Kingsbury AR - 2012 PDF

Hotel Services (Ceylon) PLC
Co. Reg. No. PQ 203
Seizing Opportunities, Embracing Change

Annual Report 2011 - 2012
Contents
Information to Shareholders 2 | Financial Summary 3 | Chairmans Statement 5 | Board of Directors 7 Annual Report of the Directors on the Affairs of the Company 9 | Corporate Governance 12 Risk Management 18 | Statement of Directors Responsibilities 20 | Audit Committee Report 21 Independent Auditors Report 23 | Income Statement 24 | Balance Sheet 25 | Statement of Changes in Equity 26 Cash Flow Statement 27 | Notes to the Financial Statements 28 | Notice of Meeting 46 | Form of Proxy 47 | Corporate Structure - Inner Back Cover

It is remarkable to reflect on our companys past year and the complete refurbishment and transformation that is taking place in this relatively short time span. Being a forerunner in the hotel sector we are uniquely grounded in our purpose to open doors to a world of opportunity and confident it will propel our success. Thus, the Hoberman Sphere on the cover of this report reflects our momentum to seize opportunity and embrace change.

Information to Shareholders
Ordinary Shareholders as at 31st March 2012
No. of Shares Held 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 50,000 50,001 - 100,000 100,001 - 500,000 500,001 - 1,000,000 OVER 1,000,000 Category Individuals Institutions No. of Shareholders 2,316 1,183 298 265 57 48 10 16 4,193 3,987 206 4,193 Residents Non Residents No. of No. of No. of No. of Shares % Shareholders Shares % Shareholders 1,049,633 3,194,063 2,465,739 6,323,408 4,352,500 11,156,300 7,690,046 138,897,811 175,129,500 22,514,467 152,964,779 175,129,500 0.5964 1.8148 1.4010 3.5928 2.4730 6.3388 4.3693 78.9192 99.5054 15.5569 83.9485 99.5054 6 12 3 10 2 2 - - 35 31 4 35 2,540 40,160 28,700 299,300 175,000 324,800 - - 870,500 520,670 349,830 870,500 0.0014 0.0228 0.0163 0.1701 0.0994 0.1845 - - 0.4946 0.2958 0.1988 0.4946 Total No. of Shares % 2,322 1,052,173 0.5978 1,195 3,234,223 1.8376 301 2,494,439 1.4173 275 6,622,708 3.7629 59 4,527,500 2.5724 50 11,481,100 6.5234 10 7,690,046 4.3693 16 138,897,811 78.9192 4,228 176,000,000 100.0000 4,018 23,035,137 13.0881 210 152,964,863 86.9119 4,228 176,000,000 100.0000
First Twenty Shareholders as at 31st March 2012

Name of Shareholder 1 HAYLEYS PLC NO 3 SHARE INVESTMENT ACCOUNT 2 CARBOTELS (PVT) LIMITED 3 EMPLOYEES PROVIDENT FUND 4 BANK OF CEYLON - A/C NO. 2 5 NATIONAL SAVINGS BANK 6 MERCHANT BANK OF SRI LANKA LTD - A/C NO. 1 7 RENUKA HOTELS LIMITED 8 RENUKA CITY HOTELS LIMITED 9 DEUTSCHE BANK AG-NATIONAL EQUITY FUND 10 SEYLAN BANK PLC. - A/C NO. 3 11 PREMIUM BRANDS (PVT) LIMITED 12 RENUKA CONSULTANTS & SERVICES LIMITED. 13 DEUTSCHE BANK AG NAMAL ACUITY VALUE FUND 14 WALDOCK MACKENZIE LIMITED/MR. L. P. HAPANGAMA 15 EAST WEST PROPERTIES PLC 16 CARGO BOAT DEVELOPMENT COMPANY LIMITED 17 MISS. A. N. DE SILVA 18 UNION BANK OF COLOMBO LTD 19 MR. V. LINTOTAWELA 20 ASSOCIATED ELECTRICAL CORPORATION LTD TOTAL No. of Shares as at 31.03.2012 % 66,762,690 23,000,000 18,374,122 7,833,500 2,707,100 2,672,370 2,371,300 2,260,300 2,200,000 2,000,229 1,928,700 1,835,100 1,650,000 1,227,700 1,064,600 1,010,100 1,000,000 1,000,000 977,700 948,400 142,823,911 37.93 13.07 10.44 4.45 1.54 1.52 1.35 1.28 1.25 1.14 1.10 1.04 0.94 0.70 0.60 0.57 0.57 0.57 0.56 0.54 81.15 No. of Shares as at 31.03.2011 66,762,690 23,000,000 12,917,700 7,833,500 1,748,900 2,792,870 2,222,300 2,166,500 2,200,000 2,350,000 1,928,700 1,510,100 1,650,000 1,227,700 0 1,010,100 1,250,000 1,000,000 1,373,100 500,000 135,444,160 % 37.93 13.07 7.34 4.45 0.99 1.59 1.26 1.23 1.25 1.34 1.10 0.86 0.94 0.70 0.00 0.57 0.71 0.57 0.78 0.28 76.96

Financial Summary
5 Year Financial Summary and Key Indicators
Revenue Rooms Food & Beverages Other Operating Income Total Revenue Direct Cost Food & Beverage Cost Total Expenses Gross Operating Profit Expenses Administration & General Advertising & Sales Heat, Light & Power Repairs & Maintenance Total Deductions Operating Profit Other Income and Expenses De - recognition of Property, Plant and Equipment Interest Expenses/(Income) Depreciation Net (Loss)/Profit Before Taxation Tax Net (Loss)/Profit After Taxation Operating Results Total Revenue Sales Growth % Operating Profit Net (Loss)/Profit Before Taxation Interest Expenditure Depreciation 2011/12 Rs.000 % 2010/11 Rs.000 2009/10 Rs.000 % 2008/09 2007/08 Rs.000 % Rs.000 % 251,439 46 282,471 52 13,267 2 547,177 100 111,156 111,156 436,021 249,222 55,500 79,956 25,716 410,393 25,628 (22,664) 20 20 80 46 10 15 5 75 5 (4) 277,689 46 310,342 51 18,517 3 606,548 100 123,313 123,313 483,235 206,129 54,328 77,512 21,624 359,593 123,642 1,042 - 124,684 (4,727) 62,751 58,024 66,660 (13,961) 52,699 20 20 80 34 9 13 4 59 20 0 - 21 (1) 10 10 11 (2) 9 111,385 33 213,013 62 17,013 5 341,411 100 75,613 75,613 265,798 136,289 19,282 49,218 10,703 215,492 50,306 1,540 - 51,846 1,476 46,294 47,770 4,076 3,132 7,208 22 22 78 40 6 14 3 63 15 0 - 15 0 14 14 1 1 2 134,799 277,645 14,753 427,197 98,492 98,492 328,705 151,508 28,674 53,354 12,687 246,223 82,482 7,380 - 89,862 4,382 47,522 51,904 37,958 (9,745) 28,213 32 172,073 35 65 300,087 62 3 15,533 3 100 487,693 100 23 23 91,120 91,120 19 19 81 37 5 10 4 56 26 0 26 (1) 10 9 17 (3) 14
77 396,573 35 180,473 7 22,335 12 49,108 3 19,864 58 271,780 19 124,793 2 1,921 - - 21 126,714 1 (3,220) 11 48,199 12 44,979 9 81,735 (2) (15,201) 7 66,534
(149,992) (27) (147,028) 1 (1,461) (0) 56,675 10 55,213 10 (202,241) (10) 13,152 2 (189,089) (35)
547,177 (9.79) 25,628 (202,241) (1,461) 56,675
606,548 77.66 123,642 66,660 (4,727) 62,751
341,411 (20.08) 50,306 4,076 1,476 46,294
427,197 487,693 (12.40) (4.78) 82,473 124,793 37,949 81,735 4,382 (3,220) 47,522 48,199

Financial Summary
Capital Employed Share Capital Revaluation & Other Reserves Retained Earnings Shareholders Fund Assets Employed Non Current Assets Net Current Assets Long-term Liabilities Deferred Liabilities Key Indicators Current Ratio Net Assets per Share Market Price per Share Earnings per Share 2011/12 Rs.000 % 2010/11 Rs.000 2009/10 Rs.000 % 2008/09 2007/08 Rs.000 % Rs.000
176,000 176,000 1,087,053 1,227,417 164,177 193,762 1,427,230 1,597,179
176,000 962,933 120,695 1,259,628
176,000 141,825 111,728 429,552
176,000 143,320 102,876 422,196
1,956,358 1,729,487 41,528 67,588 1,997,886 1,797,075 410,290 9,939 160,366 189,957 1,427,230 1,597,179
1,453,958 12,544 1,466,502 10,802 196,072 1,259,628
529,185 579,871 (16,980) (56,822) 512,205 523,049 22,825 38,414 59,828 62,439 429,552 422,196
1.63 8.11 17.40 (1.07)
1.48 9.07 23.10 0.30
1.15 7.16 23.50 0.04
0.79 24.41 152.25 1.59
0.68 23.99 145.00 3.78

Chairmans Statement
The year marks major initiatives undertaken by the Company to stand out from the competition to flagship Ceylon Continental Hotel through its major refurbishment program coupled with an ambitious program to set new standards of quality and service to its existing and potential clientele.
Dear Shareholders, On behalf of the board, I am pleased to present the Annual Report of Hotel Services (Ceylon) PLC for the financial year 2011/12. Having faced a particularly challenging environment in 2011, especially with the full scale refurbishment of the Ceylon Continental Hotel, I am pleased to report that the Company remained operationally profitable until the closure at the end of January 2012. However, the Company registered a decline in earnings compared to the previous financial year. This was largely as a consequence of the significantly reduced performance of Ceylon Continental Hotel which closed its operations in the months of February and March 2012. The year marks major initiatives undertaken by the Company to stand out from the competition to flagship Ceylon Continental Hotel through its major refurbishment program coupled with an ambitious program to set new standards of quality and service to its existing and potential clientele. Furthermore, we are offering a new standard of quality defined by its unique architecture and decor in addition to highly personalised service encompassed in our total value proposition to customers.
Performance Review
The total revenue declined to Rs. 547 million from Rs. 606 million in 2011, resulting in a 10% decline year on year. Additionally, gross profit showed a slight decline of 13% to Rs. 291 million from Rs. 335 million from the previous year. These results were in line with the Company business plan pending the major refurbishment program that commenced in early 2012, to make a total transformation of its quality and service standards to customers.
Initiative and Development

With the ongoing renovation programme taking place at the Ceylon Continental Hotel, Hotel Services (Ceylon) PLC is poised to set new standards to secure in its future growth and to maintain competitiveness. During the year, we have strived to develop and sustain all our capital expenditure programs, whilst investing in new infrastructure, marketing and human resource capabilities simultaneous with the ongoing refurbishment.

