directors of the Company and Details of their compensation are given in Note 10 to the Financial Statements.

(iii) Other Transactions with Key Management Personnel

(a) The names of Directors of Hayleys PLC, who are also Directors of other subsidiary and associate companies are stated on pages 117 to 118.

(b) Details of Directors' shareholdings are given in the Annual Report of the Directors on the Affairs of the Company on page 119. There were no other

transactions with key management personnel other than those disclosed below.

(c) The undermentioned Directors of Hayleys PLC, have leased the following residential premises to the undernoted companies in the Group:

Monthly RentalLessor Premises Lessee Rs.

N.G. Wickremeratne No. 26 E-3, Pasal Mawatha, Battaramulla. Hayleys PLC 2,500

A.M. Pandithage No. 11/3, Sri Sunandarama Road, Hayleys Advantis Ltd. 5,000

Kalubowila, Dehiwela.

R.A. Ebell No. 15/8, Nuwarawatte Place, Nawala. Hayleys PLC 1,025

P.S.P.S. Perera No. 351, Hokandara Road, Akuregoda. Volanka (Pvt) Ltd. 1,376

M.R. Zaheed No. 20/66, Fairfield Gardens, Colombo 8. Hayleys Consumer Products Ltd. 2,400

J.A.G. Anandarajah No. 66B/7, Sri Maha Vihara Road, Dehiwela. Dipped Products PLC 2,826

(d) Mr. J.D. Bandaranayake and Mr. K.D.D. Perera who were Directors as at 31st March, 2009, were also Directors of Sampath Bank PLC.

Companies within the Group have carried out transactions in the ordinary course of business with Sampath Bank during the year as follows:

Group

Bank Facilities Obtained Outstanding Interest & other as at year end charges paid

Sampath Bank (Rs. mn) 358 116 16

Company

Hayleys PLC does not have any banking facility with Sampath Bank.



169

C. Transactions with Subsidiaries and Associates

Relationships with subsidiaries and associates are explained in Note 16 and also under Report Parameters in pages 83 to 86. The Business Segment

classification is also given under Group companies.

(i) Companies within the Group engage in trading transactions under normal commercial terms and condition.

(ii) Hayleys PLC provides office space to its subsidiary and associate companies and charges rent. In addition, the Company incurs common expenses

such as on export shipping, secretarial, data processing, personnel and administration functions. Such costs are allocated to subsidiary and associate

companies. During the year, payments were made to Group companies for the supply of goods and services. Details are given below: 2008/09 Rs. '000 Subsidiaries Associates

Business segment Rent Common Purchase of Rent Common Purchase ofexpenses goods and expenses goods and

services services

Fibre 335 61,221 2,763

Hand protection 14,847 58,385

Purification products 15,223 37,400 51

Textiles – – – 3,398 25,718 1,561

Agri inputs 11,253 22,552

Agri products 22 13,214 1,029 5,785

Plantations 4,267 3,577 25 5,233 10,874

Industry inputs 8,284 19,936 1,288

Power & energy – 1,788 – 298

Transportation 32,681 64,508 3,641

Consumer products 13,755 21,125 566

Resorts – 519 – 14 1,253

Investments & services 2,337 5,247 13,748 58

Total 103,004 309,472 22,082 9,674 43,928 1,619

2007/08 Rs. '000 Subsidiaries Associates

Business segment Rent Common Purchase of Rent Common Purchase ofexpenses goods and expenses goods and

services services

Fibre 646 72,148 2,587

Hand protection 12,820 52,987 271

Purification products 14,668 37,190 38

Textiles – – – 3,138 23,520 30

Agri inputs 10,058 21,996 –

Agri products 3 9,690 2 835 4,124

Plantations 3,965 3,320 40 4,074 9,802 11

Industry inputs 7,206 20,098 10,017

Power & energy 5 1,461

Transportation 30,162 57,606 7,279

Consumer products 14,087 24,068 331

Resorts – 418 – 28 1,109

Investments & services 7,661 15,737 14,160 151 228

Total 101,281 316,719 34,725 8,075 38,706 269


170


Details of inter company balances are given below:

Company 2008/09 2007/08 Rs. '000 Rs. '000 Subsidiaries Associates Subsidiaries Associates

Business segment Receivable Payable Receivable Receivable Payable Receivable

Fibre 10,064 – – 67,714 – – Hand protection 16,042 – – 11,358 – – Purification products 5,623 – – 4,059 – – Textiles – – 20,994 – – 8,393 Agri inputs 8,675 – – 2,835 (3,864) – Agri products 3,386 – 636 1,097 – 151 Plantations 842 – 6,028 1,422 – 2,647 Industry inputs 66,282 (23,583) – 17,780 (23,583) – Power & energy 1,464 – 348 162 – 55 Transportation 6,879 – – 15,156 – – Consumer products 248,078 (69,418) – 210,039 (68,820) – Resorts 76,500 – 131 89,051 – 95 Investments & services 227 (46,534) – 2,951 (46,529) 195 Total 444,062 (139,535) 28,137 423,624 (142,796) 11,536

Group 2008/09 2007/08

Associates Associates

Business segment Receivable Payable Receivable Payable

Fibre – – 55 – Hand protection – – – – Purification products – – – – Textile 22,995 – 9,176 – Agri inputs – – – – Agri products 1,100 (25,873) 1,282 (39,532)Plantations 12,028 (1,837) 3,746 (111)Industry inputs – – – – Power & energy 42,921 – 31,737 – Transportation 2,939 – 427 (1,603)Consumer products – – – – Resorts 131 – 94 – Investments & services – – 195 – Total 82,114 (27,710) 46,712 (41,246)

(iii) Details of guarantees are given in Note 30 to the Financial Statements respectively.

