Galadari AR 2012 - CSE

1Annual Report - 2012

GALADARICOLOMBOHOTEL

Contents Corporate Information 2

Notice of Meeting 3

Chairman’s Message 4

Board of Directors 5

Statement of Directors’ Responsibilities 7

Report of the Directors’ 8

Corporate Governance 10

CSR Report 12

Report of the Audit Committee 13

Report of the Remuneration Committee 13

Independent Auditors’ Report 14

Statement of Financial Position 15

Income Statement 16

Statement of Changes in Equity 18

Cash Flow Statement 19

Notes to the Financial Statements 20

Information to Shareholders 44

Five Year Summary 45

Form of proxy 47

2 Annual Report - 2012


COMPANY NAME : Galadari Hotels (Lanka) PLC

COMPANY REGISTRATION NO. : PQ 137

LEGAL STATUS : A quoted Public Company with limited liability incorporated in Sri Lanka

BOARD OF DIRECTORS : Khaled Aly Aly Soliman - Chairman Sharif Mir Hashem Ahmed Khoory Lalith Rukman De Silva Hewa Komanage Jayantha Dharmadasa Dr. John Anthony Shivaji Felix Mohamed Hisham Abdel Wahab Al Garf Parakrama Maithri Asoka Sirimane Amit Chib Hatim Abdelaziz Mohamed Hettiaratchige Jayantha Christopher Perera (Alternate Director to H K J Dharmadasa)

AUDIT COMMITTEE : Parakrama Maithri Asoka Sirimane- Chairman Amit Chib Dr. John Anthony Shivaji Felix

REMUNERATION COMMITTEE : Khaled Aly Aly Soliman - Chairman Parakrama Maithri Asoka Sirimane Mohamed Hisham Abdel Wahab Al Garf

SECRETARIES & REGISTRARS : Jacey & Company No.9/5, Thambiah Avenue, Colombo 07 Tel: 4335159 - 62

REGISTERED OFFICE : No.9/5, Thambiah Avenue, Colombo 07

AUDITORS : M/s KPMG, Chartered Accountants No. 32A, Sir Mohamad Macan Markar Mawatha, P.O.Box 186, Colombo 03

LAWYERS : Tiruchelvam Associates No.116/10, Rosmead Place, Colombo 07

BANKERS : Hatton National Bank WTC Customer Service Centre, Colombo 01 Hongkong & Shanghai Banking Corporation No.25, Sir Baron Jayatilake Mawatha, Colombo 01 Bank Of Ceylon Corporate Branch Head Offi ce No.4, Bank Of Ceylon Mawatha, Colombo 01 Nations Trust Bank Head Offi ce P O Box No. 242, Union Place, Colombo 02

Corporate Information



NOTICE is hereby given that the 32nd Annual General Meeting of Galadari Hotels (Lanka) PLC will be held at the Ballroom of Galadari Hotel, No.64, Lotus Road, Echelon Square, Colombo 01, on Wednesday, 26th June, 2013 at 4.00 p.m. for the following purposes:

1. To receive and consider the Audited Financial Statements for the Year Ended 31st December, 2012 together with the Reports of the Directors’ and Auditors’ thereon.

2. (i) To re-elect Mr Lalith Rukman De Silva, Director, who retires by rotation in terms of Article 87 of the Articles of Association of the Company. (ii) To re-elect Mr Hewa Komanage Jayantha Dharmadasa, Director, who retires by rotation in terms of Article 87 of the Articles of Association of the Company.

(iii) To re-elect Dr John Anthony Shivaji Felix, Director, who retires by rotation in terms of Article 87 of the Articles of Association of the Company.

3. To re- appoint the Auditors Messrs KPMG, Chartered Accountants, to hold offi ce until the conclusion of the next Annual General Meeting and to authorise the Directors to determine their remuneration.

BY ORDER OF THE BOARD

JACEY & COMPANY

SECRETARIES

Colombo

2nd April, 2013

NOTE:

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE IN HIS/HER STEAD. 2. A PROXY NEED NOT BE A MEMBER OF THE COMPANY 3. THE COMPLETED FORM OF PROXY MUST BE DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANY AT NO.9/5, THAMBIAH AVENUE, COLOMBO 07 NOT LESS THAN 48 HOURS BEFORE THE TIME FIXED FOR THE MEETING.

Notice of Meeting



Chairman’s Message

On behalf of the Board of Directors, we have pleasure in welcoming you to the 32nd Annual General Meeting of Galadari Hotels (Lanka) PLC.

Company Performance

The fi nancial year under review is a milestone year on many levels which included the highest ever revenue since the inception of the hotel. This included a record turnover of Rs. 1,724,264,303/- with an increase of 33% over last year. Company Gross Profi t crossed the Rs. 1 billion mark, an increase of 43% comparatively to that of last year.

Future Outlook

With Sri Lanka’s tourism industry beginning to bloom after recovering from a 30-year war, the country is at present experiencing fast paced

tourist arrivals. This highly promising tourist traffi c undoubtedly will benefi t the future endeavors of the hotel by providing fruitful ground to enforce our long-term growth strategies that we have set in place for future development and progress.

We remain confi dent that our future plans will be rewarding and pave the way for further progressive change.

Acknowledgement

I take this opportunity to thank the Board of Directors for their contributions made towards the Management of the Company which has added to its overall progress. I also would like to thank the Government of Sri Lanka for the commitment and passion that they have shown towards the uplifting plans for the country’s tourism industry thus providing an

invaluable window of opportunity for productive growth.

On behalf of the Board of Directors, I wish to thank the Management and staff for the unstinted and loyal support which has been the foundation for our progressive drive in steering the Company forward. Finally I would like to take this opportunity to thank our Shareholders for the sincere interest and trust they have placed in us at all times.

Mr Khaled Aly SolimanChairman



Board of Directors

MR KHALED SOLIMAN - CHAIRMAN

Mr Soliman is a Graduate in Bachelor of Science Civil Engineering Degree from the faculty of Engineering, Cairo University, and holds a Management Diploma from Henley College, UK. He is the present Group Chief Executive Offi cer of Galadari Brothers Company LLC, which is a multibillion, multidiscipline leading group in Dubai, and a part of Investment Corporation of Dubai, well diversifi ed in different industries such as Automobiles, Heavy Construction Equipment, Hospitality, Food & Beverage, Media, Engineering, Industrial Trading and Travel & Tourism.

MR SHARIF HASHIM AHMED KHOORY

Mr Khoory holds a B.Sc Degree in Economics from Portland States University, and is currently the Group Head (Business Development) of Galadari Brothers Co. LLC.

MR MOHAMED HISHAM ALGARF

Mr Algarf holds a Degree in B.Sc. Architecture & Planning from the Faculty of Engineering, Cairo University and at present is Principal and Managing Partner at Living D’art Company LLC in UAE, Iran & Egypt.

MR AMIT CHIB

Mr Amit Chib is a qualifi ed Chartered Accountant, Company Secretary and Cost Accountant. He has over 18 years of work experience in industries such a Retail, Engineering, Real Estate, Trading, Automotive, Electronics, Manufacturing, Information Technology and Supply Chain Management. He is the present

Group Chief Financial Offi cer of Galadari Brothers Company LLC, which is a multibillion, multidiscipline leading group in Dubai, and a part of Investment Corporation of Dubai, well diversifi ed in different industries such as Automobiles, Heavy Construction Equipment, Hospitality, Food & Beverage, Media, Engineering, Industrial Trading and Travel & Tourism.

MR HATIM ABDELAZIZ MOHAMED

Mr Hatim Abdelaziz Mohamed was awarded a university degree of “License en Droit”, Bachelor of Law (LL.B) from Cairo University - Khartoum branch in 1993. Mr Mohamed was admitted to the Egyptian Bar Association and holds a license to practice law; he is also a listed Arbitrator in Khartoum Centre of Arbitration and attends many legal courses and workshops. Mr Mohamed has 19 years experience in corporate and commercial law and litigation. Mr Mohamed currently serves as Group Legal Manager at Galadari Brothers Co. (L.L.C.) of Dubai, U.A.E. following his services with leading companies in UAE and law fi rm, Sultanate of Oman.

DR. JOHN ANTHONY SHIVAJI FELIX

Dr. Shivaji Felix was awarded LL. B. (Honours) degrees by the University of Colombo and the University of London in 1994. He passed the fi nal examination for the admission of Attorneys-at-Law with fi rst class honours in 1995 and was admitted and enrolled as an Attorney-at-Law of the Supreme Court of Sri Lanka in 1996. In 1999 he was elected an Associate Fellow of the Society for Advanced Legal Studies of the University of London. In 2000 he was awarded a

Ph. D. degree by the University of London for his work on administrative law. He is a Fellow of the Sri Lanka Institute of Taxation (FTII) (2009) and was previously an Associate of the Institute (ATII)(2003). He was awarded a Diploma (cum laude) by the Institute of Federalism, University of Fribourg, Switzerland (2004). In 2005 University College London, appointed him an Honorary Research Fellow of the Faculty of Laws in recognition of his contribution to legal scholarship. He is a member of the Taxes Committee of the International Bar Association, a Fellow of the Royal Society of Arts (England) and a member of the Society of Legal Scholars (United Kingdom and Ireland).

Dr. Felix has many locally and internationally refereed publications to his credit. He has also functioned as a consultant to the World Bank in its Country Financial Accountability Assessment Study for Sri Lanka (CFAA). He is a Council Member of the Sri Lanka Institute of Taxation and a Committee member of the Sri Lanka Branch of the International Fiscal Association. Dr Felix practices as an Attorney-at-Law with a focus on public law and revenue law. He teaches and functions as an examiner at the Faculty of Law, University of Colombo.

MR LALITH RUKMAN DE SILVA

Mr Lalith De Silva holds a special degree in economics and a post graduate diploma in Public Financial Management. He is a fellow member of the institute of Public Finance and Development Accountancy.

He has held several senior positions in the public service, including the Director General of Treasury Operation



in the Ministry of Finance, Dy. Secretary to the Treasury, Secretary Ministry of Trade Marketing Development Cooperatives and Consumer Service.Currently he serves as a Director of Lanka Logistics and Technologies Limited and a Member of the Standing Committee on Statutory Matters of ICTAD.

MR HETTIARACHCHIGE JAYANTHA CHRISTOPHER PERERA(Alternate Director For H.K.Jayantha Dharmadasa)

Mr. Jayantha Perera is a member of the Chartered Financial Analysts (USA). He is also licenced by the Securities & Exchange Commission to offer Investment Advisory services. He presently functions as the Chief Executive offi cer of Richard Pieris Securities, a member fi rm of the Colombo Stock Exchange. Mr Perera was previously the Group Chief Financial Offi cer of Nawaloka Hospitals PLC. Mr Perera has acquired extensive experience in the fi eld of Investment Banking and Securities Trading. He also headed the Capital Market Division of the Merchant Bank of Sri Lanka PLC. Mr Perera has received overseas training in both Pakistan and India in the fi elds of Corporate Finance.

Mr Perera is also a Director of Richard Pieris Securities Private Limited, Business Intelligence Group Private Limited and Lanka Cell Technologies Private Limited.

MR HEWA KOMANAGE JAYANTHA DHARMADASA

Mr Jayantha Dharmadasa is a businessman by profession and an Accountant with over 34 years of experience in Executive Management. He is a fellow member of the Institute of Certifi ed Professional Managers (FCPM).

Mr Dharmadasa is the Chairman of Nawaloka Holdings (Pvt) Limited, Nation Lanka PLC, Nawaloka Construction Company (Pvt) Limited, Nawaloka Polisacks Ltd, Sharjah, Nawaloka Trading Private Limited, Nawaloka Aviation Private Limited, Nawaloka Motors Private Limited, Nawaloka ABC Petroleum Private Limited and Sasiri Polisacks Private Limited.

Mr Dharmadasa also functions as the Deputy Chairman of Nawaloka Hospitals PLC, Nawaloka Metropolis Clinical Laboratories Private Limited, New Nawaloka Hospitals Private Limited, New Nawaloka Medical Centre Private Limited. Mr Dharmadasa is also a Director at Sri Lanka Telecom PLC.

He is the former Chairman of the National Film Corporation in Sri Lanka. He was also a former Chairman of Sri Lanka Cricket and President Asian Cricket Council.

Board of Directors contd



Statement of Directors’ Responsibilities

Directors’ Responsibilities for the Preparation of Financial Statements

This Statement of Directors’ Responsibilities is to be read in conjunctions with the Auditors’ Report and is made to distinguish the respective responsibilities of the Directors and of the Auditors in relation to the Financial Statements contained in this Annual Report.

The Directors of your Company are required by the Companies Act No.7 of 2007 to prepare Financial Statements which give a true and fair view of the state of affairs of the Company as at the end of the fi nancial year, and of the Profi t and Loss and of the Cashfl ows of the Company for the fi nancial year.

The Directors confi rm that the Financial Statements of the Company for the year ended 31st December, 2012 presented in the Report have been prepared in accordance with the new Sri Lanka Accounting Standards (here in after referred to as SLFRSs/ LKASs) as issued by Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No.7 of 2007. In preparing the Financial Statements, the Directors have selected

the appropriate accounting policies and have applied them consistently. Reasonable and prudent judgments and estimates have been made and applicable accounting standards have been followed and the Financial Statements have been prepared on a going concern basis.