Chairmans Statement
The Hotel Services (Ceylon) PLC is investing approximately Rs 1.8 billion for its refurbishment project which will transform the property into a fully refurbished 229 room hotel as compared to the 189 units it was previously operating , making it one of the finest hotels in Colombo. The architecture of the hotel has been inspired by a neo-classical theme. Upon the completion of this major refurbishment program, it is expected to provide our customers a whole new ambience coupled with a new level of quality and service standards to provide a new meaning and experience to Sri Lankan hospitality. The hotel will consist of luxury suites and deluxe rooms, in addition to 6 restaurants, 3 banquet venues, 3 board rooms, a business centre, the lounge bar and unique sky bar, infinity pool, state-of-the-art gym and spa. An important part of the renovation project is the replacement of the old mechanical and electrical systems of the hotel in its entirety with increased focus on reducing energy consumption and carbon emissions, whilst also saving on operational costs. Simultaneously, development of our human resources remains a key focus to the overall success of this hotel. Thus particular attention is paid to ensure that we support the development of all our team members by providing them not only with the necessary working environment that will keep them motivated but by training our employees with help from outside expertise from some of the leading hotel chains. Along with this we conduct recruitment programs to hire people that have been exposed to international standards consequently developing both management and leadership capabilities as well as guaranteeing consistent delivery of high standards of service to all our customers. We are strengthening our sales and marketing efforts to gain higher market share by increasing promotional activity and innovative marketing programmes in key target markets throughout 2012. Additionally, we have redefined our marketing strategy on our regional and domestic markets with a more distinct strategy. Our new infrastructure with leading edge technology in the hospitality industry, installed throughout the hotel will help us solidify our target industry leadership position in the use of technology to better serve our customers.
Outlook
Parallel to the strong economic growth potential of Sri Lanka, the tourist figures to the country indicates an exponential growth with a hundred percent increase in the last two years. In this back drop, the overall outlook for our leisure business remains largely optimistic. The novel positioning strategy coupled to the major refurbishment program and new service standards, the Ceylon Continental Hotel is poised strategically and timely to reap maximum benefits from the boom in the leisure sector.
Appreciation
It has been a year of significant challenges and noteworthy accomplishments for the Company. I am pleased to report that the changes set in motion in 2011 will help Hotel Services (Ceylon) PLC to be a benchmark in the leisure industry in years ahead. The accomplishment of the challenges and the major initiatives set in motion are attributable to the hard work and dedication of all our employees and to the guidance and support provided by my colleagues on the Board. I convey my appreciation to them for giving me such support and guidance. My sincere appreciation is further extended to our shareholders and other key stakeholders for the confidence and support provided during the year.
Mohan Pandithage Chairman 17th May 2012
Directorate
I would like to acknowledge the service rendered by Mr Upul Gamage who resigned during the year under review and wish him success in his future endeavours.

Board of Directors
Mr. A. M. Pandithage (Chairman)
Mr. Pandithage joined Hayleys Group in 1969. Appointed Chairman and Chief Executive of Hayleys since July 2009. Honorary Consul of United Mexican States (Mexico) to Sri Lanka. Fellow of the Chartered Institute of Logistics & Transport. Member of the Presidential Committee on Maritime Matters. Committee Member of the Ceylon Chamber of Commerce. Council Member of the Employers Federation of Ceylon. Member of the Monetary Policy Consultative Committee of the Central Bank of Sri Lanka. Director, Sri Lanka Port Management & Consultancy Services Limited. Former Chairman of the Ceylon Association of Ships Agents. Former Director of both the Sri Lanka Ports Authority and Jaya Container Terminals Limited.
Mr. S. C. Ganegoda *
Mr Ganegoda is a fellow member of Institute of Chartered Accountants of Sri Lanka and member of the Institute of Certified Management Accountants of Australia. He holds an MBA from the Postgraduate Institute of Management, University of Sri Jayawardenepura. He has worked for Hayleys PLC and Diesel & Motor Engineering PLC between 1987 and 2002 and ultimately as an Executive Director of the latter. Subsequently he has held several senior management positions in private sector entities in Sri Lanka and Overseas. He rejoined Hayleys in March 2007 and functioned as Head, Strategic Business Development until July 2009. He was appointed to the Board of Hayleys PLC in September 2009 and to several other Boards of Hayleys Group Companies.
Mr. K. D. D. Perera *
Appointed to the Board in 2010. He is a quintessential strategist and business specialist with 24 years of business experience. His business interests include Hydropower generation, Manufacturing, Hospitality, Entertainment, Banking and Finance. Currently he holds the position of Secretary to the Ministry of Transport, Sri Lanka. He is the Chairman of Sampath Bank PLC, Vallibel One PLC, Vallibel Finance PLC, Vallibel Power Erathna PLC, The Fortress Resorts PLC, Lewis Brown & Company (Pvt) Ltd and Greener Water Ltd. He is the Deputy Chairman of Hayleys PLC, Royal Ceramics Lanka PLC & LB Finance PLC. He also serves on the Boards of Amaya Leisure PLC, Hayleys MGT Knitting Mills PLC, Haycarb PLC, Dipped Products PLC, Orit Apparels Lanka (Pvt) Ltd, Nirmalapura Wind Power (Pvt) Ltd, Alutec Anodising & Machine Tools (Pvt) Ltd and Sri Lanka Insurance Corporation Ltd. He is also a member of the Board of Directors of Strategic Enterprise Management Agency (SEMA).
Mr. S. P. Dissanayake *
Joined Hayleys in July 2007. Appointed to the Group Management Committee in the same month. Graduate in Hotel Management. Was awarded the Life Time Gold Award in 2011 and Honorary Membership in 2004 by the Institute of Personnel Management, in recognition of his contribution to Human Resources activities in Sri Lanka. Director of Hayleys Group Services (Pvt) Ltd and Director of Hayleys Foundation (Guarantee) Ltd. Is the Co-Patron of the Hayleys Group Toastmasters Club and Vice Patron of Hayleys Group Recreation Club. Prior to joining Hayleys, he held several senior management positions in large private sector entities in Sri Lanka and abroad in Human Resources Management and previously in Hotel Management. Has held significant honorary and advisory positions in Human Resources and the Hotel industry. Is a former President of the Hotel School Graduates Association and a former Member of the Hotel Classification Committee of Sri Lanka Tourism Development Authority. Is a member of the Ceylon Chamber of Commerce Steering Committee for HR and Education and is also a Steering Committee Member of the Lanka Business Coalition (LBCH) for prevention of AIDS. Is the Sector Head for Group Human Resources, Corporate Communications/Sustainability and Group Security at Hayleys.
Mr. S. J. Wijesinghe
Joined Hayleys in October 2008 as CEO of Civaro International and later moved on to take over his current position as Head of the Leisure and Aviation sector in 2009. He was appointed to the Group Management Committee in 2011. Johann holds a MBA from the University of Leicester (UK) and is a Member of the Chartered Institute of Marketing (UK). Johann has over 20 years experience in the

Board of Directors
Aviation industry with the National Carrier SriLankan Airlines. Prior to joining Hayleys, he was the Head of Worldwide Cargo at SriLankan Airlines responsible for the entire air freight business sector of the organisation. He also held several senior positions for the airline including management positions in Europe, Middle East, Far East and at the Head Office in Colombo. Johann also has over 5 years experience in the Hotel industry having served as the Director Marketing & Sales at The Lanka Oberoi.
Mr. N. J. De S. Deva-Aditya **
Mr. Deva-Aditya was the First Asian MP elected to Conservative Party in the House of Commons and Bachelor Technology (Honors) Upper Second, Aeronautical Engineering and Design , Research Fellow, University of Louhborough, Graduate of the Royal Aeronautical Society and Institute of Mechanical Engineers and he holds directorships in six companies.
Ms. R. N. Ponnambalam **
Mrs. Ponnambalam has held several senior management positions in large private sector entities. She has served as a Director of McLarens Holdings Limited & GAC Shipping Limited. She currently serves as Director of Amaya Leisure PLC, Alliance Finance Co. PLC and McBolon Polymer (Pvt) Ltd. She is presently the Managing Director / CEO of Macbertan (Pvt) Ltd. She has also been in roles of International & Local Business Development and negotiation.
Mr. L. N. De S. Wijeyeratne **
Mr. De Silva Wijeyeratne is a fellow member of the Institute of Chartered Accountants of Sri Lanka and counts over thirty years experience in finance and general management, both locally and overseas. He was the former Group Finance Director of Richard Pieris & Company PLC and is presently a Director of several listed and unlisted companies.
Mr. W. D. N. H. Perera *
Appointed to the Board in 2011. He counts for over 30 years experience in Finance, Capital Market Operations, Manufacturing, Marketing and Management Services. Managing Director of Royal Ceramics Lanka PLC, Executive Deputy Chairman of Vallibel One PLC, Chairman of Pan Asia Banking Corporation PLC, Don Wilbert Capital Ltd, N Sports (Pvt) Ltd, N Capital (Pvt) Ltd, Director of Hayleys PLC, Haycarb PLC, Amaya Leisure PLC, LB Finance PLC, Vallibel Finance PLC, Talawakele Tea Estates PLC and Vallibel Power Erathna PLC.
Mr. L. T. Samarawickrama *
Mr. Samarawickrama serves as the Managing Director of Amaya Leisure PLC. He is an internationally qualified Hotelier having gained most of his Management experience in UK, Working for large international hotel chains over a long period of time. First Sri Lankan Manager to be appointed by the Beaufort International chain of Hotels to run the first seaside boutique resort in the island. He is a Member of the Institute of Hospitality UK (formerly HCIMA) and of the Royal Society of Health, London. He counts over several years of experience in the trade. Having specialised in Hotel design, he has been responsible for the careful planning and execution of Amaya Resorts & Spas refurbishment and rehabilitation programs. He is also a Director of the Fortress Resorts PLC, Hunas Falls PLC, Royal Ceramics Lanka PLC and Kelani Valley Plantations PLC. Executive * Non-Executive ** Non-Executive Independent

Annual Report of the Directors on the Affairs of the Company

The Board of Directors is pleased to present their report and the Audited Financial Statements of the Company for the year ended 31st March 2012. The details set out herein provide pertinent information required by the Companies Act, No.7 of 2007 and the Colombo Stock Exchange Listing rules and are guided by recommended best accounting practices.
Directors Remuneration and Other Benefits

Directors remuneration in respect of the Company for the financial year ended 31st March 2012 is given in Note - 5 to the financial statements. Executive Directors remuneration is established within an established framework. The total remuneration of Executive Directors for the year ended 31st March 2012 is Nil. The total remuneration of Non-Executive Directors for the year ended 31st March 2012 is Rs. 1,219,000 determined according to scales of payment decided upon by the Board. The Board is satisfied that the payment of this remuneration is fair to the company.
Review of the year

The Chairmans review describes the Companys affairs and mentions important events of the year.
Principal Activity
The principal activity of the Company is Hoteliering and is the owner of Ceylon Continental Hotel Colombo.
Corporate Donations
Donations made during the year was nil.
Financial Statements
The financial statements of the Company are given in pages 24 to 43.
Directorate
Directors of the Company as at 31st March 2012 Mr. A. M. Pandithage Mr. S. C. Ganegoda* Mr. S. P. Dissanayake* Mr. S. J. Wijesinghe Mr. N. J. De S. Deva Aditya** Mr. L. T. Samarawickrama* Mr. L. N. De S. Wijeyeratne** Mr. K. D. D. Perera* Ms. R. N. Ponnambalam** Mr. W. D. N. H. Perera* * Non-Executive Directors ** Independent Non-Executive Directors Mr. U. D. Gamage resigned from the Board on 20th December 2011. In terms of the Article 87 of the Articles of Association of the Company Messrs. N. J. De S. Deva Aditya, S. J. Wijesinghe and L. T. Samarawickrama retire by rotation and being eligible, offers themselves for re-election.
Auditors Report
The auditors report on the financial statements is given on page 23.
Accounting Policies
The accounting policies adopted in preparation of financial statements are given on pages 28 to 32 There were no material changes in the accounting policies adopted.
Interest Register
The Company in compliance with the Companies Act No. 7 of 2007, maintains an interest register. Particulars of the entries in the register are detailed below.
Directors Interests in Transactions

The Directors of the Company have made the general disclosure provided for in section 192(2) of the Companies Act No. 7 of 2007. Note - 25 to the financial statements dealing with related party disclosure includes details of their interests in transactions.
Directors Interests in Shares

Directors interests in shares are given later in this report. There were no changes to the relevant interests in shares during the year.
Directors Shareholdings
None of the Directors held shares directly in the Company as at 31st March 2012.