(iv) There are no related parties or related party transactions other than those disclosed above.

38. DISCONTINUED OPERATIONS/ASSETS HELD FOR SALE Consolidated

2008/09 2007/08 Rs. '000 Rs. '000

Revenue and expenses from Discontinued Operations

Gross turnover 25,479 371,281

Turnover tax (97) (3,238)

Net turnover 25,382 368,043

Cost of sales (23,154) (354,663)

Gross profit 2,228 13,380

Other income 21,029 1,479

Distribution expenses (51,612) (194,854)

Administrative expenses (60,692) (167,046)

Other expenses –

Net finance cost (10,937) (83,417)

Share of profit from associates

Loss before tax from discontinued operations (99,984) (430,458)

Tax expense (284)

Loss for the year from discontinued operations (99,984) (430,742)

Earnings per share

Basic earnings per share (Rs.) (1.35) (5.51)

Diluted earnings per share (Rs.) (1.35) (5.51)



171

Loss before tax from discontinued operations is stated after charging all expenses including the following:

Consolidated

2008/09 2007/08 Rs. '000 Rs. '000

Audit services 195 315

Non audit services – 108

Depreciation of property, plant & equipment – 2,562

Staff cost (i)

Defined contribution plan cost 742 1,395

Defined benefit plan cost 1,646 3,691

Other Staff cost (excluding defined contributions & defined benefits) 14,569 27,215

Provision for bad and doubtful debts & bad debts written off 46,469 124,304

Consolidated


Assets and Liabilities of Discontinued Operations

Assets Classified as Held for Sale

Property, plant & equipment 8,000 73,652

Inventories – 11,243

Trade and other receivables – –

Total assets 8,000 84,895

Liabilities Directly Associated with Assets Classified as Held for Sale

Retirement benefit obligations – 2,147

Trade and other payables – 2,966

Short-term interest-bearing borrowings – 2,825

Total liabilities – 7,938

Consolidated

2008/09 2007/08 Rs. '000 Rs. '000

Cash Flow Related to Discontinued Operations

Net cash flows from operating activities 77,168 225,511

Net cash flows from investing activities 105,497

Net cash flows from financing activities (348,079)

Net cash flows from discontinued operation 182,665 (122,568)

Industry Segment Information Purification Consumer Discontinued Operation

For the year ended 31st March, 2009 2008 2009 2008 2009 2008

Turnover

Total – 34,745 25,479 336,536 25,479 371,281

Intra Group – – – – – –

External – 34,745 25,479 336,536 25,479 371,281

Segment results 7,113 (44,547) (96,162) (302,494) (89,048) (347,041)

Inter Segment adjustments – – – – – –

Profit before net finance cost 7,113 (44,547) (96,162) (302,494) (89,048) (347,041)

Net finance cost (223) (2,076) (10,713) (81,341) (10,936) (83,417)

Profit before tax 6,890 (46,623) (106,875) (383,835) (99,984) (430,458)


172


39. INDUSTRY SEGMENT INFORMATIONFibre Hand Purification Textile Agri Inputs Agri Products Plantation

Protection Products

For the year ended 31st March 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

In Rs. '000

Turnover

Total 3,251,759 3,677,605 9,462,829 8,845,503 4,503,794 4,177,948 – – 3,678,175 3,213,533 1,090,063 1,022,676 3,108,571 2,827,974

Intra Group – – – – – – – – – – – – (675,415) (520,581)

External 3,251,759 3,677,605 9,462,829 8,845,503 4,503,794 4,177,948 – – 3,678,175 3,213,533 1,090,063 1,022,676 2,433,156 2,307,393

Segment results 66,942 238,977 637,491 375,349 446,747 381,535 – – 382,126 308,452 (21,549) 76,665 311,999 434,578

Inter segment adjustments – – – – – – – – – – – – – –

Profit before net finance cost 66,942 238,977 637,491 375,349 446,747 381,535 – – 382,126 308,452 (21,549) 76,665 311,999 434,578

Net finance cost (136,945) (182,966) (325,266) (209,566) (40,304) (102,629) – – (169,614) (174,156) (55,570) (25,675) (18,018) (26,256)

Share of associate

company profits (3,760) (5,056) – – – – 142,777 260,371 – – 3,438 7,463 26,073 53,950

Profit before tax (73,763) 50,955 312,225 165,783 406,443 278,906 142,777 260,371 212,512 134,296 (73,681) 58,453 320,054 462,272

Depreciation 77,937 72,225 261,061 251,354 107,383 97,514 – – 22,947 18,001 40,257 31,099 122,939 111,735

Impairment of assets – – – – – – – – – – – – – –

Amortisation of intangible assets – – – – – – – – – – – – – –

Total assets (excluding associates) 3,833,380 4,351,630 5,897,007 5,326,773 2,624,242 2,602,609 – – 1,828,825 1,980,386 678,882 631,796 3,999,275 3,631,011

Investment in associates 34,737 36,141 – – – – 1,136,636 991,229 – – 70,110 66,631 366,752 362,678

Capital expenditure 89,223 84,948 217,910 279,772 33,021 200,673 – – 32,856 38,229 103,149 99,277 581,217 399,516

Non-interest bearing liabilities

Deferred taxation 24,014 22,008 7,402 13,482 4,000 4,533 – – – 24 5,400 2,500 132,983 119,638

Retirement benefit obligations 258,542 250,530 260,220 231,965 18,876 61,306 – – 88,802 65,813 27,527 20,499 586,526 543,508