The Directors are of the view that adequate funds and other resources are available within the Company for the Company to continue in operation for the foreseeable future.

The Directors have taken all reasonable steps expected of them to safeguard the assets of the Company and to establish appropriate systems of internal controls in order to prevent, deter and detect any fraud, misappropriation or other irregularities. The Directors have also taken all reasonable steps to ensure that the Company maintain adequate and accurate accounting books of record which refl ect the transparency of transactions and provide an accurate disclosure of the Company’s fi nancial position.

The Directors are required to provide the Auditors with every opportunity

to take whatever steps and undertake whatever inspection they consider appropriate for the purpose of enabling them to give their Audit Report. The Directors are of the view that they have discharged their responsibilities in this regard.

Compliance Report

The Directors confi rm that, to the best of their knowledge, all taxes and levies payable by the Company and all contributions, levies and taxes payable on behalf of the employees of the Company, and all other known statutory obligations as at the balance sheet date have been paid or provided for in the Financial Statements.

By Order of the Board JACEY & COMPANY Secretaries

Colombo 2nd April, 2013



The Directors have pleasure in presenting to the shareholders the Annual Report of the Board of Directors for the year ended 31st December, 2012.

This Report contains information required by Section 168 of the Companies Act No. 7 of 2007 and other necessary information required by the Listing Rules of Colombo Stock Exchange.

Principal Activities

The Principal activity of the Company is hoteliering.

Changes to the nature of Business

There was no signifi cant changes to the principle activities of the Company during the Financial year ended 31st December, 2012.

Financial Statements

The Financial Statements for the Year ended 31st December, 2012 are set out on pages 15 to 43 in the Annual Report.

Auditors’ Report

The Auditors’ Report which is an integral part of the Financial Statements prepared for the Accounting period ended 31st December, 2012 is set out in the page 14 in the Annual Report.

Director’s Responsibility for the Financial Statements

The Directors are responsible for preparing and presenting the Financial Statements, which are set-out on page 7 The Financial Statements have been prepared in conformity with the new Sri Lanka Accounting Standards (here in after referred to as SLFRSs/LKASs) as issued by the Institute of Chartered Accountants of Sri Lanka, Companies Act No.7 of 2007 and the Listing Rules of the Colombo Stock Exchange.

The Directors are satisfi ed that the Financial Statements, presented on pages 15 to 43 give a true and fair view

Report of the Board of Directors’

of the state of affairs of the Company.

Accounting Policies

The accounting policies adopted in the preparation of the Financial Statements are given on pages 20 to 25.

The Directors consider that, in preparing these Financial Statements, suitable accounting policies have been used which are applied consistently and supported by reasonable and prudent judgment and that all applicable accounting standards have been followed. The Financial Statements are prepared on a going concern basis.

Corporate Governance

A description of the Company’s Corporate Governance practices is set out on pages 10 to 11.

Directorate

The names of the Directors as at 31st December, 2012 set out under Corporate Information on page 2. The changes to the Directorate during the period under review are set out below:

Khaled Aly Aly Soliman

Sharif Mir Hashem Ahmed Khoory

Mohamed Hamad Obaid Khamis Al Shehi-Resigned with effect from 9th May, 2012

Lalith Rukman De Silva

Hewa Komanage Jayantha Dharmadasa

Hettiaratchige Jayantha Christopher Perera (Alternate Director For H.K.Jayantha Dharmadasa)

Dr.John Anthony Shivaji Felix

Parakrama Maithri Asoka Sirimane-Resigned with effect from 31st December, 2012

Mohamed Hisham Abdel Wahab Al Garf

Amit Chib

Hatim Abdelaziz Mohamed-Appointed with effect from 9th May, 2012

In terms of Article 87 of the Articles of Association of the Company Mr

Lalith Rukman De Silva, Director, retires by rotation and being eligible is recommended by the Board of Directors for re-election by the Members at the Annual General Meeting for the year 2013.

In terms of Article 87 of the Articles of Association of the Company Mr Hewa Komanage Jayantha Dharmadasa, Director, retires by rotation and being eligible is recommended by the Board of Directors for re-election by the Members at the Annual General Meeting for the year 2013.

In terms of Article 87 of the Articles of Association of the Company Dr. John Anthony Shivaji Felix, Director, retires by rotation and being eligible is recommended by the Board of Directors for re-election by the Members at the Annual General Meeting for the year 2013.

Board Subcommittees

The following Board Sub-Committees were established by the Company as at 31st December, 2012:

Audit Committee

Parakrama Maithri Asoka Sirimane- Chairman- Resigned with effect from 31st December, 2012Amit ChibDr. John Anthony Shivaji Felix

Remuneration Committees:

Khaled Aly Aly Soliman - ChairmanParakrama Maithri Asoka Sirimane - Resigned with effect from 31st December, 2012Mohamed Hisham Abdel Wahab Al Garf

The Reports of the Board Audit and Remuneration Subcommittees are set out on page 13

The Composition of the above Board Sub-Committees, and their functions and responsibilities are set out in the Corporate Governance Report



Report of the Board of Directors’ contd...

appearing on pages 10 to 11 of this Annual Report.

Interest Register

An interest Register is required to be maintained in terms of Companies Act No. 7 of 2007, which came into effect on 03rd May, 2007.

Directors’ Interest in Contracts or proposed contracts with the Company are disclosed in Note 29 to the Financial Statements for the period under review.

Directors’ Shareholding

The shares held by the Directors at the beginning and at the end of the fi nancial year were as follows. The Articles of Association of the Company do not stipulate a share qualifi cation for Directors:

31.12.2012 31.12.2011

Khaled Aly Aly Soliman - Chairman - -Sharif Mir Hashem Ahmed Khoory - -Mohamed Hamad Obaid Khamis Al Shehi - -Lalith Rukman De Silva - -Hewa Komanage Jayantha Dharmadasa - -Dr. John Anthony Shivaji Felix - -Mohamed Hisham Abdel Wahab Al Garf - -Parakrama Maithri Asoka Sirimane - -Hettiaratchige Jayantha Christopher Perera - 18(Alternate Director to H K J Dharmadasa)Amit Chib - -Hatim Abdelaziz Mohamed - -

Directors’ Fees and Emoluments

Directors’ fees and emoluments in respect of the Company for the fi nancial year ended 31st December, 2012 are as follows.

Directors’ Fees and emoluments Rs. 1,710,000/- (2011- Rs.1,560,000/-)

Donations

During the year the Company has not made any charitable contributions. (2011- Rs. 660,759/-)

Property, Plant & Equipment

The details of the property, plant & equipment of the Company, additions during the year and the depreciation charges for the year are shown in Note 7 to the Financial Statements. The Directors consider the market value of the property, plant & equipment not to be signifi cantly different to the amounts disclosed.

Stated Capital

There has been no change in the Stated Capital of the Company during the year under review. The Stated Capital of the Company as at 31st December, 2012 was Rs. 1, 824, 340, 604/-. consisting of 182, 434, 060 Ordinary Shares. The Shares of the Company are listed on the Colombo Stock Exchange.

Shareholders

The total shareholder base of the Company as at 31st December, 2012

was 12, 039 (2011 -11,187). The distribution of the shareholding and a listing of the 20 major shareholders are given under Investor Information on page 44.

Statutory Payments

The Directors, to the best of their knowledge and belief are satisfi ed that all statutory payments in relation to the government had been made upto date.

Post Balance Sheet Events

No circumstances have arisen since the Balance Sheet date, which would require adjustment to, or disclosure in the Financial Statements.

Auditors

The Financial Statements for the period under review have been audited by Messrs KPMG, Chartered Accountants. Rs. 1,125,000/- has been paid as Audit Fee for the year ended 31st December, 2012.

Auditors’ Relationship with the Company

Messrs KPMG, Chartered Accountants, also provided other Consultancy Services to the Company during the year under review for which a fee of Rs. 1,501,226/- was paid to them.

By Order Of the Board

Mr A ChibDirector

Mr L R De SilvaDirector

JACEY & COMPANYSecretaries

2nd April, 2013



Corporate Governance defi nes the decision-making systems and structure through which a company is managed in the best interest of the company and its various stakeholders. Whilst good Corporate Governance helps improve public understanding of the activities of the Company it is also a powerful tool for protecting investors. Accordingly, timely and accurate disclosure of information regarding the fi nancial stability, performance and ownership are important aspects of Corporate Governance.

The Company recognises that controls and procedures play an integral part in maintaining high standards and that transparency, disclosure, fi nancial controls and accountability are pillars of any good system of Corporate Governance.

Compliance with the Code of Best Practice

The Company currently complies with the requirements set out in the Code of Best Practice for Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the Rules on Corporate Governance contained in the Listing Rules of the Colombo Stock Exchange.

Board of Directors

The Board of Directors jointly oversees the activities of the Company and is responsible for the management of the Company. The Company’s Board of Directors consists of professionals in varied fi elds and collectively posses a wide area of knowledge and experience, and are thus eminently suitable to provide leadership and direction required. The Board of Directors of the Company as at 31st December 2012 comprised of nine members.

All Directors other than the Directors nominated by the Foreign Investor retires by rotation at each Annual General Meeting and those eligible are

Corporate Governance

recommended for re-election.The Board meets as and when the need arises to discuss any prevailing issues, appropriate action in achieving the results and to review the fi nancial performance of the Company.

In accordance with the Listing Rules of the Colombo Stock Exchange, the Board has constituted 2 committees, namely, the Audit and Remuneration Committee.

A Statement of Directors’ Responsibilities for the preparation of Financial Statements is set out on page 7 of this Report.

Board Sub-Committees

The Board sub-committees scrutinize and analyze the areas under their purview and make recommendations to the Board on necessary improvements and modifi cations to the systems and processes of the Company. The Board has constituted an Audit Sub-Committee and a Remuneration Sub-Committee.

Name of the Director Category Board

Eligible to attend

attended

Mr K A A Soliman Non-executiveNon- Independent 4 4

Mr L R De Silva Non-executiveNon- Independent 4 4

Mr H K J Dharmadasa(represented by his Alternate Mr H J CPerera)

Non-executiveIndependent 4 0

Dr J A S Felix Non-ExecutiveIndependent 4 4

Mr M H O K Al Shehi(Resigned with effect from 9th May, 2012)

Non- IndependentNon-Executive 2 1

Mr S M H A Khoory Non-executiveNon- Independent 4 4

Mr M H A W Al Garf Non-ExecutiveIndependent 4 2

Mr P M A Sirimane(Resigned with effect from 31st December, 2012)

Non-ExecutiveIndependent 4 3

Mr A Chib Non-executiveNon- Independent 4 4

Mr Hatim Abdelaziz Mohamed(Appointed with effect from 9th May, 2012)

Non-executiveNon- Independent 2 2

The Composition of the Board as at the end of the Period Under Review is set out in the Table below, together with a Record of the Attendance of Every Director.



Corporate Governance contd...

Company Secretaries

Jacey & Company provides Corporate Secretarial Services to the Company. The Company Secretaries play a key role in compliance matters by ensuring that the Company complies with the requirements of the Companies Act, the Colombo Stock Exchange and other regulatory bodies. The Secretaries also ensure that Board procedures are followed and information is provided to shareholders on a timely basis.

Compliance with Legal Requirements

All Directors have access to the advice and services of the Company Secretaries as well as to the Financial Information of the Company. The Directors make every endevour to ensure that the Company Complies with Laws and Regulations.

Name of the Committee Member Category Audit Committee

Eligible to attend attended

Mr P M A SirimaneResigned with effect from 31st December, 2012)

Non-executiveIndependent 5 4

Dr. J A S Felix Non-executiveIndependent 5 5

Mr A Chib Non-executiveNon-Independent 5 5

The Composition of the Audit Committee as at the end of the Period Under Review is set out in the Table below, together with a Record of the Attendance of Every Committee Member.

Corporate Governance Report Levels of Compliance as per Section 07 of the Listing Rules of the Colombo Stock Exchange

Rule No: Subject Applicable requirement Compliance Status

7.10.1 Non-Executive Directors

At least 1/3 of the total number of Directors should be Non-Executive Directors at the immediately preceding Annual General Meeting.All Directors of the Board were Non-Executive Directors

Complied

7.10.2 Independent Directors

At least 1/3 of Non Executive Directors should be independentOf the Nine Non-Executive Directors, Dr. J A S Felix, Mr P M A Sirimane, Mr H K J Dharmadasa and Mr M Al Garf were considered Independent Directors.Each Non-Executive Director should submit a declaration of independence/non independence in the prescribed format

Complied

Complied

7.10.3 Disclosure relating to Directors

Names of independent Directors should be disclosed in the Annual ReportThe Board shall make a determination annually as to the independence or non independence of each non-executive Director based on the DeclarationA brief resume of each Director should be included in the Annual Report and should include the Director’s areas of expertise

Complied

Complied

Complied

7.10.5 Remuneration Committee

A listed Company shall have a Remuneration Committee and shall comprise of Non-Executive Directors a majority of whom will be independent

CompliedPlease refer page 13 of the Annual Report

7.10.6 Audit Committee

A Listed entity shall have an Audit Committee comprising of Non-Executive Directors a majority of whom shall be independentA Non Executive Director shall be appointed as the Chairman of the Audit CommitteeUnless otherwise determined by the Committee the Chief Executive Offi cer and the Chief Financial Offi cer shall attend Audit Committee MeetingsThe Chairman or one Member of the Committee should be a member of a recognized professional accounting body

CompliedPlease refer page 13 of the Annual Report



The Audit Committee as at 31st December, 2012 comprised of three Members of whom two were independent Non-Executive Directors:

Parakrama Maithri Asoka Sirimane- Chairman- Resigned with effect from 31st December, 2012Mr A ChibDr. J A S Felix

Five Meetings of the Committee were held during the period under review and attendance of the Members at these Meetings is given on page 11 of the Annual Report.

