palm garden hotels plc annual report 2020 - 2021

PALM GARDEN HOTELS PLC ANNUAL REPORT 2020 - 2021

Corporate Information

Chairman’s Review

Board of Directors

Report of the Directors

Corporate Governance Report

Report of the Audit Committee

Report of the Related Party Transactions Review Committee

Report of the Remuneration Committee

Shareholders’ Information

Management Discussion

Ten year Summary

Directors’ Responsibility for Financial Reporting

Chairman’s and Chief Financial Officer’s Responsibility Statement

Independent Auditors Report

Statement of Profit or Loss and Other Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flow

Notes to the Financial Statements

Summarized Quarterly Statistics

Statement of Value Added

Notice of Meeting

Form of Proxy

Registration of Shareholder

Notes

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76

TABLE OF CONTENTS .......

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Name of Company

PALM GARDEN HOTELS PLCDate of Incorporation 5 April 1973

Legal Form

A Public Quoted Company with Limited LiabilityCompany Registration No PQ 132

Stock Exchange ListingThe Ordinary shares of the Company are listed on the Colombo Stock Exchange

Directors

Mr. W. D K Jayawardena - Non Executive Chairman Mrs. K U Amarasinghe - Non Executive Director Mr. D. S. K Amarasekera - Independent Director Dr. J M Swaminathan - Independent Director

Audit Committee

Dr. J M Swaminathan - Committee Chairman Mr. W. D K Jayawardena Mr. D. S K Amarasekera

Remuneration Committee

Dr. J M Swaminathan - Committee Chairman Mrs. K U Amarasinghe Mr. D. S K Amarasekera

Related Party Transactions Review Committee

Dr. J M Swaminathan - Committee Chairman Mr. W D K Jayawardena Mrs. K U Amarasinghe

Registered Office

100/1, Sri Jayawardenapura Mawatha, Rajagiriya, Sri Lanka. Tel : +94 11 5880880 Fax : +94 11 2865606

Company SecretariesLOLC Corporate Services (Pvt) Ltd

AuditorsPricewaterhouseCoopers (Chartered Accountants)

LawyersNithya Partners (Attorneys-at-Law)

RegistrarsP W Corporate Secretarial (Pvt) Ltd

BankersBank of CeylonNations Trust Bank PLC

SUBSIDIARIES

Riverina Resorts (Pvt) Ltd

Directors : Mr. W D K Jayawardena Mrs. K U Amarasinghe Mr. D S K Amarasekera Mr. K A K P Gunawardena

Eden Hotel Lanka PLC

Directors : Mr. W D K Jayawardena Mrs. K U Amarasinghe Mr. D S K Amarasekera Prof. M T A Furkhan Mr. S Furkhan Dr. J M Swaminathan

Serendib Hotels PLC

Directors: Mr. W D K Jayawardena Mrs. K U Amarasinghe Dr. J M Swaminathan Mr. D S K Amarasekera Mr. J P S Kurumbalapitiya Mr. W A T M Wijesinghe Mr. S A Chojnacki Mr. E J D Rajakarier

Dolphin Hotels PLC

Directors: Mr. W D K Jayawardena Mrs. K U Amarasinghe Dr. J M Swaminathan Mr. D S K Amarasekera Mr. J P S Kurumbalapitiya Mr. B S M De Silva Mrs. A R Gamage (Alt. Prof. L D K B Gamage)

Sigiriya Hotels PLC

Directors: Mr. W D K Jayawardena Mrs. K U Amarasinghe Dr. J M Swaminathan Mr. D S K Amarasekera Mr. J P S Kurumbalapitiya Mr. B S M De Silva Mrs. A R Gamage (Alt. Prof. L D K B Gamage)

Serendib Leisure Management Limited

Directors: Mr. K A K P Gunawardena Mrs. K U Amarasinghe Dr. J M Swaminathan Mr. D S K Amarasekera Mr. J P S Kurumbalapitiya Mr. E J D Rajakarier

Frontier Capital Lanka (Private) Limited

Directors: Mr. K A K P Gunawardena Mrs. K U Amarasinghe Dr. J M Swaminathan Mr. D S K Amarasekera Mr. J P S Kurumbalapitiya

Sanctuary Resorts Lanka (Private) Limited

Directors: Mr. K A K P Gunawardena Mrs. K U Amarasinghe Dr. J M Swaminathan Mr. D S K Amarasekera Mr. J P S Kurumbalapitiya

Dickwella Resorts (Pvt) Ltd

Directors : Mr. J B W Kelegama Mr. P D G Jayasena

Bodufaru Beach Resort Pvt Limited

Directors : Mr. D S K Amarasekera Mr. K A K P Gunawardena Mr. M Niham

Green Paradise (Pvt) Ltd

Directors : Mr. D S K Amarasekera Mr. K A K P Gunawardena Mrs. K U Amarasinghe

Sun & Fun Resorts Ltd

Directors: Mr. Charkravarthy Melappati Mr. V K Vemuru Mr. D S K Amarasekera Mr. K A K P Gunawardena Mr. T Selviah

Browns Ari Resort (Pvt) Limited, Maldives

Directors: Mr. I C Nanayakkara Mr. D S K Amarasekera Mr. K A K P Gunawardena Mr. M Niham Mr. S Mohmed

Browns Raa Resort (Pvt) Limited, Maldives

Directors: Mr. I C Nanayakkara Mr. D S K Amarasekera Mr. K A K P Gunawardena Mr. M Niham

Browns Kaafu N Resort (Pvt) Limited, Maldives

Directors: Mr. I C Nanayakkara Mr. D S K Amarasekera Mr. O A Razzak

CORPORATE INFORMATION .......

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On behalf of the Board, I am pleased to present the Annual Report and Financial Statements of Palm Garden Hotels PLC for the year ended 31st March 2021.

Tourism has traditionally been the third largest foreign exchange earner in the country. It is a significant economic force in Sri Lanka and the most reliable source of foreign exchange, it may aid in resolving the trade deficit. Sri Lanka recorded over 1.9 million tourist arrivals in 2019, a 21% drop from the previous year owing to the aftermath of the Easter Terror Attacks. It is estimated that the sector earned around $3.5 billion in 2019. The effects of the global COVID-19 pandemic crippled the sector in 2020 upon the closure of the airports to commercial traffic in March 2020. At present, the industry is catering almost exclusively to local tourists and international arrivals under strict “travel bubble” restrictions.

Despite all these challenging and uncertain operating environment, the Group demonstrated agility, while prioritizing the health and safety of its employees, guests and other stakeholders. Long-term strategic priorities, such as Asset Light Expansion, operational excellence, developing a future ready workforce, strengthening brand value and creating a sustainable operation are the key areas which has been considered in this interim period.

GROUP PERSPECTIVE

With the view of expanding the local foot print, Eden Hotel Lanak PLC, subsidiary of Palm Garden Hotels PLC, acquired 56.67% of voting shares and 53.48% of Non-Voting Shares of Serendib Hotels PLC, a subsidiary of Hemas Holdings PLC for Rs 792 million, which added additional 366 room inventory to the sector. Serendib Hotels PLC owns and operates Avani Bentota Resort at Bentota. Serendib Hotels PLC is also a major shareholder of Hotel Sigiriya PLC, which owns Hotel Sigiriya in Sigiriya and of listed Dolphin Hotels PLC, which owns Club Hotel Dolphin in Waikkal. The company fully owns and operates Frontier Capital Lanka (Pvt) Ltd., which owns the Lantern Boutique Hotel and two Ubuntu Beach Villas by Lantern located in Mirissa, which is the villa collection of the Group.

In order to sustain with in the industry, as a medium term strategy, except for Villa collection of the Group, all other operating properties

are operating as paid quarantine hotels from June 2020 onwards. This decision positively impacted to the Group and its employees, generating steady cash flows in the interim period.

As a result of the quarantine operations, the Group was able to record a net revenue of Rs 751.3Mn which resulted in Gross Profits of 556.3Mn for the year under review. However due to the higher operational expense, the Group reported a negative EBIT of Rs 793.2Mn for the year ended 31st March 2021 Despite all the negative financial performance, as a result of the strategic investments made in diversified leisure properties in Sri Lanka and as well as Maldives, the Group was able to grow its asset base by Rs 18.7Bn in the year under review. The Group recorded an asset base of Rs 45.9Bn as at 31st March 2021.

Eden Hotel Lanka PLC and Green Paradise (Pvt) Limited, subsidiaries of Palm Group, entered into a Hotel Management Agreement with Barceló Group in the previous financial year. Barceló will commence the commercial operations of Green Paradise in September 2021 and the commercial operations of Eden in November 2021. The management is intending to perform much needed refurbishment projects in several properties with the view of increasing the overall value proposition of the properties which is expected to generate positive financial results in the future post Covid 19.

Management is focusing on the future prospects of the leisure sector when the situation of the industry is back to normalcy. All the medium term and long terms plans are in place to increase the overall value proposition and the shareholder value of the Group. With this objective, management is in constant dialog with Foreign Tour Operators (FTO’s) and local Destination Management Companies (DMC’s), to ascertain the current market conditions of the target market segments. Even though the industry is having a temporary drawback, those local and foreign tour operators are positive for the medium and long term. Several Foreign Tour Operators are in discussions to finalize contracts for the immediate future.

I take this opportunity, to express my sincere gratitude and appreciation to our valued guests, business partners who provided their continuous support and our staff, who are working hard during these tiring times to provide a quality customer service.

Finally, I take this opportunity to place on record my appreciation to my colleagues on the Board for their valuable guidance and support during the year under review.

Kapila JayawardenaChairmanPalm Garden Hotels PLC30 August 2021

CHAIRMAN’S REVIEW .......Mr W D K JayawardenaChairman

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W. D. K. JAYAWARDENANon-Executive Chairman

MRS. KALSHA AMARASINGHENon-Executive Director

Kapila Jayawardena holds a MBA in Financial Management and is a fellow member of the Institute of Bankers and an Associate Member of the Institute of Cost and Executive Accountants, London. He served as Country Head and CEO (Sri Lanka and Maldives) of Citibank NA from 1998 to 2007. With his varied experience in the fields of Investment Banking, Banking Operations, Audit, Relationship Management, Corporate Finance, Corporate Banking and Treasury Management, Mr. Jayawardena served in the following Boards/Committees:

• Chairman of the Sri Lanka Banks’ Association (SLBA) in 2003/04• President of the American Chamber of Commerce in Sri Lanka in

2006/2007• Member of the Financial Sector Reforms Committee (FSRC)• Member of the National Council of Economic Development

(NCED)• Board Member of the United States - Sri Lanka Fulbright

Commission.

Kapila Jayawardena joined LOLC in the year 2007 as the Group Managing Director/CEO and is the Chairman/Director of the following companies and is also on the Boards of the subsidiaries of the LOLC Group.

ChairmanLOLC Development Finance PLCLOLC General Insurance Ltd LOLC Securities Limited Eden Hotel Lanka PLCSerendib Hotels PLCDolphin Hotels PLCHotel Sigiriya PLC

DirectorLOLC Holdings PLC Seylan Bank PLCBrown & Company PLCRiverina Resorts (Private) Limited LOLC International (Private) LimitedBrowns Investments PLCLOLC Advance Technologies (Private) LimitedLOLC Asia (Private) LimitedLOLC Private LimitedCeylon Graphene Technologies (Private) LimitedLOLC Africa Holdings (Private) Limited Leapstich Technologies (Pvt) Ltd

Kalsha Amarasinghe holds an Honours Degree in Economics and has an outstanding vision for investments. She serves on the Boards of subsidiaries of Browns Group of Companies and L O L C Holdings PLC.

Key appointments: Executive Director LOLC Holdings PLC LOLC Finance PLC

Director LOLC Life Assurance LimitedEden Hotel Lanka PLCRiverina Resorts (Pvt) LtdBrown & Co. PLCBrowns Investments PLCGreen Paradise (Pvt) LtdBrowns Holdings LtdDanya Capital (Pvt) Ltd Ultimate Sports (Pvt) LtdSerendib Hotels PLCHotel Sigiriya PLCDolphin Hotels PLC Serendib Leisure Management LimitedSanctuary Resorts Lanka (Private) LimitedFrontier Capital Lanka (Private) LimitedKammala Hoteliers (Private) LimitedMelana Capital (Pvt) Ltd

BOARD OF DIRECTORS .......

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D. S. K. AMARASEKERAIndependent Director

DR. J. M. SWAMINATHANIndependent Director

Kamantha Amarasekera is a member of the Institute of Chartered Accountants of Sri Lanka and is an Attorney-at-Law of the Supreme Court of Sri Lanka. He also holds a degree in Business Administration from the University of Sri Jayawardenapura and began his career in the year 1998.

D.S.K. Amarasekera is an eminent Tax Consultant and the Senior Tax and Legal Partner of Amarasekera & Company, a leading tax consultancy firm in Sri Lanka.