Annual Report of The Directors on The Affairs of The Company

Mr. K. D. D. Perera held directly and indirectly 48% of the total issued shares of Hayleys PLC. PricewaterhouseCoopers, Chartered Accountants were paid Rs.250,000 ) by the Company for non- audit related work. As far as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor) with the Company other than those disclosed above. The auditors also do not have any interest with the Company. Messrs Ernst & Young, Chartered Accountants, are deemed reappointed, in terms of section 158 of the Companies Act No.7 of 2007, as auditors of the Company.
Corporate Governance
The Company has complied with the corporate governance rules laid down under the listing rules of the Colombo Stock Exchange. The corporate governance section on page 12 to 17 discuss this further.
Employment
Number of persons employed by the Company was 393.
Dividends
The Directors do not recommend the payment of dividends for the financial year ended 31st March 2012.
Internal Controls
The Directors acknowledge their responsibility for the Companys system of internal control. The system is designed to give assurance, inter alia, regarding the safeguarding the assets, the maintenance of proper accounting records and the reliability of financial information generated. However, any system can only ensure reasonable and not absolute assurance that errors and irregularities either prevented or detected within a reasonable time period. The Board, having reviewed the system of internal controls, is satisfied with its effectiveness for the period up to the date of signing the financial statements.
Investments
Details of the investments held by the Company are disclosed in Note 12 to the financial statements.
Property, Plant and Equipment

An analysis of the property, plant and equipment of the Company additions and disposals made during the year and depreciation charged during the year are set out in Note 11 to the financial statements. The Company closed down the hotel from 1st February 2012 for a major refurbishment. As part of the refurbishment, property, plant and equipment with net book value amounting to Rs.150Mn were de-recognised by the Company. Total de-recognised amount was charged to the income statement.
Going Concern
The Directors, after making necessary inquiries and reviews including the reviews of the Companys budget for the ensuing year, Capital expenditure requirement, future prospects and risks, cash flows and borrowing facilities, have a reasonable expectation that the Company have adequate resources to continue in operational existence for the foreseeable future. Therefore, the going concern basis has been adopted in the preparation of the financial statements.
Capital Commitments
Details of the capital commitments of the Company as at 31st March 2012 are disclosed in Note 21 to the financial statements.
Auditors
The Auditors, Messrs Ernst & Young, Chartered Accountants, were paid Rs. 350,000 (2011 Messrs PricewaterhouseCoopers, Chartered Accountants were paid Rs.306,000) as audit fees by the Company. In addition, they were paid Rs. 100,000 (2011 Messrs
Stated Capital
The stated capital of the Company is Rs.176,000,000/- comprising 176,000,000 shares.
10

Reserves
Total Company reserves as at 31st March 2012 amounts to Rs. 233.68 Mn. (2011 Rs. 263.26 Mn.) Movements are shown in the statement of changes in equity in the financial statements.
Statutory Payments
The Directors to the best of their knowledge and belief are satisfied that all statutory payments in relation to the government and the employees have been made and provided.
Taxation
The tax position of the Company is given in Note 9 and 15 to the financial statements.
Contingent Liabilities
There were no material contingent liabilities outstanding as at 31st March 2012 other than that described in Note 20 to the financial statements.
Employees and Industrial Relations

There have been no material issues pertaining to employees and industrial relations of the Company during the financial year.
Post Balance Sheet Events

Subsequent to the date of the balance sheet no circumstances have arisen which would require adjustments to the accounts. Significant post balance sheet events which in the opinion of the Directors require disclosure are described in Note 26 to the financial statements.
Disclosure as per Colombo Stock Exchange Rule No.7.6.Xi

31.03.12 Market price per share as at 31st March Highest share price during the year Lowest share price during the year Net Asset per share Ordinary shares in issue 17.40 25.60 12.60 8.11 31.03.11 23.10 32.00 22.30 9.07
Annual General Meeting

The Annual General Meeting will be held at the Ceylon Continental Hotel Colombo, Sapphire Ballroom at 3.00 p.m. on Tuesday, 26th June 2012. The Notice of the Annual General Meeting appears on page 46. For and on behalf of the Board HOTEL SERVICES (CEYLON) PLC
176,000,000 176,000,000
Shareholding
The number of registered shareholders of the Company as at 31st March 2012 was 4228.
Major Shareholders
The twenty largest shareholders of the Company as at 31st March 2012, together with an analysis are given on page 2 of the annual report.
A. M. Pandithage
S. J. Wijesinghe
Public Shareholding
As at 31st March 2012, 49% of the issued capital of the Company was held by the public.
Hayleys Group Services (Pvt) Ltd Secretaries 17th May 2012
11

Hotel Services (Ceylon) PLC is committed to achieve the highest standards in Corporate Governance practices in conducting its business. We set out below the corporate governance practices adopted by the Company in line with the Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the Listing Rules of the Colombo Stock Exchange.
Board of Directors
The Board of Hotel Services (Ceylon) PLC comprise of 10 Directors; an Executive Chairman, one Executive Director and eight NonExecutive Directors of which three are independent. The names of the Directors and their profiles are available on page 7 of this report. The Board meets quarterly as a practice and adhoc meetings are held whenever necessary. During the year under review the Board met on 9 occasions. The attendance of these meetings were: Name of Director Mr. A. M. Pandithage Chairman Mr. S. C. Ganegoda Mr. S. P. Dissanayake Mr. S. J. Wijesinghe Mr. N. J. De S. Deva-Aditya Mr. L. T. Samarawickrama Mr. L. N. De S. Wijeyeratne Mr. U. D. Gamage Mr. K. D. D.Perera Ms. R. N. Ponnambalam Mr. W. D. N. H. Perera
Ensuring due compliance with applicable legal, ethical, health, environment and safety standards and regulations. Ensuring that due attention is given to appropriate accounting policies and practices and setting priorities and communicating values and ethical standards for management. Ensuring that appropriate systems of internal controls are in place to safeguard the assets of the Company. Reviewing and approving Annual Budgets and periodic monitoring of performance against the budgets. Approving of major investments on business proposals and adopting annual and interim financial statements prior to publication. Evaluating and monitoring the performance of the Company on a regular basis and initiating remedial action where necessary. Adopting annual and interim accounts and recommending dividend for approval by the shareholders.
Executive / Non-Executive Executive Non-Executive Non-Executive Executive Independent Non-Executive Non-Executive Independent Non-Executive Executive Non-Executive Independent Non-Executive Non-Executive
Attendance 9/9 8/9 8/9 8/9 3/9* 6/9 8/9 4/5** 1/9 9/9 1/9
* Mr. N. J. De S. Deva-Aditya participated in 02 of these meetings via conference call. ** Mr. U. D. Gamage resigned from the board w.e.f. 20/12/2011.
The Board is ultimately responsible for the Companys financial performance. It is in control of the Companys affairs and conscious of its obligation to all stakeholders.
Responsibilities
The directors of the Company are responsible for:
Company Secretary
The service and advice of the Company Secretary are made available to Directors as necessary. The Company Secretary keeps the Board informed of new laws, regulations and requirements coming in to effect which are relevant to them as individual Directors and collectively to the Board.
Enhancing shareholder value, formulating, communicating, implementing and monitoring of business policies and strategies.
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Board Balance
The composition of the Executive and Non-Executive Directors (the latter are over one third of the total number of Directors) satisfies the requirements laid down in the Listing Rules of the Colombo Stock Exchange. The balance of Executive and Non- Executive Directors on the Board ensures that decision making is transparent and not dominated by any individual or small group. As at 31 March 2012, the Board consisted of 10 Directors comprising of:
Appointments to the Board

The Board as a whole decides on the appointment of Directors in accordance with the Articles of association of the Company.
Re-election of Directors
The provisions of the Companys Articles require a Director appointed by the Board to hold office until the next Annual General Meeting, and seek re-appointment by the shareholders at that meeting. The Articles call for one third of the Directors in office to retire at each Annual General Meeting. The Directors who retire are those who have served for the longest period after their appointment/ re-appointment. Retiring Directors are generally eligible for reelection. The Chairman does not retire by rotation.
2 Executive Directors (ED) 5 NonExecutive Non-Independent Directors (NED) 3 Non-Executive Independent Directors (NED/ID)
Their profiles reflect their calibre and the weight their views carry in Board deliberations. The Board has determined that the Directors: Mr. N. J. De S. DevaAditya, Ms. R. N. Ponnambalam and Mr. L. N. De S. Wijeyeratne satisfy the criteria for independence set out in the Listing Rules. The Independent Non-Executive Directors are free from any relationship that can interfere with the affairs of the Company. The Chairman of the Company is also the Chairman of Hayleys PLC. Chief Executive Authority is vested in the General Manager (CEO) of the Company. The distinction between the Chairman and Officers wielding executive powers in the Company ensures the balance of power and authority.
Remuneration Committee
The Remuneration Committee was formed on 21st May 2010. Mr. J. D. Bandaranayake, who was the Chairman of the remuneration Committee resigned with effect from 2nd February 2011 and Mr. L. T. Samarawickrama, a Non-Executive Director, was appointed the Chairman of the Committee with effect from 9th May 2011.
Members of the Remuneration Committee

Mr. L. T. Samarawickrama - Non-Executive Director (Chairman) Mr. L. N. De S. Wijeyeratne - Independent Non-Executive Director Ms. R. N. Ponnambalam - Independent Non-Executive Director Remuneration Committee of Hayleys PLC, the parent Company of Hotel Services (Ceylon) PLC is responsible for laying down guidelines and parameters for the compensation structures of all management staff within the group. The Remuneration Committee of Hotel Services (Ceylon) PLC is guided to work with the above given parameters and design compensation levels appropriate for the hotel within the group and commensurate with each employee level of expertise and contribution, bearing in mind the business performance and shareholder returns.
Financial Acumen
The Board includes two senior Chartered Accountants who possess the necessary knowledge and competence to offer the Board guidance on matters of finance.
Supply of Information
Directors are provided with quarterly reports on performance and appropriate documentation in advance of each Board meeting for individual directors to study matters under discussion.
13

The total of Directors remuneration is reported in Note 5 to the financial statements. The Statement of Directors Responsibilities for the financial statement is given in page 20 of this report.
Relations with Shareholders

The Notice of Meeting is included in the Annual Report. The Notice contains the Agenda for the AGM as well as instructions on voting, including appointments of proxies. A Form of Proxy is enclosed with the Annual Report. The period of notice prescribed by the Companies Act No. 7 of 2007 has been met.
Going Concern
The Directors, after making necessary inquiries and reviews including reviews of the company budget for the ensuing year, capital expenditure requirements, future prospects and risk, cash flows and borrowing facilities, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, the going concern basis has been adopted in the preparation of the Financial Statements.
Constructive use of Annual General Meeting

The Board considers the Annual General Meeting as a means of continuing effective dialogue with shareholders and encourages their participation. The Board offers clarifications and responds to concerns shareholders have over the content of the Annual Report as well as other matters which are important to them. The Annual General Meeting also used to adopt the financial statement for the year.
Internal Controls
The Board is responsible for the Companys internal controls and its effectiveness. Internal control is established with emphasis placed on safeguarding assets, making available accurate and timely information and imposing greater discipline on decision making. It is important to state that any system can ensure only reasonable, and not absolute, assurance that errors and irregularities are prevented or detected within reasonable time. Hayleys Groups Management Audit & System Review Department plays a major role in assessing the effectiveness and successful implementation of the existing controls and strengthening these and establishing new controls where necessary. The Board has reviewed the effectiveness of the System of financial controls for the period up to the date of signing the accounts.
Communication with Shareholders