The Committee discusses reports of internal and external Auditors at these Meetings. Minutes of each Audit Committee Meeting is placed before

Report of the Audit Committee

Report of the Remuneration Committee

the Board and discussed at length. The Company’s external and internal Auditors are also invited to participate at these Meetings whenever their presence is required. The Financial Controller attends the Meetings by invitation.

The Audit Committee had also reviewed and discussed the Company’s quarterly and annual fi nancial statements with the Management and the external Auditors prior to publication.

The Committee plays a supervisory role in covering the following areas;

• Preparation of Company’s fi rst fi nancial statements in accordance with the new Sri Lankan Accounting

Standards SLFRS and LKAS and Sri Lanka Accounting Standards - SLFR S 1 First time adoption of Sri Lanka Accounting Standards.

• Reporting System and Management Information.

• Management of Business Risks.

• Management of Internal Controls.

• Compliance with Laws and Company Policies.

• Co-ordinating with external and internal Auditors.

Mr A ChibChairman - Audit Committee2nd April, 2013

The Remuneration Committee appointed by the Board comprised of three Members of whom two were Independent Non-Executive Directors. The Committee was headed by Mr K A A Soliman, and the members included Mr Parakrama Maithri Asoka Sirimane (Resigned with effect from 31st December, 2012) and Mr M H A W Al Garf.

The primary purpose of the Remuneration Committee is to review

the performance of the General Manager and recommend appropriate remuneration benefi ts and other payments based on the remuneration policy of the Company, which has been formulated on market and industry factors and performance of the General Manager. The proceedings of the Committee are reported to the Board of Directors who will in turn make the fi nal determination based on the recommendations of the Committee.

The aggregate remuneration paid to Directors is set out in Note 29.2 to the Financial Statements.

Mr K A SolimanChairman - Remuneration Committee2nd April, 2013



Independent Auditors’ Report

Report on the Financial StatementsWe have audited the accompanying fi nancial statements of Galadari Hotels (Lanka) PLC (“the Company”), which comprise the statement of fi nancial position as at December 31, 2012, the statements of income, comprehensive income, changes in equity and cash fl ow for the year then ended, and notes, comprising a summary of signifi cant accounting policies and other explanatory information set out on pages 15 to 43 of the annual report.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these fi nancial 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 fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these fi nancial 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 fi nancial statements are free from material misstatement.

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

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

OpinionIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended December 31, 2012 and the fi nancial statements give a true and fair view of the fi nancial position of the Company as at December 31, 2012, and of its fi nancial performance and its cash fl ow for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory RequirementsThese fi nancial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTSColomboApril 02, 2013

TO THE SHAREHOLDERS OF GALADARI HOTELS (LANKA) PLC



Statement of Financial PositionAs at 31 December 2012

2012 2011 01.01.2011 Notes Rs. Rs. Rs.

AssetsNon Current AssetsProperty Plant & Equipment 7 6,729,584,158 6,272,890,741 6,196,069,570Leasehold property 8 1,574,935,063 1,598,441,557 1,621,948,051Deferred tax assets 17 623,709,535 622,767,094 628,633,197Total Non Current Assets 8,928,228,756 8,494,099,392 8,446,650,818

Current AssetsInventories 9 38,632,347 34,369,585 35,414,020Trade and other receivables 10 205,560,633 184,926,906 127,757,841Investments 11 807,969,458 388,754,150 222,802,805Cash and cash equivalents 12 134,844,690 97,390,549 67,720,826Total Current Assets 1,187,007,128 705,441,190 453,695,492Total Assets 10,115,235,884 9,199,540,582 8,900,346,310

EquityStated capital 13 1,824,340,604 1,824,340,604 1,824,340,604Revaluation reserve 14 8,388,149,379 7,980,734,744 7,795,957,489Reserve for replacement of furniture, fi ttings and equipments 15 141,070,069 73,418,355 99,864,296AFS Reserve (263,867) (1,641,112) 116,628Accumulated losses (9,203,799,471) (8,684,986,790) (8,445,376,128)Total equity 1,149,496,714 1,191,865,801 1,274,902,888

Non-current liabilitiesInterest bearing borrowings 16 7,054,667,352 6,286,525,275 6,063,157,653Deferred tax liabilities 17 980,990,051 905,583,562 881,498,016Employee Benefi ts 18 62,012,307 54,158,630 48,770,682Total Non-current liabilities 8,097,669,710 7,246,267,467 6,993,426,351

Current liabilitiesTrade and other payables 19 297,113,052 275,351,425 227,540,513Interest bearing borrowings 16 397,616,929 334,534,817 271,999,299Provisions 20 144,042,176 137,467,191 131,430,999Current taxation 21 29,295,173 14,047,801 48,107Bank Overdraft 12 2,130 6,080 998,153Total Current liabilities 868,069,460 761,407,314 632,017,071Total liabilities 8,965,739,170 8,007,674,781 7,625,443,422Total equity & liabilities 10,115,235,884 9,199,540,582 8,900,346,310

Notes from the pages no. 20 to 43 from an integral part of these Financial Statements.These fi nancial statements are in compliance with the requirement of companies Act No.07 of 2007.

M. G. U. Perera Financial Controller

The Board of directors is responsible for the preparation and presentation of these fi nancial statements.Approved and signed for and on behalf of the board of Directors.

Amit Chib L. R. De Silva Director Director

April 02, 2013



Income Statement

2012 2011 Note Rs. Rs.

Revenue 22 1,724,264,303 1,297,419,296

Cost of sales (625,800,194) (529,290,204)

Gross profi t 1,098,464,109 768,129,092

Other income 23 4,101,855 2,814,220

Marketing expenses (32,125,605) (29,106,116)

Administrative expenses (382,044,993) (333,402,127)

Other operating expenses (385,607,150) (371,603,956)

Results from operating activities 24 302,788,216 36,831,113

Finance expenses 25 (831,224,189) (285,903,139)

Finance income 25 71,116,335 28,087,794

Net fi nance expenses (760,107,854) (257,815,344)

Loss before income tax expense (457,319,638) (220,984,231)

Income tax expense 26 (34,704,661) (45,072,372)

Loss for the year (492,024,299) (266,056,603)

Figures in brackets indicate deductions.

For the year ended 31 december 2012



Statement of Comprehensive Income

2012 2011 Note Rs. Rs.

Loss for the year (492,024,299) (266,056,603)

Other comprehensive income

Surplus on revaluation of property, plant & equipment 514,979,053 183,725,782

Net change in fair value of available for sale fi nancial assets 1,377,245 (1,757,740)

Deferred tax adjustment on revaluation (66,701,086) 1,051,473

Other comprehensive income for the year, net of tax 449,655,212 183,019,515

Total comprehensive income for the year (42,369,087) (83,037,088)

Basic loss Per Share 27 (2.70) (1.46)




Statement of Changes in Equity

St

ated

Re

valu

atio

n Re

serv

e fo

r A

vaila

ble

Acc

umul

ated

To

tal

Ca

pita

l Re

serv

e Re

plac

emen

t for

sal

e re

serv

e Lo

sses

Rs

. Rs

. Rs

. Rs

. Rs

. Rs

.

Bala

nce

as a

t 1st

Jan

uary

201

1 1,

824,

340,

604

7,79

5,95

7,48

9 99

,864

,296

11

6,62

8 (8,

445,

376,

128)

1,

274,

902,

888

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

rLo

ss fo

r the

yea

r -

- -

- (2

66,0

56,6

03)

(266

,056

,603

)O

ther

com

preh

ensi

ve in

com

eSu

rplu

s on

reva

luat

ion

of p

rope

rty, p

lant

& e

quip

men

t -

183,

725,

782

- -

- 18

3,72

5,78

2D

efer

red

tax

adju

stm

ent o

n re

valu

atio

n -

1,05

1,47

3 -

- -

1,05

1,47

3N

et c

hang

e in

fair

valu

e of

ava

ilabl

e fo

r sal

e fi n

anci

al a

sset

s -

- -

(1,7

57,7

40)

- (1

,757

,740

)To

tal c

ompr

ehen

sive

inco

me

for t

he y

ear

- 18

4,77

7,25

5 -

(1,7

57,7

40)

(266

,056

,603

) (8

3,03

7,08

8)Tr

ansa

ctio

ns w

ith o

wne

rs o

f the

com

pany

, re

cogn

ized

dire

ctly

in e

quity

Prov

ision

for R

eser

ve o

f rep

lace

men

t of f

urni

ture

, fi t

tings

and

equ

ipm

ents

-

- 66

,416

,276

-

(66,

416,

276)

-

Repl

acem

ent o

f fur

nitu

re, fi

ttin

gs a

nd e

quip

men

ts

durin

g th

e ye

ar

- -

(92,

862,

217)

-

92,8

62,2

17

-To

tal t

rans

actio

ns w

ith o

wne

rs o

f the

com

pany

-

- (2

6,44

5,94

1)

- 26

,445

,941

-

Bala

nce

as a

t 31

Dec

embe

r 201

1 1,

824,

340,

604

7,98

0,73

4,74

4 73

,418

,355

(1

,641

,112

) (8,

684,

986,

790)

1,

191,

865,

801

Bala

nce

as a

t 01

Janu

ary

2012

1,

824,

340,

604

7,98

0,73

4,74

4 73

,418

,355

(1

,641

,112

) (8,

684,

986,

790)

1,

191,

865,

801

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

rLo

ss fo

r the

yea

r -

- -

- (4

92,0

24,2

99)

(492

,024

,299

)O

ther

Com

preh

ensi

ve in

com

eSu

rplu

s on

reva

luat

ion

of P

rope

rty, P

lant

& E

quip

men

t -

514,

979,

053

- -

- 51

4,97

9,05

3D

efer

red

tax

adju

stm

ent o

n re

valu

atio

n -

(66,

701,

086)

-

- -

(66,

701,

086)

Net

cha

nge

in fa

ir va

lue

of a

vaila

ble

for s

ale fi n

anci

al a

sset

s -

- -

1,37

7,24

5 -

1,37

7,24

5To

tal c

ompr

ehen

sive

inco

me

for t

he y

ear

- 44

8,27

7,96

7 -

1,37

7,24

5 (4

92,0

24,2

99)

(42,

369,

087)

Tran

sact

ions

with

ow

ners

of t

he c

ompa

ny,

reco

gniz

ed d

irect

ly in

equ

ityPr

ovisi

on fo

r Res

erve

of r

epla

cem

ent o

f fur

nitu

re,

fi ttin

gs a

nd e

quip

men

ts

- -

89,9

87,3

88

- (8

9,98

7,38

8)

-Re

plac

emen

t of f

urni

ture

, fi tt

ings

and

equ

ipm

ents

du

ring

the

year

-

- (2

2,33

5,67

4)

- 22

,335

,674

-

Tran

sfer

to re

tain

ed e

arni

ngs (

Not

e 1)

-

(40,

863,

332)

-

- 40

,863

,332

-

Tota

l tra

nsac

tions

with

ow

ners

of t

he c

ompa

ny

- (4

0,86

3,33

2)

67,6

51,7

14

- (2

6,78

8,38

2)

-Ba

lanc

e as

at 3

1 D

ecem

ber 2

012

1,82

4,34

0,60

4 8,

388,

149,

379

141,

070,

069

(263

,867

) (9,

203,

799,

471)

1,

149,

496,

714

Not

e 1

Def

erre

d Ta

x re

leas

e to

reva

luat

ion

rese

rve

had

been

ove

r sta

ted

by 4

0.8M

n th

roug

h re

tain

ed e

arni

ngs.

This

had

been

adj

uste

d by

deb

iting

to R

eval

uatio

n Re

serv

e an

d cr

editi

ng to

reta

ined

ear

ning

s.




2012 2011 Rs. Rs.