Dr. J. M. Swaminathan holds LLB (Ceylon), LLM, M. Phil. (Colombo) and LLD (Honoris Causa) Degrees and is an Attorney-at-Law. He is an Attoney-at-Law with 55 years in practice. He is a Member of the Office for Reparation Sri Lanka. He has served as a Member of the Law Commission of Sri Lanka and Member of the Council of Legal Education and the Council of the University of Colombo. He is also Member of the Company Law Advisory Commission and The Intellectual Property Law Advisory Commission. He is the Chairman of the Studies of the Council of Legal education and also a Consultant at the Institute of Advanced Legal Studies of the Council of Legal Education. He is a Member of the Visiting Faculty of the LLM Course of the University of Colombo. He also serves on the Boards of several public and private companies.

BOARD OF DIRECTORS CONTD. .......

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The Directors take pleasure in presenting their Annual Report for the year under review and trust that the reports and financial statements will enable all stakeholders to obtain a comprehensive overview of the Company’s position.

Board of Directors

The Board comprises the following Directors:

W D K Jayawardena - Non Executive Chairman Mrs. K U Amarasinghe - Non Executive Director Dr. J. M Swaminathan - Independent DirectorD S K Amarasekera - Independent Director

The profiles of the Directors are given on pages 4 & 5.

Directors’ shareholdings

Details of the Directors’ shareholdings in the Company are given below:

As at As at 31.03.2021 31.03.2020W D K Jayawardena - -Dr. J M Swaminathan - -Mrs. K U Amarasinghe - -D S K Amarasekera - -Directors’ interests

Directors’ interests are disclosed in the notes to the financial statements (Page 61).

Retirement of Directors

In terms of Article 86 of the Articles of Association of the Company Mr. D S K Amarasekera retires by rotation and offers himself for re- election. The Directors recommend that he be re-elected.

Dr. J M Swaminathan, who is over the age of 70 will retire in terms of Section 210 of the Companies Act No. 7 of 2007. The Company has received notice from a shareholder of its intention to move a resolution to re-elect Dr. Swaminathan as a Director. The Directors recommend his re-election.

Board sub committees

The Board has appointed the following Board Sub Committees :

The Audit Committee The Remuneration Committee The Related Party Transactions Review Committee

These Committees meet regularly. Minutes of these meetings are tabled at Board meetings, so the entire Board can be kept aware and informed of the detailed discussions and be confident that relevant issues are receiving the focused attention they need.

The Composition and Attendance of the Board and Audit Committee are found at the bottom of this report.

The respective reports of these Committees can be found on pages 9 & 10.

Compliance with laws and regulations

The Company has not engaged in any activity that contravenes any applicable laws or regulations.

Corporate Governance

The Board is committed to the principles of good governance, and accordingly the Board meets regularly to review both performance and compliance.

The Corporate Governance Report is on pages 8 & 9 The Company is compliant with the Corporate Governance requirements of the Colombo Stock Exchange.

Statutory Payments

For the year under review, all known statutory payments have been made and all retirement gratuities have been provided for . Further, all management fees and payments to related parties for the year under review have been reflected in the accounts.

Risk Management

While currently there are limited operations, the Enterprise Risk Management Division of the LOLC Group continues to monitor and report on potential risk or deviations from policies and procedures.

Employee relations

There are currently no full time employees, as there are no operations. Support services are provided by the centralized support services of the LOLC Group.

Property

Details of the Company’s properties are found on page 48.

Financial Statements

The financial statements together with the notes thereon are given on pages 16 to 69.

Significant accounting policies

The significant accounting policies adopted when preparing these financial statements and any changes thereof if applicable are given on pages 28 to 41.

Going concern

The Audit Committee and the Board of Directors have reviewed the interim financials, the year-end financials and the Company’s future plans and believe that the Company is in a position to continue to function in the foreseeable future. Accordingly, the Financial Statements are prepared on the basis that the Company is a going concern.

Responsibility statements

The Chairman’s and Chief Financial Officer’s responsibility statement appears on page 15. The Directors responsibility statement appears on page 15.

REPORT OF THE DIRECTORS .......

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Auditor's Report

The Auditor's report appears on pages 16 to 22.

Annual General Meeting

The Annual General Meeting of the Company will be held as a virtual meeting emanating from the LOLC Board Room at 100/1 Sri Jayewardenapura Mawatha, Rajagiriya.

The notice of meeting is included in this Annual Report..

W D K Jayawardena Mrs. K U AmarasingheChairman Director

REPORT OF THE DIRECTORS CONTD .......

Board /Sub Committee Composition & Attendance

Director BoardAudit

CommitteeRem:

CommitteeRPTR

Committee

Board Meeting Attendance

14.07.2020 12.02.2021W. D. K. Jayawardena √* √ - √ √ √

Mrs. K. U. Amarasinghe √ - √ √ √ √

D. S. K. Amarasekera √ √ √ - √ √

Dr. J. M. Swaminathan √ √** √** √** √ √

*Company Chairman** Committee Chairman

Due to the COVID-19 outbreak the Board meeting scheduled for the months of August & November 2020 were not held. However approving of the Quarterly financials were done by circular resolutions.

Transactions with Related Parties

The Directors have disclosed transactions, if any, that could be classified as related party transactions in terms of LKAS 24.

Details of related party transactions are disclosed in the financial statements.

Related Party Transactions are disclosed in note 31 to the Financial Statements. The Directors hereby confirm that to the best of their knowledge and information available to them, the Company has complied with the requirements of the rules relating to the related party transactions as contained in Section 9 of the listing Rules of the Colombo Stock Exchange.

Auditors

The Auditors, M/s PricewaterhouseCoopers, Chartered Accountants retire, and offer themselves for re-appointment. The Board recommends their re-appointment for the year 2021/2022 subject to shareholder approval, at a fee to be decided upon by the Board.

During the year under review, the Auditors were paid Rs.250,000/- as audit fees .

As far as the Directors are aware, the Auditors do not have any other relationship with the Company or any of its subsidiaries nor do they have any interest in contracts with the Company or any of its subsidiaries.

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The Board of Directors endorse the principles of good corporate governance. While there were no operations during the year under review, the Board met regularly to review compliance with regulatory and statutory requirements.

Board of Directors

The Board comprises the following Directors :

W D K Jayawardena Dr. J M SwaminathanD.S K Amarasekera Mrs. K U Amarasinghe

Their profiles can be found on (pages 4 & 5).

Board composition is in compliance with the requirements of the Listing Rules of the Colombo Stock Exchange. As required by these Listing Rules, all the Non-Executive Directors have submitted declarations relating to their independence.

The Board has determined that Mr. D S K Amarasekera and Dr. J M Swaminathan are able to carry out their functions as independent directors, because of their professionalism, expertise and experience.

Directors' shareholdings are also given in the Directors’ Report on page 6.

Board sub committees

In compliance with the Listing Rules of the Colombo Stock Exchange, the Board has appointed three Board sub committees - the Audit Committee, the Remuneration Committee and the Related Party Transactions Review Committee. These Committees meet regularly, providing a forum for detailed review of relevant issues.

Relevant senior management officers are also invited to these Sub Committee meetings. Thus these meetings provide a forum for the Board to meet with the management. This enable the Committee to obtain more clarity on issues, and also discuss the practicality of mitigation methods.

Reports of the individual committees, found on 9 & 10 provide further details.

Auditors

The Auditors M/s PricewaterhouseCoopers, Chartered Accountants retire and offer themselves for re appointment. The Board recommends their reappointment for the year 2021/2022 at a fee to be decided upon by the board.

Compliance with regulations

During the year under review, the Company was compliant with the Corporate Governance requirements of the Colombo Stock Exchange(“CSE”).

Attendance at Meetings

The Board met two times during the year with all meetings presided over by the Chairman according to a calendar circulated last year for the preceding year. Directors who are unable to participate at any meetings receive the Board papers. Attendance at Board meetings and sub committee meetings are given below.

Names Classification Board Audit CommitteeRemuneration

Committee

Related Party Transactions

Review Committee

W D K Jayawardena Non-Executive Chairman 2/2 2/2 1/1 2/2

Mrs. K U Amarasinghe Non-Executive Director 2/2 - 1/1 2/2

D S K Amarasekera Independent Director 2/2 1/2 1/1 -

Dr. J M Swaminathan Independent Director 2/2 2/2 ** 1/1 ** 2/2**

** Committee Chairman

The extent of compliance as required by the Listing Rules of the Colombo Stock Exchange and subsequent amendments thereto:

Sec No. Rules of the Colombo Stock Exchange Level of compliance

7.10 Corporate Governance

Statement confirming that as at the date of the annual report that the Company is in compliance with these rules.

Complied with

The Company is in compliance with the listing rules of the Colombo Stock Exchange.

7.10.1 Non-Executive Directors

The Board of Directors of a listed entity shall include at least : two non executive directors; or such number of non executive directors equivalent to one third of the total number of directors whichever is higher.

Complied with

As at 31 March 2021 the Board comprised 4 Non Executive Directors.

7.10.2 Independent Directors

Where the constitution of the Board of Directors includes only two Non-Executive directors in terms of 7.10.1, both such Non-Executive directors shall be independent. In all other instances two or 1/3rd of the non-executive directors appointed to the Board, whichever is higher shall be independent.

Complied with

As at 31 March 2021 the Board comprised 2 Independent Directors from whom signed declarations of independence were obtained.

CORPORATE GOVERNANCE REPORT .......

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Sec No. Rules of the Colombo Stock Exchange Level of compliance

7.10.3-4 Disclosures Relating to Directors

Annual determination as to the independence or non independence of each Non-Executive Director.

Complied with

The Board has reviewed and satisfied itself as to the independent/ non independent status of the Non Executive directors.

Please refer Director's profiles on pages 4 & 5.7.10.5 Remuneration Committee

Shall comprise of a minimum of two independent Non - Executive Directors or of non executive directors a majority of whom shall be independent, which ever shall be higher.

Complied with

As at 31 March 2021 the Committee comprised 3 Non Executive Directors of whom 2 are independent .

Please refer committee report on page 10.7.10.6 Audit Committee

Shall comprise of a minimum of two independent non executive directors or of non executive directors a majority of whom shall be independent, which ever shall be higher.

Complied with

As at 31 March 2021 the Committee comprised 3 Non Executive Directors of whom 2 are independent.

Please refer committee report on page 9.9.2.2 Related Party Transactions Review Committee

The Committee should comprise a combination of non-executive directors and independent non-executive directors. The composition of the Committee may also include executive directors, at the option of the Listed Entity. One Independent Non-Executive director shall be appointed as Chairman of the Committee.

Complied with

As at 31 March 2021 the Committee comprised 2 Non Executive Directors and 01 Independent Director who is the Committee Chairman.

Please refer committee report on page 10.

CORPORATE GOVERNANCE REPORT CONTD .......

During the financial year, the Committee met to review the interim financial statements and the year-end financial statements and recommend them to the Board for approval prior to these statements being released to the Colombo Stock Exchange. At these meetings, changes to accounting policies, taxation and required disclosures are also discussed. The External Auditors are also invited to the meetings, so any areas of concern could be highlighted and dealt with.

The Committee also reviews and makes a determination on the External Auditor’s independence and the effectiveness of both the External Audit and Internal Audit processes. Based on their length of service as Auditors, the fees charged and the professionalism of the officers concerned, the Committee is of the view that the Auditors are independent.

The Audit Committee has recommended that M/s PricewaterhouseCoopers be re-appointed auditors for the ensuing year, and accordingly the Board of Directors is also making this recommendation. Re-appointment of the auditors is subject to the approval of the shareholders at the Annual General Meeting.

The Committee met 2 times during the financial year. Due to the COVID-19 outbreak the Audit Committee meetings scheduled for the months of August & November 2020 had not been held. However approving of the Quarterly financials were noted by circular resolution.

Details of meeting attendance is set out below :

14.7.2020 12.02.2021

Dr. J. M. Swaminathan √ √

Mr. W. D. K. Jayawardena √ √

Mr. D. S. K. Amarasekera - √

REPORT OF THE AUDIT COMMITTEE .......

The Audit Committee comprises 3 non-executive directors of which 02 are independent. The composition of the Committee, is as follows :- -

Dr. J.M.Swaminathan - Independent Director (Committee Chairman)

Mr. D.S.K.Amarasekera - Independent Director

Mr. W.D.K.Jayawardena - Non Executive Director

Dr. J. M. SwaminathanChairman - Audit Committee

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Composition :

The Related Party Transactions Review (“RPTR”) Committee comprises the following Directors :

Dr. J.M. Swaminathan - Independent Director (Committee Chairman)Mr. W.D.K.Jayawardena - Non Executive DirectorMrs. K.U.Amarasinghe - Non Executive Director

Policies and Procedures adopted

The Committee has established a Related Party Transaction Policy consistent with the Company’s business model to ensure that all related party transactions are carried out in compliance with the provisions of the aforementioned regulations.

Activities of the Committee

Guided by the role of this Committee, as laid down by the Colombo Stock Exchange, the Committee worked with the management to put in place an appropriate system to facilitate the effective working of the Committee. Procedures and processes are in place to gather information about which parties should be considered related, and to ensure that any transaction with such parties is identified and reported on.

The Committee has communicated the information it requires, relating to each transaction, and the Chief Manager Finance (Browns hotels & Resorts Ltd “BHRL”) is responsible for providing appropriate reports, which will enable the Committee to better understand each transaction.

Apart from details of the transaction, the report also details any connected statutory or regulatory requirement and a confirmation that all requirements have been met.