Shareholders are provided with the Annual Report and also with Quarterly Financial Statements via Colombo Stock Exchange website, which the company considers as its principal communication with them and other stakeholders. Shareholders may bring up concerns they have, either with the Chairman or the Company Secretary as appropriate. The Company maintains an appropriate dialogue with them.
Audit Committee
The Audit Committee is chaired by Mr. L. N. De S. Wijeyeratne, a Fellow member of the Institute of Chartered Accountants of Sri Lanka. The General Manager and the Financial Controller attends the meetings of the Audit Committee by invitation. The Audit Committee has written terms of reference and is empowered to examine any matters relating to the financial affairs of the Company and its internal and external audits. It helps the Company to strike the proper balance between conformance and performance.
Accountability and Audit

Financial Reporting
The Board places great emphasis on complete disclosure of financial and non financial information within the bounds of commercial reality, and on the adoption of sound reporting practices. Financial information is disclosed in accordance with the Sri Lanka accounting Standards. Revisions to existing accounting standards and adoption of new standards are carefully monitored.
14

Members of the Audit Committee

Mr. L. N. De S. Wijeyeratne (Chairman) - Independent Non-Executive Director Mr. L. T. Samarawickrama (Resigned w.e.f 12.09.2011) - Non-Executive Director Ms. R. N. Ponnambalam - Independent Non-Executive Director The Audit Committee report appears in page 21 of this report. Levels of compliance with the CSEs New Listing Rules- Section 7.10, Rules on Corporate Governance as at 31st March, 2012 are given in the following table. Rule No. 7.10. 1(a) Subject Applicable Requirement Compliance Status Compliant
Details
Eight out of the ten Directors are Non-Executive Directors Three out of the Eight Non-Executive Directors are Independent Directors Non-Executive Directors have submitted the declaration
Non-Executive Directors At least one third of the total number of Directors should be Non-Executive Directors Independent Directors Two or one third of Non-Executive Directors, whichever is higher should be Independent Each Non-Executive Director should submit a declaration of independence/non-independence in the prescribed format
7.10.2(a)
Compliant
7.10.2 (b)
Independent Directors
Compliant
7.10.3(a)
Disclosure relating to Directors
The Board shall annually make a Compliant determination as to the independence or other wise of the Non-Executive Directors and names of Independent Directors should be disclosed in the Annual Report The basis for the Board to determine a Director is independent when the criteria specified for independence is not met Compliant
Please refer Board of Directors on pages 7 and 8
7.10.3(b)
Disclosure relating to Directors
Please refer page 13 under the heading of Board Balance
7.10.3(c)
Disclosure relating to Directors Disclosure relating to Directors
A brief resume of each Director should Compliant be included in the Annual Report including the areas of Expertise Forthwith provide a brief resume of Compliant new Directors appointed to the Board with details specified in 7.10.3 (a),(b) and (c) to the Exchange A listed company shall have a Remuneration Committee Compliant
Please refer Board of Directors on pages 7 and 8 A brief resume provided to the Exchange
7.10.3(d)
7.10.5
Remuneration Committee.
Names of the members of the Remuneration Committee are stated on page 13
15

Rule No. Subject Composition of Remuneration Committee Remuneration Committee Functions Applicable Requirement Shall comprise of Non-Executive Directors a majority of whom will be independent Remuneration Committee shall recommend the remuneration of the Chief Executive Officer and Executive Directors Compliance Status Compliant
Details
The Committee consists of one Non-Executive Director and two Independent NonExecutive Directors Please refer remuneration procedure on page 13 of this Report Please refer page 13 Please refer page 13 Please refer page 9 Names of the members of the Audit Committee are stated on page 15 Audit Committee consists of two Independent NonExecutive Directors Chairman of the Audit Committee is an Independent Non-Executive Director General Manager (CEO) and Financial Controller (CFO) has attended the Audit Committee meetings Chairman of the Audit Committee is a Chartered Accountant
7.10.5(a)
7.10.5(b)
Compliant
7.10.5(c)
Disclosure in the Annual Report relating to Remuneration Committee Audit Committee
Names of Directors comprising the Compliant Remuneration Committee Statement of remuneration policy Aggregated remuneration paid to Executive and Non-Executive Directors The company shall have an Audit Committee Shall comprise of Non-Executive Directors a majority of whom will be independent A Non-Executive Director shall be appointed as the Chairman of the Committee Chief Executive Officer and Chief Financial Officer should attend Audit Committee meetings Compliant
7.10.6
7.10.6(a)
Composition of Audit Committee
Compliant
7.10.6(b)
Audit Committee Functions
Compliant
Compliant
The Chairman of the Audit Committee Compliant or one member should be a member of a professional accounting body
16

Rule No. 7.10.6(b)
Subject Audit Committee Functions
Applicable Requirement
Compliance Status
Details
The terms of reference of the Audit Committee have been agreed by the Board
Functions shall include: Compliant Overseeing of the preparation, presentation and adequacy of disclosures in the financial statements in accordance with Sri Lanka Accounting Standards Overseeing of the compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements. Overseeing the processes to ensure that the internal controls and risk management are adequate to meet the requirements of the Sri Lanka Auditing Standards Assessment of the independence and performance of the external auditors Make recommendations to the Board pertaining to appointment, re appointment and removal of external auditors and approve the remuneration and terms of engagement of the external auditors. a) Names of Directors comprising the Compliant Audit Committee b) The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determination c) The Annual Report shall contain a Report of the Audit Committee setting out of the manner of compliance with their functions Compliant
7.10.6(c)
Disclosure in the Annual Report relating to Audit Committee
Please refer page 15
Please refer Audit Committee Report on page 21
Compliant
Please refer Audit Committee Report on page 21
17

Risk Management
Risk management is a central part of the Companys strategic management. It assists in striking the correct balance between achieving Companys objectives whilst safeguarding its assets and enhancing shareholder value. In the course of its operations, the Company, being a leading city hotel in Sri Lanka, is exposed to various internal and external risks. A risk management process is in place to identify these risks, analyse them and assess the impact of the risk to the Company with the view of accepting the said risk, finding means of mitigating it or eliminating the risk completely. The Board of Directors with the support of the management takes necessary action to mitigate or minimise the impact of these risks with control plans implemented with the agreed time frames. More importantly, the Company understands that risk is an intrinsic component of its business operations. The Company accepts the necessary risk only after going through the above process and carefully evaluating the risk and return of its ventures and ensuring adequate returns. The responsibility of the risk management process of the Company is with the Board of Directors. The matters related to risk management are discussed and deliberated extensively at the Board meetings. The major risks the Company is exposed to and the ways in which the Company deals with them are given below. event promotions, through driving for service excellence and continuous improvements mitigates the effect of the said risks of competition. Risk Rating Moderate Likelihood Rating High Risk Type: Government Policy Risk While benefiting from various opportunities and growth in the country, government policy decision is a major factor that influences the hotel operations and financial performance.
Factors such as recent rate changes to electricity tariffs and fuel rates have affected the performance of the hotel where it is difficult to transfer these costs to the customers in the short term. If the minimum rates are further increased, it could be difficult to attract new clients especially during the off season.
The Company maintains a strong relationship with the regulatory bodies through Hayleys PLC and other lobby groups. Through them the Company campaigns for clear and indisputable laws to facilitate the business. Risk Rating Moderate Likelihood Rating Moderate
Major Risks
Risk Type: Competition Recent improvement in the countrys outlook has attracted various new business opportunities and positively affected the hotel performance and tourism industry in general. However this could have an adverse effect on the hotel both from the existing competition and new competition entering the market. The Company is undergoing an extensive refurbishment programme especially in view of managing this risk. This will enable the hotel to sustain its position in the market and make use of the growth opportunities. The risk of price competition on lodging is minimized with the prevailing minimum room rates whereby city hotels have to adhere to the specified minimum rates for their clients. The Company through innovation whereby various food and
Risk Type: Failure to Comply with Health and Safety Regulations Failure to comply with health and safety regulations could affect the Company in adverse publicity and claims through legal action against the Company. The health and safety standards are of primary importance to the Company and are subjected to continuous direct supervision where deviations are directly reported to the senior management and actions taken to rectify them at the highest levels. The Company has commenced the certification process for obtaining HACCP standards which is the international standard on food safety process control systems, through the same, policies and procedures are being implemented in line to ensure the health and safety regulations are effectively practiced. Risk Rating High Likelihood Rating Low
18

Risk Type: Interest Rate Risk Companys major refurbishment project is funded through external borrowings. The recent adverse fluctuations in interest rates have impacted the company earnings, cash flow and economic value. This will continue to be a critical risk factor in the times ahead. The Company works closely with the Treasury department of Hayleys PLC to negotiate favourable terms and conditions for loans. The Treasury Department continuously monitors interest rates and financial markets and are in a position to implement necessary hedging techniques if required. Risk Rating High Likelihood Rating High
the pricing policy of the hotel is to provide rates in USD terms or to give equivalent rupee rates. However, should the USD depreciate unexpectedly the hotel with the consent of respective authorities could provide rates in Sri Lanka rupees mitigating the effects from long term adverse currency fluctuations. Risk Rating High Likelihood Rating Moderate
Risk Type: Breakdown of Internal Controls and Procedures Breakdown of internal process and procedures could result in frauds, errors effecting in loss of Share holder wealth and resulting in material misstatements on its financial statements. The Company through its Audit Committee carries out reviews and assessments of its internal control environment. Internal audits are carried out quarterly by the Group Management Audit and Systems Review Department of Hayleys PLC and its findings are reported to the Audit Committee meetings, which convenes quarterly. Findings are reviewed, corrective actions are taken and the implications of the same are monitored as a continuous improvement process on Audit Committee meetings. Risk Rating High Likelihood Rating Moderate
Risk Type: IT Systems Risk Failure of the various IT systems utilised by the hotel could have a temporary effect on the hotel operations depending on the extent of the damage. Current major IT systems of the hotel include Property Management Software, Stock System, Accounting Software, Online Booking Engines, email, internet etc. The Company is in the process of investing in a new operating system which will be much efficient and effective in comparison to the one at present. The risk of data loss and down time is mitigated by the IT department of the Company, which has implemented safety measures to taking timely backups and storing them on remote locations and reduces the down time and ensures continuity of operations through the implementation of the Hayleys Groups Disaster Recovery Policy. Risk Rating High Likelihood Rating Moderate
Risk Type: Timely Completion of Refurbishment Project and Cost Overruns Non-completion of the refurbishment project within the stipulated time frame could result in an increase in closure cost. In addition, non-managing the refurbishment cost could result in spending over and above the budgeted amount. The Board of Directors meets weekly and works closely with the project team monitoring and reviewing the project completion progress and takes necessary corrective action in a timely manner. Project expenses are closely monitored in comparison with the budget and are reviewed at Board meetings on regular basis. Risk Rating High Likelihood Rating Moderate
Risk Type: Exchange Rate Risk Exchange rate risk represents a major risk for the hotel where revenue could be adversely affected through exchange rate fluctuations. However, the recent rupee devaluation will result in a favorable impact on Companys revenue. The Company continuously monitors the Exchange rate movements and countrys outlook of major currencies. Currently
19