Cash fl ows from operating activities

Loss before income tax expense (457,319,638) (220,984,231)

Adjustments forAllowance/(Reversal) of imapairment for bad and doubtful receivables 213,106 (1,075,602)Reversal of provision for slow moving inventories (183,982) (4,105,143)Depreciation and amortization 231,851,250 209,931,618Provision for employee benefi ts 15,895,045 9,219,965Finance expenses 831,224,189 285,903,139Interest of provision for litigation settlement 6,574,985 6,036,192Interest Income (71,116,335) (28,087,794)Operating profi t before working capital changes 557,138,620 256,838,143

Changes in inventories (4,078,780) 5,149,578Changes in trade and other receivables (20,846,834) (56,462,300)Changes in trade and other payables 21,761,627 47,810,912Total working capital changes (3,163,987) (3,501,810)

Cash generated from operations 553,974,633 253,336,333

Gratuity paid (8,041,368) (3,832,017)Current tax paid (11,694,327) (69,555)Net cash fl ows from operating activities 534,238,938 249,434,761

Cash fl ows from investing activitiesAcquisition of property, plant & equipment (150,059,120) (79,520,511)Interest received 71,116,335 28,087,794Net investment on treasury bills and reverse repos (417,838,063) (168,338,401)Net cash used in investment activities (496,780,847) (219,771,118)

Net change in cash & cash equivalents 37,458,091 29,663,643

Cash and cash equivalents at the beginning of the year 97,384,469 67,720,826Cash and cash equivalents at the end of the year (Note A) 134,842,560 97,384,469

Note ACash in hand 1,399,000 1,354,000Cash at bank 104,948,157 71,205,070Fixed deposits 28,497,533 24,831,479Bank overdraft (2,130) (6,080) 134,842,560 97,384,469

Statement of Cash FlowFor the year ended 31 december 2012



Notes to the Financial StatementsFor the year ended 31 december 2012

1. REPORTING ENTITY

Galadari Hotel (Lanka) PLC, is a company with limited liability incorporated & domiciled in Sri Lanka. The address of the Company’s registered offi ce is No. 9/5, Thambiah Avenue, Colombo 07 and the principal place of business is situated at No. 64, Lotus Road, Colombo 01. During the year, the principal activity of the Company was hoteliering.

Total number of employees of the company as at 31st December 2012 was 729. (31st December 2011-761)

2. BASIS OF PREPARATION

2.1. Statement of compliance

The fi nancial statements have been prepared in accordance with new Sri Lanka Accounting Standards (hereinafter referred to as SLFRS / LKASs) as issued by the Institute of Chartered Accountants of Sri Lanka, the requirements of the Company’s Act No. 07 of 2007 and the listing rules of the Colombo Stock Exchange.

These are the Company’s fi rst fi nancial statements prepared in accordance with Sri Lanka Accounting Standards - SLFRSs and LKASs and Sri Lanka Accounting Standard - SLFRS 1 First - time adoption of Sri Lanka Accounting Standards has been complied.

An explanation on how the transition to Sri Lanka Accounting Standards - SLFRSs and LKASs, has affected the reported fi nancial position and the fi nancial performance of the Company is provided in Note 30 to the fi nancial statements.

The fi nancial statements were authorized for issue by the Board of Directors on 2nd April 2013.

2.2. Basis of measurementThe fi nancial statements have been prepared on historical cost basis, except as indicated below.

Financial assets classifi ed as available for sale - Fair ValueProperty Plant and Equipments - Revalued amounts(Except for Motor Vehicles, Cutlery, Crockery and Linen)Defi ned benefi t obligation - Actuarially valued and

recognized at present value of the defi ned benefi t obligation.

Note 3.2.6 - Impairment of assetsNote 3.7 b - Defi ned benefi t

obligationsNote 3.8 - Provisions and

contingenciesNote 4.4.b - Deferred tax liabilities/

assets

3. SIGNIFICANT ACCOUNTING POLICIES

The Accounting policies set out below have been consistently applied to all period presented in these fi nancial statements. The changes to accounting policies set out below have been applied consistently to all periods presented in these fi nancial statements and in preparing the opening SLFRS / LKASs statement of fi nancial position as at 1 January 2011 for the purpose of transition to SLFRS / LKASs.

3.1. Foreign Currency TransactionsTransactions in foreign currencies are translated to Sri Lankan Rupees at the foreign exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated to Sri Lankan Rupees at the foreign exchange rate ruling as at the balance sheet date. Foreign exchange differences arising on the settlement or reporting of the Company’s monetary items at rates different from those which were initially recorded are dealt with in the income statement.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost at the balance sheet date are translated

2.3. Functional & presentation currencyThe fi nancial statements are presented in Sri Lankan Rupees, which is the Company’s functional currency. All fi nancial information presented in Sri Lanka Rupees has been rounded to the nearest rupee.

2.4. Use of estimates & judgmentsThe preparation of fi nancial statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. Hence, actual results may differ from these judgments and estimates.

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

Information about critical judgements in applying accounting policies that have the most signifi cant effect on the amounts recognized in the fi nancial statements is included in following notes.

Note 3.3.1 d - Revaluation of Property, plant and equipment



Notes to the Financial Statements contd...For the year ended 31 december 2012

to Sri Lankan Rupees at the foreign exchange rate ruling at the date of initial transaction.

Non monetary assets & liabilities that are stated at fair value, denominated in foreign currencies are transla1ted to Sri Lanka Rupees at the exchange rate ruling at the dates that the value were determined. Foreign exchange differences arising on translation are recognized in the income statement.

3.2. Financial instruments3.2.1 Non derivative fi nancial assetsThe Company initially recognizes loans, receivables and deposits on the date that they are originated. All other fi nancial assets are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

A fi nancial asset is measured initially at fair value plus, in the case of assets not at fair value through profi t or loss, transaction costs that are directly attributable to its acquisition or issue.

The Company derecognises a fi nancial asset when the contractual rights to the cash fl ows from the asset expire; it transfers the right to receive the contractual cash fl ows on the fi nancial asset in a transaction in which substantially all the risks and rewards of ownership of the fi nancial asset are transferred. Any interest in transferred fi nancial assets that is created or retained by the Company is recognised as a separate asset or liability.

The fi nancial assets and liabilities are offset and the net amount will be presented in the statement of fi nancial position when, and only when, the Company has a legal right to set off the amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under

SLFRSs, or for gains and losses arising from a Company of similar transactions such as in the Company’s trading activity.

The Company classifi es non derivative fi nancial assets into the following categories;

(a) Loans and receivables, and(b) Available for sale fi nancial assets.

(a) Loans and receivablesLoans and receivables are fi nancial assets with fi xed or determinable payment that are not quoted in an active market. Such assets are recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.Loan and receivables comprise of trade receivables, other receivables, fi xed deposits (Dollar deposit), reverse repos and cash & cash equivalents.

(b) Available for sale fi nancial assetsAvailable-for-sale fi nancial assets are fi nancial assets that are designated as available for sale and are not classifi ed in any of the previous categories. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses on available for sale equity instruments are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profi t or loss.

Available for sales fi nancial assets comprise of investment in treasury bills and bonds.

3.2.2 Non derivative fi nancial liabilitiesThe Company initially recognizes liabilities on the date that they are originated. All other liabilities are

recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

The Company classifi es fi nancial liabilities into other fi nancial liabilities category. Such fi nance liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these fi nancial liabilities are measured at amortised cost using the effective interest method.

The Company derecognizes a fi nancial liability when its contractual obligations are discharged, cancelled or expired.

Other fi nancial liabilities comprise trade payables, shareholder loans, other liabilities and bank borrowings.

3.2.3 Amortized cost measurementThe amortised cost of a fi nancial asset or liability is the amount at which the fi nancial asset or liability is measured at initial recognition, minus principal repayments and any impairment and plus/minus the cumulative amortization using the effective interest method of any difference between the initial amount recognised and the maturity amount.

3.2.4 Fair value measurementFair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date.

The fair value of fi nancial instruments that are traded in an active market at each reporting date is determined by reference to quoted market prices or dealer price quotations, without any deduction for transaction costs.

For fi nancial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length



market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash fl ow analysis or other valuation models.

3.2.5 Stated CapitalOrdinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

3.2.6 ImpairmentThe Company assesses at each reporting date whether there is any objective evidence that fi nancial assets or group of fi nancial assets is impaired. A fi nancial asset or a group of fi nancial assets is deemed to be impaired if, and only if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash fl ows of the fi nancial asset that can be estimated reliably.

Objective evidence that a fi nancial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the company on terms that the company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security.

(a) Impairment losses on fi nancial assets carried at amortised cost.

Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the fi nancial asset and the present value of estimated future cash fl ows discounted at the asset’s original effective interest rate. Impairment losses are recognised in profi t or loss and refl ected in an allowance account against loans and advances. When a

subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profi t or loss.

The Company considers evidence of impairment for loans and receivable on a specifi c asset basis. Therefore all loans and receivables are assessed individually and made specifi c impairment provisions.

(b) Impairment losses on available for sale fi nancial assets

Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income to profi t or loss as a reclassifi cation adjustment. The cumulative loss that is reclassifi ed from other comprehensive income to profi t or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profi t or loss. Changes in impairment provisions attributable to time value are refl ected as a component of interest income.If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profi t or loss, the impairment loss is reversed, with the amount of the reversal recognised in profi t or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

3.3. Property, Plant and Equipment

3.3.1. Recognition and measurementProperty, plant & equipment are tangible items that are held for servicing, or for administrative purposes and are expected to be used during more than one period.

a. Recognition

Property, plant & equipment are

recognized if it is probable that future economic benefi ts associated with the assets will fl ow to the company and cost of the asset can be reliably measured.

b. Measurement

Items of property, plant and equipment are stated initially at cost or valuation less accumulated depreciation (See Accounting Policy 3.3.1(e)) and impairment losses.

Cost 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 cost directly attributable in bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located.

Purchased software that is integrated to the functionality of the related equipment is capitalized as part of that equipment.

Expenditure on repairs or maintenance of property, plant and equipment made to restore or maintain future economic benefi ts expected from the assets has been recognized as an expense when incurred.

c. Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalized. The cost of replacing part of an item of Property, Plant & Equipment is recognized in the carrying amount of the item, if it is probable that the future economic benefi ts embodied within the part will fl ow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The cost of the day-to-day servicing of property, plant and equipment are




recognized in profi t or loss as incurred.

d. Revaluation

The Company’s property, plant & equipment except for Motor Vehicles, Cutlery, and Crockery & Linen were revalued each year up to the current year. Commencing from current year the Company will revalue these assets once in 3 to 5 years except for building. Building will be revalued each year. As a result of revaluation if the carrying amount is increased, the increased amount is credited to equity under the heading of Capital Reserve on Revaluation of Property, Plant & Equipment. When an asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognized as an expense unless it reverses a previous increment relating to that asset, in which case it is charged against any related revaluation surplus in respect of that same asset. Any balance remaining in the revaluation surplus in respect of an asset, is transferred directly to accumulated profi ts on retirement or disposal of the asset.

e. Depreciation

Depreciation is recognized in profi t or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives of the assets are as follows.

At cost At revaluation

Buildings 46 Years 46 yearsElectrical installations 20 Years 5 yearsFurniture, fi xures & fi ttings 20 Years 10 - 18 yearsFurnishing 4 Years -Kitchen equipment & utencils 20 Years 5 - 14 yearsGenerator 20 Years 10 - 18 yearsPlant & machinery 20 Years 10 - 17 yearsAir conditioning equipment 20 Years 14 - 19 year Laundry equipment 20 Years 15 - 18 yearsComputers 4 Years 5 - 9 yearsElevators 20 Years 5 yearElectrical Equipment 5 Years 14 - 19 yearsMotor Vehicles 4 Years -Cutlery Crockery & Linen 2 Years -

Depreciation of an asset begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation of an asset ceases at the earlier of the date that the asset is classifi ed as held for sale (or included in a disposal group that is classifi ed as held for sale) and the date that the asset is derecognized.

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

3.4. Leasehold Property

A) Basis of ValuationLeasehold property comprising of land use rights are stated at cost, is amortised on a straight line basis over the period of the lease. Leasehold property is tested for impairment annually and is written down where applicable.

B) AmortisationThe lease period is for 99 years commencing 8th December 1979 and the leasehold land is being amortised over a period of 99 years which commenced from 1st January 1980.

The impairment loss if any is recognized in the Income Statement.

3.5. InventoriesInventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories includes expenditure incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition. Accordingly, the costs of inventories are accounted as follows:

Food and - At weighted Beverage average cost

Other - At weighted Consumables average cost

Engineering - At weightedSupplies average cost

Fuel Stock - At actual cost on FIFO basis

3.6. Impairment of non fi nancial assetsThe carrying amount of the company’s non fi nancial assets, other than inventories and deferred tax 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. An impairment loss is recognised if the carrying amount of an assets or cash generating unit (CGU) exceeds its recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash infl ows from continuing use that are largely independent of the cash




infl ows of other assets or CGUs.Impairment losses are recognised in the statement of income. Impairment losses recognised in respect of CGUs are allocated fi rst to reduce the carrying amount of any goodwill allocated to CGU (if any) and then to reduce the carrying amounts of other assets in the CGU (group of CGUs) on pro rata basis. For other assets , an impairment loss is reversed only to the extent that the assets 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.

3.7. Liabilities and Provisions

Liabilities classifi ed 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.

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

3.7.1. ProvisionsA provision is recognized if, as a result of a past event, the company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation.

3.8. Employee Benefi ts

a. Defi ned contribution plansA defi ned contribution plan is a post employment plan under which an entity pays fi xed contribution into a separate entity and will have no legal or constructive obligation to pay a further amount. Obligations for contributions to defi ned contribution plans are recognized as expense in the profi t and loss in the period during which related services are rendered by employees.

Employees’ Provident FundThe Company and Employees’ contribute 15% & 10% respectively

on the salary of each employee respectively. Said provident fund is being managed by the Central Bank of Sri Lanka.

Employees Trust FundThe company contributes 3% of the salary of each employee to the Employees’ Trust Fund contributions to defi ned contribution plans are recognized as an expense in the income statement as incurred.

b. Defi ned benefi t plansRetiring GratuityA defi ned benefi t plan is a post employment benefi t plan other than a defi ned contribution plan.In accordance with revised Sri Lanka Accounting Standard 16 (Revised 2006)- “Employee Benefi ts” which became effective from the fi nancial year commencing after 01 July 2007, the Company has adopted the actuarial valuation method and the valuation method used by the actuary is “Projected Unit Credit Method”.