Trade and other payables 263,761 182,693 984,785 1,084,196 321,494 299,210 – – 485,438 845,576 71,620 107,243 290,591 311,247

Cash Flow

Segment cash flow from

operating activities 322,039 (63,732) 136,514 212,913 254,158 464,349 (114,375) 214,392 (43,356) (23,606) 453,227 397,902


investment activities 211,566 269,851 (397,141) (289,394) 23,633 (105,275) (13,902) (2,743) (103,059) (94,894) (309,096) (342,807)


financing activities (306,724) (145,613) (4,869) (202,191) (177,028) 204,300 24,833 (11,298) 114,374 50,023 (188,127) (240,089)



173

Industry Inputs Power Transportation Consumer Resorts Investments Non-segment Group Total & Energy Products & Services Adjustments

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

946,109 1,369,705 109,732 53,524 3,799,598 3,446,861 3,118,178 2,799,147 – – 365,228 646,624 – – 33,434,036 32,081,100

– – (10,298) (6,369) – – – – – – (330,803) (598,848) – – (1,016,516) (1,125,798)

946,109 1,369,705 99,434 47,155 3,799,598 3,446,861 3,118,178 2,799,147 – – 34,425 47,776 – – 32,417,520 30,955,302

102,236 154,211 (544) (20,042) 455,258 569,596 70,636 194,668 (828) (691) 259,101 505,791 – – 2,709,615 3,219,089

– – – – – – – – – – (196,341) (501,052) – (528) (196,341) (501,580)

102,236 154,211 (544) (20,042) 455,258 569,596 70,636 194,668 (828) (691) 62,760 4,739 – (528) 2,513,274 2,717,509

(83,209) (63,823) (63,305) (27,720) (37,067) (16,880) (114,741) (105,099) 518 709 (111,219) (141,870) – – (1,154,740) (1,075,930)

– – (16,260) (3,676) 11,282 1 1 ,155 – – (34,450) (33,791) (13,012) 53,183 – – 116,088 343,599

19,027 90,388 (80,109) (51,438) 429,473 563,871 (44,105) 89,569 (34,760) (33,773) (61,471) (83,948) – (528) 1,474,622 1,985,178

4,909 3,532 17,442 23,767 112,032 190,209 9,671 12,890 – – 22,762 26,157 – – 799,340 838,483

– – – – – – – – – – – – – – – –

– – 793 618 – – – – – – – – – – 793 618

1,159,403 959,417 477,477 521,787 4,200,559 3,871,862 938,346 1,050,759 94,638 95,684 5,510,338 5,490,285 – – 31,242,372 30,513,979

– – 51,570 67,832 36,863 35,583 – – 690,988 755,384 – 528,589 – – 2,387,656 2,844,067

4,362 4,209 15,469 1,656 236,457 436,664 1,179 6,372 – – 14,646 40,563 – – 1,329,489 1,591,879

– – 25,615 9,246 9,291 6,200 – 284 – – 28,140 27,335 – – 236,843 205,250

48,379 31,842 51,103 29 227,629 191,543 28,578 34,420 – – 320,219 269,890 – – 1,916,401 1,701,345

654,317 497,868 38,460 23,638 1,406,579 1,316,125 476,574 342,045 149 93 88,114 205,394 – – 5,081,882 5,215,328

38,812 83,959 31,537 48,100 255,240 357,147 95,559 327,159 (1,531) (20,420) 68,968 403,526 (414,595) (567,698) 1,082,197 1,833,991

(46,851) (96,047) (95,502) (190,894) (18,343) 83,143 (32,018) (311,497) 467 26,814 496,756 (217,767) 484,121 543,063 200,631 (728,447)

64,243 (12,000) 83,123 159,706 31,788 (443,515) (13,424) 180,218 (5,800) (688,500) (225,258) 167,477 3,929 (892,834) (687,588)


174


B. Secondary Segments (Geographical Segments)

(i) Geographical segment turnover (see Note 6 on page 139)

(ii) Geographical segment results Consolidated

2008/09 2007/08 Rs. '000 Rs. '000

Sri Lanka 2,019,690 2,575,776

Australia (31,981) (3,996)

Thailand 58,351 (117,527)

Bangladesh 17,923 9,250

Japan 24,663 10,612

India (33,691) –

Indonesia 35,350 (8,972)

Continental Europe 268,924 178,836

United Kingdom 52,455 20,684

United States of America 101,590 53,374

2,513,274 2,718,037

Non-segment expense – (528)