Statement of Directors Responsibilities

The Directors are responsible, under the Sections 150 (1), 151, 152 (1) & 153 of the Companies Act No. 07 of 2007, to ensure compliance with the requirements set out therein to prepare Financial Statements for each financial year giving a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit & loss of the Company for the financial year. The Directors are also responsible, under Section 148 for ensuring that proper accounting records are kept to disclose, with reasonable accuracy, the financial position and enable preparation of the Financial Statements. The Board accepts responsibility for the integrity and objectivity of the Financial Statements presented. The Directors confirm that in preparing the Financial Statements, appropriate accounting policies have been selected and applied consistently while reasonable and prudent judgments have been made so that the form and substance of transactions are properly reflected. They also confirm that the Financial Statements have been prepared and presented in accordance with the Sri Lanka Accounting Standards. The Financial Statements provide the information required by the Companies Act and the listing rules of the Colombo Stock Exchange. The Directors have taken reasonable measures to safeguard the assets of the Company and, in that context, have instituted appropriate systems of internal control in order to prevent and detect fraud and other irregularities. The External Auditors, Messrs. Ernst & Young, Chartered Accountants, were deemed re-appointed in terms of section 158 of the Companies Act no.7 of 2007 and were provided with every opportunity to undertake the inspections they considered appropriate to enable them to form their opinion on the Financial Statements. The report of the Auditors, shown on page 23 sets out their responsibilities in relation to the Financial Statements.
Compliance Report
The Directors confirm that to the best of their knowledge, all statutory payments relating to employees and the Government that were due in respect of the Company as at the Balance Sheet date have been paid or where relevant, provided for. By Order of the Board, HAYLEYS GROUP SERVICES (PVT) LTD. Secretaries 17th May 2012
20

Audit Committee Report

Role
The primary role of the Audit Committee is to review and monitor the financial reporting process of the Company, so as to provide additional assurance on the reliability of the financial statements through a process of independent and objective review. As such, the Audit Committee acts as an effective forum in assisting the Board of Directors in discharging their responsibilities of ensuring the quality of financial reporting and related communications to the shareholders and the public. The Audit Committee is empowered amongst other functions to examine any matters relating to the financial affairs of the Company and to review the adequacy of the internal control procedures, role and performance of the external auditors, disclosures of accounting policies, compliance with statutory and corporate governance requirements. statements to ensure reliability of the processes and consistency of the accounting policies and methods adopted in their compliance with the Sri Lanka Accounting Standards and other statutory and regulatory requirements. The Committee recommended the financial statements to the Board for its publication.
Internal Controls and Internal Audit

The Committee reviewed the processes in place to assess the effectiveness of the Internal Financial Controls that are in place to provide reasonable assurance to the Directors that assets are safeguarded and that the financial reporting system can be relied upon in preparation and presentation of Financial Statements. The Hayleys PLCs Group Management Audit and Systems Review Department act as the Internal Auditors for the Company. Internal Audits are outsourced to audit firms in line with an agreed annual audit plan. At Audit Committee meetings detailed Internal Audit Reports were reviewed and audit concerns and recommendations for improvement of financial and operational control systems with the management responses were tabled, discussed and appropriate actions were initiated.
Composition
The Audit Committee comprises of two Independent NonExecutive Directors. The Chairman of the Audit Committee is Mr. L. N. De. S. Wijeyeratne, a fellow member of the Institute of Chartered Accountants of Sri Lanka. The names of the members are given below on this report and a brief profile of each member is given on page 8. The General Manager, The Financial Controller and the Head of Internal Audit of Group Management Audit and Systems Review Department of Hayleys PLC attend the meeting of the Audit Committee by invitation. The Chairman of the Company and other Directors attend the meetings as required.
External Audit
The Committee had discussions with the external auditors Messrs. Ernst and Young, to review the nature, approach, scope of the audit and the Audit Management Letter of the Company. The Committee also reviewed the non audit services provided by the Auditors to ensure that the provision of such services does not impair their independence.
Meetings
The Committee met formally five times during the financial year ended 31st March 2011. The attendance of the members at these meetings is as follows: Mr. L. N. De. S. Wijeyeratne (Chairman) Mr. L. T. Samarawickrama Ms. R. N. Ponnambalam - - - 5/5 1/2* 5/5
Conclusion
The audit committee is satisfied that the companys accounting policies and operational controls provide a reasonable assurance that the affairs of the company are managed in accordance with the companys policies and the company assets are properly accounted for and adequately safeguarded.
*Mr. L. T. Samarawickrama was appointed as an Executive Director of Hayleys PLC. on 12/09/2011, hence ceased to be a member of the Audit Committee of Hotel Services (Ceylon) PLC from that date onwards.
Tasks of the Audit Committee

Financial Reporting System The Committee reviewed the financial reporting system adopted by the Company in the preparation of its quarterly and annual
L. N. De. S. Wijeyeratne Chairman - Audit Committee 17th May 2012.
21

Financial Reports
Independent Auditors Report | 23 Income Statement | 24 Balance Sheet | 25 Statement of Changes in Equity | 26 Cash Flow Statement | 27 Notes to the Financial Statements | 28
22

Independent Auditors Report
TO THE SHAREHOLDERS OF HOTEL SERVICES (CEYLON) PLC

Report on the Financial Statements
We have audited the accompanying financial statements of Hotel Services (Ceylon) PLC (Company), which comprise the balance sheet as at 31 March 2012, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. The Financial Statements of the Company as at 31 March 2011 were audited by another auditor, whose report dated 13 May 2011, expressed an unqualified opinion on those Financial Statements.
significant estimates made by management, as well as evaluating the overall financial statement presentation. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.
Opinion
In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2012 and the financial statements give a true and fair view of the Companys state of affairs as at 31 March 2012 and its loss and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
Managements Responsibility for the Financial Statements

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

In our opinion, these financial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.
Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and
17th May 2012 Colombo
23

Income Statement
Year ended 31 March 2012 Notes Turnover 3 2012 Rs 000 547,177 (256,499) 290,678 (22,664) (259,251) (62,474) (53,711) (149,992) 1,462 (202,241) 13,152 (189,089) (1.07) 2011 Rs 000 606,548 (271,001) 335,547 1,042 (219,898) (53,585) 63,106 3,554 66,660 (13,961) 52,699 0.30 Cost of Sales Gross Profit Other Income and Gains 4
Administrative Expenses Marketing Expenses Operating Profit /(Loss) Loss from De-recognition of Property, Plant and Equipment Net Finance Costs 5 7 8
Profit / (Loss) Before Tax Income Tax Expenses / (Reversal) 9
Net profit / (Loss) Basic Earnings / (Loss) Per Share (Rs) 10
The notes on pages 28 to 43 form an integral part of these financial statements
24

Balance Sheet
As at 31 March 2012 Notes ASSETS Non-current assets Property, plant and equipment 11.2 Investments 12 Current assets Inventories 13 Receivables and prepayments 14 Tax recoverable Cash and cash equivalents 16 Total assets EQUITY AND LIABILITIES Capital and reserves Stated capital 22 Revaluation reserve 23 Revenue reserve Retained earnings Non-current liabilities Borrowings 18 Employee Benefit Liabilities 19 Deferred tax liability 15 Current liabilities Trade and other payables 17 Borrowings 18 Tax payable Total liabilities Total equity and liabilities
These Financial Statements are in compliance with the requirements of the Companies Act No :07 of 2007.
2012 Rs. 000
2011 Rs. 000
1,956,358 - 1,956,358 13,219 50,303 5,676 38,061 107,259 2,063,617
1,729,486 1,729,486 16,035 84,825 106,404 207,264 1,936,750
176,000 1,017,553 69,500 164,177 1,427,230 400,000 10,290 160,365 570,655 37,296 28,436 - 65,732 636,387 2,063,617
176,000 1,157,917 69,500 193,762 1,597,179 9,939 189,957 199,896 105,040 26,024 8,611 139,675 339,571 1,936,750
R. K. Nanayakkara Financial Controller

The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the Board by:
A. M. Pandithage Chairman / Director
S. J. Wijesinghe Director
The accounting policies and notes on pages 28 through 43 form an integral part of the Financial Statements. 17th May 2012 Colombo
25

Statement of Changes in Equity

Year ended 31 March 2012 Notes Stated Revaluation capital and other reserves Rs. 000 Rs. 000 Balance at 1 April 2010 Net profit Transfer from revaluation reserve 23 Revaluation during the year 11 Transfer from revaluation reserve 23 Deferred tax on revaluation Effect on different tax rates Deferred tax on transfer 15 Balance at 31 March 2011 Net Loss Transfer from revaluation reserve 23 Transfer from revaluation reserve 23 Transfer from revaluation reserve 23 Transfer from revaluation reserve 23 Deferred tax on transfer 15 Balance at 31 March 2012 176,000 - - - - - - - 176,000 - - - - - - 176,000 893,433 - (1,759) 285,708 (18,609) (34,285) 30,374 3,055 1,157,917 - (1,759) (19,836) (24,162) (113,747) 19,140 1,017,553 Revenue reserve Rs. 000 69,500 - - - - - - - 69,500 - - - - - - 69,500 Retained earnings Rs. 000 120,695 52,699 1,759 - 18,609 - - - 193,762 (189,089) 1,759 19,836 24,162 113,747 - 164,177 Total Rs. 000 1,259,628 52,699 285,708 (34,285) 30,374 3,055 1,597,179 (189,089) 19,140 1,427,230
The notes on pages 28 to 43 form an integral part of these financial statements
26

Cash Flow Statement

Year ended 31 March 2012 Notes Operating activities Cash generated from operations 24 Interest received 8 Interest paid 8 Tax paid Retirement benefit paid 19 Net cash used in / generated from operating activities Investing activities Capital work in progress 11.1 Purchases of property, plant and equipment 11 Proceeds from disposal of property, plant and equipment Net cash used in investing activities Financing activities Proceeds from long term borrowings Payments on long term borrowings Net cash generated / used in financing activities Net increase in cash and cash equivalents Movement in cash and cash equivalents At start of year Net increase At end of year 16 The notes on pages 28 to 43 form an integral part of these financial statements 2012 Rs. 000 2011 Rs. 000 (2,847) 2,252 (738) (11,586) (911) (13,830) 117,247 5,367 (1,838) (13,886) (1,127) 105,763
(362,835) (110,847) 16,755 (456,927)
(35,850) (17,622) 1,250 (52,222)
400,000 (4,166) 395,834 (74,923)
(20,243) (20,243) 33,298
84,547 (74,923) 9,625
7,628 33,298 84,547
27

Notes to the Financial Statements Year ended 31st March 2012

1. Corporate Information
1.1 General
Hotel Services (Ceylon) PLC is engaged in the hotel business and is the owner of Ceylon Continental Hotel Colombo, the first Five Star Hotel established in Colombo. The Company is a limited liability company incorporated in Sri Lanka and listed on the Colombo Stock Exchange. The address of its registered office is No. 48, Janadhipathi Mawatha, Colombo 1.
2.1.2 Judgments
In the process of applying the Companys accounting policies, management has made the following judgments, apart from those involving estimations, which has the most significant effect on the amounts recognised in the Financial Statements Deferred Tax Assets : Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
1.2 Parent Entity and Ultimate Parent Entity

The Companys parent entity is Hayleys PLC. In the opinion of the Directors, the Companys ultimate parent undertaking and controlling party is Hayleys PLC, which is incorporated in Sri Lanka.
2.1.3 Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below. The respective carrying amounts of assets and liabilities are given in related notes to the Financial Statements Fair value of Property, Plant and Equipment: The property, plant and equipment of the Company except for motor vehicles and linen and furnishing are reflected at fair value. When current market prices of similar assets are available, such evidences are considered in estimating fair values of theses assets. In the absence of such information the Company determines within a reasonable fair value estimates, amounts that can be attributed as fair values, taking in to consideration discounted cash flow projections based on estimates, derived evidence such as current market rents for similar properties and using discount rates that reflect uncertainty in the amount and timing of cash flows. De-recognition of Property Plant & Equipment Subject to Refurbishments: In order to comply with the SLAS 18 - Property Plant & Equipment, the company determined the carrying value of de-recognised assets with the assistance of a professional valuer who has valued the same assets in the last carried out revaluation (More fully described in Note 11 (b)). Defined Benefit Plans: The cost of defined benefit plans - gratuity is determined using actuarial valuations. The actuarial valuation involves making
1.3 Date of Authorisation for Issue