However, under the payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continues service.

Any actuarial gains or losses arising are recognized immediately in the income statement.

The liability was not externally funded.

3.9. Capital Commitments & Contingencies

Contingent liabilities are possible obligations whose existence will be confi rmed only by uncertain future events or present obligations where the transfer of economic benefi ts is not probable or cannot be reliably measured.

Capital commitment and contingent liabilities of the Group are disclosed

in the respective notes to the fi nancial statements.

3.10. Events after the Balance Sheet DateThe materiality of the events after the balance sheet date has been considered and appropriate adjustments and provisions have been made in the fi nancial statements wherever necessary.

4. Income Statements

4.1. Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefi ts will fl ow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. Following specifi c criteria are used for the purpose of recognition of revenue.

a. Room RevenueApartment revenue is recognized based on the daily rooms occupation.

b. Food and Beverage RevenueFood and Beverage Revenue is accounted at the time of the sale.

c. Rental IncomeRental income is recognized on an accrual basis.

d. InterestInterest income is recognized on an accrual basis.

e. OthersOther income is recognized on an accrual basis. Net losses of a revenue nature arising from the disposal of Property, Plant and Equipment and other non-current assets, including investments, are accounted for in the income statement, after deducting from the proceeds from disposal, the carrying amount of such assets and the related selling expenses.




Gains and Losses arising from incidental activities to main revenue generating activities and those arising from a group of similar transactions which are not material, are aggregated, reported and presented on a net basis.

4.2. Expenditure

All expenditure incurred in running of the business and in maintaining the property, plant & equipment in a state of effi ciency has been charged to revenue in arriving at the profi t for the year. For the purpose of presentation of Income Statement, the Directors are of the opinion that function of expense method present fairly the elements of the enterprise’s performance, hence such presentation method is adopted.

Expenditure incurred for the purpose of acquiring, expanding or improving assets of a permanent nature by means of which to carry on the business or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure.Repairs and renewals are charged to revenue in the year in which the expenditure is incurred.

The loss incurred by the company before taxation as shown in the Income Statement is after making provision for all known liabilities and for the depreciation of property, plant & equipments.

4.3. Finance income & Finance cost

Finance income comprises interest income on funds invested (including available for sale fi nancial assets), gains on the disposal of available for sale fi nancial assets. Interest income is recognized as it accrues in profi t or loss, using the effective interest method.

Finance cost comprise interest expenses on borrowings, unwinding of the discount on provisions and contingent consideration, losses on disposal of available for sale fi nancial assets, impairment losses recognized

on fi nancial assets (other than trade receivables).

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profi t or loss using the effective interest rate method.

Foreign currency gains and losses are reported on a net basis as either fi nance income or fi nance cost depending on whether foreign currency movements are in a net gain or net loss position.

4.4. Income Tax Expenses

An income tax expense comprises current and deferred tax. An income tax expense is recognized directly in income statements except to the extent that if relates to items recognized directly in equity, in which case it is recognized in equity.

a. Current taxCurrent tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

b. Deferred taxDeferred tax is provided using the balance sheet liability method, providing for the tax effect of temporary differences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and the tax base of assets and liabilities, which is the amount attributed to those assets and liabilities for tax purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted by the reporting date.

Deferred tax assets including those related to temporary tax effects of income tax losses and credits available to be carried forward, are recognized

only to the extent that it is probable that future taxable profi ts will be available against which the asset can be utilized. 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 benefi t will be realized.

4.5. Basic Earnings Per ShareThe fi nancial statements present basic earnings per share (EPS) data for its ordinary shareholders.

The basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Company by the weighted averaged number of ordinary shares outstanding during the period.

5. Cash Flow Statement

5.1. Cash and Cash Equivalents

Cash and cash equivalents are defi ned as cash in hand, demand deposits and short-term highly liquid investments, readily convertible to known amounts of cash and subject to insignifi cant risk of changes in value.

For the purpose of cash fl ow statement, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities i.e. three months or less from the date of acquisition are also treated as cash equivalents.

The Cash Flows Statements has been prepared using the “indirect method”.

Interest paid are classifi ed as operating cash fl ows, interest and dividend received are classifi ed as investing cash fl ows while dividends paid are classifi ed as fi nancing cash fl ows for the purpose of presenting of cash fl ow statement.

6. DIRECTOR’S RESPONSIBILITIES

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




Notes to the Financial Statements contd...

07. P

ROPE

RTY,

PLAN

T & EQ

UIPM

ENT

7.1 Pr

opert

y, Pla

nt &

Equip

ment

Fu

rnitu

re,

Kitch

en

Air

Cu

tlery,

Bu

ilding

&

Electr

ical

fi xtu

res &

eq

uipme

nt &

Ge

nerat

or

mach

inery

cond

itionin

g eq

uipme

nt

Comp

uters

Ele

vato

rs eq

uipme

nt

vehic

les c

rock

ery an

d To

tal

Furn

ishing

ins

tallat

ions

fi ttin

gs

uten

sils

equip

ment

linen

Cost/

Reva

lued a

moun

ts

Open

ing Ba

lance

9,1

03,09

6,177

35

0,290

,205

385,8

73,79

5 2,1

02,70

3,248

54

,865,5

39

1,221

,942,8

33

287,4

06,63

6 81

,900,5

66

56,23

1,322

21

9,222

,346

201,4

87,70

5 9,6

48,57

6 64

,766,8

76 1

4,139

,435,8

23

Addit

ions

41,70

0,503

-

53,66

5,273

-

- -

3,257

,544

- 6,3

64,15

2 -

29,50

2,589

-

15,56

9,059

15

0,059

,120

Dispo

sals d

uring

the y

ear

- -

- -

- -

- -

- -

- -

(7,24

7,702

) (7,

247,7

02)

Trans

ferred

to re

valua

tion

(3,23

5,731

,522)

(303,0

40,20

5) (33

4,056

,573)

(2,09

8,075

,936)

(44,07

0,084

) (1,

211,4

51,40

4) (27

6,074

,637)

(52,39

8,424

) (54

,583,1

24)

(219,2

22,34

6) (16

3,985

,604)

- -

(7,99

2,689

,858)

Chan

ge on

reva

luatio

n 58

2,205

,842

2,750

,000

(51,62

8,775

) (3,

305,9

84)

(6,10

5,855

) (8,

501,3

52)

(6,50

5,019

) 3,5

84,85

9 2,6

86,66

5 7,0

00,00

0 (7,

201,3

28)

- -

514,9

79,05

3

Balan

ce as

at 31

/12/

2012

6,4

91,27

1,000

50

,000,0

00

53,85

3,720

1,3

21,32

8 4,6

89,60

0 1,9

90,07

7 8,0

84,52

4 33

,087,0

01

10,69

9,015

7,0

00,00

0 59

,803,3

62

9,648

,576

73,08

8,232

6,8

04,53

6,435

Depr

eciat

ion

Open

ing Ba

lance

3,1

04,61

7,177

29

3,590

,205

313,7

23,48

0 2,0

94,99

8,748

42

,990,5

39

1,208

,802,8

33

272,9

58,63

6 49

,039,9

12

52,15

1,983

20

9,722

,346

157,4

24,19

2 9,6

48,57

6 56

,876,4

57

7,866

,545,0

83

Charg

e for

the ye

ar 13

1,114

,345

9,450

,000

20,33

3,093

3,0

77,18

8 1,0

79,54

5 2,6

48,57

1 3,1

16,00

1 3,3

58,51

2 2,4

31,14

1 9,5

00,00

0 6,5

61,41

2 -

15,67

4,948

20

8,344

,756

Trans

fers a

nd di

spos

als

- -

- -

- -

- -

- -

- -

(7,24

7,704

) (7,

247,7

04)

Trans

ferred

to re

valua

tion

(3,23

5,731

,522)

(303,0

40,20

5) (33

4,056

,573)

(2,09

8,075

,936)

(44,07

0,084

) (1,

211,4

51,40

4) (27

6,074

,637)

(52,39

8,424

) (54

,583,1

24)

(219,2

22,34

6) (16

3,985

,604)

- -

(7,99

2,689

,858)

Balan

ce as

at 31

/12/

2012

-

- -

- -

- -

- -

- -

9,648

,576

65,30

3,701

74

,952,2

77

Net B

ook V

alue 2

012

6,491

,271,0

00

50,00

0,000

53

,853,7

20

1,321

,328

4,689

,600

1,990

,077

8,084

,524

33,08

7,001

10

,699,0

15

7,000

,000

59,80

3,362

-

7,784

,531

6,729

,584,1

58

Net B

ook V

alue 2

011

5,998

,479,0

00

56,70

0,000

72

,150,3

15

7,704

,500

11,87

5,000

13

,140,0

00

14,44

8,000

32

,860,6

54

4,079

,339

9,500

,000

44,06

3,513

-

7,890

,420

6,272

,890,7

41

Net B

ook V

alue 2

010

5,967

,900,0

00

63,00

0,000

58

,400,0

00

8,473

,000

12,50

0,000

14

,500,0

00

15,96

8,000

13

,400,0

00

2,135

,000

10,00

0,000

23

,700,0

00

27,59

1 6,0

65,97

9 6,1

96,06

9,570

7.2 Al

l Prop

erty,

Plant

and E

quipm

ent e

xcept

for M

otor V

ehicle

s, Cutl

ery, C

rocke

ry an

d Line

n were

last

revalu

ed on

31 D

ecem

ber, 2

012,

by P.

B. Ka

lugala

gede

ra, an

inde

pend

ent v

aluer.

The r

esults

of su

ch re

valua

tion w

ere in

corpo

rated

in th

ese fi n

ancia

l state

ments

from

its ef

fectiv

e date

31 D

ecem

ber, 2

012.

Such

asset

s were

value

d at a

n ope

n mark

et va

lue fo

r exis

ting u

se ba

sis. T

he su

rplus

arisin

g from

the r

evalu

ation

was

trans

ferred

to re

valua

tion r

eserve

.

7.3 Th

e carr

ying a

moun

t of re

value

d asse

ts tha

t wou

ld ha

ve be

en in

clude

d in t

he Fi

nanc

ial St

ateme

nts, h

ad th

e asse

ts be

en ca

rried a

t cos

t less

depre

ciatio

n, is a

s foll

ows;

Fu

rnitu

re,

Kitch

en

Air

Year

Build

ing &

Ele

ctrica

l fi x

tures

eq

uipme

nt &

Ge

nerat

or

Plant

& c

ondit

ioning

La

undr

y Co

mput

ers

Electr

ical

Total

Fu

rnish

ing

instal

lation

& fi t

tings

ut

ensil

s

mach

inery

equip

ment

eq

uipme

nt

eq

uipme

nt

2012

65

4,855

,700

3,910

,707

124,1

56,41

6 3,4

99,80

1 12

,413,1

71

340,9

83

24,55

0,082

32

,340,2

26

8,954

,806

44,73

6,718

90

9,758

,610

2011

62

9,147

,597

4,276

,828

77,17

5,945

3,7

43,35

7 13

,993,4

35

402,9

24

23,06

9,810

34

,260,1

11

3,966

,218

22,24

0,007

81

2,276

,230

2010

64

3,697

,862

4,642

,948

62,65

6,308

3,9

86,91

3 15

,573,6

98

464,8

64

24,77

9,080

15

,036,0

86

2,819

,635

4,423

,959

778,0

81,35

3

7.4 Fu

lly de

precia

ted pr

opert

y, pla

nt &

equip

ment

as at

the ba

lance

shee

t date

is Rs

. 862

,383,7

95/-

(2011

- Rs. 8

62,38

3,795

/-)

As at 31 december 2012



2012 2011 2010 Rs. Rs. Rs.

08. Leasehold Property Cost 2,118,078,571 2,118,078,571 2,118,078,571 Accumulated Amortization Opening Balance (519,637,014) (496,130,520) (472,624,026) Charge for the Year (23,506,494) (23,506,494) (23,506,494) Closing Balance (543,143,508) (519,637,014) (496,130,520) Carrying value 1,574,935,063 1,598,441,557 1,621,948,051 The leasehold property is amortised on a straight line basis over 99 years. Remaining lease period as at 31 st

December 2012 was 67 years.

09. Inventories Food and beverage 16,644,555 13,634,164 15,601,239 Other consumables 10,383,547 9,762,469 7,845,944 Engineering supplies 9,319,834 9,760,381 14,740,744 Fuel inventories 2,984,718 2,096,859 2,215,525 39,332,654 35,253,874 40,403,452

Less: Provision for slow moving inventories (700,307) (884,289) (4,989,432) 38,632,347 34,369,585 35,414,020

10. Trade and other receivables Trade receivables 160,654,031 137,393,161 86,963,938 Less: Allowance for Impairment loss (Note 10.1) (17,624,645) (17,411,539) (18,487,141) 143,029,386 119,981,622 68,476,797 Deposits, advances and other receivables 51,484,038 54,605,262 38,834,519 Cumulative Interest Receivable - 1,567,123 - Prepayments 9,466,905 7,253,296 19,041,967 Advances to staff (Note 10.2) 1,580,305 1,519,603 1,404,558 205,560,633 184,926,906 127,757,841

10.1 Provision for doubtful receivables As at 01 January (17,411,539) (18,487,141) (18,980,381) Provision for doubtful receivables (213,106) 1,075,602 493,240 As at 31 December (17,624,645) (17,411,539) (18,487,141) 10.2 Advances to staff As at 01 January 1,519,603 1,404,558 1,293,970 Granted during the year 7,069,106 6,313,636 5,744,203 Repayments (7,008,404) (6,198,591) (5,633,615) As at 31 December 1,580,305 1,519,603 1,404,558

Notes to the Financial Statements contd...As at 31 december 2012



2012 2011 2010 Rs. Rs. Rs.