2,513,274 2,717,509

(iii) Geographical segment assets and capital expenditure Consolidated

Total Assets Capital Expenditure2008/09 2007/08 2008/09 2007/08

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

Sri Lanka 25,747,890 25,419,306 1,196,994 1,478,709

Australia 154,585 214,460 1,393 4,679

Thailand 1,712,106 1,851,566 70,991 83,787

Bangladesh 99,825 22,937 15,298 2,348

Japan 232,417 226,259 – –

India 162,426 – 11,650 –

Indonesia 226,328 207,094 30,435 20,560

Continental Europe 2,208,357 1,972,213 1,519 1,107

United Kingdom 225,031 232,086 1,090 689

United States of America 473,408 368,058 119 –

31,242,372 30,513,979 1,329,489 1,591,879

Investment in associates 2,387,656 2,844,067 – –

33,630,028 33,358,046 1,329,489 1,591,879



175

As at 31st March, 2009Ownership Location Extent Market Value

(in acres) Rs. mn

Hayleys PLC Colombo 6.11 2,961.00

Subsidiaries

Carbotels (Pvt) Ltd. Kandy 42.44 94.60

Volanka (Pvt) Ltd. Ekala 15.80 166.80

Ravi Industries Ltd. Ekala 6.08 73.01

Rileys (Pvt) Ltd. Ekala 3.80 151.87

Galle 1.20 39.00

Chas P. Hayley & Company (Pvt) Ltd. Galle 4.06 134.53

Toyo Cushion Lanka (Pvt) Ltd. Katana 3.50 60.53

Volanka Exports Ltd. Nattandiya 7.20 6.91

Hayleys Exports Group Ekala 6.56 100.79

Kuliyapitiya 3.00 4.80

Lignocell (Pvt) Ltd. Madampe 7.03 8.50

Kuliyapitiya 3.52 8.45

Sunfrost (Pvt) Ltd. Alawwa 5.18 34.54

Haychem (Pvt) Ltd. Kottawa 5.00 19.00

Hayleys Electronics Ltd. Malabe 2.27 100.60

Hayleys Advantis Ltd. Welisara 11.00 581.00

Kelaniya 7.75 496.00

Haycolour (Pvt) Ltd. Kalutara 4.43 8.47

Haycarb PLC Madampe 25.95 36.26

Wewelduwa 2.45 39.20

Badalgama 12.88 20.60

Recogen (Pvt) Ltd. Badalgama 10.84 19.09

Dipped Products PLC Kottawa 8.40 52.68

Weliveriya 8.19 46.72

Palma Ltd. Gonawela 1.82 17.78

Venigros (Pvt) Ltd. Weliveriya 7.09 28.22

Bhagya Hydro (Pvt) Ltd. Gomala Oya 2.11 2.05

Neluwa Cascade Hydropower (Pvt) Ltd. Neluwa 2.45 4.52

Total 228.11 5,317.52

Associates

Hayleys MGT Knitting Mills PLC Horana 45.75 219.37

Hunas Falls Hotels PLC Kandy 19.88 19.88

Eastern Hotels Ltd. Trincomalee 23.47 75.00

Royal Heritage Hotels (Pvt) Ltd. Kandy 11.58 73.30

Sigiriya 25.09 96.36

Negombo Hotels Ltd. Negombo 2.53 284.82

Seashells Hotel Ltd. Negombo 1.86 163.35

The Lighthouse Hotel PLC Galle 11.62 627.95

Tropical Villas (Pvt) Ltd. Beruwela 2.50 183.99

144.28 1,744.02

Total 372.39 7,061.54

GENERAL INFORMATIONVALUE OF REAL ESTATE

176


Year ended 31st March 10-Year Compound 2009 2008 2007 Growth (%) Rs. ’000 Rs. ’000 Rs. ’000

Results

Group turnover 15 32,442,999 31,326,583 27,584,626

Profit before taxation 6 1,374,638 1,554,720 1,521,915

Taxation 13 (571,236) (464,946) (432,631)

Profit after tax 2 803,402 1,089,774 1,089,284

Minority interest 8 (492,464) (637,151) (555,719)

Profit attributable to Hayleys PLC (3) 310,938 452,623 533,565

Funds Employed

Stated capital*** 3 1,575,000 1,575,000 1,575,000

Capital reserves 19 5,697,166 5,954,623 5,457,476

Revenue reserves 13 5,083,473 4,692,428 4,667,992

Shareholders’ funds 13 12,355,639 12,222,051 11,700,468

Preliminary, pre-operational and deferred expenditure – – – –

Minority interest 10 4,220,619 3,986,239 3,704,926

Borrowings (both short and long-term) 15 9,232,776 9,600,416 10,235,592

13 25,809,034 25,808,706 25,640,986

Assets Employed

Non-current assets 12 17,215,706 17,625,669 17,005,585

Current assets 14 16,414,322 15,732,377 15,214,288

Current liabilities net of borrowings 15 (5,317,991) (5,391,701) (4,832,001)

Provisions 12 (2,153,244) (1,906,595) (1,541,717)

Deferred income 8 (349,759) (251,044) (205,169)

Capital Employed 13 25,809,034 25,808,706 25,640,986

Cash Flow

Net cash inflow/(outflow) from operating activities 1,082,097 1,841,624 408,821

Net cash inflow/(outflow) investing activities 200,631 (751,827) (843,422)

Net cash inflow/(outflow) financing activities (892,834) (687,588) (1,153,882)

Increase/(decrease) in cash and cash equivalents 389,894 402,209 (1,588,483)

Key Indicators

Earnings per share (basic) (Rs.) 4.15 6.03 7.11

Net assets per share (Rs.) 164.74 162.96 156.01

Market price per share (Rs.) 90.00 97.75 142.00

% change in market price (after adjusting for scrip issues) (7.9) (31.2) 44.2

% change in All Share Price Index (36) (9) 23

Return on average shareholders’ funds (%) 3 4 5

Return on average capital employed (%) 9.8 11 11

Price earnings ratio (times) 21.7 16.2 20.0

Interest cover (times covered) 2.1 2.5 3.4

Dividend cover (times covered) 1.4 2.0 2.0

Dividend rate (Rs.) 3.00 3.0 3.50

Current ratio (times) 1.3 1.3 1.3

Turnover to capital employed (times) 1.26 1.21 1.08

Property, plant & equipment to shareholders’ funds (%) 106 108 112

Borrowings to equity ratio (%) 75 79 87

Equity to total assets ratio (%) 37 37 36

* Increase through scrip issues.** Includes results of discontinued operations.*** Share capital and share premium previously reported has been reclassified to reflect stated capital as defined in the Companies Act No. 07 of 2007.+ Increase due to a rights issue followed by scrip issue.++ Increase due to a rights issue.