The Financial Statements of Hotel Services (Ceylon) PLC, for the year ended 31 March 2012 were authorised for issue in accordance with a resolution of the Board of Directors on 17 May 2012.
2. Summary of Significant Accounting Policies

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

The Financial Statements have been prepared on a historical cost basis, except for all property, plant and equipment other than motor vehicles and linen and furnishing which were subsequently measured at fair value, based on valuations by external independent valuers. The Financial Statements are presented in Sri Lankan Rupees Thousands. The preparation and presentation of these Financial Statements is in compliance with the Companies Act. No. 07 of 2007. The Financial Statements of Hotel Services (Ceylon) PLC have been prepared in accordance with Sri Lanka Accounting Standards (SLAS).
2.1.1 Comparative Information

The accounting policies have been consistently applied by the Company and, are consistent with those used in the previous year.
28

assumptions about discount rates, expected rates of return on assets, future salary increases, and mortality rates. Due to the long term nature of these plans, such estimates are subject to significant uncertainty
to the income statement during the financial period in which they are incurred. When an asset is revalued, any increase in the carrying amount is credited directly to a revaluation reserve, except that it is credited to the income statement to the extent that it reverses a previous deficit recognised as an expense. Any revaluation deficit that offsets previous surplus in the same asset is directly offset against the surplus in the revaluation reserve and any excess recognised as an expense. Upon disposal or De-recognition, any revaluation reserve relating to the asset sold is transferred to retained earnings. The difference between depreciation based on the assets original cost and the depreciation based on the revalued amount is transferred from revaluation reserve to retained earnings. Depreciation is calculated on the straight line method to allocate the cost of each asset or its revalued amount, to their residual values over their estimated useful life as follows: Buildings Sports complex Motor vehicles Sign board Plant, machinery and equipment Furniture and fittings Linen and furnishing Linen and furnishing (food & beverage & house keeping) 50 years 50 years 5 years 5 years 8 years 10 years 10 years 3 years
2.2 Foreign Currencies (a) Functional and Presentation Currency

Items included in the financial statements of the entity are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Sri Lanka Rupees, which is the Companys functional and presentation currency.
(b) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
2.3 Borrowing Costs

Borrowing costs are recognised as an expense in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of an asset that takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of that asset.
2.4 Property, Plant and Equipment

All property, plant and equipment is initially recorded at cost. All property, plant and equipment except motor vehicles and, linen and furnishing are subsequently shown at fair value, based on valuations by external independent valuers, less subsequent depreciation. Motor vehicles and, linen and furnishing are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged
The assets residual values are reviewed, and adjusted as appropriate, at each balance sheet date an assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining profit or loss. On disposal or de-recognition of revalued assets, amounts in revaluation reserve relating to that asset are transferred to retained earnings.
2.5 Impairment of Assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
29

Notes to the Financial Statements

Year ended 31st March 2012
recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use.
2.11 Trade Payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
2.6 Operating Leases

Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
2.11.1 Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
2.7 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted average method. The cost of the inventory comprises purchase price, taxes (other than those subsequently recoverable by the Company from the tax authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods. It excludes the borrowing costs. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.
2.12 Employee Benefits (a) Defined Contribution Plans

All employees of the Company are members of the Employees Provident Fund and the Employees Trust Fund, to which the Company contributes 12% and 3% respectively of such employees basic or consolidated wage or salary and cost of living and all other allowances. The Companys contributions to the defined contribution plans are charged to the income statement in the year to which they relate.
2.8 Trade Receivables

Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at the year end. Other receivables and dues from Related Parties are recognised at cost less allowances for bad and doubtful receivables.
(a) Defined Benefit Plan

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date together with past service cost. The defined benefit obligation is calculated by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of treasury bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged to the income statement.
2.9 Cash and Cash Equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings in current liabilities.
2.13 Dividend Distribution

Dividend distribution to the Companys shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the Companys shareholders.
2.10 Stated Capital

Ordinary shares are classified as stated capital.
30

2.14 Taxation
The tax charge is computed on the results for the year in accordance with the provisions of the Inland Revenue Act No. 10 of 2006, as amended. Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. The provision for income tax is based on the elements of income and expenditure as reported in the Financial Statements and computed in accordance with the provisions of the relevant tax legislations.
Dividend income - when the shareholders right to receive payments is established. Turnover Based Taxes Turnover based taxes include value added tax, Nations building tax and tourism development levy. Company pays such taxes in accordance with the respective statutes.
2.17 Earnings per Shares

The Company presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.
2.15 Deferred Taxation

Deferred income tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. The temporary differences arise from the depreciation on property, plant and equipment, provision for employment benefit obligations and tax losses carried forward. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
2.18 Sri Lanka Accounting Standards effective from 01 January 2012

The Company will be adopting the new Sri Lanka Accounting Standards (new SLAS) comprising LKAS and SLFRS applicable for financial periods commencing from 01 January 2012 as issued by the Institute of Chartered Accountants of Sri Lanka. The Company has commenced reviewing its accounting policies and financial reporting in readiness for the transition. As the Company has a 31 March year end, priority has been given to considering the preparation of an opening balance sheet in accordance with the new SLASs as at 01 April 2012. This will form the basis of accounting for the new SLASs in the future, and is required when the Company prepares its first new SLAS compliant financial statements for the year ending 31 March 2012. Set out below are the key areas where accounting policies will change and may have an impact on the financial statements of the Company. The Company is in the process of quantifying the impact on the financial statements arising from such changes in accounting policies. (a) SLFRS 1 First Time Adoption of Sri Lanka Accounting Standards requires the Company to prepare and present opening new SLFRS financial statements at the date of transition to new SLAS. The Company shall use the same accounting policies in its opening new SLAS financial statements and throughout all comparable periods presented in its first new SLAS financial statements. LKAS 1 Presentation of Financial Statements requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non owner changes in equity are required to be presented in one statement of comprehensive income or in two statements (a separate income statement
2.16 Revenue Recognition

Room revenue is recognised on the rooms occupied on daily basis. Food and Beverage revenue is recognised at the time of sales. Other revenues earned by the Company are recognised on the following bases: Interest income - on an accrual basis.
31


and a statement of comprehensive income). This standard also requires the Company to disclose information that enables users of its financial statements to evaluate the entitys objectives, policies and processes for managing capital. (b) LKAS 16 Property Plant and Equipment requires the company to initially measure an item of property plant and equipment at cost, using the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognised as interest over the period, unless such interest is capitalised in accordance with LKAS 23 Borrowing Costs. All site restoration costs including other environmental restoration and similar costs must be estimated and capitalised at initial recognition, in order that such costs can be depreciated over the useful life of the asset. This standard requires depreciation of assets over their useful lives, where the residual value of assets is deducted to arrive at the depreciable value. It also requires that significant components of an asset be evaluated separately for depreciation.
current method of assessing for impairment will have to be changed to meet the requirements of these new standards. Financial liabilities will be either classified as fair value through profit or loss or at amortised cost. At present, the company/ does not identify, categorise and measure financial assets and liabilities as per the requirements of the standard and also does not recognise certain derivative instruments on the balance sheet.
(d) LKAS 12 Income Tax requires deferred tax to be provided in respect of temporary differences which will arise as a result of adjustments made to comply with the new SLAS. (e) LKAS 18 Revenue requires the company to measure revenue at fair value of the consideration received or receivable. It also specifies recognition criteria for revenue, and the Company needs to apply such recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction. The Institute of Chartered Accountants of Sri Lanka has resolved an amendment to Sri Lanka Accounting Standard 10, whereby the provision contained in paragraphs 30 and 31 of SLAS 10 Accounting Policies, Changes in Accounting Estimates and Errors, would not be applicable for financial statements prepared in respect of financial periods commencing before 1 January 2012 and hence the impact of this transition is not required to be disclosed in these financial statements.
(c) LKAS 32 Financial Instruments: Presentation, LKAS 39 Financial Instruments: Recognition and Measurement and SLFRS 7 Disclosures will result in changes to the current method of recognising financial assets, financial liabilities and equity instruments. These standards will require measurement of financial assets and financial liabilities at fair value at initial measurement. The subsequent measurement of financial assets classified as fair value through profit and loss and available for sale will be at fair value, with the gains and losses routed through the statements of comprehensive income and other comprehensive income respectively. Financial assets classified as held to maturity and loans and receivables will be measured subsequently at amortized cost. These assets will need to be assessed for any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) coupled with a reliable estimate of the loss event (or events) impact on the estimated future cash flows of the financial asset or group of financial assets . As such the
32

2012 Rs. 000
2011 Rs. 000
3. Turnover
Total revenue derived from rendering of services comprises the following categories: Room Sales Food & Beverage Sales Other Hotel Related Revenue Turnover Turnover is shown net of indirect taxes and service charge. 2012 Rs. 000 2011 Rs. 000 251,439 282,471 13,267 547,177 277,689 310,342 18,517 606,548
4. Other Income and Expenses

Profit/(Loss) on disposal of property, plant and equipment Profit/(Loss) on disposal of cutlery Scrap sales Sundry income Other income and expenses (23,728) (1,278) - 2,342 (22,664) 450 260 332 1,042
2012 Rs. 000
2011 Rs. 000
5. Operating Profit / (Loss)

The following items have been charged /(credited) in arriving at operating profit: Directors emoluments Auditors remuneration - audit fees - non audit fees Depreciation on property, plant and equipment (Note 11) Repair and maintenance expenditure Operating lease rentals on property Staff costs (Note 6) Power and energy expenditure Loss on disposal of property, plant and equipment De-recognition of property, plant and equipment Marketing and promotional fee Due to the major refurbishment, hotel was closed from 1st February 2012 onwards. 1,219 350 100 56,675 25,716 2,465 128,102 79,955 23,728 149,992 16,423 7,522 306 250 62,751 21,624 2,462 104,840 77,512 450 18,791
33


2012 Rs. 000
2011 Rs. 000
6. Staff Costs
Wages and salaries Cost of meals Defined contribution plans Defined benefit plans (Note 19) Staff costs Monthly average number of employees during the year 95,002 18,366 13,472 1,262 128,102 393 80,594 10,419 9,520 4,307 104,840 417
2012 Rs. 000
2011 Rs. 000
7. De-recognition of Property, Plant and Equipment

De-recognition of property, plant and equipment (Note 11 (b)) (149,992) (149,992) -
2012 Rs. 000
2011 Rs. 000
8. Net Finance Income/(Costs)

Interest income Interest expenses Net foreign exchange gain/(loss) Net finance income/(costs) 2,252 (738) (52) 1,462 5,367 (1,838) 25 3,554
2012 Rs. 000
2011 Rs. 000
9. Tax
Current income tax (Over) / under provision in respect of previous years Deferred tax (Note 15) Tax charge/(reversals) 205 (2,905) (10,452) (13,152) 20,798 135 (6,972) 13,961
34

Reconciliation of accounting profit to income tax expense Profit/(Loss) before tax Disallowable expenses Tax deductible expenses Tax loss carried forward Interest income Taxable income Income tax - 28% (2011 - 35%) Income tax - 12% (2011 - 15%) Tax on taxable income SRL on income tax Notional tax credit Income tax expense Further information on deferred tax and tax rates are presented in Note 15.
2012 Rs. 000 (202,241) 241,653 (45,899) 5,611 2,502 1,626 455 - 455 - (250) 205
2011 Rs. 000 66,660 94,579 (38,548) 5,963 128,654 2,087 18,402 20,489 307 20,796
10. Earnings per Share

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year. Net profit attributable to shareholders Weighted average number of ordinary shares in issue (thousands) (Note 22) Basic earnings/(loss) per share (Rs) 2012 (189,089) 176,000 (1.07) 2011 52,699 176,000 0.30
35