11. Investments Treasury Bills (11.1) 479,958,671 279,376,293 95,632,170 Treasury Bonds (11.1) - 49,710,001 - Reverse Repos (11.2) 328,010,787 59,667,856 127,170,635 807,969,458 388,754,150 222,802,805

11.1 Investment carried at Fair Value (Available for sale investments) Treasury Bills 479,958,671 279,376,293 95,632,170 Treasury Bond - 49,710,001 - 479,958,671 329,086,294 95,632,170 11.2 Investment carried at amortized cost Reverse Repos 328,010,787 59,667,856 127,170,635 328,010,787 59,667,856 127,170,635

12. Cash and Cash Equivalents Cash in hand 1,399,000 1,354,000 1,399,000 Cash at bank 104,948,157 71,205,070 42,859,444 Fixed deposits 28,497,533 24,831,479 23,462,382 134,844,690 97,390,549 67,720,826 Bank overdraft 2,130 6,080 998,153 2,130 6,080 998,153 134,842,560 97,384,469 66,722,673

13. Stated Capital 182,434,060 Ordinary shares 1,824,340,604 1,824,340,604 1,824,340,604

14. Revaluation reserve As at 01 January 7,980,734,744 7,795,957,489 7,634,135,951 Surplus on revaluation during the year 514,979,053 183,725,782 158,128,606 Transfer to retained earnings (40,863,332) - - Transfer from deferred tax liabilities (Note 17.2) - 20,623,720 20,239,612 Recognition of deferred tax liabilities on revaluation surplus (Note 17.2) (66,701,086) (19,572,247) (16,546,679) As at 31 December 8,388,149,379 7,980,734,744 7,795,957,489

15. Reserve for replacement of furniture, fi ttings and equipments As at 01 January 73,418,355 99,864,296 104,245,048 Provision for the year 89,987,388 66,416,276 51,722,228 Replacement during the year (22,335,674) (92,862,217) (56,102,980) As at 31 December 141,070,069 73,418,355 99,864,296




16.

INTE

REST

BEA

RIN

G LO

ANS

& B

ORRO

WIN

GS

20

12

2012

20

12

2011

20

11

2011

20

10

2010

20

10

Re

paya

ble

Repa

yabl

e To

tal

Repa

yabl

e Re

paya

ble

Tota

l Re

paya

ble

Repa

yabl

e To

tal

With

in 1

Yea

r Af

ter 1

Yea

r

With

in 1

Yea

r Af

ter 1

Yea

r

With

in 1

Yea

r Af

ter 1

Yea

r

Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

.

Lo

ans f

rom

Rel

ated

Par

ties

Go

vern

men

t of S

ri La

nka

(N

ote

16.1)

39

7,616

,929

203,7

78,62

5 60

1,395

,554

334,5

34,81

7 25

6,284

,548

590,8

19,36

5 27

1,999

,299

308,7

90,47

2 58

0,789

,771

Ga

ladar

i Bro

ther

s Co.

LLC

(N

ote

16.2)

-

6,850

,888,7

27

6,850

,888,7

27

- 6,0

30,24

0,727

6,0

30,24

0,727

-

5,754

,367,1

81

5,754

,367,1

81

39

7,616

,929

7,054

,667,3

52

7,452

,284,2

81

334,5

34,81

7 6,2

86,52

5,275

6,6

21,06

0,092

27

1,999

,299

6,063

,157,6

53

6,335

,156,9

52 16

.1

Gove

rnm

ent o

f Sri

Lank

a

As a

t In

tere

st fo

r Un

real

ized

As a

t

01.0

1.20

12

the

year

exc

hang

e lo

ss

31.1

2.20

12

Rs.

Rs.

Rs.

Rs.

Ca

pita

l am

ount

527,3

64,63

8 -

- 52

7,364

,638

In

tere

st ch

arge

63,45

4,727

10

,576,1

89

- 74

,030,9

16

590,8

19,36

5 10

,576,1

89

- 60

1,395

,554

16.2

Ga

lada

ri Br

othe

rs C

o. LL

C

As a

t In

tere

st fo

r Un

real

ized

As a

t

01.0

1.20

12

the

year

exc

hang

e lo

ss

31.1

2.20

12

Rs.

Rs.

Rs.

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2012 2011 2010 Rs. Rs. Rs.

17. DEFERRED TAX ASSETS/ LIABILITIES Deferred tax assets (Note 17.1) 623,709,535 622,767,094 628,633,197 Deferred tax liabilities (Note 17.2) (980,990,051) (905,583,562) (881,498,016) (357,280,516) (282,816,468) (252,864,819)

17.1 Deferred tax assets As at 01 January 622,767,094 628,633,197 630,458,693 Originating/ (Reversal) of deferred tax assets 942,441 (5,866,103) (1,825,496) As at 31 December 623,709,535 622,767,094 628,633,197 17.2 Deferred tax liabilities As at 01 January (905,583,562) (881,498,016) (865,604,488) Transfer to the revaluation reserve - 20,623,720 20,239,612 Provision for temporary differences (8,705,403) (25,137,019) (19,586,460) Recognition of deferred tax liabilities on revaluation surplus (66,701,086) (19,572,247) (16,546,679) As at 31 December (980,990,051) (905,583,562) (881,498,016) 17.3 The amount recognized as deferred tax asset is as follows: Amount Deferred tax as at Deferred Tax asset Deferred Tax asset

31st December 2012 recognized in the F/S not recognized in the F/S

Rs. Rs. Rs. Rs. Tax loss 5,811,600,656 697,392,079 616,268,058 81,124,021 Gratuity 62,012,306 7,441,477 7,441,477 - 704,833,555 623,709,535 81,124,021

Deferred tax asset on tax loss amounting to Rs. 616,268,058/- has been recognized in the fi nancial statements as

management has concluded that there are future taxable profi ts available to recover the recognised asset. In order to assess that the company will have sufi ciant future taxable profi ts to recover the diferred tax asset, the Man-

agement has carried out fi nancial projections which indicated that the company will make sufi cient taxable profi ts Assumptions and estimates made in arriving at fi nancial projections was reasonable considering industry average and

past performance of the company and are aligned to future strategies of the Company. In order to develop the fi nancial forecast, it was assumed that the long term loan has been converted to equity, as

disclosed in note number 16.3 to the fi nancail statements.




2012 2011 2010 Rs. Rs. Rs.

18. EMPLOYEE BENEFITS Retiring gratuity As at 01 January 54,158,630 48,770,682 37,877,771 Current service cost and interest 9,935,400 9,055,632 8,057,733 Benefi ts paid (8,041,368) (3,832,017) (5,016,938) Actuarial losses 5,959,645 164,333 7,852,116 As at 31 December 62,012,307 54,158,630 48,770,682

18.1 Actuarial valuation has been carried out as at 31 December, 2012 by Mr. M. Poopalanathan (AIA) of Actuarial & Management Consultants (Pvt) Ltd. The valuation method used by the actuary was “Projected Unit Credit Method”,

18.2 Principal actuarial assumptions as at the balance sheet date are, Discount rate as at 31 December 10% 10% 10% Future salary increases 9.5% 9.5% 9.5%

18.3 Assumptions regarding future mortality are based on A67/70 Mortality table, issued by the Institute of Actuar-ies, London, United Kingdom.

19. TRADE AND OTHER PAYABLES

2012 2011 2010

Trade payable 109,417,668 116,035,985 89,167,540 Amounts payable to non-residential directors 6,125,819 5,885,840 6,081,775 Annual fee received in advance 3,446,740 2,623,997 325,028 Advances and deposits 63,575,863 40,295,808 42,702,615 VAT payable 17,616,167 14,472,516 13,351,556 Accrued expenses 50,310,319 43,938,532 31,797,339 Other creditors 46,620,476 52,098,747 44,114,660 297,113,052 275,351,425 227,540,513




2012 2011 2010 Rs. Rs. Rs.

20. PROVISION As at 01 January 137,467,191 131,430,999 120,828,710 Legal interest accrued during the year 6,574,985 6,036,192 10,602,289 Balance as at 31 December 144,042,176 137,467,191 131,430,999

20.1 Provision represents the award delivered by the Arbitrator in favour of Phil East Asia Construction Corporation (PEACC) on 24 April, 2008 in relation to claims in litigation for construction of the hotel. The legal interest over the Award has been accrued based on the Gazette published by the Government.

21. CURRENT TAXATION As at 01 January 14,047,801 48,107 104 Provision for the year 29,295,173 13,120,259 4,301,325 (Over)/Under provision in respect of prior year (2,353,474) 948,991 - Payments made for the year (11,694,327) (69,556) (4,253,322) As at 31 December 29,295,173 14,047,801 48,107

For the year ended 31 December, 2012 2011 Rs. Rs.22. REVENUE Gross revenue 2,139,460,356 1,602,109,465 Less: Tourism development levy (17,632,627) (13,313,580) Value added tax (187,154,365) (132,421,499) Nation Building Tax (39,379,385) (29,853,563) Service charge (171,029,676) (129,101,527) Net revenue 1,724,264,303 1,297,419,296

22.1 Revenue analysis Room revenue 853,507,588 588,375,127 Food and beverage revenue 768,731,935 631,455,522 Other hotel related revenue 102,024,780 77,588,647 1,724,264,303 1,297,419,296

23. OTHER INCOME Taxi charges 4,101,855 2,814,220 4,101,855 2,814,220 24. RESULTS FROM OPERATING ACTIVITIES Results from operating activities is stated after charging all expenses including the followings; Auditors remuneration (Note 24.1) 1,625,000 980,000 Other consultancy services 1,001,226 1,245,258 Directors’ remuneration 1,710,000 1,560,000 Depreciation 208,344,756 186,425,124 Leasehold property amortization 23,506,494 23,506,494 Advertizing 8,473,653 6,662,466 Donations - 660,759 Legal fees 1,882,857 1,696,204 Reversal of provision for bad & doubtful receivables 213,106 (1,075,602) Reversal of provision for inventories (183,982) (4,105,143) Staff cost (Note 24.2) 201,003,952 160,337,052




26. INCOME TAX EXPENSES Current tax expenses On current year profi ts (Note 26.1) 29,295,173 13,120,259 (Over)/Under provision in respect of prior year (2,353,474) 948,991 26,941,699 14,069,250 Deferred tax expense Net provision for temporary differences (Note 17.2) 7,762,962 31,003,122 7,762,962 31,003,122 Total tax expenses 34,704,661 45,072,372

26.1 Tax reconciliation statement Loss before income tax expense (457,319,638) (220,984,231) Disallowable expenses 991,507,038 491,368,577 Allowable expenses (221,867,953) (140,806,883) Other sources of income- interest income 63,259,689 25,485,795 Loss utilized during the year (Note 26.2) (131,452,698) (54,272,140) Taxable profi t 244,126,438 100,791,118 Tax payable @ 12% 29,295,173 12,094,934 Deemed dividend tax - 1,025,325 29,295,173 13,120,25926.2 Tax losses As at 01 January 5,932,492,892 5,990,121,276 Adjusted in respect of prior period 10,560,462 (3,356,244) Utilized during the year (131,452,698) (54,272,140) As at 31 December 5,811,600,656 5,932,492,892

2012 2011 Rs. Rs.

24.1 Auditors remuneration Audit fee 1,125,000 975,000 Audit related services 500,000 5,000 1,625,000 980,000 24.2 Staff cost Salaries and wages 117,264,875 87,722,287 Casual wages 41,633,839 40,075,338 EPF and ETF 26,210,193 23,319,462 Defi ned benefi t plan- gratuity 15,895,045 9,219,965 201,003,952 160,337,052

25. NET FINANCE EXPENSE25.1 Finance Income Interest income 64,098,542 26,380,755 Exchange gain 7,017,793 1,707,040 71,116,335 28,087,794

25.2 Finance Expenses Interest on loans from related parties (132,372,757) (132,902,838) Exchange loss Note 16.2 (698,851,432) (153,000,300) (831,224,189) (285,903,139) Net Finance Expense (760,107,854) (257,815,344)

Notes to the Financial Statements contd...For the year ended 31 December,



27. BASIC LOSS PER SHARE The calculation of basic earnings/(defi cit) per share is based on the net profi t attributable to ordinary shareholders

and the number of ordinary shares outstanding during the year. FOR THE YEAR ENDED 31 DECEMBER, 2012 2011 Rs. Rs. Loss after tax (492,024,299) (266,056,603) Weighted average number of ordinary shares (Note 10) 182,434,060 182,434,060 Basic defi cit per share - Rs. (2.70) (1.46)

28. FINANCIAL RISK Introduction and overview The Galadari Hotel is exposed to arange of fi nancial risks through its fi nancial assets and fi nancial liabilities In particular, the key fi nancial risk categories are: A. Credit risk B. Liquidity risk and C. Market risk This note presents information about the company exposure to each of the above risks, the Company objectives,

policies and processes for measuring and managing risk, and the Company management of capital. Further quantita-tive disclosures are included throughout these fi nancial statements.

Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the Company risk manage-

ment framework. The Company risk management processes are established to identify and analyse the risks faced by the Company, to

set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management systems are reviewed regularly to refl ect changes in market conditions and the company activities.

The Audit Committee oversee how management monitors compliance with the Company risk management process-

es/guidelines and procedures and reviews the adequacy of the risk management framework in relation to the risks. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

A. Credit Risk This is the risk that arises when one party to a fi nancial arrangement fails to discharge an obligation and causes the

other party to incur a fi nancial loss. Carrying amount of fi nancial assets represents the maximum credit exposure The maximum exposure to credit risk at the reporting date was as follows; 2012 2011 01.01.2011 Rs. Rs. Rs. Trade and other receivables 205,560,633 184,926,906 127,757,841 Other investment 807,969,458 388,754,150 222,802,805 Cash and cash equivalents 134,844,690 97,390,549 67,720,826 1,148,374,781 671,071,605 418,281,472 Trade and other receivables The Company has a very well established credit policy for both International customers and Domestic customers to

minimise credit risk. A separate credit team has been established to evaluate and recommend the credit worthiness of the customers. Further prepaid sales are used as a means of mitigating credit risk.




Impairment losses The aging of trade and other receivables at the reporting date that were impaired are as follows: 2012 2011 01.01.2011 Age Rs. Rs. Rs. Trade and other receivables over 1 year 17,624,645 17,411,539 18,487,141 Provision for impairment over 1 year 17,624,645 17,411,539 18,487,141 The movement in the provision for impairment in respect of trade and other receivables during the year is provided

in note: Impairment Balance 1/1/2011 18,487,141 Reversal of provision (1,075,602) Balance 31/12/2011 17,411,539 Impairment losses recognised 213,105 Balance 31/12/2012 17,624,645

Other investments The Company limits its exposure to credit risk by investing only in government debt securities, repos and in short

term deposits with selected bankers with Board approval.

Liquidity Risk Liquidity risk is the risk that the Company will encounter diffi culty in meeting the obligations associated with its

fi nancial liabilities that are settled by delivering cash or another fi nancial asset. The Company approach to managing liquidity is to ensure, as far as possible, that it will always have suffi cient liquidity to meet its liabilities when due, un-der both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company reputation.

The Company ensures its liquidity is maintained by investing in short, medium and long-term fi nancial instruments to

support operational and other funding requirements. Short and medium-term requirements are regularly reviewed and managed by the fi nance team.

The following are the contractual maturities of fi nancial liabilities, including estimated interest. The maturity analysis of liabilities As at 31st December 2012 (Current and Non Current) Current Non Current Carrying Value Upto 1 year Above 1 year Bank overdrafts 2,130 2,130 - Galadari Brothers Co. LLC 6,850,888,727 - 6,850,888,727 Government of Sri Lanka 601,395,554 397,616,929 203,778,625 7,452,286,411 397,619,059 7,054,667,352 As at 31st December 2011 (Current and Non Current) Current Non Current Carrying Value Upto 1 year Above 1 year Bank overdrafts 6,080 6,080 - Galadari Brothers Co. LLC 6,030,240,727 - 6,030,240,727 Government of Sri Lanka 590,819,365 334,534,817 256,284,548 6,621,066,172 334,540,897 6,286,525,275 As at 1st January 2011 (Current and Non Current) Current Non Current Carrying Value Upto 1 year Above 1 year Bank overdrafts 998,153 998,153 - Galadari Brothers Co. LLC 5,754,367,181 - 5,754,367,181 Government of Sri Lanka 580,789,771 271,999,299 308,790,472 6,336,155,105 272,997,452 6,063,157,653




Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates which will affect the Company income or the value of its holdings of fi nancial instruments. The objective of market risk man-

agement is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency Risk The Company is exposed to currency risk on fi xed deposit that are denominated in a currency other than the Sri

Lankan rupees (LKR)

The summary of quantitative data about the Company exposure to foreign currency was as follows: 2012 2011 01.01.2011 Rs. Rs. Rs. Cash and cash equivalents 28,497,533 24,831,479 23,462,382 Interest Rate Risk Interest rate risk mainly arises as a result of Company having interest sensitive assets and liabilities, which are directly,

impacted by changes in the interest rates.

29 RELATED PARTIES

29.1 Parent & ultimate controlling party The parent and the ultimate controlling party of the Company is Galadari Brothers Company LLC which is incorpo-

rated Dubai, UAE. 29.2 Transactions with key management personnel Key management personnel consist of Board of Directors. Key management personal compensation comprised of;

For The Year Ended 31 December, 2012 2011 2010 Rs. Rs. Rs. Short term employee benefi ts - - - Director’s fees 1,710,000 1,560,000 780,000 1,710,000 1,560,000 780,000 29.3 Other transactions with key management personnel Directors of the Company hold voting shares of the Company. The terms and conditions of the transactions of the

key management personnel and their related parties were no more favorable than those available, or which might reasonably be expected to be available, on similar transactions to non key management personnel related entities on an arm’s length basis.





29.4 Transactions with other related parties

(a) Galadari Brothers Holding Company LLC, the promoters of the project, was in erstwhile partnership with late Mr. Abdul Rahim Ebrahim Galadari and Mr.Abdul Latif Ebrahim Galadari. During the year 1996 the erstwhile partnership was registered as a limited liability company with Mr. Abdul Latif Ebrahim Galadari and heirs of the late Mr. Abdul Rahim Ebrahim Galadari as shareholders under the name Galadari Brothers Company LLC. The Company owes a loan payable to Galadari Brothers Company LLC, of which on the amount outstanding of Rs. 6,030,240,272/-, the accrued interest for the year amounts to Rs.121,796,568/- calculated at 1.5% over LIBOR is refl ected as a liability in Note No. 16 to these Financial Statements.

(I) However, Galadari Brothers Company LLC has confi rmed to the Board of Directors that, Galadari Hotels (Lanka) PLC may repay the loan due to Galadari Brothers Holding Company LLC, whenever net funds are available in excess of working capital requrement and any other commitments made in the company’s cources of business.

(II) For the year 2012, no payment in cash of the said loan would be required from Galadari Hotels (Lanka) PLC,

without however any prejudice whatsoever to any right of Galadari Brothers Company LLC to convert the whole or part of the said loan to equity or to seek legal enforcement of such conversion.

(III) Notwithstanding the above, Galadari Brothers Co LLC retains the right to repayment of the oustanding loan in the event of liquidation of Galadari Hotels (Lanka) PLC.

(b) The Government of Sri Lanka who presently holds 0.16% of the ordinary share capital, has granted a loan of Rs.150 million, through SRCC&T Fund (Strikes, Riots, Civil Commotions & Terrorism Fund), to the Company

during the year 1997 in respect of damages caused due to the bomb blast which occurred in October 1997. A further sum of Rs.200 million was granted during the year 1998, and a sum of Rs.50 million was granted in year 2000 and a further Rs.100 million was granted in 2003 by the Government of Sri Lanka through SRCC&T Fund. All loans were granted at a concessionary rate of 2% per annum with a grace period of 5 years to repay the Capital and Interest. A further sum of Rs. 37,588,837/- that was outstanding as interest accrued was also converted into a loan. The interest charged for the year 2012 amounts to Rs. 10,576,189/-.

The total value of the loan is Rs.527,364,638/- (2011 - Rs.527,364,638/-), which is refl ected as a liability in Note No. 16 to these Financial Statements.



30. EXPLANATION OF TRANSITION TO REVISED ACCOUNTING STANDARDS

30.1 Reconciliation of Equity as at 1st January 2011 Effect of transition As per SLAS to SLFRS / LKASs As per SLFRS / LKASs Rs. Rs. Rs. Assets

Property Plant & Equipment 6,196,069,570 - 6,196,069,570 Leasehold property 1,621,948,052 - 1,621,948,052 Deferred tax assets 628,633,197 - 628,633,197 8,446,650,819 - 8,446,650,819 Current Assets

Inventories 35,414,020 - 35,414,020 Trade and other receivables 129,229,093 (1,471,252) 127,757,841 Investments 221,295,981 1,506,824 222,802,805 Cash and cash equivalents 67,832,667 (111,841) 67,720,826 453,771,761 (76,269) 453,695,492 Total Assets 8,900,422,580 (76,269) 8,900,346,311

Equity

Stated capital 1,824,340,604 - 1,824,340,604 Revaluation reserve 7,795,957,489 - 7,795,957,489 Reserve for replacement of FFE 99,864,296 - 99,864,296 AFS Reserve - 116,628 116,628 Accumulated losses (8,445,183,231) (192,898) (8,445,376,129) Total equity 1,274,979,159 (76,270) 1,274,902,889

Non-current liabilities

Interest bearing borrowings 6,063,157,653 - 6,063,157,653 Deferred tax liabilities 881,498,016 - 881,498,016 Retirement benefi t obligations 48,770,682 - 48,770,682 6,993,426,350 - 6,993,426,350 Current liabilities

Trade and other payables 227,540,513 - 227,540,514 Interest bearing borrowings 272,997,452 - 272,997,452 Provisions 131,430,999 - 131,430,999 Current tax payables 48,107 - 48,107 632,017,071 - 632,017,072 Total liabilities 7,625,443,421 - 7,625,443,422

Total liabilities & equity 8,900,422,580 (76,270) 8,900,346,311




30.2. Reconciliation of Equity as at 31st December 2011

Effect of

transition to As per SLFRS / As per SLAS SLFRS / LKASs LKASs Rs. Rs. Rs.

Assets

Property Plant & Equipment 6,272,890,740 - 6,272,890,740 Leasehold property 1,598,441,558 - 1,598,441,558 Deferred tax assets 622,767,094 - 622,767,094 8,494,099,392 - 8,494,099,392 Current Assets

Inventories 34,369,585 - 34,369,585 Trade and other receivables 187,368,225 (2,441,319) 184,926,906 Investments 388,015,879 738,272 388,754,151 Cash and cash equivalents 97,525,695 (135,146) 97,390,549 707,279,384 (1,838,193) 705,441,191 Total Assets 9,201,378,776 (1,838,193) 9,199,540,583

Equity

Stated capital 1,824,340,604 - 1,824,340,604 Revaluation reserve 7,980,734,744 - 7,980,734,744 Reserve for replacement of FFE 73,418,355 - 73,418,355 AFS Reserve - (1,641,112) (1,641,112) Accumulated losses (8,684,789,708) (197,082) (8,684,986,790) Total equity 1,193,703,995 (1,838,194) 1,191,865,802

Non-current liabilities

Interest bearing borrowings 6,286,525,275 - 6,286,525,275 Deferred tax liabilities 905,583,562 - 905,583,562 Retirement benefi t obligations 54,158,630 - 54,158,630 7,246,267,467 - 7,246,267,467 Current liabilities

Trade and other payables 275,351,425 - 275,351,425 Interest bearing borrowings 334,540,897 - 334,540,897 Provisions 137,467,191 - 137,467,191 Current tax payables 14,047,801 - 14,047,801 761,407,314 - 761,407,314 Total liabilities 8,007,674,781 - 8,007,674,781

Total liabilities & equity 9,201,378,776 (1,838,194) 9,199,540,583




30.3. Reconciliation of Statement of Comprehensive Income and Other Comprehensive Income for the Year Ended 31st December 2011

Statement of Comprehensive Income

Effect of transition to As per SLFRS / As per SLAS SLFRS / LKASs LKASs Rs. Rs. Rs. Revenue 1,297,419,296 - 1,297,419,296

Cost of sales (529,290,204) - (529,290,204)

Gross profi t 768,129,092 - 768,129,092

Other income 2,814,220 - 2,814,220

Marketing expenses (29,106,116) - (29,106,116)

Administrative expenses (333,402,127) - (333,402,127)

Other operating expenses (371,603,956) - (371,603,956)

Results from operating activities 36,831,113 - 36,831,113

Finance expenses (285,903,139) - (285,903,139)

Finance income 28,091,979 (4,185) 28,087,794

Net fi nance expenses (257,811,160) (4,185) (257,815,344)

Profi t/(loss) before income tax expense (220,980,047) (4,185) (220,984,231)

Income tax expense (45,072,372) - (45,072,372)

Loss for the year (266,052,419) (4,185) (266,056,603)




30.4. Notes to the Reconciliation of Equity as at 1st January 2011 and 31st December 2011, Statement of compre hensive income and Other comprehensive income for the year ended 31st December 2011 A. Other investments Under SLASs, the company recognized & measured investments at cost. However, in accordance with LKAS 39 Finan cial Instruments. Treasury bills and bonds were classifi ed as available for sale fi nancial assets and have been measured at fair value and Repos & USD deposits have been classifi ed as loans and receivables and measured at amortized cost using EIR method.

The difference between the fair value under SLFRS / LKASs and amortized cost has been recognized as a separate components of equity in the available for sale reserve in accordance with LKAS 39.