TEN YEAR SUMMARY

** **

GENERAL INFORMATION

**


177

2006 2005 2004 2003 2002 2001 2000Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24,011,798 19,445,441 15,503,450 12,509,780 10,895,507 10,834,243 9,000,302

1,448,558 1,837,232 1,337,700 1,246,353 1,017,700 1,262,053 837,557

(468,127) (427,861) (276,559) (277,626) (242,961) (251,888) (193,314)

980,431 1,409,371 1,061,141 984,745 774,739 1,010,165 644,243

(394,170) (634,984) (401,789) (360,024) (337,660) (404,290) (247,102)

586,261 774,387 659,352 608,703 437,079 605,875 397,141

1,575,000 +1,575,000 ++1,475,000 ++1,375,000 ++1,275,000 ++1,215,000 *1,185,000

2,466,637 2,253,637 2,054,681 1,520,054 1,299,674 1,293,218 1,233,079

4,215,591 4,110,588 3,578,426 2,995,943 2,402,942 2,144,840 1,723,838

8,257,228 7,939,225 7,108,107 5,890,997 4,977,616 4,653,058 4,141,917

– – – – – – (2,748)

2,967,915 2,868,478 2,899,028 2,549,315 2,366,528 2,147,942 1,827,318

9,781,034 8,113,582 5,493,388 3,737,764 3,492,061 3,181,389 2,535,794

21,006,177 18,921,285 15,500,523 12,178,076 10,836,205 9,982,389 8,502,281

12,957,290 11,932,426 9,655,743 7,523,269 6,803,060 6,317,170 6,078,911

14,496,109 12,538,508 9,504,855 7,824,077 6,614,491 6,403,770 4,870,896

(4,895,234) (4,193,374) (2,422,279) (2,099,047) (1,586,677) (1,768,581) (1,529,236)

(1,360,003) (1,185,246) (1,092,694) (947,932) (848,812) (816,170) (746,091)

(191,985) (171,029) (145,102) (122,291) (145,857) (153,800) (172,199)

21,006,177 18,921,285 15,500,523 12,178,076 10,836,205 9,982,389 8,502,281

216,967 1,095,244 419,206 89,434 814,385 518,950 814,546

(1,650,184) (3,016,839) (1,721,816) (846,674) (714,875) (472,536) (445,528)

768,153 1,638,736 680,486 (92,049) (105,970) (95,429) 22,431

(665,064) (282,859) (622,124) (849,289) (6,460) (49,015) 391,449

7.82 10.37 8.89 8.83 6.34 8.79 5.76

110.10 106.35 95.79 85.50 72.24 67.53 60.11

98.50 112.50 115.00 125.00 121.00 78.00 93.75

(12.9) 44.3 (4.0) 16.2 72.4 (9.2) (14.1)

29 36 74 20 46 (14) (7)

7 10 10 11 9 14 10

11 14 12 14 14 17 14

12.6 10.8 12.9 14.1 19.1 8.9 16.3

2.9 5.2 5.2 5.1 3.8 5.6 4.0

2.2 3.0 3.8 3.9 3.1 4.8 4.0

3.50 3.50 3.50 3.50 3.50 3.50 3.00

1.3 1.3 1.5 1.6 1.6 1.7 1.7

1.14 1.03 1.00 1.03 1.01 1.09 1.06

109 107 93 88 95 95 102

118 102 77 63 70 68 61

30 32 37 38 37 37 38

GENERAL INFORMATION

178


COUNTRY REPORT

Sri Lanka is strategically located in the path of major

sea routes between Europe and the Far East and is

steadily positioning itself as a commercial hub for

logistics and financial services. The country has a

multi-religious population with, up to 70% following

Buddhism. The economy has grown gradually and

has one of the highest per capita incomes in South

Asia. World renowned for its exceptional quality tea

and garments, Sri Lanka has also fast become an

important exporter of value added products.

KEY FACTS PERTAINING TOSRI LANKA:

Land Area: 65,525 sq. km.

Commercial Capital: Colombo

Climate: Tropical (10o C - 32o C)

2008 Estimated Population: 20.22 mn

Per Capita GDP at market price: (US $) 2,014

Currency: Sri Lanka Rupee

Corporate Tax Rate: 35%

Ports: Colombo, Galle and Trincomalee

Languages: Sinhala, Tamil and English

POLITICAL ENVIRONMENT

Sri Lanka has an Executive Presidency based on

the French model and the President is elected for a

period of six years. The national legislature is a 225

member parliament elected once in six years.

The Government of Sri Lanka (GoSL) has just

ended a three decade long conflict against what

has been identified as “the world’s most ruthless

terrorist organisation” by the world community.

The GoSL is now committed to finding a political

solution that would facilitate long-term harmony

between and within all communities.

SOCIAL INFRASTRUCTURE

The favourable developments in social

infrastructure in Sri Lanka have been well

recognised. Sri Lanka stands well above its

peers and close to developed countries on social

indicators such as mortality rates, life expectancy,

educational attainment, poverty indices and

gender equality.

The Government provides health services free

of charge to its people at all Government health

institutions. The ratio of hospital beds to people

amounts to 3 beds per 1,000 persons. The private

sector accounts for 220 hospitals and 8,850

hospital beds.

The demand for housing and urban

infrastructure has grown with the increase in

population, income levels, urbanisation and

changes in life styles. The private sector has

emerged as the major provider of housing for

middle and high income Sri Lankans, while the

Government continues to be involved in providing

housing facilities for low income households and

specific groups. The housing finance market was

affected by high interest rates in 2008. With the

economic slowdown, the demand for new houses

also declined considerably.