Buildings Sports Plant, complex machinery & equipment Rs000 Rs000 Rs000
Furniture & fittings Rs000
Motor vehicles Rs000
Sign board Rs000
Linen & furnishing Rs000
Total Rs000
11. Property, Plant and Equipment

Year ended 31st March 2011 Cost / valuation Balance brought forward as at 1st April 2010 1,460,056 Additions - Disposal - Revaluation surplus 156,718 Balance carried forward as at 31st March 2011 1,616,774 Depreciation Balance brought forward as at 1st April 2010 120,656 Depreciation charge (Note 5) 26,788 Disposal - Balance carried forward as at 31st March 2011 147,444 Net book value as at 31st March 2011 1,469,330 Year ended 31st March 2012 Cost / valuation Balance brought forward as at 1st April 2011 1,469,330 Additions 69,582 Disposal (872) De-recognition (127,477) Revaluation surplus - Balance carried forward as at 31st March 2012 1,410,563 Depreciation Balance brought forward as at 1st April 2011 Depreciation charge (Note 5) Disposal De-recognition Balance carried forward as at 31st March 2012 Net book value as at 31st March 2012 - 29,605 (5) (2,549) 27,051 1,383,512
12,772 - - 42,482 55,254 3,020 256 - 3,276 51,978
157,586 8,224 - 50,675 216,485 105,837 17,417 - 123,254 93,231
123,189 3,811 - 35,859 162,859 84,788 12,394 - 97,182 65,677
3,000 - (3,000) - - 1,950 250 (2,200) - -
742 - - (26) 716 659 39 - 698 18
42,809 5,587 - - 48,396 29,387 5,607 - 34,994 13,402
1,800,154 17,622 (3,000) 285,708 2,100,484 346,297 62,751 (2,200) 406,848 1,693,636
51,978 27 - - - 52,005 - 1,647 - - 1,647 50,358
93,231 23,158 (19,118) (25,611) - 71,660 - 12,798 (1,979) (3,201) 7,618 64,042
65,677 2,294 (24,084) - - 43,887 - 6,236 (1,948) - 4,288 39,599
- 14,475 - - - 14,475 - 1,166 - - 1,166 13,309
18 - - (18) - - - 3 (3) - - -
48,396 1,311 - (12,782) - 36,925 34,994 5,220 - (10,142) 30,072 6,853
1,728,630 110,847 (44,074) (165,888) 1,629,515 34,994 56,675 (3,935) (15,892) 71,842 1,557,673
(a) The Hotel building is constructed on land obtained from the Ceylon Tourist Board on a 99 years lease commencing from 9 May 1970, for which the Company pays a sum of Rs 2.5 Mn annually as operating lease rental (Note 21). (b) The carrying value of item of property, plant and equipment that were subject to refurbishment were determined with the assistance of the independent professional valuer and consultant, K Arthur Perera (A.M.I.V-(Sri Lanka). In arriving at such value, the valuer used approximate values that were included in the valuation that was carried out in 2011, of such components derecognised due to refurbishment. In order to ensure such judgement is appropriate, the Company also obtained the independent professional opinion of P Kalugalagedara(Chartered Valuer) who also has concurred with such determination within a reasonable range of values. Accordingly an amount of Rs.149,991,415/- being the net book value of such items was de-recognised as the amount of loss arising due to refurbishment which was included in profit and loss in accordance with paragraph 68 of SLAS 18.
36

In such de-recognised amounts, the revaluation surplus amounting to Rs 113,746,926/- included under revaluation reserve was transferred to retained earnings, in accordance with paragraph 41 of SLAS 18.
(c) If the property, plant and equipment except for motor vehicles and linen and furnishing, which have not been revalued were stated at historical cost, the carrying amounts would be as follows: Asset category Cost Rs. 000 Plant, machinery and equipment Buildings Sports complex Furniture and fittings 109,584 522,127 12,814 82,750 727,275 Accumulated depreciation Rs. 000 80,350 130,635 3,277 68,013 282,275 2012 Rs. 000 Net book value Rs. 000 29,234 391,492 9,537 14,737 445,000 2011 Rs. 000
11.1.
Capital Work in Progress

35,850 432,416 (69,581) 398,685 35,850 35,850
At beginning of year Cost incurred during the year Amount transferred to property, plant and equipment (Note 11) At end of year
The presentation and classification of Capital work in progress in these Financial Statements are amended to ensure the better presentation to the financial statements. 2012 Rs. 000 2011 Rs. 000
11.2.
Net Book Values of Property, Plant and Equipment

1,557,673 398,685 1,956,358 2012 Rs. 000 1,693,636 35,850 1,729,486 2011 Rs. 000
At Cost or Valuation Property Plant and Equipments (Note 11) Capital Work in Progress (Note 11.1) Building Work in Progress Net Book Values of Property, Plant and Equipment
12. Investments
Opening net book amount Provision for diminution in value Closing net book amount - - - 100 (100) -
37


2012 Rs. 000
2011 Rs. 000
13. Inventories
Food, beverages and tobacco (at cost) Consumables (at cost) Kitchen utensils (at cost) Less: Provision for obsolete inventories Inventories 4,119 3,669 6,187 13,975 (756) 13,219 6,619 2,191 7,225 16,035 16,035
2012 Rs. 000
2011 Rs. 000
14. Receivables and Prepayments

Trade receivables Less: Provision for bad debts Intercompany receivables Prepayments Other receivables Receivables and prepayments 17,381 (15,355) 2,026 2,094 5,077 41,106 50,303 84,655 (15,554) 69,101 873 2,171 12,680 84,825
15. Deferred Tax Liabilities

Deferred taxes are calculated on temporary differences under the liability method using a principal tax rate of 12% (2011 - 12%) . The movement on the deferred income tax account is as follows: Deferred tax assets At beginning of year Income statement release (Note 9) At end of year Deferred tax liabilities At beginning of year Income statement release (Note 9) Deferred tax on amount transferred from revaluation reserve (Note 23) Effect on different tax rates (Note 23) Deferred tax on revaluation (Note 23) At end of year Deferred income tax liabilities (net)
2012 Rs. 000
2011 Rs. 000
3,181 691 3,872
2,618 563 3,181
193,138 (9,761) 183,377 (19,140) - - 164,237 160,365
198,691 (6,409) 192,282 (3,055) (30,374) 34,285 193,138 189,957
38

Deferred tax assets and liabilities in the balance sheet, deferred tax charge / (release) in the income statement and deferred tax charge/ (credit) in equity, are attributable to provision for employment benefit obligations, accelerated tax depreciation, tax losses carried forward and asset revaluation. The deferred tax on amount transferred from revaluation reserve to retained earnings represents the deferred tax on the difference between the depreciation on revalued property, plant and equipment and the equivalent depreciation based on the historical cost of property, plant and equipment. 2012 Rs. 000 2011 Rs. 000
16. Cash and Cash Equivalents

Cash at bank and in hand Short term deposits Cash and cash equivalents 27,584 10,477 38,061 3,262 103,142 106,404
For the purposes of the cash flow statement, the year end cash and cash equivalents comprise the following: Cash and bank balances Bank overdraft (Note 18) 2012 Rs. 000 38,061 (28,436) 9,625 2011 Rs. 000 106,404 (21,857) 84,547
2012 Rs. 000
2011 Rs. 000
17. Trade and Other Payables

Trade payables Intercompany payables Social security and other taxes payable Accrued expenses [Note (a)] Other payables [Note (b)] Trade and other payables 16,834 637 2,062 5,662 12,101 37,296 40,548 18,871 1,412 9,204 35,005 105,040
(a) Accrued expenses includes service charge payable amounting to Rs.72,207 (2011 - Rs.5,136,231) and electricity payable amounting to Rs.1,126,062/- (2011 - Rs.4,300,681/-). (b) Other payables include advances received from customers amounting to Rs.8,760,146/- (2011 - Rs. 10,772,625/-) and VAT payable amounting to Rs.Nil (2011 - Rs. 6,150,175/-).
39


2012 Rs. 000
2011 Rs. 000
18. Borrowings
Current Bank overdraft (Note 16) Bank borrowings Current borrowings Non-current Bank borrowings Total borrowings 28,436 - 28,436 21,857 4,167 26,024
400,000 428,436
26,024
The short term bank borrowings are negative book balances and are not actual bank overdrafts. The long term bank borrowings are secured by a negative pledge over assets of the Company. 2012 Rs. 000 2011 Rs. 000
19. Employee Benefit Liabilities (Gratuity)

At beginning of year Current service cost (Note 6) Benefits paid At end of year The principal actuarial assumptions used were as follows : Discount rate Expected annual average salary increment Staff turnover factor Retiring age 9,939 1,262 (911) 10,290 6,759 4,307 (1,127) 9,939
11% 10% 2% 55 years
11% 10% 3% 55 years
An actuarial valuation was carried out by an independent professional actuary, Messrs Actuarial & Management Consultants (Private) Limited, in March 2012, to ascertain the full liability arising in respect of all employees of the Company as at 31 March 2012.
20. Contingencies
Contingent Liabilities There were no contingent liabilities outstanding at the balance sheet date, except for pending litigation in relation to: (a) The application filed by legal counsel on behalf of the Company objecting the order made by the Learned Magistrate of Maligakanda Magistrate Court for the Company to pay 1% of the turnover of the Hotel as license fees to the Colombo Municipal Council. On support of the application for interim relief and notice the learned High Court Judge issued notice on the respondent and an interim order staying further proceeding of the Magistrate Court in November 2009. However, by judgment dated 14 January 2011 the revision application was dismissed and the stay order vacated. Legal council have filed a Petition of Appeal on 27 January 2011 in the Court of Appeal, challenging the judgment and the appeal is listed for hearing on 23 May 2012.
40

(b) In addition to the above there are two other cases filed by the Colombo Municipal Council at the Maligakanda Magistrate Court for operating a restaurant without obtaining a requisite license in the years 2009 and 2010, whereby the Legal Counsel on behalf of the Company had informed the Magistrate Court that the decision to levy license fees equivalent to 1% of the turnover as a precondition is challenged. The matters are to be called in Courts on 25 June 2012. The Legal Counsel has also filed a writ application on behalf of the Company and it is now fixed for argument on 19 June 2012. (c) The Company has sought writs of certiorari and prohibition challenging the decision of the Provincial Commissioner of Revenue Western Province to charge turnover tax on sale of liquor and cigarettes in the course of providing hotel services to its customers. the above matter will be mentioned in Court on 23 July 2012 to ascertain whether as a settlement the respondents are willing to grant the reliefs sought by the Company.
21. Commitments
(a) Capital Commitments
The approximate amounts of capital expenditure approved by the Directors as at 31 March 2012 were: Capital expenditure contracted for which no provision is made in the financial statements - Rs. 578 Mn (2011 - Nil). Capital expenditure approved by the Directors but not contracted for - Rs 812 Mn (2011 - Nil).
(b) Operating Lease Commitments

The Company has an annual commitment to pay a sum of Rs 2.5 Mn to Ceylon Tourist Board as operating lease rental for the land on which the hotel building has been constructed.
The future aggregate minimum lease payments under non cancellable operating lease are as follows : Not later than 1 year Later than 1 year and no later than 5 years Later than 5 years Operating lease commitments 2012 Rs 000 2,500 10,000 132,500 145,000 2011 Rs 000 2,500 10,000 135,000 147,500
Number of shares 000
Ordinary shares Rs 000
22. Stated Capital

At 31 March 2011 At 31 March 2012 176,000 176,000 176,000 176,000
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23. Revaluation Reserve