The impact arising from the change is summarized as follows:

Statement of fi nancial position

i. Treasury Bills and Treasury Bonds As at 31st As at 1st December 2011 January 2011 Carrying value of as per SLAS 329,031,822 94,709,760 Amortization of discount 1,695,583 805,782 Impact on fi nancial assets due to movement in fair value (1,641,111) 116,628

Fair Value of the available for sale fi nancial assets as per LKAS 39 329,086,294 95,632,170

ii. Repos As at 31st As at 1st December 2011 January 2011

Carrying value as per SLAS 58,984,056 126,586,221 Impact on fi nancial assets due to the adjustment to amortized cost 683,800 584,414 Amortized cost as per LKAS 39 59,667,856 127,170,635 Total Investment as per LKAS 39 388,754,150 222,802,805 B. Cash and cash equivalents Fixed Deposits - USD As at 31st As at 1st December 2011 January 2011

Carrying value as per SLAS 24,966,625 23,574,223 Impact on fi nancial assets due to the adjustment to amortized cost 60,367 47,906 Exchanage Loss (195,513) (159,747)

USD Deposit as per LKAS 39 24,831,479 23,462,382




C. Other Receivables As at 31st As at 1st December 2011 January 2011

Carrying value as per SLAS 58,613,704 40,305,771 Impact on fi nancial assets due to the adjustment to amortized cost (2,441,319) (1,471,252)

Carrying value as per SLFRS 56,172,385 38,834,519

D. Analysis the impact to PBT As at 31st December 2011

PBT as per SLAS (220,980,047) Adjustment Amortized cost 31,581 Forex gain/loss (35,765)

PBT as per SLFRS (220,984,231)

E. Reconciliation of retained earnings As at 31st As at 1st December 2011 January 2011

Adjustment due to effective interest rate (231,404) (192,897)

(231,404) (192,897)

i. Adjustments due to effective interest rate (EIR) As per SLAS, company recognised interest income using the contracted interest rate on the capital granted using the straight line method. According to SLFRS / LKASs interest shall be computed using the effective interest rate (EIR) method.




31. CAPITAL COMMITMENTS AND CONTINGENCIES

There are no capital commitment and contingencies as at the balance sheet date, except as disclosed below, 31.1 The following assets have been pledged as security for liabilities; Nature of assets Nature of liability 2012 2011 2010 Rs. Rs. Rs. Movable property (included under First /secondary mortage Property, plant & equipment) for loans and borrowings 2,100,000 16,105,000 17,200,000 2,100,000 16,105,000 17,200,000 31.2 Department of Inland Revenue has raised assessments for additional income tax for the years of assessment 2009/2010 and 2010/2011 amounting to Rs. 575Million and Rs. 25Mn Respectively. Company has lodged an appeal against the assessment.

32. GOING CONCERN The Company incurred an accumilated loss of Rs. 9,203,799,471 as at 31st December 2012 (2011 Restated- Rs. 8,684,986,790) and, as of that date, Company’s losses exceeded its stated capital by Rs. 7,379,458,867 (2011 Restated- Rs. 6,860,646,186). Although these conditions indicate an uncertainity regarding the Company’s ability to continue as a going concern the board of directors of Galadari Hotel (Lanka) PLC is of the view that the Company is a going concern as the following measures have been taken by the directors.

Board has taken steps with the relevant authorities for the conversion of the loan appearing in the books of the company as payable to Galadari Brothers Co. (LLC) into equity. The Colombo Stock Exchange has approved the Galadari Brother Co. LLC loan to be converted in to equity and an Extra Ordinary General Meeting held on 1st April 2013 to obtain approval from shareholders to proceed with the said converstion.

Further, Galadari Brothers Co. (LLC) without however any prejudice whatsoever to any right of Galadari Brothers Co. (LLC) to convert the whole or part of the said loan to equity or to seek legal enforcement of such conversion has confi rmed to the Board of Directors that it will not request repayment of either the loan capital or interest due as at the balance sheet date of 31 December, 2012 within the next 12 months.

Taking such into consideration, the directors have assessed and are confi dent that the company will be ble to continue its operations for the foreseeable future, hence, have adopted the going concern assumption in the preparation and presentation of these fi nancial statements.

33. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE No circumstances have arisen since the Balance Sheet date other than what is disclosed under note 16.3 to these fi nancial statements.

34. COMPARATIVE INFORMATION Comparative Figures have been re - arranged & reclassifi ed wherever necessary to conform with the current year’s presentation.

35. SEGMENT REPORTING An operating segment is a component within the Company that engage in business activities for which it may earn distigush revenue and expenses for such segment.

The operting results arising for hoteling business of the Company as a whole is reviewed regularly bt the Company’s General manager to make decisions about resource to be allocated & assess its performance. Therefore no operating segment within the Company is identifi ed & reported.

36. DIRECTOR’S RESPONSIBILITIES The Board of Directors of the company is responsible for the preparation and presentation of these Financial Statements.




(1) Ordinary Shareholders As At 31st December, 2012 Number of Shareholders - 12,039 (As at 31.12.2011 -11,187) Range No. of Total No. Percentage (Shareholdings) Shareholders of Shares

1- 1000 10,428 2,496,986 1.37 1001- 5000 1,174 2,988,790 1.64 5001- 10000 232 1,809,831 0.99 10001- 50000 157 3,400,676 1.86 50001- 100000 15 1,084,529 0.59 100001- 500000 15 3,651,712 2.00 500001 & above 18 167,001,536 91.55 TOTAL 12,039 182,434,060 100.00

(2) Major Shareholders as at 31.12.2012 Name of Shareholder Total Holding Percentage

Iceberg 2 Limited 29,510,817 16.18 Employees Provident Fund 23,712,200 13.00 Calgary Holdings S.A 18,146,303 9.95 Pershing LLC S/A Averbach Grauson & Co. 14,840,300 8.13 M. A. I. Galadari 9,810,017 5.38 I.A.L.I. Galadari 9,810,017 5.38 S. A. L. E. Galadari 9,810,016 5.38 Sabah Abdul Rahim Galadari 8,865,064 4.86 Suaad Abdul Rahim Galadari 8,865,064 4.86 Samia Abdul Rahim Galadari 8,865,064 4.86 Dubai Bank Limited 6,760,390 3.71 Z.A.I. Galadari 4,905,000 2.69 S.A I.Galadari 4,905,000 2.69 F. E. Abdul Qader 3,166,094 1.74 F. N. M. Alam Khan 2,802,861 1.54 Seylan Bank PLC - A/C No. 3 1,125,500 0.62 M.I.M. Rizly 596,500 0.33 National Wealth Corporation Limited 505,329 0.28 J Rudra 477,000 0.26 Nation Lanka Capital Limited/Anilana Hotels and Properties Limited 467,234 0.26

(ii) The percentage of Shares held by the Public as at 31.12.2012- 21.52% (iii) Directors’ Shareholding as at 31st December, 2012 31.12.2012 31.12.2011

Mr K A A Soliman - - Mr M H O K Al Shehi - - Mr L R De Silva - - Mr S M H A Khooray - - Mr H K J Dharmadasa - - Dr. J A S Felix - - Mr P M A Sirimane - - Mr M H A W Al Garf - - Mr Amit Chib - - Mr H A Mohamed - - Mr H J C Perera ( Alternate Director to Mr H K J Dharmadasa) - 18

(3) Market Price of Share 31.12.2012 31.12.2011 Rs. Rs. Highest Market Value per Share 30.50 (02.01.12) 43.00 (06.09.11) Lowest Market Value per Share 10.40 (06.06.12) 26.50 (25.11.11) Closing Price 14.20(31.12.12) 29.10 (30.12.11)

(4) Net Asset Value Per Share 6.30 6.53

Information to Shareholders



2012 2011 2010 2009 2008 Rs. Rs. Rs. Rs. Rs. 000 000 000 000 000

TRADING RESULTSTurnover net of Turnover based Taxes 1,724,264 1,297,419 1,026,180 730,093 701,389Profi t/(Loss) beforeInterest Expenses and other Income (434,869) (164,054) 100,546 (247,489) (467,518)Profi t/(Loss) before Taxation (457,320) (220,984) 27,952 (351,369) (627,640)Taxation Provision (34,705) (45,072) (25,713) (616) (1,490)Profi t/(Loss)after Taxation on Ordinary Activities (492,024) (266,056) 2,239 (351,985) (629,130)

SHARE CAPITAL AND RESERVESSated Capital/Share capital 1,824,341 1,824,341 1,824,341 1,824,341 1,824,341Capital reserves 8,388,149 7,980,735 7,795,957 8,422,570 7,787,456Revenue Reserves (9,204,063) (8,686,628) (8,445,259) (9,005,092) (8,634,175)Provision for Replacement of FurnitureFittings & Equipment 141,070 73,418 99,864 104,245 85,313Shareholder’s Funds 1,149,497 1,191,866 1,274,903 1,346,064 1,062,935

ASSETS EMPLOYEDCurrent Assets 1,187,007 705,441 453,695 239,417 203,108Current Liabilities (868,069) (761,407) (632,016) (347,184) (316,724)Working Capital 318,938 (55,966) (178,321) (107,767) (113,616)Property, Plant & Equipment 6,729,584 6,272,891 6,196,069 6,196,913 5,747,011Leased Assets 1,574,935 1,598,441 1,621,948 1,645,454 1,668,961Deferred Tax Assets 623,710 622,767 628,633 - -Long term Liabilities (8,097,670) (7,246,267) (6,993,426) (6,388,536) (6,239,421) 1,149,497 1,191,866 1,274,903 1,346,064 1,062,935RATIOS & STATISTICSGearing Ratio (Times) 6.48 5.56 4.97 4.75 5.86Current Ratio (Times) 1.37 0.93 0.72 0.69 0.64Earnings per share (2.70) (1.46) 0.01 (1.93) (3.45)Net Assets Value per share 6.30 6.53 6.99 7.38 5.83

Five Year SummaryYear ended 31st December 2012



Form of Proxy

GALADARI HOTELS (LANKA) PLC

I/We the undersigned ………………..…………………………………………………………….……………………................................................................................of………………………………………………………………………………………………………………….……..………………………………………………………………......………………………………………………………………...................................… being a member/members of Galadari Hotels (Lanka) PLC do hereby appoint ………………………………….…………………………………………………..………………...…………….....................................................................................of …………..……………………………………………………………………………………………………………..............................................................................................

whom failing KHALED ALY ALY SOLIMAN whom failing SHARIF MIR HASHEM AHMED KHOORY whom failing LALITH RUK-MAN DE SILVA whom failing HEWA KOMANAGE JAYANTHA DHARMADASA whom failing DR. JOHN ANTHONY SHIVAJI FELIX whom failing MOHAMED HISHAM ABDEL WAHAB AL GARF whom failing AMIT CHIB whom failing HATIM ABDELAZIZ MOHAMED as my/our Proxy to represent me/us and *………………. to vote on my/our behalf at the THIRTY SECOND ANNUAL GENERAL MEETING of the Company to be held on Wednesday, 26th June, 2013 and at any adjournment thereof, and at every poll which may be taken in consequence thereof. I /We the undersigned hereby authorise my/our proxy to vote on my/our behalf in accordance with the preference indicated below:- For Against1. To receive and consider the Audited Financial Statements for the year ended 31st December, 2012 and the Reports of the Auditors’ and of the Directors’ thereon

2. Directors(i) To re-elect Mr Lalith Rukman De Silva, Director, who retires by rotation in terms of Article 87 of the Articles of Association of the Company(ii) To re-elect Mr Hewa Komanage Jayantha Dharmadasa, Director, who retires by rotation in terms of Article 87 of the Articles of Association of the Company(iii) To re-elect Dr. John Anthony Shivaji Felix, Director, who retires by rotation in terms of Article 87 of the Articles of Association of the Company

3. To re-appoint the Auditors Messrs KPMG, Chartered Accountants, to hold offi ce until the conclusion of the next Annual General Meeting and to authorise the Directors to determine their remuneration.

As witness my/our hand this ……………day of ………………..Two Thousand and Thirteen .

…………………………................. Signature of Shareholder

Notes:If you wish your Proxy to speak at the Meeting you should insert the words “to speak and” in the place indicated with an asterisk and initial such insertion.

Please indicate with an “x” in the space provided how your Proxy is to vote. If there is in the view of the Proxyholder doubt (by reason of the way in which the instructions contained in the Proxy have been completed) as to the way in which the Proxyholder should vote, the Proxyholder shall vote as he thinks fi t.

A Proxyholder need not be a member of the Company

Instructions as to completion appear on the reverse hereof



INSTRUCTIONS AS TO COMPLETION

1. To be valid this Form of Proxy must be deposited at the Registered Offi ce of the Company at No.9/5, Thambiah Avenue, Colombo 07 not less than 48 hours before the time appointed for the holding of the Meeting.

2. The instrument appointing a Proxy shall in the case of an individual be signed by the appointor or by his Attorney and in the case of a Company/Corporation, the Proxy Form must be executed under its Common Seal, which should be affi xed and attested in the manner prescribed by its Articles of Association or other constitutional documents.

3. If the Proxy Form is signed by an Attorney, the relevant Power of Attorney or a notarially certifi ed copy thereof, should also accompany the completed Form of Proxy if it has not already been registered with the Company.

4. The full name and address of the Proxyholder and of the Shareholder appointing the Proxyholder should be entered legibly in the Form of Proxy.

Galadari AR 2012 - CSE

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Transcript of Galadari AR 2012 - CSE