At each Committee meeting these transactions are reviewed and discussed. The Chief Manager Finance (BHRL) is invited to be present, so that the Committee can obtain greater clarity or more information on any transaction if so desired. In matters of compliance, the Committee seeks additional clarification from the Chief Legal Officer. The Committee is also empowered to invite any other relevant officer to these meetings.

Minutes of the Committee meetings are tabled at the next Board Meeting, which enables the entire Board to note the transactions, the discussion and the decisions.

In accordance with the requirements of the Colombo Stock Exchange, public disclosures are made by the Company on related party transactions.

The Aggregate value of the Recurrent related party transactions exceeding 10% of the gross revenue/ income is 337,333,633.

The Committee met two times during the year under review.

Due to the COVID-19 outbreak the RPTR Committee meetings scheduled for the months of August & November 2020 had not been held. However, RPTR transactions for each quarter were noted by circulation. Details of the participation of the members of the RPTR committee at such meetings are set out below :

REPORT OF THE REMUNERATION COMMITTEE .......

The Company has adopted a Board approved Remuneration Policy. In addition to approving remuneration of the Board Members, the policy reflects the thinking that performance should be rewarded appropriately and that remuneration should facilitate sourcing, motivating and retaining staff.

The creation and adoption of this policy are in line with good governance, and the Committee and Board endorse the value of these principles. However, as the Company currently has no operations there are no employees.

The Companies remuneration policy which was reviewed by the Committee remained unchanged during the year under review.

The Committee met once during the year under review

RPTR Committee Meeting Attendance14.07.2020 12.02.2021

Dr. J. M. Swaminathan √ √Mr. W. D. K. Jayawardena √ √Mr. K.U.Amarasinghe √ √

Remuneration Committee Meeting Attendance15.02.2021

Dr. J.M. Swaminathan(Committee Chairman) √D.S.K. Amarasinghe √Mrs. K.U.Amarasinghe √

REPORT OF THE RELATED PARTY TRANSACTIONS REVIEW COMMITTEE .......

The Remuneration Committee is appointed by the Board of Directors of the Company and reports directly to the Board.

Composition

The Remuneration Committee comprises two Independent Directors, together with one Non-Executive Director as follows :-Dr. J.M.Swaminathan - Independent Director(Committee Chairman)Mr. D.S.K. Amarasekera - Independent DirectorMrs. K.U. Amarasinghe - Non Executive Director

The Related Party Transactions Review (RPTR) Committee is appointed by the Board of Directors of the Company and reports directly to the Board. On behalf ofthe board, the Committee ensures that all Related Party Transactions of the Company are consistent with the Code of Best Practice on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka

Dr. J. M. SwaminathanChairman - Related Party Transaction Reporting Committee

J. M. SwaminathanChairman - Remuneration Committee

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1) SHAREHOLDINGS The 20 largest shareholders of the Company as at 31 March 2021 were as follows:

Name of Shareholder 31 MARCH 2021 31 MARCH 2020

No. of Shares (%) No. of

Shares (%)

1 BROWNS HOTELS AND RESORTS LIMITED 38,671,013 89.378 38,671,013 89.378

2 DFCC BANK PLC/ G I VASUNTHARA 373,290 0.863 - -

3 EMPLOYEES PROVIDENT FUND 268,600 0.621 268,600 0.621

4 MES S. SHANGRI- LA- HOTELS 233,750 0.540 233,750 0.540

5 HATTON NATIONAL BANK PLC/CAPITAL TRUST HOLDINGS LIMITED 217,005 0.502 31,156 0.072

6 MERCANTILE INVESTMENTS AND FINANCE PLC 200,000 0.462 200,000 0.462

7 MR. M A JABIR 160,000 0.370 - -

8 MR K M S M RAZEEK, MR K S M RAJUBDEEN & MR S M R MOHAMED 151,400 0.350 151,400 0.350

9 MERCHANT BANK OF SRI LANKA & FINANCE PLC 01 147,472 0.341 147,472 0.341

10 MR L WEINMAN 136,400 0.315 136,400 0.315

11 MBSL/K S DEVSHANKAR 113,000 0.261 113,000 0.261

12 TUDAWE BROTHERS LIMITED 64,004 0.148 64,004 0.148

13 ASSETLINE LEASING CO. LTD / BRITISH AMERICAN TECHNOLOGIES PVT LTD 62,860 0.145 62,860 0.145

14 MES K G INVESTMENTS LTD 56,500 0.131 56,500 0.131

15 MR. N SHANTHAKUMAR 50,000 0.116 32,300 0.075

16 MES CINEMAS LTD 42,500 0.098 42,500 0.098

17 MR. G H F WELIKALA 41,900 0.097 36,381 0.084

18 MES SHANGRILA HOTELS LTD 37,750 0.087 37,750 0.087

19 MR. W G T DISALA & MR. W G MITHRARATNE 37,397 0.086 3,000 0.007

20 MR. A Z HASHIM 34,350 0.079 - -

41,099,191 94.990 40,288,086 93.115

OTHERS 2,167,809 5.010 2,978,914 6.885

TOTAL 43,267,000 100.000 43,267,000 100.000

2) PUBLIC SHAREHOLDING

As at 31 March 2021, 10.62% (2019/2020 – 10.62%) of the issued ordinary shares were held by 2,066 shareholders.

Ordinary Voting shares of Palm Garden Hotels PLC have been transferred from the Main Board to Diri Savi Board, with effect from 29 January 2018.

3) FLOAT ADJUSTED MARKET CAPITALIZATION

As at 31 March 2021 Float Adjusted market capitalization is Rs. 118,116,865.90/-

The Float adjusted market capitalization of the Company falls under Option 2 of Rule 7.13.1 (b) of the Listing Rules of the Colombo Stock Exchange and the Company has complied with the minimum public holding requirement applicable under the said Option.

SHAREHOLDERS’ INFORMATION .......

12


4) DIRECTORS SHAREHOLDING AS AT 31 MARCH 2021

NO OF SHARES (%)1 Mr. W D K Jayawardena Nil Nil2 Ms. K U Amarasinghe Nil Nil3 Mr. D S K Amarasekera Nil Nil4 Dr. J M Swaminathan Nil Nil

5) SHAREHOLDING SUMMARY AS AT 31 MARCH

Range

2021 2020

No. of Shareholders No. of Shares % of

SharesNo. of

Shareholders No. of Shares % of Shares

1 - 1,000 1,694 300,810 0.70 1,733 315,933 0.73

1,001 - 10,000 319 1,085,301 2.51 329 1,122,998 2.6

10,001 - 100,000 53 1,208,959 2.79 51 1,090,408 2.51

100,001 - 1,000,000 10 2,000,917 4.62 10 2,066,648 4.78

Over 1,000,000 - Shares 1 38,671,013 89.38 1 38,671,013 89.38

2,067 43,267,000 100 2,124 43,267,000 100

6) CATEGORIES OF SHAREHOLDERS

2021 2020

No. of Shareholders

No. of Shares % No. of Holders No. of Shares %

Local Individuals 1,929 2,452,874 5.67 1,983 2,915,947 6.74

Local Institutions 102 40,750,833 94.18 105 40,287,839 93.11

Foreign Individuals 36 63,293 0.15 36 63,214 0.15

Foreign Institutions - - - - - -

2,067 43,267,000 100 2,124 43,267,000 100 7) MARKET INFORMATION ON ORDINARY SHARES OF THE COMPANY

2021 2020

Market price per share as at the last trading date Rs.25.70 Rs.18

Highest during the year Rs.36.00 Rs.31

Lowest during the year Rs.15.50 Rs.15.20

Earnings per share (Rs. 3.94) (Rs.0.40)

Net asset per share Rs. 69.97 Rs.72.16

2020/2021 2019/2020Number of Transactions during the year - 1,381 791 Number of Shares traded during the year - 999,935 301,544 Value of shares traded during the year (Rs.) - 22,682,974.40 7,985,291

SHAREHOLDERS’ INFORMATION CONTD .......

13


MANAGEMENT DISCUSSION

Sri Lankan Tourism Industry

Throughout its history, the tourism industry has been severely impacted by numerous disasters, including 30 decades of ethnic conflict, the tsunami disaster in 2004, the Easter Sunday attack in 2019, and coronavirus in 2020, all of which have had a significant impact on the resources and capacities of the tourism industry in Sri Lanka. Despite the catastrophic events, the Sri Lankan tourism industry experienced a two-digit growth rate in both foreign visitor arrivals and tourism earnings. Travel and Tourism have been emphasized as the main source of foreign exchange as well as an emerging economic sector in the country. Further, Tourism has identified as one of the major economic sectors and due to the massive growth and development rate, the widespread volume of foreign exchange, and huge infrastructure development, all are contributing to the socio-economic development in the country.

However, the strong historical growth has been halted in 2020 amid the global Covid-19 pandemic. With airplanes on the ground, hotels closed, and travel restrictions implemented, travel and tourism became one of the most affected sectors since the very start of the virus spread. The pandemic has cut international tourist arrivals to a greater extent, which resulted significant negative impacts to the industry. The present coronavirus outbreak is a stark reminder of the vulnerability of the tourism and hospitality industry against external shocks and era of zero sales, leaving the industry’s stakeholders in a dilemma on the next steps.

Palm Garden Hotels PLC and Palm Group.

Please refer to the following table for the nature of operations and main locations of the subsidiaries consolidated at the Palm Garden Hotels PLC level.

No Name of the Company Nature of operations

Principal place of business

01 Eden Hotel Lanka PLC Operating Hotel Aluthgama

02 Dickwella Resorts (Pvt) Limited Operating Hotel Dickwella

03 Green Paradise (Pvt) Limited Operating Hotel Dambulla

04 Sun and Fun Resorts Limited Operating Hotel Passikudha

05 Serendib Hotels PLC Operating Hotel Aluthgama

06 Dolphin Hotels PLC Operating Hotel Waikkal

07 Hotel Sigiriya PLC Operating Hotel Sigiriya

08 Frontier Capital Lanka (Pvt) Ltd Operating Hotel Mirissa

09 Serendib Leisure Management Ltd Hotel Management Colombo

10 Sanctuary Resorts Lanka (Pvt) Ltd Non-Operating Colombo

11 Riverina Resorts (Pvt) Limited Under Construction Aluthgama

12 Bodufaru Beach Resort (Pvt) Limited Under ConstructionNorth Male

Atoll-Maldives

13 Browns Ari Resort (Pvt0 Limited Under ConstructionSouth Ari

Atoll-Maldives

14 Browns Raa Resort (Pvt) Limited Under Construction Raa Atoll-Maldives

15 Browns Kaafu N Resort (Pvt) Limited Non-Operating Republic of Maldives

Impact Assessment of Local Leisure Investments

in December 2021, Eden Hotel Lanka PLC (a subsidiary of Palm Garden Hotels PLC) acquired 56.67% of voting shares and 53.48% of Non-Voting Shares of Serendib Hotels PLC, a subsidiary of Hemas Holdings PLC for Rs 792 million. As a result of this acquisition, the local footprint of Palm Group expanded further and now the Group owns 10 local operating hotels, which owns a room inventory of 708 across the different parts of the country.

Riverina Resorts (Pvt) Limited, a fully owned subsidiary of Palm Garden Hotels PLC, recommenced the construction of a new resort with 365 rooms targeting the upscale market segment. Construction work of Riverina Resorts progressed in a moderate manner in line with design changes that are to take place.

Eden Hotel Lanka PLC and Green Paradise (Pvt) Limited entered into a Hotel Management Agreement with Barcelo Group in the previous financial year. Barcelo will commence the commercial operations of Green Paradise in 01 September 2021 and commercial operations of Eden in November 2021.

With the view of increasing the overall value proposition of the properties, the management is intending to perform much needed refurbishment for several group properties in the near future. All these strategic investments and alliances are expected to enhance the shareholders in the medium to long term.

These hotels are temporarily suspended its commercial operations and are currently closed for guests. The management has considered the short term to medium term strategies for all the properties and operated these properties as quarantine hotels in the year under review which will support cash flows

Debtor’s recovery was slowed down with the pandemic up to a greater extent . However, group has a robust collection process, which prompts active engagement with the local and foreign tour operators and regular follow ups. Evaluations are regularly carried out on the outstanding debtor balances. Letter of undertaking was signed with agents with significant amounts and proactive decisions are made to improve the debtor collection process.

Impact Assessment of Foreign Investments

With the view of expanding the local footprints globally, group has made significant investment in Maldives. These strategic investments are under construction stage. The foreign portfolio consists of 670 room count, which further strengthen the Group presence in the industry.

Financial Review

Despite all of the negative challenges , the Group able to record net revenues of Rs 751.3 Mn, resulting in gross profits of Rs 556.3 Mn for the fiscal year under review. However, the Group recorded negative EBIT of Rs 793.2 Mn in the year under review due to the decrease in revenue and increase of operational expenses.

With the view of raising additional capital and to settle the intercompany borrowings, Eden Hotel Lanka PLC, issued new shares by way of a rights issue. Eden was able raise Rs 4.2 Bn from the rights issue and the proceeds used to settle the intercompany borrowing, which will positively impact to the profitability of the Group and to leverage gearing.

Despite the negative financial performances, total asset base of the Group grew by Rs 18.7 Bn compared to the previous financial year. The Group is having a strong asset base which is amounting to Rs 45.9 Bn which mainly includes the strategic investments made in diversified leisure properties in Sri Lanka as well as in Maldives.