The revaluation surplus, comprises gains on revaluation of property, plant and equipments made in 1996, 2002, 2010 and 2011. The movement in the revaluation reserve is as follows. At beginning of year Deferred tax on amount transferred to revaluation reserve (Note 15) Revaluations during the year (Note 11) Effect on different tax rates (Note 15) Transfer to retained earnings [Note (a)] Transfer to retained earnings [Note (b)] Transfer to retained earnings [Note (c)] Transfer to retained earnings [Note (c)] Deferred tax on revaluation (Note 15) At end of year
2012 Rs. 000 1,157,917 19,140 - - (1,759) (19,836) (24,162) (113,747) - 1,017,553
2011 Rs. 000 893,433 3,055 285,708 30,374 (1,759) (18,609) (34,285) 1,157,917
(a) Transfer to retained earnings amounting to Rs. 1,759,000/- represents the difference between depreciation charge for the year based on cost and depreciation charge based on revalued amounts of the assets revalued in 1996. (b) Transfer to retained earnings amounting to Rs. 19,836,301/- represents the difference between depreciation charge for the year based on cost amounting to Rs. 18,851,706/- and depreciation charge based on the revalued amount of Rs. 38,688,007/- of the property, plant and equipment revalued in 2010 and 2011. (c) Transfer to retained earnings amounting to Rs. 24,162,559/- and Rs. 113,746,926/- represents the revaluation surplus pertaining for the property, plant and equipment which were disposed and de-recognised during the year, respectively.
2012 Rs. 000
2011 Rs. 000
24. Cash Generated from Operations

Reconciliation of profit before tax to cash generated from operations: Profit/(Loss) before tax Adjustments for: Depreciation on property, plant and equipment (Note 11) Provision for diminution in value of investments (Note 12) Interest income (Note 8) Interest expense (Note 8) (Profit)/Loss on disposal of property, plant and equipment & cutlary (Note 4) De-recognition of property, plant and equipment (Note 7) Changes in working capital: - receivable and prepayments - inventories - payables - employment benefits (Note 19) Cash generated from operations (202,241) 56,675 - (2,252) 738 25,006 149,992 34,522 1,196 (67,744) 1,262 (2,847) 66,660 62,751 100 (5,367) 1,838 (450) (53,971) (5,136) 46,515 4,307 117,247
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25. Related Party Transactions

Details of significant related party disclosures are as follows: Parent 2012 2011 Rs. 000 Rs. 000 Fellow Subsidiaries 2012 2011 Rs. 000 Rs. 000 Total 2012 Rs. 000 2011 Rs. 000
25.1 Transaction with the Parent and Related Entities,

Nature of Transaction Rooms and banquet sales Purchase of goods/services Sales of furniture Marketing and promotional fees Purchase of materials for construction 3,164 - - - - 2,581 - - - - 16,401 31,513 5,551 16,423 976 6,098 11,625 - 18,791 - 19,565 31,513 5,551 16,423 976 8,679 11,625 18,791 -
25.2 Transactions with Key Management Personnel of the Company or its parent
The key management personnel of the Company are the members of its Board of Directors and that of its parent . 2012 Rs. 000 2011 Rs. 000
a) Key Management Personnel Compensation

Short-term employee benefits Post-employment benefits Key management personnel compensation 1,219 - 1,219 2012 Rs. 000 5,419 2,103 7,522 2011 Rs. 000
25.3 Transaction with the Parent and Related Entities, Outstanding Receivables Balance Arising from the Above Transactions:
Parent Fellow Subsidiaries - 2,094 192 681
Outstanding payable balance arising from the above transactions:

Parent Fellow Subsidiaries 567 70 18,871
26. Post Balance Sheet Events

No events have occurred since the balance sheet date which would require adjustment to, or disclosure in the financial statements.
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Notes
44

Notes
45

Notice of Meeting
Company No. PQ 203
Notice of Meeting
NOTICE IS HEREBY GIVEN that the Forty Third Annual General Meeting of Hotel Services (Ceylon) PLC, will be held at Ceylon Continental Hotel Colombo Sapphire Ballroom on Tuesday, 26th June 2012 at 3.00 p.m. and the business to be brought before the meeting will be:
Agenda
1) 2) 3) 4) 5) 6) To consider and adopt the Annual Report of the Board of Directors and the Statements of Accounts for the year ended 31st March 2012. To re-elect Mr. N. J. De S. Deva Aditya, who retires by rotation at the Annual General Meeting a Director To re-elect Mr. S. J. Wijesinghe, who retires by rotation at the Annual General Meeting a Director. To re-elect Mr. L. T. Samarawickrama, who retires by rotation at the Annual General Meeting a Director. To authorise the Directors to determine contributions to Charities. To authorise the Directors to determine the remuneration of the Auditors, M/s Ernst & Young, chartered accountants , who are deemed to have been reappointed as Auditors in terms of Section 158 of the Companies Act no.7 of 2007. To consider any other business of which due notice has been given.
7) Note : (1) A Shareholder is entitled to appoint a proxy to attend and vote instead of himself and a proxy need not be a shareholder of the Company. A Form of Proxy is enclosed for this purpose. The instrument appointing a proxy must be deposited at the Registered Office No. 48, Janadhipathi Mawatha, Colombo 01 by 3.00pm on 24th June 2012 By Order of the Board HOTEL SERVICES (CEYLON) PLC Hayleys Group Services (Private) Limited Secretaries Colombo 25th May 2012
46

Form of Proxy
I/We* of being a shareholder/ shareholders* of HOTEL SERVICES (CEYLON) PLC hereby appoint, 1. of or failing him/them,* 2. ABEYAKUMAR MOHAN PANDITHAGE (Chairman of the Company) of Colombo, or failing him, one of the Directors of the Company as my/our* proxy to attend and vote as indicated hereunder for me/us* and on my/our* behalf at the Forty Third Annual General Meeting of the Company to be held on Tuesday, 26th June 2012 and at every poll which may be taken in consequence of the aforesaid meeting and at any adjournment thereof: For Against
1) To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31st March 2012 with the Report of the Auditors thereon. To re-elect Mr. N. J. De S. Deva Aditya, who retires by rotation at the Annual General Meeting a Director To re-elect Mr. S. J. Wijesinghe, who retires by rotation at the Annual General Meeting a Director. To re-elect Mr. L. T. Samarawickrama, who retires by rotation at the Annual General Meeting a Director. To authorise the Directors to determine contributions to Charities. To authorise the Directors to determine the remuneration of the Auditors, M/s Ernst & Young, chartered accountants, who are deemed to have been reappointed as Auditors in terms of Section 158 of the Companies Act no.7 of 2007.
2) 3) 4) 5) 6)
(**) The proxy may vote as he thinks fit on any other resolution brought before the Meeting.
As witness my/our* hands this .. day of ....2012
.. Signature of Shareholder Witnesses . . . NOTE : : * Please delete the inappropriate words. 1. A proxy need not be a member of the Company. 2. Instructions as to completion appear on the reverse
47

Form of Proxy
Instructions as to Completion
1. To be valid, this Form of Proxy must be deposited at the Registered Office of the Company, No.48, Janadhipathi Mawatha, Colombo 01 by 3.00 p.m. Sunday 24th June 2012 In perfecting the Form of Proxy, please ensure that all details are legible. If you wish to appoint a person other than the Chairman of the Company (or failing him, one of the Directors) as your proxy, please insert the relevant details at 1 overleaf and initial against this entry. Please indicate with an X in the space provided how your proxy is to vote on each resolution. If no indication is given, the proxy in his discretion will vote as he thinks fit. Please also delete (**) if you do not wish your proxy to vote as he thinks fit on any other resolution brought before the Meeting. In the case of a Company / Corporation, the proxy must be under its Common Seal which should be affixed and attested in the manner prescribed by its Articles of Association. Where the Form of Proxy is signed under a Power of Attorney (POA) which has not been registered with the Company, the original POA together with a photocopy of same or a copy certified by a Notary Public must be lodged with the Company along with the Form of Proxy.
2. 3.
4.
5.
6.
48
Corporate Structure
Legal Form
A Public Limited Company Incorporated in Sri Lanka on 4th May 1969
Auditors
Ernst and Young Chartered Accountants No. 201 De Saram Place Colombo 10.
Company Number
PQ 203
Stock Exchange Listing Directors

A. M. Pandithage - Chairman S. C. Ganegoda S. P. Dissanayake S. J. Wijesinghe N. J. De S. Deva - Aditya L. T. Samarawickrama L. N. De S. Wijeyeratne U. D. Gamage (Resigned w.e.f. 20.12.2011) K. D. D. Perera Ms. R. N. Ponnambalam W. D. N. H. Perera The Ordinary shares of the Company are listed with the Colombo Stock Exchange of Sri Lanka
Registered Office
Ceylon Continental Hotel Colombo No. 48, Janadhipathi Mawatha, Colombo 01
Audit Committee
L. N. De S. Wijeyeratne - Chairman L. T. Samarawickrama (Resigned w.e.f. 12.09.2011) Ms. R. N. Ponnambalam
Secretaries
Hayleys Group Services (Private) Limited 400, Deans Road, Colombo 10. Sri Lanka Telephone 2627650-3 (4 Lines) Fax 2627645
Produced by Copyline (Pvt) Ltd Printed by Printel (Pvt) Ltd
www.ceyloncontinental.com

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Hotel Services (Ceylon) PLC

Co. Reg. No. PQ 203

Seizing Opportunities, Embracing Change

Hotel Services (Ceylon) PLC

Hotel Services (Ceylon) PLC

First Twenty Shareholders as at 31st March 2012

Hotel Services (Ceylon) PLC

547,177 (9.79) 25,628 (202,241) (1,461) 56,675

606,548 77.66 123,642 66,660 (4,727) 62,751

341,411 (20.08) 50,306 4,076 1,476 46,294

Hotel Services (Ceylon) PLC

176,000 176,000 1,087,053 1,227,417 164,177 193,762 1,427,230 1,597,179

176,000 962,933 120,695 1,259,628

176,000 141,825 111,728 429,552

176,000 143,320 102,876 422,196

1,453,958 12,544 1,466,502 10,802 196,072 1,259,628

1.63 8.11 17.40 (1.07)

1.48 9.07 23.10 0.30

1.15 7.16 23.50 0.04

0.79 24.41 152.25 1.59

0.68 23.99 145.00 3.78

Hotel Services (Ceylon) PLC

Initiative and Development

Hotel Services (Ceylon) PLC

Mohan Pandithage Chairman 17th May 2012

Hotel Services (Ceylon) PLC

Hotel Services (Ceylon) PLC

Hotel Services (Ceylon) PLC

Annual Report of the Directors on the Affairs of the Company

Directors Remuneration and Other Benefits

Review of the year

Directors Interests in Transactions

Directors Interests in Shares

Hotel Services (Ceylon) PLC

Annual Report of The Directors on The Affairs of The Company

Property, Plant and Equipment

Hotel Services (Ceylon) PLC

Employees and Industrial Relations

Post Balance Sheet Events

Disclosure as per Colombo Stock Exchange Rule No.7.6.Xi

Annual General Meeting

Hayleys Group Services (Pvt) Ltd Secretaries 17th May 2012

Hotel Services (Ceylon) PLC

Hotel Services (Ceylon) PLC

Appointments to the Board

Members of the Remuneration Committee

Hotel Services (Ceylon) PLC

Relations with Shareholders

Constructive use of Annual General Meeting

Communication with Shareholders

Accountability and Audit

Hotel Services (Ceylon) PLC

Members of the Audit Committee

Disclosure relating to Directors

Please refer Board of Directors on pages 7 and 8

Disclosure relating to Directors

Please refer page 13 under the heading of Board Balance

Disclosure relating to Directors Disclosure relating to Directors

Names of the members of the Remuneration Committee are stated on page 13

Hotel Services (Ceylon) PLC

Disclosure in the Annual Report relating to Remuneration Committee Audit Committee

Composition of Audit Committee

Audit Committee Functions