Sri Lanka enjoys the most extensive social

protection programme in South Asia. The Samurdhi

Welfare Programme was streamlined further in

2008. Under this programme a total of 1.6 mn

families benefitted in 2008.

ECONOMY

The Sri Lankan economy demonstrated its

resilience by recording real growth of 6% in 2008

despite the setbacks in the global and domestic

environments. In 2008, all sectors contributed

to this growth. The Industry and Services

sectors, which grew over 7.6% and 7.1% in 2007,

decelerated to 5.9% and 5.6%, respectively, mainly

due to the slowing down of domestic economic

activity amidst lower external demand in the

fourth quarter of 2008. However, the Agriculture

sector grew at a striking rate of 7.5% benefitting

from higher commodity prices and the potential

of the rehabilitated Eastern Province. The

Services sector continued to provide the highest

contribution of 57% to overall growth while the

Industry and Agriculture sectors contributed 28%

and 15%, respectively.

State sponsored infrastructure development

(mainly roads and fishing harbours) is taking place

in the recently liberated Eastern Province. The

Eastern Province has the capacity to produce 30%

of Sri Lanka’s paddy requirements and its salt-

water fishing industry has the potential to grow

by about three times its current volume. The rich

coastal belt of the North and East provinces could

attract a large number of tourists.

GENERAL INFORMATION


179

COUNTRY REPORT

Proposed Development Projects and ForeignDirect Investments

As part of the reawakening of the Northern and Eastern Provinces and the economic development of the

South, the following are some of the ongoing and planned physical infrastructure developments and their

current status. Expected year of Completion Status

Colombo - Matara Expressway 2011 First phase began in 2006

Colombo - Kandy Expressway 2012

Colombo - Katunayake Expressway 2012

Katunayake - Anuradhapura Road 2012

Northern Expressway 2017

National Highway Network Road Improvement 2012

Upper Kotmale Hydro Power Plant 2010 Contracts were assigned in 2008

Norochcholai Coal Fired Power Plant 2011 Construction began in 2006

Colombo Port Expansion 2010 Construction work in progress

Oluvil Port Development 2010

Galle Port Development 2012

Hambantota Port Development 2011 Construction work began in 2007

Colombo Matara Railway Line Upgrade 2012

Matara - Kataragama Railway Line Extension 2014

Eastern Railway Line Rehabilitation 2012

STOCK MARKET

The price performance of the Colombo Stock

Exchange is gauged by two Indices. The All Share

Price Index (ASPI) fell 40.8% and the Milanka Price

Index (MPI) fell 50.4% in 2008, to close at 1,503

and 1,631 points, respectively. In comparison, the

ASPI fell 6.7% and the MPI fell 11.1% in 2007. Given

the prevailing high interest rate and inflationary

environment, most company results for the

quarter ended 31st December, 2008 showed

negative growth, with market earnings declining

68% YoY for the quarter.

The ASPI is up more than 20% in the year

to date, as of April 2009, with growth primarily

as a result of increased retail confidence given

recent military victories in the North. Once the

North is entirely under Government control, retail

sentiment should improve further. Furthermore,

with lower inflation, and the Government easing

its monetary policy (leading to falling interest

rates), investor sentiment and corporate results are

also expected to improve and thus stimulate

market growth.

GENERAL INFORMATION

SOME WEBSITES FOR MORE INFORMATION:

Economic information: www.cbsl.gov.lk

Export Development Board: www.srilankabusiness.com

Investment Opportunities: www.boi.lk

Tourism: www.srilankatourism.org

Infrastructure Investment: www.bii.gov.lk

Stock Market: www.cse.lk & www.sec.gov.lk

Restructure & Divestiture of Public Enterprises: www.perc.gov.lk

Leisure Guide to Colombo: www.leisuretimes.lk

Road Development: www.rda.gov.lk/supported/expressways

Asian Development Bank: www.adb.org/Projects

Sri Lanka Ports Authority: www.slpa.lk

180


1878

Charles Pickering Hayley forms Chas P. Hayley &

Co. in Galle.

1909

Hayley & Kenny, a partnership formed between

W W Kenny and Chas P Hayley, opens in

Colombo.

1913

Hayley & Kenny purchases Thurburn Stores, 400,

Deans Road premises.

1936

Hayley and Kenny becomes a private limited

liability company.

1944

Chas P Hayley & Co. becomes a private limited

liability company and fully owned subsidiary of

Hayley & Kenny Ltd.

1952

George G Hayley with senior executives also

subscribing to equity forms Hayleys Ltd. with

a paid up capital of Rs. 200,000/-, to acquire

from the heirs of the late Chas P Hayley and W

W Kenny, the entire undertaking of Hayley &

Kenny Ltd.

1954

Hayleys Ltd., becomes a public Company.

1958

Shipping agency department is formed, later

to be reconstituted as Maritime Agencies Ltd.

(forerunner of Hayleys Advantis Ltd.).

MILESTONES

1964

Industries department is formed to

manufacture agricultural machinery and

spraying equipment.

1968

Haychem Ltd., a collaboration with Bayer of

Germany, is formed to formulate agrochemicals.

1973

Haycarb Ltd., is formed to pioneer the

manufacture and export of activated carbon

from coconut shell charcoal.

1975

Ravi Industries Ltd., a Company engaged in the

manufacture of brushes is acquired.

1976

Dipped Products Ltd., is incorporated to pioneer

manufacture of Rubber Gloves.

1983

The first overseas venture, Sorbtech Inc. (now

Haymark Inc.) is formed in USA.

1985

Overseas marketing companies are formed in

Holland, UK, Japan and Australia.