Future Outlook

According to the perspective of the stakeholders, the tourism industry in Sri Lanka was the top prioritized economic activity prior to the Easter Sunday attack and corona virus outbreak with high occupancy, high arrivals, more investments for new rooms, new facilities and services, more comprehensive marketing campaigns and new strategies.

Most beautiful and safe islands in Asia as an integral part of Sri Lanka’s National Export Strategy, the concept of wellness tourism focuses on providing international travellers with services focusing on mental and physical wellbeing including services such as ayurveda spas and yoga retreats. Although wellness tourism remains a new concept, and a nascent industry, Sri Lankan traditions of ayurveda and traditional medicine provide the sector with a unique advantage, and the potential for immense growth.

With the event of vaccines to fight Coronavirus and therefore the strong and effective measures taken by Sri Lanka to regulate the spread of Coronavirus, a positive trend is often expected within the near future for the tourism industry. Priority given to safety and hygiene standards, and our properties are currently within the process of implementing the safety guidelines outlined by the Ministry of Health (MOH) to make sure the safety of our guests and employees to re-commence once things of the country regimented under a new normal environment. Management is in constant dialog with Foreign Tour Operators and native Destination Management Companies, to determine the present market conditions of the target market segments.

The existing and anticipated impact of the pandemic on our properties have been adequately evaluated and addressed through a wide range of factors under multiple stress tested scenarios, and management is confident of the recovery of the Group in the long run once the industry regularizes at global level.

14


DESCRIPTION2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000)TRADING RESULTSTurnover (Gross) 208,981 7,463 - - - - - - - - -

Gross Profit 147,758 2,295 - - - - - - - - -

Other Operating income

8,272 15,664 4,141 8,164 674 350 19,296 287,254 1,185 289,710 175,269

Administration Expenses

(139,591) (214,786) (268,915) (17,858) (17,936) (2,588) (13,021) (4,277) (6,064) (5,189) (11,983)

Earnings Before Interest & Tax

62,143 (223,337) (345,551) (10,596) (17,262) (2,238) 6,275 284,784 (4,879) 284,521 163,285

Finance Income/ (Expenses) - Net

(64,325) (77,739) (158,921) (169,265) (138,885) (30,801) (118,717) (167,267) (266,040) (301,929) (333,708)

Share of (loss)/ profit of associate

21,103 - - - - - - - - - -

Profit /(Loss) before Tax 18,921 (301,076) (504,472) (179,861) (156,147) (33,039) (112,442) 117,517 (270,919) (17,408) (170,423)

Tax (1,650) 14,394 18,267 5,675 (7,263) (20) (46) (26) - - -

Profit /(Loss) after Tax 17,271 (286,682) (486,205) (174,186) (163,410) (33,059) (112,489) 117,490 (270,919) (17,408) (170,423)

DESCRIPTION2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000)ASSETS & LIABILITIESNon Current Assets 1,299,831 1,338,902 1,816,391 2,419,279 2,902,910 3,619,017 4,182,286 4,700,260 5,031,794 5,371,766 7,748,497 Current Assets 106,773 16,372 124,107 168,667 27,128 35,432 28,431 25,699 20,722 22,995 19,113 Borrowings 461,558 515,434 1,171,632 1,258,637 179,818 209,131 238,443 509,793 940,294 1,070,149 1,192,416 Deferred Tax Liabilities 47,094 16,111 - - - - - - - - - Retirement Benefit Obligation

7,115 6,767 - - - - - - - - -

Current Liabilities 450,950 30,352 154,612 242,331 229,816 316,322 985,155 1,382,287 1,967,033 2,272,515 4,740,092

CAPITAL & RESERVES

Stated Capital 90,731 90,731 651,327 651,327 2,436,091 2,436,091 2,436,091 2,436,091 2,436,091 2,436,091 2,436,091 Reserves 743,240 702,131 (37,074) 435,651 264,131 902,036 789,471 907,581 649,393 686,156 591,426

DESCRIPTION2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000) Rs.(000)RATIOS & STATISTICS

Market Share (Rs.) 235.10 166.50 95.50 71.50 45.90 29.90 24.10 23.50 18.50 18.00 25.70Earnings/(Loss) Per Share (Rs.)

2.40 (39.82) (57.85) (16.10) (8.68) (0.76) (2.60) 2.72 (6.26) (0.40) (3.94)

DESCRIPTION 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021RATIOS & STATISTICSGearing 0.55 0.65 1.91 1.16 0.07 0.06 0.07 0.15 0.30 0.34 0.39 Current Ratio 0.24 0.54 0.80 0.70 0.12 0.11 0.03 0.02 0.01 0.01 0.00 Net Assets Per Share (Rs.)Company 115.83 110.12 56.79 100.50 62.41 77.15 74.55 77.28 71.31 72.16 69.97 Group - - 117.94 170.78 76.98 93.57 80.55 57.32 44.77 24.21 147.02

TEN YEAR SUMMARY .......

15


CHAIRMAN’S AND CHIEF FINANCIAL OFFICER’S RESPONSIBILITY STATEMENT .......

The Directors confirm that the Company’s Financial Statements for the year ended 31 March 2021 are prepared and presented in conformity with the requirements of the Sri Lanka Accounting Standards, the Listing Rules of the Colombo Stock Exchange, the and the Companies Act No.07 of 2007. They believe that the Financial Statements present a true and fair view of the state of the affairs of the Company as at the end of the financial year.

The Directors also accept responsibility for the integrity and accuracy of the Financial Statements presented and confirm that appropriate accounting policies have been selected and applied consistently and reasonable and prudent judgment has been exercised so as to accurately report transaction.

The Directors have taken reasonable steps to safeguard the assets of the Company, to prevent, deter and detect fraud, and to ensure the integrity, accuracy and safeguarding of operational and financial records.

The Directors confirm that to the best of their knowledge, all statutory payments due in respect of the Company and its subsidiaries as at the Reporting date have been paid for, or where relevant, provided for.

The Financial Statements are prepared in compliance with the Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No.07 of 2007 and any other applicable statues to the extent applicable to the Company. There are no departures from the prescribed accounting standards in their adoption. The accounting policies used in the preparation of the Financial Statements are appropriate and are consistently applied.

The Board of Directors and the management of your Company accept responsibility for the integrity and objectivity of these financial statements. The estimates and judgments relating to the financial statements were made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the form and substance of transactions reasonably present the Company’s state of affairs. To ensure this, the Company has taken proper and sufficient care in installing a system of internal controls and accounting records, for safeguarding assets and for preventing and detecting frauds as well as other irregularities, which is reviewed, evaluated and updated on an ongoing basis. However, there are inherent limitations that should be recognized in weighting the assurances provided by any system of internal controls and accounting.

The financial statements were audited by Messer’s PricewaterhouseCoopers, Chartered Accountants, the Company’s External Auditors. The audit committee of your company meets periodically with the External auditors to review the manner in which these auditors are performing their responsibilities and to

The External Auditors, Messer’s PricewaterhouseCoopers were provided with the opportunity to make appropriate inspections of financial records, minutes and other documents to enable them to form an opinion of the Financial Statements. The Report of the Auditors is set out on pages 16 to 22.

Kapila JayawardenaChairman.30 August 2021

discuss auditing and financial reporting issues. To ensure complete independence, the external auditors have full and free access to the members of the Audit Committee to discuss any matter of substance.

It is also declared and confirmed that the Company has complied with and ensured compliance by the Auditor with the guidelines for the audit of listed companies where mandatory compliance is required. It is further confirmed that all the other guidelines have been complied with.

Kapila JayawardenaChairman30 August 2021

Sunjeevani KotakadeniyaChief Financial Officer-LOLC Group30 August 2021

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING .......

16


The Key Audit Matter How our audit addressed the Key audit matter

The Company only:

Recoverability of investments in subsidiaries

See notes 3.2 and 15 of the consolidated financial statements for disclosures of related accounting policies, judgments, estimates and balances.

The carrying value of the investments in subsidiaries amounting to Rs. 4,194 Mn as at 31 March 2021, is significant to the Company’s total assets.

In determining the recoverability of the investments in subsidiaries management has also considered the impact of the COVID-19 pandemic on the operational cash flows of the subsidiaries and performed sensitivity analysis over their cash flow forecasts.

During the year ended 31 March 2021, the Company has not recognised any additional provision for impairment of investments in subsidiaries as the recoverable amounts have exceeded the carrying amounts.

Our audit procedures included the following:

• Obtaining an understanding of the process by which management evaluates the recoverability of investments in subsidiaries;

• Evaluating management’s assessment in determining whether there are any indicators that the carrying amount of investments in subsidiaries may not be recoverable;

• Where impairment indicators were noted by management, satisfying ourselves that the final impairment calculations, including the final assumptions used, were approved by senior management;

• Checking the appropriateness of the selection of the impairment testing technique;

• Obtaining management’s impairment calculations and testing the reasonableness of the key assumptions as detailed below, in respect of the discounted cash flow model used:

INDEPENDENT AUDITOR’S REPORT .......

Basis for opinion

We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

To the Shareholders of Palm Garden Hotels PLC

Report on the audit of the financial statements

Our opinion

In our opinion, the financial statements of Palm Garden Hotels PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”) give a true and fair view of the financial position of the Company and the Group as at 31 March 2021, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

What we have audited

The financial statements of the Company and the consolidated financial statements of the Group, which comprise:

• the statement of financial position as at 31 March 2021;• the statement of profit or loss and other comprehensive income

for the year then ended;• the statement of changes in equity for the year then ended;• the statement of cash flows for the year then ended; and• the notes to the financial statements, which include a summary of

significant accounting policies.

17


INDEPENDENT AUDITOR’S REPORT CONTD .......


We focused on this matter because of the:

• Value of the investments in subsidiaries in the statement of financial position is significant; and

• Inherently subjective nature of estimating the recoverable amounts due to the use of estimates and judgments in the valuation methodology.

- Agreeing the forecasted information to management approved budgets and business plans;

- Testing the reliability of management’s projections, by comparing actual results for 2020/21 to the forecasts prepared for 2020/21 in the previous year;

- Checking the reasonability of the calculation of the discount rate including agreeing inputs used in the calculation to external data, where available;

- Checking the mathematical accuracy of the discounted cash flow model; and

- Re-performing the sensitivity analysis performed by management by stress-testing the discount rate and terminal growth rate.

Based on the work performed, we found the estimation of recoverable amounts of investment in subsidiaries by management was based upon reasonable assumptions and appropriate methodology.

Valuation of investment property


As at 31 March 2021, the carrying value of the land, classified as investment property of the Company amounted to Rs. 3,333 Mn.

The Company determines the fair value of its investment property in accordance with the Company’s valuation policy. This policy requires all investment properties to be valued by an independent valuation expert at least, annually.

During the year ended 31 March 2021, the Company recognised a gain of Rs 172 Mn on change in fair value of the investment property.

The fair value of the investment property is dependent on the valuation methodology adopted by the valuation expert and the inputs into the valuation model. Factors such as prevailing market conditions, the nature, condition and location of the property, recent comparable property sales transactions and the expected future income from the property directly impact the fair value.


• Investment property balance in the statement of financial position is significant;

• Quantum of fair value gain reported in the financial statements; and

• Inherently subjective nature of investment property valuation due to the use of estimates and judgments in the valuation methodology.

Our audit approach mainly included substantive audit procedures as follows:

• Through discussions with management, obtaining an understanding of the specific characteristics of the property including, amongst other things changes, if any, in the use of the property;

• Meeting with management’s external valuation expert, who performed the investment property valuation for the Company, to discuss the appropriateness of the methodology adopted and reasonability of assumptions used in the valuation;

• Assessing the qualifications and experience of the external valuation expert of the Company;

• Verifying the completeness and accuracy of the information provided to the external valuation expert;

• Comparing a sample of the recent transactions used by the external valuation expert to ascertain the valuation of the Company’s property with other publicly available sales transactions and sales listings;

• Inspecting the final valuation report and agreeing the fair value recorded including the fair value gain recognised in the Company’s accounting records and financial statements;

• Discussing with and obtaining information from the external valuation expert of the Company to understand the extent to which the impact of COVID -19 pandemic on the leisure sector and economy at macro level had been considered in the valuation; and

• Reviewing the adequacy and appropriateness of management’s disclosures in the financial statements.

Based on the work performed, we found the valuation of investment property by management was based upon reasonable assumptions and appropriate methodology and adequate disclosures have been made in the financial statements.

18




The Group and Company:

Basis of preparation - impact of COVID-19

See note 2 Basis of preparation and note 37 Impact of COVID-19.

The Group prepares its financial statements in accordance with Sri Lanka Accounting Standards and on a going concern basis of accounting. We focused on the appropriateness of using a going concern basis of accounting given the travel restrictions on inbound tourists to the Country and the potential impact on demand for occupancy from both international and local tourists as a result of the COVID-19 pandemic which had continued from the previous year to the current year of audit. The ability of the Group to continue as a going concern is dependent on management’s ability to maintain liquidity in order to repay its existing creditors and continuing operations.

Management has also considered the impact of the COVID-19 pandemic on the Group’s future occupancy rates and income from domestic guests/repatriated quarantine arrivals and resulting cash flows. The pandemic which resulted in decline in guest arrivals and other leisure sector activities will continue to negatively impact future cash inflows.

Management’s assessment of going concern is based on the support extended by the ultimate parent Company, LOLC Holdings PLC, as and when required, in addition to the cash flows generated internally by operating hotels as quarantine centres until the COVID-19 pandemic situation subsides and the situation is favourable to the leisure sector.

We identified the impact of COVID-19 as a key audit matter because the cash flow projections referred to above involves consideration of future events and circumstances which are inherently uncertain and requires significant management judgment.

Our audit approach mainly included the following procedures:

• Checking the mathematical accuracy of management’s cash flow forecasts and validating the opening cash position;

• Obtaining evidence over management’s underlying cash flow projections for the Group by agreeing data to other external and internal sources as necessary, including recent occupancy ratios and comparing cost assumptions to historic actuals and assessing the realistic probability of achieving cost reductions;

• Performing independent sensitivity analysis to assess the impact of changes in the key assumptions underlying the Group cash flow forecast, such as continuation of travel restrictions both international and local, imposition of lockdowns impacting day to day operations and the Group’s ability to take mitigating actions, if required. Specifically,

- For international guests, considered the key inputs such as lifting restrictions for international travel both local and country specific destinations imposed by governments; and

- For local guests, considered the key inputs of room rates in the short-term (in the absence of international guests) and long-term.

• Reviewing the financial strength of the ultimate parent company to support the Group until the COVID-19 pandemic situation subsides and becomes favourable to the leisure industry;

• Reviewing the adequacy and appropriateness of management’s going concern disclosures in the financial statements.

After performing the procedures above, we concluded that the impact of COVID -19 pandemic on the Group’s operations has been considered satisfactorily and disclosed adequately in the financial statements.

Valuation of unquoted equity securities

See notes 3.14 and 17 of the financial statements for disclosures of related accounting policies, judgments, estimates and carrying value.

As at 31 March 2021, the Group’s and Company’s investment in unquoted equity securities amounted to Rs. 564 Mn and Rs. 218 Mn, respectively.

The Group measures these investments at fair value through other comprehensive income.

During the year ended 31 March 2021, the Group and the Company recognised gains on changes in fair values of unquoted equity securities of Rs 150 Mn and Rs 76 Mn, respectively.

The measurement of unquoted equity securities at fair values involves significant judgment over the valuation technique to be applied. The key judgments made in determining the inputs for valuation include:

• Recent share transactions of the relevant unquoted equity securities that can be considered as reference points for valuation; and


• Obtaining an understanding of the process by which fair value calculations are performed;

• Checking whether the fair value calculations, including the judgments made, were approved by senior management;

• Testing the reasonableness of the significant judgments made in determining the inputs for valuation as detailed below:

- Corroborating information on recent share transactions used in the valuation with independent sources; and

19




• Adjusted net assets per share in relation the unquoted equity securities, where there were no recent share transactions to estimate the fair values.


• Relative size of the investment in unquoted equity securities in the Company’s and consolidated statements of financial position;

• Quantum of fair value gains recognised in the financial statements of the Company and Group; and

• Inherently subjective nature of investment valuations due to the use of estimates and judgments.

- For investments, where there were no recent share transactions, assessment of the fair value through adjusted financial statements were verified including assumptions used in determining the adjusted net assets per share.

Based on the work performed, we found that the estimation of the fair value of unquoted equity securities by management to be based upon appropriate valuation techniques and reasonable assumptions.

The Group only:

Revaluation of freehold land, buildings and reclaimed land


As at 31 March 2021, carrying value of freehold land, buildings and reclaimed land, classified as property, plant and equipment of the Group amounted to Rs. 29,849 Mn.

During the year, the Group capitalised the reclaimed land and adopted the revaluation model in line with the accounting policy adopted for its freehold land and buildings. Accordingly, the Group revalue its freehold land, buildings and reclaimed land which are measured at their fair values with sufficient regularity, to ensure that the carrying amounts do not materially differ from the fair values which would be determined using fair values at the reporting date. The Group engaged independent valuation experts to revalue the Group’s freehold land, buildings and reclaimed land.

During the year ended 31 March 2021, the Group reported a gain on revaluation of freehold land, buildings and reclaimed land of Rs. 11,623 Mn.

Freehold land, buildings and reclaimed land are valued at their fair values at reporting date using the market approach for freehold land and reclaimed land and the replacement cost approach for buildings. The fair values of freehold land, buildings and reclaimed land are dependent on the valuation methodology adopted and the inputs into the valuation model. Factors such as prevailing market conditions, the individual nature, condition and location of each property (freehold and reclaimed land and building) and recent comparable transactions for each category of property at different locations directly impact fair values.

We focused on this matter because of the:• Relative size and significance of the freehold land, reclaimed land

and building balances in the consolidated statement of financial position;

• Quantum of revaluation gains recognised by the Group, that directly impact the consolidated statement of other comprehensive income; and

• Inherently subjective nature of freehold land, buildings and reclaimed land valuations due to use of estimates and judgment in the valuation methodology.

Our audit approach mainly included substantive audit procedures as follows:• Obtaining the latest independent property market rates for

freehold land, buildings and reclaimed land to understand the prevailing market for comparable properties in similar conditions and locations;

• Assessing the qualifications and experience of the external valuation experts of the Group;

• Verifying the completeness and accuracy of the information provided to the external valuation experts of the Group;

• Comparing historical valuations of freehold land and buildings against current year valuations and noted that the movements appear to be in line with overall movement in the market;

• Meeting with management’s external valuation experts, who performed the freehold land, buildings and reclaimed land valuations for the Group, to discuss the appropriateness of the methodologies adopted and reasonability of assumptions used in the valuations;

• Comparing samples of recent transactions of freehold land and reclaimed land listed by the external valuation experts with other similar sales transaction information available in the market and sales listings;

• Comparing estimated price per perch of freehold land and reclaimed land and cost per square foot of building by location to a reasonable range determined based on benchmark market data. Where the prices/costs fell outside of the anticipated ranges, we discussed with the management the reasons to support the variances. The variances related to the relative age of building or size/location of both freehold and reclaimed land and buildings. In the context of the specific properties identified, the reasons for variances were appropriate;

• Inspecting the final valuation reports and agreeing the fair values to the Group’s accounting records and financial statements;

• Discussing with and obtaining information from the external valuation experts of the Group to understand the extent to which the impact of COVID -19 pandemic had been considered in their valuations;

• Checking the work performed by the component auditors in relation to valuation of freehold and reclaimed land and buildings; and

• Checking the adequacy and appropriateness of management’s disclosures in the financial statements.

Based on the work performed, we found the valuation of freehold land, buildings and reclaimed land classified as property, plant and equipment by management to be based upon reasonable assumptions and appropriate methodology.

20



Valuation of right-of-use assets relating to leasehold land

See notes 3.11.1 and 13 of the consolidated financial statements for disclosures of related accounting policies, judgments, estimates and balances.

During the year, the Group changed its accounting policy for measurement of right-of-use assets relating to leasehold land from ‘cost model’ to ‘revaluation model’.

The Group revalue its right-of-use assets relating to leasehold land which are measured at their fair value to ensure that the carrying amounts do not materially differ from the fair value which would be determined using fair values at the reporting date. The Group engaged an independent valuation expert to measure the value of right- of-use assets relating to leasehold land.

As at 31 March 2021, the carrying value of rights of use assets relating to leasehold land of the Group amounted to Rs. 4,296 Mn and the gain on revaluation of such assets for the year then ended recognised in the consolidated financial statements was Rs. 215 Mn.

Right-of-use of assets relating to leasehold land are valued at fair value at reporting date using the sales comparison approach. The fair values of right-of-use of assets relating to leasehold land are dependent on the valuation methodology adopted and the inputs into the valuation model. Factors such as prevailing market conditions, the individual nature, condition and location of each right -of-use assets relating to leasehold land and recent comparable transactions for each land directly impact fair values.


• Relative size of the right-of-use of assets relating to leasehold land balance in the consolidated statement of financial position;

• Quantum of revaluation gain that directly impact the consolidated statement of other comprehensive income; and

• Inherently subjective nature of right-of use-of assets relating to leasehold land valuation due to use of estimates and judgment in the valuation methodology.

Our audit approach mainly included substantive audit procedures as follows:

• Obtaining the latest independent property market rates for both freehold and leasehold land to understand the prevailing market for comparable properties in similar conditions and locations;

• Meeting with management’s external valuation expert, who performed the right-of-use assets relating to leasehold land valuations for the Group, to discuss the appropriateness of the methodology adopted and reasonability of assumptions used in the valuations;

• Assessing the qualifications and experience of the external valuation expert;

• Verifying the completeness and accuracy of the information provided to the external valuation expert;

• Comparing estimated price per perch of freehold land and leasehold land by location to a reasonable range determined based on benchmark market data. Where the prices fell outside of the anticipated ranges, we discussed with the management the reasons to support the variances. The variances mainly related to the different size/location of land. In the context of the specific properties identified, the reasons for variances were appropriate;

• Inspecting the final valuation reports and agreeing the fair values to the Group’s accounting records and financial statements;

• Discussing with and obtaining information from the external valuation expert of the Group to understand the extent to which the impact of COVID -19 pandemic had been considered in his valuations;

• Checking the work performed by the component auditors in relation to valuation of right-of-use assets relating to leasehold land in the respective component financial statements; and

• Checking the adequacy and appropriateness of management’s disclosures in the financial statements.

Based on the work performed, we found the valuation of right-of-use assets relating to leasehold land by management was based upon reasonable assumptions and appropriate methodology.


21


INDEPENDENTAUDITOR’S REPORT CONTD .......


Business combination - Acquisition of Serendib Hotels Group

See notes 3.2.3 and 15.7 of the consolidated financial statements for disclosures of related accounting policies, judgments, estimates and balances.

During the year, the Group acquired Serendib Hotels PLC, a listed entity incorporated in Sri Lanka for a consideration of Rs. 794 Mn. Serendib Hotels PLC is the holding Company of five entities incorporated in Sri Lanka, including two listed entities. The transaction resulted in the Group recognising a gain on bargain purchase of Rs. 205 Mn.


• Significance of the gain reported in the financial statements; and

• Measurement of the identifiable assets and liabilities acquired at fair value is inherently judgmental.


• Checking that the final calculations, including the assumptions used in measurement of fair values of identifiable assets and liabilities acquired, were approved by senior management;

• Obtaining management’s gain on bargain purchase calculations and performing the following procedures:

- Checking the mathematical accuracy of the calculation;

- Agreeing the numbers in the calculation to the audited financial statements as at the acquisition date; and

- Checking the work performed by the component auditor of Serendib Hotels PLC.

• Checking the reasonableness of key assumptions used and the appropriateness of methodologies adopted by the valuation experts in valuing the acquired properties, including the extent to which the impact of COVID -19 pandemic had been considered in the valuations, based on our knowledge of the Group and the industry;

• Checking the purchase price allocation and related accounting adjustments made by the Group are in line with the applicable accounting standards.

• Assessing the competence, capabilities and objectivity of the external valuation experts engaged by the Group and gaining an understanding of the work performed by the experts by examining the property valuation reports; and

• Checking the adequacy and appropriateness of management’s disclosures in relation to the acquisition in the financial statements.

Based on the worked performed, we found that the gain on bargain purchase recognised by management was in line with applicable accounting standards and based upon reasonable assumptions and appropriate methodology.

Other information

Management is responsible for the other information. The other information comprises the Palm Garden Hotels PLC Annual Report 2020/21 (but does not include the financial statements and our auditor’s report thereon).

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

22


INDEPENDENTAUDITOR’S REPORT CONTD .......

In preparing the separate/ consolidated financial statements, management is responsible for assessing the Company’s/ Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company/ Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s/ Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate/ consolidated financial statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company/ Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

As required by section 163 (2) of the Companies Act, No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

CHARTERED ACCOUNTANTSCA Sri Lanka membership number 3015COLOMBO 30 August 2021

23


For the year ended 31st March NoteGROUP COMPANY

2021 2020 2021 2020 (Rs.) (Rs.) (Rs.) (Rs.)