1991

Hayleys ventures into Hoteliering through

its subsidiary Carbotels Ltd.

Employee share ownership schemes are

introduced within the Group.

Hayleys steps into the business of

plantations.

1994

Group’s first overseas manufacturing facility

Carbokarn Co. Ltd., opens in Thailand.

2000

Hayleys moves into the insurance sector in

collaboration with the American International

Group.

2001

Hayleys steps into power generation in

collaboration with AES Corporation of USA.

2002

Inland marketing companies realigned under 3

focused companies Hayleys Agri Products Ltd.,

Hayleys Consumer Products Ltd. and Hayleys

Industrial Solutions Ltd.

2003

Group entered into ship owning business,

where Maritime Holdings Ltd. makes its

maiden investment in the Container Vessel

“Orient Stride”.

Dipped Products Ltd's initial overseas plant

is set up in Thailand heralding its entry into

the medical glove market.

2006

Hayleys adopts a new visual identify

replacing its former logo of 50 years

with one more contemporary and

representative of the diversity of the

Group's products and services.

Hayleys achieves hat trick by winning Sri

Lanka's Best Corporate Citizen title for the

third successive year.

Mabroc Kelani Valley launches the world's

first “Ethical Tea” to be recognised by the

UN's Global Compact.

2007

Hayleys becomes one of the first ten signatories

worldwide to the CEO Water Mandale of the

UN’s Global Compact.

GENERAL INFORMATION


181

GLOSSARY OF FINANCIAL TERMS

Accounting Policies

The specific principles, bases, conventions,

rules and practices adopted by an enterprise in

preparing and presenting Financial Statements.

Amortisation

The systematic allocation of the depreciable

amount of an intangible asset over its useful life.

Basic earnings per share

Profits attributable to ordinary shareholders

divided by the weighted average number of

ordinary shares in issue during the period.

Borrowings

All interest bearing liabilities.

Capital employed

Total equity, minority interest and interest bearing

borrowings.

Capital reserves

Reserves identified for specific purposes and

considered not available for distribution.

Cash equivalents

Liquid investments with original maturity periods

of three months or less.

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.

Credit rating

An evaluation of a corporate’s ability to repay its

obligations or the likelihood of not defaulting,

carried out by an independent rating agency.

Current ratio

Current assets divided by current liabilities.

A measure of liquidity.

Deferred taxation

The tax effect of timing differences deferred

to/from other periods, which would only qualify

for inclusion on a tax return at a future date.

Dividends

Distribution of profits to holders of equity

investments.

Dividend cover

Profit attributable to ordinary shareholders divided

by dividend. Measures the number of times

dividend is covered by distributable profit.

Dividend yield

Dividend per share as a percentage of the market

price. A measure of return on investment.

EBITDA

Abbreviation for earnings before Interest, tax,

depreciation and amortisation.

Effective tax rate

Income tax expenses divided by profit from

ordinary activities before tax.

Equity

Shareholders’ funds.

Gearing

Proportion of total interest bearing borrowings to

capital employed.

Interest cover

Profit before tax plus net finance cost divided

by net finance cost. Measure of an entity’s debt

service ability.

Market capitalisation

Number of shares in issue multiplied by the market

value of a share at the reported date.

Net assets per share

Shareholders’ funds divided by the weighted

average number of ordinary shares in issue. A

basis of share valuation.

Price earnings ratio

Market price of a share divided by earnings per

share as reported at that date.

Related parties

Parties who could control or significantly influence

the financial and operating policies of the business.

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 oblligation which arises because

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

Return on average capital employed

Profit before tax plus net interest cost divided by

average capital employed.

Return on average shareholders’ funds

Attributable profits to the shareholders divided by

average shareholders’ funds.

Revenue reserves

Reserves considered as being available for

distributions and investments.

Segments

Constituent business units grouped in terms of

similarity of operations and location.

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.

Working capital

Capital required to finance day-to-day operations

computed as the excess of current assets over

current liabilities.

GENERAL INFORMATION

182


NOTICE IS HEREBY GIVEN that the Fifty-Eighth Annual General Meeting of Hayleys PLC, will be held at the Auditorium of The Institute of Chartered

Accountants of Sri Lanka, No. 30A, Malalasekara Mawatha, Colombo 07 on Monday, 29th June, 2009 at 3.00 p.m. and the business to be brought before the

Meeting will be:

1. To consider and adopt the Annual Report of the Directors and the Statements of Accounts for the year ended 31st March, 2009, with the Report of the

Auditors thereon.

2. To declare a dividend as recommended by the Directors.

3. To re-elect Mr. K.D.D. Perera, who has been appointed by the Board, since the last Annual General

Meeting, a Director.

4. To re-elect, Mr. A.M. Pandithage, who retires by rotation at the Annual General Meeting, a Director.

5. To re-elect Mr. T.L.F.W. Jayasekara, who retires by rotation at the Annual General Meeting, a Director.

6. To re-elect Mr. J.A.G. Anandarajah, who retires by rotation at the Annual General Meeting, a Director.

7. To reappoint Mr. L.K.B. Godamunne, who retires having attained the age of seventy six years and the Company has received special notice of the

undernoted Ordinary Resolution in compliance with Section 211 of the Companies Act No. 7 of 2007 in relation to his reappointment.

Ordinary Resolution

“That Lalit Kirti Bandara Godamunne, a retiring Director, who has attained the age of seventy six years be and is hereby reappointed a Director of the

Company and it is hereby declared that the age limit of seventy years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to

the appointment of the said Director.