Revenue 4 751,343,665 1,108,258,744 - -

Direct costs (194,974,936) (291,293,656) - -

Change in fair value of investment property 12 2,500,000 10,868,000 172,085,000 288,375,000

Other income / (expenses) 5 (6,290,385) 28,187,893 3,183,645 1,334,534

Profit before operating expenses 552,578,344 856,020,981 175,268,645 289,709,534

Operating expenses

Personnel costs 6 (320,336,371) (296,077,921) - -

Depreciation and amortization 7 (457,319,863) (218,969,413) - -

Other administrative expenses (530,711,632) (505,194,339) (11,983,364) (5,189,313)

Marketing expenses (37,459,208) (73,946,209) - -

Results from operating activities 7 (793,248,730) (238,166,901) 163,285,281 284,520,221

Interest expense 8 (1,717,874,690) (2,281,733,929) (333,725,354) (301,963,130)Interest income 8 97,434,085 84,896,560 17,199 34,512 Gain on bargain purchase 15.7 204,505,308 - - -

Loss before income tax expense (2,209,184,027) (2,435,004,270) (170,422,874) (17,408,397)

Income tax expense/(reversal) 9 36,168,023 (18,606,395) - -

Loss for the year (2,173,016,004) (2,453,610,665) (170,422,874) (17,408,397)

Other comprehensive income

Items that will not be reclassified to profit or loss

Revaluation gain,(net of tax) 11, 13, 9.4 10,049,687,096 288,375,000 - -

Actuarial gains on defined benefit obligations,(net of tax) 25, 9.4 10,699,281 1,956,658 - -

Fair value gains that arose during the year, (net of tax) 17, 9.4 162,337,279 101,196,389 75,693,677 54,171,495

Items that are or may be reclassified to profit or loss

Exchange differences on translation of foreign operations 788,148,666 664,795,339 - -

Other comprehensive income for the year, net of tax 11,010,872,322 1,056,323,386 75,693,677 54,171,495

Total comprehensive income for the year 8,837,856,318 (1,397,287,279) (94,729,197) 36,763,098

Loss attributable to:

Equity holders of the Company (1,113,810,372) (1,551,249,825) (170,422,874) (17,408,397)

Non controlling interests (1,059,205,632) (902,360,840) - -

(2,173,016,004) (2,453,610,665) (170,422,874) (17,408,397)

Total comprehensive income attributable to:

Equity holders of the Company 5,102,697,799 (889,691,412) (94,729,197) 36,763,098

Non controlling interests 3,735,158,519 (507,595,867) - -

8,837,856,318 (1,397,287,279) (94,729,197) 36,763,098

Loss per share 10 (25.74) (35.85) (3.94) (0.40)

The notes annexed on pages 28 through 69 form an integral part of these financial statements.

Figures in brackets indicate deductions.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .......

24


As at 31st MarchNote

GROUP COMPANY 2021 2020 2021 2020 (Rs.) (Rs.) (Rs.) (Rs.)

AssetsNon Current Assets Property, plant and equipment 11 38,121,589,206 20,345,891,923 - - Investment property 12 51,000,000 48,500,000 3,333,000,000 3,160,915,000 Right-of-use assets 13 4,296,146,380 3,666,610,933 - - Intangible assets 14 100,344,174 89,554,980 - - Investment in subsidiaries 15 - - 4,194,018,480 2,066,345,620 Trading assets - fair value throgh profit or loss 16 4,503,151 2,550,936 3,177,586 1,898,096 Investment securities 17 583,808,795 303,114,934 218,300,490 142,606,812 Total Non Current Assets 43,157,391,706 24,456,223,706 7,748,496,556 5,371,765,528

Current AssetsInventories 18 62,335,894 32,952,840 - - Trade and other receivables 19 1,611,894,752 2,046,615,201 3,095,970 7,668,883 Current tax receivables 20 259,939,453 178,731,675 13,366,907 13,366,041 Cash and cash equivalents 21.1 809,154,703 475,903,846 2,649,885 1,960,495 Total Current Assets 2,743,324,802 2,734,203,562 19,112,762 22,995,419 Total Assets 45,900,716,508 27,190,427,268 7,767,609,318 5,394,760,947

Equity and Liabilities Stated capital 22 2,436,090,770 2,436,090,770 2,436,090,770 2,436,090,770 Reserves 23 10,093,634,745 3,886,500,013 1,912,207,859 1,836,514,182 Accumulated losses (6,168,783,805) (5,275,093,192) (1,320,781,399) (1,150,358,525)Equity attributable to equity holders 6,360,941,710 1,047,497,591 3,027,517,230 3,122,246,427 Non controlling interests 10,149,579,663 2,476,811,228 - - Total equity 16,510,521,373 3,524,308,819 3,027,517,230 3,122,246,427

LiabilitiesNon Current Liabilities Loans and borrowings 24 8,209,484,410 6,826,372,057 - - Retirement benefit obligations 25 104,403,344 30,079,780 - - Deferred tax liabilities 26 2,984,900,400 811,541,906 - - Total Non Current Liabilities 11,298,788,154 7,667,993,743 - -

Current LiabilitiesTrade and other payables 27 14,619,656,534 13,672,606,493 3,547,033,237 1,201,722,052 Loans and borrowings 24 3,312,253,082 2,259,170,015 1,192,415,575 1,070,149,192 Current tax payables 28 101,671,391 12,497,427 643,276 643,276 Bank overdrafts 21.2 57,825,974 53,850,771 - - Total Current Liabilities 18,091,406,981 15,998,124,706 4,740,092,088 2,272,514,520 Total Liabilities and Equity 45,900,716,508 27,190,427,268 7,767,609,318 5,394,760,947

The notes annexed on pages 28 through 69 form an integral part of these financial statements.Figures in brackets indicate deductions.These financial statements have been prepared and presented in compliance with the requirements of the Companies Act No. 07 of 2007.

Mrs. S. S. KotakadeniyaChief Financial Officer - LOLC GroupThe Board of Directors is responsible for the preparation and presentation of these financial statements.Approved and signed for and on behalf of the Board.

Mr. W.D.K. JayawardenaChairman30 August 2021Colombo

Mrs.K.U. AmarasingheDirector

STATEMENT OF FINANCIAL POSITION .......

25


GROUP

Equity attributable to the shareholders of the company

Stated Capital Revaluation Reserve

Fair Value Reserve

Foreign Currency

Translation Reserve

Capital Reserve

Accumulated Losses

Non Controlling

Interests Total

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) Balance as at 01 April 2019 2,436,090,770 3,309,911,444 16,184,958 328,718,053 (429,025,594) (3,724,690,628) 2,984,407,095 4,921,596,098 Total comprehensive income for the yearLoss for the year - - - - - (1,551,249,825) (902,360,840) (2,453,610,665)

Other comprehensive incomeFair value gains that arose during the year

- - 75,901,699 - - - 25,294,690 101,196,389

Revaluation gain - 288,375,000 - - - - 288,375,000

Actuarial gains on defined benefit obligations (net of tax) - - - - - 847,261 1,109,397 1,956,658

Foreign currency translation differences of foreign operations

- - - 296,434,453 - - 368,360,886 664,795,339

Total comprehensive income for the year - 288,375,000 75,901,699 296,434,453 - (1,550,402,564) (507,595,867) (1,397,287,279)

Balance as at 31 March 2020 2,436,090,770 3,598,286,444 92,086,657 625,152,506 (429,025,594) (5,275,093,192) 2,476,811,228 3,524,308,819

Balance as at 1 April 2020 2,436,090,770 3,598,286,444 92,086,657 625,152,506 (429,025,594) (5,275,093,192) 2,476,811,228 3,524,308,819 Total comprehensive income for the yearLoss for the year - - - - - (1,113,810,372) (1,059,205,632) (2,173,016,004)

Other comprehensive incomeFair value gains that arose during the year - -

118,915,131 - - - 43,422,148 162,337,279

Revaluation gain - 5,665,025,238 - - - - 4,384,661,858 10,049,687,096 Actuarial gains on defined benefit obligations (net of tax)

- - - - - 9,373,439 1,325,842 10,699,281

Foreign currency translation differences of foreign operations

- - - 423,194,363 - - 364,954,303 788,148,666

Total comprehensive income for the year

- 5,665,025,238 118,915,131 423,194,363 - (1,104,436,933) 3,735,158,519 8,837,856,318

Transactions with owners directly recorded in equityOther movements in equityInvestment in subsidiaries by non controlling interests

- - - - - - 2,096,327,140 2,096,327,140

Effect of change in percentage holding in subsidiaries

- - - - - 210,746,320 (210,746,320) -

Acquisition of subsidiaries with non controlling interests

- - - - - - 2,052,029,096 2,052,029,096

- - - - - 210,746,320 3,937,609,916 4,148,356,236 Balance as at 31 March 2021 2,436,090,770 9,263,311,682 211,001,788 1,048,346,869 (429,025,594) (6,168,783,805) 10,149,579,663 16,510,521,373

The notes annexed on pages 28 through 69 form an integral part of these financial statements.Figures in brackets indicate deductions.

STATEMENT OF CHANGES IN EQUITY - GROUP .......

26


COMPANY Equity attributable to the shareholders of the company

Stated Capital Revaluation

Reserve Fair Value Reserve

Capital Reserve Accumulated

Losses Total

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) Balance as at 01 April 2019 2,436,090,770 1,930,775,680 12,589,316 (161,022,309) (1,132,950,128) 3,085,483,329 Total comprehensive income for the yearLoss for the year - - - - (17,408,397) (17,408,397)

Other comprehensive incomeFair value gains that arose during the year - - 54,171,495 - - 54,171,495 Total comprehensive income for the year - - 54,171,495 - (17,408,397) 36,763,098 Balance as at 31 March 2020 2,436,090,770 1,930,775,680 66,760,811 (161,022,309) (1,150,358,525) 3,122,246,427

Balance as at 1 April 2020 2,436,090,770 1,930,775,680 66,760,811 (161,022,309) (1,150,358,525) 3,122,246,427 Total comprehensive income for the yearLoss for the year - - - - (170,422,874) (170,422,874)

Other comprehensive incomeFair value gains that arose during the year - - 75,693,677 - - 75,693,677 Total comprehensive income for the year - - 75,693,677 - (170,422,874) (94,729,197)Balance as at 31 March 2021 2,436,090,770 1,930,775,680 142,454,488 (161,022,309) (1,320,781,399) 3,027,517,230


STATEMENT OF CHANGES IN EQUITY - COMPANY .......

27


For the year ended 31 March Note


CASH FLOWS FROM OPERATING ACTIVITIESLoss before income tax expense (2,209,184,027) (2,435,004,270) (170,422,874) (17,408,397)Adjustment for:Loss on disposal of property, plant and equipment 5 614,068 - - - Depreciation and amortization 7 457,319,863 218,969,413 - - Provision for retirement benefit obligations 25 12,894,448 6,516,465 - - Finance expense 8 1,717,874,690 2,281,733,929 333,725,354 301,963,130 Interest income 8 (97,434,085) (84,896,560) (17,199) (34,512)Dividend income 5 (3,496,507) (183,913) (31,855) (105,043)Change in fair value of investment properties 12 (2,500,000) (10,868,000) (172,085,000) (288,375,000)Impairment of trade receivable 7 - 12,446,044 - - Gain/(loss) on fair valuation of other FVTPL instruments 5 (1,952,215) 518,414 (1,279,490) 379,064 Gain on bargain purchase 15.7 (204,505,308) - - - Operating profit/(loss) before working capital changes (330,369,073) (10,768,478) (10,111,064) (3,580,758)

Working capital changes(Increase)/decrease in trade and other receivables 1,660,692,223 (450,830,761) 4,572,047 (2,520,064)(Increase)/decrease in inventories 6,521,481 5,356,320 - - Increase/(decrease) in trade and other payables (3,477,941,903) 186,315,429 2,852,213 3,518,556 Cash generated from /(used in) operations (2,141,097,272) (269,927,490) (2,686,804) (2,582,266)

Finance cost paid (395,853,891) (79,548,026) - - Income tax paid (4,608,122) (3,585,609) - - Retirement benefit obligations paid 25.1 (6,371,117) (2,320,962) - - Net cash generated from/(used in) operating activities (2,547,930,402) (355,382,087) (2,686,804) (2,582,266)

CASH FLOWS FROM INVESTING ACTIVITIESInvestment in subsidiaries - - (2,127,672,860) - Net cash and cash equivalents on acquisition of subsidiary 15.7 (497,175,655) - - - Acquisition of property, plant and equipment (1,357,321,482) (1,287,463,530) - - Acquisition of intangible assets - (4,024,950) - - Acquisition of investment securities - (17,641,474) - - Proceeds from the disposal of FVTPL asset - 2,195,856 - 2,195,856 Proceeds from the disposal of property, plant and equipment

1,186,958 - - -

Interest income received 97,434,085 84,896,560 17,199 34,512 Dividend income received 3,496,507 183,913 31,855 105,043 Net cash generated from (used in) investing activities (1,752,379,587) (1,221,853,625) (2,127,623,806) 2,335,411

CASH FLOWS FROM FINANCING ACTIVITIESIssue of shares by subsidiaries to non controlling interests 2,096,327,140 - - - Proceeds from interest bearing loans and borrowings 24.2 403,363,083 2,444,987,831 - - Repayments of interest bearing loans and borrowings 24.2 (179,909,580) (938,025,000) - - Lease rentals paid during the year 24.1 (4,700,000) (500,000) - - Fund transfers from ultimate parent 2,314,505,000 344,500,000 2,131,000,000 - Net cash generated from financing activities 4,629,585,643 1,850,962,831 2,131,000,000 -

Net increase/(decrease) in cash and cash equivalents 329,275,654 273,727,119 689,390 (246,855)Cash and cash equivalents at the beginning of the year 422,053,075 148,325,956 1,960,495 2,207,350 Cash and cash equivalents at the end of the year 751,328,729 422,053,075 2,649,885 1,960,495

Analysis of cash and cash equivalents at the end of the yearCash in hand and favourable bank balances 21.1 809,154,703 475,903,846 2,649,885 1,960,495 Unfavourable bank balances 21.2 (57,825,974) (53,850,771) - -

751,328,729 422,053,075 2,649,885 1,960,495


STATEMENT OF CASH FLOW .......

28


1. REPORTING ENTITY

1.1 General

Palm Garden Hotels PLC (‘the Company’) is a public quoted company incorporated on 05 April 1973 and domiciled in Sri Lanka. The address of the Company’s registered office and principal place of business is No. 100/1, Sri Jayewardenepura Mawatha, Rajagiriya.

The financial statements as at, and for the year ended 31 March 2021 comprise the separate financial statements of the Company and consolidated financial statements of the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”).

Ordinary shares of the Company are listed on the diri savi board of the Colombo Stock Exchange (CSE).

1.2 Principal activities and nature of operations

The principal activity of the Company is investment and investment management and there were no significant changes in the nature of the operations of the Company during the financial year under review.

The nature of operations and principal places of business of the subsidiaries are as follows.

Company NameNature of Operation

Principal Place of Business

Eden Hotel Lanka PLC Hoteliering Kalowamodara, Aluthgama


Hoteliering Batheegama, Dickwella

Riverina Resorts (Pvt) Ltd Hoteliering Moragalle, BeruwalaSun and Fun Resorts Limited

Hoteliering Passikudha

Green Paradise (Pvt) Ltd Hoteliering Kubukkadanwala, Dambulla

Serendib Hotels PLC Hoteliering Kalowamodara, Aluthgama

Dolphin Hotels PLC Hoteliering WaikkalHotel Sigiriya PLC Hoteliering SigiriyaSerendib Leisure Management Ltd

Hotel Management

Colombo

Sanctuary Resorts Lanka (Pvt) Ltd

Non-Operating Colombo

Frontier Capital Lanka (Pvt) Ltd

Hoteliering Mirissa, Matara

Bodufaru Beach Resorts (Pvt) Ltd

Hoteliering Republic of Maldives

Browns Ari Resort (Pvt) Ltd


Browns Raa Resort (Pvt) Ltd


Browns Kaafu N Resort (Pvt) Ltd


1.3 Parent and entity and ultimate parent entity

In the opinion of the Board of Directors, the Group’s immediate parent company is Browns Hotels and Resorts Limited and ultimate parent

undertaking and controlling party as at the date of financial position is LOLC Holdings PLC , a Company incorporated and domiciled in Sri Lanka

2. BASIS OF PREPARATION

2.1 Statement of compliance

The consolidated financial statements of the Group and the separate financial statements of the Company have been prepared in accordance with the Sri Lanka Accounting Standards (herein referred to as SLFRSs/LKASs) laid down by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the requirements of the Companies Act No. 07 of 2007 and the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995. These financial statements also provide appropriate disclosures as required by the listing rules of the Colombo Stock Exchange.

2.2 Historical cost convention

The financial statements have been prepared on a historical cost basis, except for certain financial assets, certain classes of property, plant and equipment, investment property measured at fair value.

2.3 Directors’ responsibility for the financial statements

The Board of Directors is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards and as per the provisions of the Companies Act No. 07 of 2007. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

The Board of Directors acknowledges their responsibility as set out in the “Report of the Directors” and “Director’s Responsibility for Financial Reporting”.

These financial statements include the following components;

• A statement of financial position providing the information on the financial position of the Group and the Company as at the year end.

• A statement of profit or loss providing the information on the financial performance of the Group and the Company for the year under review.

• A statement of comprehensive income providing the information of the other comprehensive income and total comprehensive income of the Group and the Company.

• A statement of changes in equity depicting all changes in shareholders’ funds during the year under review of the Group and the Company.

• A statement of cash flows providing the information to the users, on the ability of the Group and the Company to generate cash and cash equivalents and the needs of entities to utilize those cash flows, and

• Notes to the financial statements comprising accounting policies and other explanatory information.

NOTES TO THE FINANCIAL STATEMENTS .......

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2.4 Approval of financial statements by the Board of Directors

The consolidated financial statements of the Group and the separate financial statements of the Company for the year ended 31 March 2021 were approved and authorized for issue by the Board of Directors on 30 August 2021. The Board of Directors has the power to amend and reissue the financial statements.

2.5 Functional currency and presentation currency

Items included in the financial statements of each of the Group’s entities 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 Lankan Rupee (Rs.), which is Company’s functional and Group’s presentation currency.

Functional currency of all the Group companies is Sri Lankan Rupees, other than the following companies whose functional currency is given below.

Company Country of incorporation

Functional currency

Bodufaru Beach Resorts (Pvt) Ltd

Republic of Maldives United States Dollars (USD)

Browns Ari Resort (Pvt) Ltd

Republic of Maldives United States Dollars (USD

Browns Raa Resort (Pvt) Ltd


Browns Kaafu N Resort (Pvt) Ltd


See note 3.4 for the accounting policy relating to foreign currency translation.

2.6 Comparative information

Comparative information including quantitative, narrative and descriptive information is disclosed in respect of the previous period in the financial statements in order to enhance the understanding of the current period’s financial statements and to enhance the inter period comparability. The presentation and classification of the financial statements of the previous year are amended, where relevant for better presentation and to be comparable with those of the current year.

2.7 Materiality and aggregation

Each material class of similar items is presented separately in the financial statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard – LKAS 1 on ‘Presentation of Financial Statements’.

Notes to the financial statements are presented in a systematic manner which ensures the understandability and comparability of financial statements of the Group and the Company. Understandability of the financial statements is not compromised by obscuring material information with immaterial information or by aggregating material items that have different natures or functions.

The share of results of equity accounted investees in the statement of profit or loss and other comprehensive statement of profit or loss are shown net of all related taxes

2.8 Offsetting

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or to realize the assets and settle the liabilities simultaneously. Income and expenses are not offset in the statement of profit or loss, unless required or permitted by Sri Lanka Accounting Standards and as specifically disclosed in the significant accounting policies.

2.9 Going concern

The Directors have made an assessment of the Company’s ability to continue as a going concern and are satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, the Board is not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern and they do not intend either to liquidate or to cease operations of the Company. Therefore, the financial statements continue to be prepared on the going concern basis.

2.10 Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.

An asset is current when it is expected to be realized or intended to be sold or consumed in the normal operating cycle and held primarily for the purpose of trading.

OrIs cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when it is expected to be settled in the normal operating cycle and is held primarily for the purpose of trading and is due to be settled within twelve months after the reporting period.

OrThere is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current.

2.11 Use of accounting estimates and judgements

The preparation of the financial statements of the Group and Company in conformity with SLFRSs/LKAS’s requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable

NOTES TO THEFINANCIAL STATEMENTS .......

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under the circumstances, the results which form the basis of making the judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources.

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

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following notes to these financial statements.

Critical accounting estimate/judgement NoteDetermination of fair value of investment properties 12Revaluation of lands and buildings 11Revaluation of right-of-use assets 13Good will on acquisition 14.1Retirement benefit obligations 25Deferred tax assets/ liabilities 26Fair value of financial instruments 32Useful lives of property, plant and equipment 3.9.1Useful lives of intangible assets 3.12.5

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.

3.1 Changes in accounting policies

3.1.1 Subsequent measurement of right-of-use assets

The Group has voluntarily changed the accounting policy on Right-Of-Use Assets relating to Lands which meets the definition of a property, plant and equipment from cost model to revaluation model with effect from 01 October 2020, by carrying out a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the lands being valued. This is done to provide reliable and more relevant information.

The change in accounting policy from cost model to revaluation model has not led for a retrospective restatement due to the exemption available in the Paragraph 17 of LKAS 8 “Accounting Policies, Change in Accounting Estimates and Errors”. As per Paragraph 17 of LKAS 8, the initial application of a policy to revalue assets in accordance with LKAS 16 “Property, Plant and Equipment” is a change in an accounting policy to be dealt with as a revaluation in accordance with LKAS 16, rather than in accordance with LKAS 8. LKAS 16 provides that when an item of property, Plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount at the date of revaluation.

3.1.2 New and amended standards adopted by the Group

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 01 April 2020:

i. Definition of Material – Amendments to LKAS 1 and LKAS 8

The amendments to LKAS 1 Presentation of Financial Statements and LKAS 8 Accounting Policies, Changes in Accounting Estimates

and Errors which use a consistent definition of materiality throughout Sri Lanka Financial Reporting Standards and the Conceptual Framework for Financial Reporting, clarify when information is material and incorporate some of the guidance in LKAS 1 about immaterial information.

In particular, the amendments clarify:

a) that the reference to obscuring information a ddresses situations in which the effect is similar to omitting or misstating that information, and that an entity assesses materiality in the context of the financial statements as a whole, and

b) the meaning of ‘primary users of general-purpose financial statements’ to whom those financial statements are directed, by defining them as ‘existing and potential investors, lenders and other creditors’ that must rely on general purpose financial statements for much of the financial information they need.

ii. Definition of a Business – Amendments to SLFRS 3

The amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition of the term ‘outputs’ is amended to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits. The amendments will likely result in more acquisitions being accounted for as asset acquisitions.

iii. Revised Conceptual Framework for Financial Reporting

The revised Conceptual Framework which will be used in standard-setting decisions with immediate effect. Key changes include:

a) increasing the prominence of stewardship in the objective of financial reporting

b) reinstating prudence as a component of neutrality c) defining a reporting entity, which may be a legal entity, or a

portion of an entity d) revising the definitions of an asset and a liability e) removing the probability threshold for recognition and

adding guidance on derecognition f) adding guidance on different measurement basis, and g) stating that profit or loss is the primary performance indicator

and that, in principle, income and expenses in other comprehensive income should be recycled where this enhances the relevance or faithful representation of the financial statements.

No changes will be made to any of the current accounting standards. However, entities that rely on the Framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under the accounting standards will need to apply the revised Framework from 1 January 2020. These entities will need to consider whether their accounting policies are still appropriate under the revised Framework.

iv. Covid-19-related Rent Concessions – Amendments to SLFRS 16

Amendments and interpretations listed above did not have any material impact on the amount recognised in prior periods and are not expected to significantly affect the current or future periods.


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3.1.3 New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31st March 2021 reporting periods and have not been early adopted by the Company. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

3.2 Principles of consolidation and equity accounting3.2.1 Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group (refer to note 3.2.3).

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of profit or loss, comprehensive income, changes in equity and financial position respectively.

3.2.2 Changes in ownership interests

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Company.

When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in statement of profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive

income are reclassified to profit or loss where appropriate.

3.2.3 Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:

• fair values of the assets transferred;

• liabilities incurred to the former owners of the acquired business;

• equity interests issued by the Group;

• fair value of any asset or liability resulting from a contingent consideration arrangement; and

• fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the

• consideration transferred,

• amount of any non-controlling interest in the acquired entity, and

• acquisition-date fair value of any previous equity interest in the acquired entity

over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

3.3 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any


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of the Group's other components. The management has assessed and concluded that there are no separately identifiable segments that require disclosure in accordance with SLFRS 8 Operating Segments.

3.4 Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss.

Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other income/ other expenses.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other comprehensive income.

3.4.1 Group companies

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

• income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. When a foreign operation is sold the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

3.5 Revenue and Income

Group revenue represents sales to customers outside the Group and excluding taxes.

3.5.1 Revenue from contracts with customers

SLFRS 15 established a comprehensive framework for determining whether how much and when revenue recognized. Revenue is measured based on the consideration specified in a contract with a customer. Under SLFRS 15, the Group revenue is recognise when a customer obtains control of the goods or services - Determining the timing of the transfer of control - at a point in time or over time requires judgement.

Under SLFRS 15, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognition will not occur.

The following specific criteria are used for the purpose of recognition of revenue:

• Apartment revenue is recognised for the rooms occupied on a daily basis. All revenues are recognised on an accrual basis over the time of the duration of the stay of the customer and matched with the related expenditure where they simultaneously receive and consumes the benefits of the services rendered.

• Restaurant revenue includes the revenue recognized on the sale food and beverage. All revenue is accounted for at the time of sale.

• Bar revenue are accounted for at the time of sale.

• Spa is operated by a third party and invoices are raised together with the spa bills. Spa related revenue is recognized gross after completion of service / treatments.

• Transfers and excursions include the consideration earned from providing excursions to customers. Revenue is recognised for at the time of rendering the service.

• Telephone, laundry, and diving represents the services provided to customers which are implied as business practice in the industry. All revenue is recognised for at the time of rendering the service.

3.5.2 Other Income

Rent and shop income represents the rental income arising from renting of property, plant and equipment and investment properties. All revenue is accounted for on accrual basis on a straight-line basis over the term of the leases.

Dividend income is recognized when the right to receive payment is established which generally when the dividend is declared.

Interest income is recognized in profit or loss as it accrues, using the effective interest method.

Gain on disposal of property, plant and equipment and other non-current assets, including investments held by the Group have been


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accounted for in the statement of profit or loss, after deducting from the net sales proceeds on disposal of the carrying amount of such assets.

3.5.3 Financing components

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

3.6 Government grants and subsidies

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be compiled with. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.

Where the Group receives non-monetary grants, the asset and the grant are recorded gross at nominal amounts and released to the Profit or loss over the expected useful life and pattern of consumption of the benefit of the underlying asset by equal annual instalments.

Where loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional government grant.

Revenue grants are recognized in the profit or loss in the period in which they are receivable.