8. To authorise the Directors to determine contributions to charities.

9. To authorise the Directors to determine the remuneration of the Auditors, Messrs. KPMG Ford, Rhodes, Thornton & Company, who are deemed to have

been reappointed as Auditors in terms of Section 158 of the Companies Act No. 7 of 2007.

10. To consider any other business of which due notice has been given.

Note:

(i) A shareholder is entitled to appoint a proxy to attend and vote instead of himself and a proxy need not be a shareholder of the Company. A

Form of Proxy is enclosed for this purpose. The instrument appointing a proxy must be deposited at the Registered Office No. 400, Deans Road,

Colombo 10 by 3.00 p.m. on 27th June, 2009.

(ii) It is proposed to post ordinary dividend warrants on 7th July, 2009 and in accordance with the rules of the Colombo Stock Exchange the shares of

the Company will be quoted ex-dividend with effect from 30th June, 2009.

By Order of the Board

HAYLEYS PLC

HAYLEYS GROUP SERVICES (PRIVATE) LIMITED

Secretaries

Colombo

29th May, 2009

NOTICE OF MEETINGHayleys PLC

Company No. PQ22


183

I/We*……………………………………...............................……………...........……………………………........................

of …….………..…………………………………....................................……………………………………..........................

being a shareholder/shareholders* of HAYLEYS PLC hereby appoint,

1. .…………………………………………..................................……………………………………………..........................

of …………….…………………………...............................……….......……….………………................................ or

failing him/them.

2. NIRMALA GIHAN WICKREMERATNE (Chairman of the Company) of Colombo, or failing him, one of the Directors of the Company as my/our* proxy to

attend and vote as indicated hereunder for me/us* and on my/our* behalf at the Fifty-Eighth Annual General Meeting of the Company to be held on

Monday, 29th June, 2009 and at every poll which may be taken in consequence of the aforesaid meeting and at any adjournment thereof:

For Against

1. To adopt the Annual Report of the Board of Directors and the Statements of Accounts

for the year ended 31st March, 2009, with the Report of the Auditors thereon.

2. To declare a dividend as recommended by the Directors.

3. To re-elect Mr. K.D.D. Perera, who has been appointed by the Board since the last

Annual General Meeting, a Director.

4. To re-elect Mr. A.M. Pandithage, who retires by rotation at the Annual General


5. To re-elect Mr. T.L.F.W. Jayasekara, who retires by rotation at the Annual General


6. To re-elect Mr. J.A.G. Anandarajah, who retires by rotation at the Annual General

Meeting, a Director..

7. To re-appoint Mr. L.K.B. Godamunne, who retires having attained the age of

seventy six years, a Director by passing the Ordinary Resolution set out in the Notice.

8. To authorise the Directors to determine contributions to charities.

9. To authorise the Directors to determine the remuneration of the Auditors,

Messrs KPMG, Ford, Rhodes, Thornton & Company, who are deemed to have

been re-appointed as Auditors.

(**) The proxy may vote as he thinks fit on any other resolution brought before the Meeting.

As witness my/our* hands this …………........................................... day of ………..…........................... 2009.

Witnesses

…………………….......…………...

…………………….......…………...

…………………….......…………...

…………………………………

Signature of Shareholder

Note* Please delete the inappropriate words.

1. A proxy need not be a shareholder of the Company.

2. Instructions as to completion, appear on the reverse.

FORM OF PROXY

184


INSTRUCTIONS AS TO COMPLETION

1. To be valid, this Form of Proxy must be deposited at the Registered Office No. 400, Deans Road, Colombo 10,

by 3.00 p.m. on 27th June, 2009.

2. In perfecting the Form of Proxy, please ensure that all details are legible.

3. If you wish to appoint a person other than the Chairman of the Company (or failing him, one of the Directors of the Company) as your proxy, please

insert the relevant details at (1) overleaf and initial against this entry.

4. Please indicate with an X in the space provided how your proxy is to vote on each resolution. If no indication is given, the proxy in his discretion will

vote as he thinks fit. Please also delete (* *) if you do not wish your proxy to vote as he thinks fit on any other resolution brought before the Meeting.

5. 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.

6. Where the Form of Proxy is signed under a Power of Attorney (POA) which has not been registered with the Company, the original POA together with

a photocopy of same or a copy certified by a Notary Public must be lodged with the Company along with the Form of Proxy.

FORM OF PROXY

Name of Company

Hayleys PLC

Legal Form

A Public Limited Company Incorporated in

Sri Lanka in 1952.

Founded 1878.

Company Number

PQ 22

Accounting year end

31st March

Principal Activities

Holding Company; carrying out investments

in and providing management and services

to Hayleys Group Companies.

Stock Exchange Listing

The ordinary shares of the Company are

listed on the Colombo Stock Exchange of

Sri Lanka.

Hayley Building

P.O. Box 70, No. 400, Deans Road,

Colombo 10, Sri Lanka.

Telephone: (94-11) 2627000

Facsimile: (94-11) 2699299

Auditors

KPMG Ford, Rhodes, Thornton & Co.

Chartered Accountants

P.O. Box 186, Colombo, Sri Lanka.

Bankers

Hatton National Bank

HSBC

Bank of Ceylon

NDB Bank

Standard Chartered Bank

Sampath Bank

Commercial Bank of Ceylon

Deutsche Bank

Secretaries

Hayleys Group Services (Private) Limited

No. 400, Deans Road, Colombo 10,

Sri Lanka.

Telephone: (94-11) 2627650

Please direct any queries about the

administration of shareholdings to the

Company Secretaries.

Investor relations

Please contact the Corporate Affairs Unit

Telephone: (94-11) 2627610

E-mail: [email protected]

Internet

www.hayleys.com

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