3.7 Expenses recognition

Expenses are recognized in the statement of profit or loss on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to income in arriving at the profit for the year.

For the presentation of the statement of profit or loss the Directors are of the opinion that the function of the expenses method present fairly the elements of the Group’s performance, and hence such a presentation method is adopted.

Preliminary and pre-operational expenditure is recognized in the statement of profit or loss.

Repairs and renewals are charged to the statement of profit or loss in the year in which the expenditure is incurred.

3.8 Income tax

The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

The deferred tax liability in relation to investment property that is measured at fair value is determined assuming the property will be recovered entirely through sale.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

3.8.1 Companies enjoying tax holidays

Group companies enjoying a tax exemption period shall only recognize deferred tax in their financial statements for temporary differences, where reversals of such differences extend beyond the tax exemption period.

Deferred tax shall not be considered nor provided for assets/ liabilities for which tax impacts and reversals take place within the tax exemption period. If there will be no tax implications that take place after the expiration of the tax exemption period for such assets.


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Where a Company is entitled to claim the total value or any part of expenditure made during the tax holiday period, as deductions for tax purposes after the tax holiday period, such an entity will treat such amount of expenditure as part of the tax base throughout the tax holiday period in the purpose of recognizing deferred tax.

3.8.2 Withholding tax on dividends

Dividend distributed out of taxable profit of the local companies attracts a 10% deduction at source and is not available for set off against the tax liability of the Company. Withholding tax that arises from the distribution of dividends by the Company is recognized at the same time as the liability to pay the related dividend is recognized.

3.8.3 Sales Taxes (Value Added Tax and Turnover Tax)

Revenues, expenses and assets are recognized net of the amount of sales tax except for the following;

• Sales tax incurred on a purchase of a assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of other receivables or other payables in the statement of financial position.

3.9 Property, plant and equipment

3.9.1 Freehold property, plant and equipment

i) Basis of recognition

Property, plant and equipment are recognized if it is probable that future economic benefits associated with the assets will flow to the Group and cost of the asset can be reliably measured.

ii) Basis of measurement

Items of property, plant and equipment other than freehold land and building, are measured at cost less accumulated depreciation and any impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site at which they are located and capitalized borrowing costs.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

iii) Cost model

The Group applies the cost model to all property, plant and equipment except freehold land and buildings which are recorded at cost of purchase together with any incidental expenses thereon less accumulated depreciation and any accumulated impairment losses.

iv) Revaluation model

The Group revalues its freehold land and buildings which are measured at its fair value at the date of revaluation less any subsequent accumulated depreciation and any accumulated impairment losses. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date.

On revaluation of land and buildings, any increase in the revaluation amount is credited to the revaluation reserve in shareholder’s equity unless it offsets a previous decrease in value of the same asset that was recognized in profit or loss. A decrease in value is recognized in profit or loss where it exceeds the increase previously recognized in the revaluation reserve. Upon disposal, any related revaluation reserve is transferred from the revaluation reserve to retained earnings and is not taken into account in arriving at the gain or loss on disposal.

v) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is de-recognized. The costs of the day-to-day servicing of property, plant and equipment are expensed as incurred.

vi) Depreciation

Depreciation is based on the cost/revalued amount of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful life of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is de-recognized.

Depreciation methods, useful lives, residual values are assessed at the reporting date and adjusted if appropriate. The estimated useful lives for the current year are listed below.


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Property, plant & equipment No. of years Building 3-50 yearsReclaimed island 50 yearsPlant and machinery 8-13 yearsMotor vehicles 4-5 YearsFurniture and Fittings 5-10 YearsOffice Equipment 4-5 YearsComputer equipment 5-8 YearsSwimming pool 10 yearsCutlery, crockery and glassware 5 YearsLinen 3 YearsMarine Vessel 10 YearsSewage system 20 YearsImprovements to Land 20 Years

vii) De-recognition

An item of property, plant and equipment is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognized net within other income/other expenses in the statement of profit or loss. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

3.9.2 Capital work-in progress

Capital work-in-progress is stated at cost. These are expenses of a capital nature directly incurred in the construction of capital assets.

3.10 Investment properties

3.10.1 Basis of recognition

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

3.10.2 Basis of measurement

i) Fair value model

Investment properties are initially recognized at cost. Subsequent to initial recognition the investment properties are stated at fair values, which reflect market conditions at the reporting date. Gains or losses arising from changes in fair value are included in profit or loss in the year in which they arise.

Where Group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the consolidated financial statements, and accounted for as per LKAS 16 - Property, Plant and Equipment.

ii) De-recognition

Investment properties are de-recognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected

from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in profit or loss in the year of retirement or disposal.

iii) Subsequent transfers to/from investment property

Transfers are made to investment property when, and only when, there is a change in use, evidenced by the end of owner occupation, commencement of an operating lease to another party or completion of construction or development.

For a transfer from investment property to owner occupied property or inventories, the deemed cost of property for subsequent accounting is its fair value at the date of change in use. If the property occupied by the Group as an owner occupied property becomes an investment property, the Group, accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

iv) Determining Fair Value

External and independent valuers, having appropriate recognized professional qualifications and recent experience in the location and category of property being valued, values the investment property portfolio every year.

The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably.

3.11 Leases

The Group leases various land for its business activities. Rental contracts are typically made for fixed terms. Under SLFRS 16, the Group recognizes right-of-use assets and lease liabilities for leases of properties and present as separate line items in the Statement of Financial Position.

3.11.1 Right-of-use assets

i) Initial Recognition

The Group recognises right-of-use assets when the underlying asset is available for use. Right-of-use assets are initially recognised at cost.

The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

Right-of-use assets are recognised at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs, and

• restoration costs.

ii) Subsequent Measurement

Right-of-use assets in the consolidated financial statements are subsequently measured at cost, less any accumulated depreciation


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and impairment losses, and adjusted for any re-measurement of lease liabilities except in following;

The Group apply fair value model to right-of-use assets that meet the definition of investment property in LKAS 40.

If right-of-use assets relate to a class of property, plant and equipment to which the group applies the revaluation model in LKAS 16, a lessee may elect to apply that revaluation model to all of the right-of-use assets that relate to that class of property, plant and equipment.

Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life or the lease term. Right-of-use assets are subject to impairment.

iii) Change of Accounting Policy from Cost model to Revaluation Model

The Group has voluntarily changed the accounting policy on right-of-use assets relating to Lands which meets the definition of a property, plant and equipment from cost model to revaluation model with effect from 1 October 2020, by carrying out a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the lands being valued. This was done to provide more reliable and more relevant information by reflecting the Fair Market Value of Right-Of-Use Assets.

The change in accounting policy from cost model to revaluation model has not led for a retrospective restatement due to the exemption available in the Paragraph 17 of LKAS 8 “Accounting Policies, Change in Accounting Estimates and Errors”. As per Paragraph 17 of LKAS 8, the initial application of a policy to revalue assets in accordance with LKAS 16 “Property, Plant and Equipment” is a change in an accounting policy to be dealt with as a revaluation in accordance with LKAS 16, rather than in accordance with LKAS 8. LKAS 16 provides that when an item of property, Plant and equipment is revalued, the carrying amount of that asset is adjusted to the revalued amount at the date of revaluation.

3.11.2 Lease Liabilities

i) Initial Recognition

At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.

ii) Subsequent Measurement

After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

iii) Incremental Borrowing Rate

Incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment.

In the absence of specific guidance in SLFRS 16, the Group determines the incremental borrowing rate by referring to the “Application Guidance Notes on SLFRS 16 – Leases” issued by CA Sri Lanka. As per the guideline, Group determines Incremental Borrowing Rate by incorporating following key elements.

• Risk free rate (Basis rate for economic factors)

• Financial Factors (Lessee specific factors)

• Asset Factor

iv) Timing of the lease payments

We assumed that the rent payments will occur at the end of the month/quarter (paid in arrears). Therefore, discount factors adjusted accordingly.

v) Short term leases and leases of low value assets

The Group applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the commencement date. It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

3.12 Intangible assets

3.12.1 Goodwill

Goodwill is measured as described in note 3.2.3. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortized but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments.

3.12.2 Software

Costs associated with maintaining software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:


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• it is technically feasible to complete the software so that it will be available for use;

• management intends to complete the software and use or sell it;

• there is an ability to use or sell the software;

• it can be demonstrated how the software will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the software are available; and

• the expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalized as part of the software include employee costs and an appropriate portion of relevant overheads.

Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use.

3.12.3 Subsequent expenditure

Subsequent expenditure on intangible assets is capitalized only when it increases the future economic benefits embodied by these assets. All other expenditure is expensed when incurred.

3.12.4 De-recognition

Intangible assets are de-recognized on disposal or when no future economic benefits are expected from its use. The gain or loss arising from de-recognition of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset.

3.12.5 Amortization

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

The estimated useful life of each intangible asset is as follows;

Computer Software 8 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

3.13 Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).

Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

3.14 Investments and other financial assets and liabilities

3.14.1 Investments and other financial assets

(i) Classification

Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through OCI or through profit or loss), and

• those to be measured at amortized cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognized on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

(iii) Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:

• Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in


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finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss.

• FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognized in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as other income when the Group’s right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognized in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

(iv) Impairment

The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by SLFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

3.14.2 Non-derivative financial liabilities

i) Other financial Liabilities

All financial liabilities other than those at fair value through profit and loss are classified as other financial liabilities.

All other financial liabilities are recognized initially at fair value plus directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest rate method. The financial liabilities include trade and other payables, bank overdrafts, loans and borrowings.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

ii) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

3.14.3 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

3.15 Inventories

Inventories are measured at the lower of cost and net realizable value.

The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.

The net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion of selling expenses.

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

Spares and Consumables Weighted Average Cost Basis

Food and Beverages Weighted Average Cost Basis

3.16 Trade receivables

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less loss allowance.

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognized initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognized at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost using the effective interest method.


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The Group applies the SLFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.

To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.

The expected loss rates are based on the payment profiles of sales over a period of before 31st March 2021 or 01st April 2020 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.

Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments according an agreed repayment plan with the Group.

Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item.

3.17 Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

3.18 Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.

3.19 Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility

will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preference shares are recognized in profit or loss as finance costs.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortized cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognized and included in shareholders’ equity, net of income tax effects.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

3.20 Borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

Other borrowing costs are expensed in the period in which they are incurred.

3.21 Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.


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Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

3.22 Employee benefits

3.22.1 Defined contribution plans

A Defined Contribution Plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to Defined Contribution Plans are recognized as an employee benefit expense to profit or loss in the periods during which services are rendered by employees.

i) Employee provident fund and employee trust fund – Sri Lanka

For employees in Sri Lanka the Group contributes a sum not less than 12% of the gross emoluments as provident fund benefits and a sum equivalent 3% of the gross emoluments as trust fund benefits.

ii) Employees pension scheme – Maldives

All Maldivian employees of the Group are members of the retirement pension scheme established in the Maldives. The Group contributes 7% of the pensionable wage of such employees to this scheme

3.22.2 Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs are deducted.

The calculation is performed every year by a qualified actuary using the projected unit credit method. For the purpose of determining the charge for any period before the next regular actuarial valuation falls due, an approximate estimate provided by the qualified actuary is used.

The Group recognizes all actuarial gains and losses arising from the defined benefit plan in Statement of Comprehensive Income and all other expenses related to defined benefit plans are recognized in profit loss. The retirement benefit obligation is not externally funded.

The defined benefit plan comprises the gratuity provided under the payment of Gratuity Act, No.12 of 1983.

3.22.3 Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus if the company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

3.23 Stated capital and equity

Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

3.24 Dividends

Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

3.25 Related party transactions

The Group carries out transactions in the ordinary course of its business with parties who are defined as related parties in LKAS 24 - “Related Party Disclosures”. Disclosure has been made in respect of the related party transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies / decisions of the other, irrespective of whether a price is being charged or not.

3.25.1 Transactions with key management personnel

According to LKAS 24 - “Related Party Disclosures”, Key Management Personnel, are those having authority and responsibility for planning, directing and controlling the activities of the entity.

3.26 Earnings per share

3.26.1 Basic earnings per share

Basic earnings per share is calculated by dividing:

• the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares

• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

3.26.2 Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:

• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.


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3.27 Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair values, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and disclosure purposes based on the following methods. Where applicable further information about the assumptions made in determining fair value is disclosed in the notes specific to that asset or liability.

3.27.1 Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the assets and liabilities that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified its assets and liabilities into the three levels prescribed under the accounting standards.

There were no transfers between levels 1 and 2 for recurring fair value measurements during the year.

The Group’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.

3.27.2 Valuation techniques used to determine fair values

Specific valuation techniques used to value assets and liabilities include:

i) Property, plant and equipment acquired in business combinations

The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction. The fair value of items of plant, equipment fixtures and fittings are based on market prices for similar items when available and depreciated replacement cost when appropriate.

ii) Property, plant and equipment owned by the Group

External, independent qualified valuers having appropriate experience in valuing properties in locations of properties being valued, value the land and building owned by the Group based on market values, this is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.


iii) Investment property

External, independent qualified valuers having appropriate experience in valuing properties in locations of properties being valued, value the land and building owned by the Group based on market values, this is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

iv) Equity securities

The fair value of the equity securities is determined by reference to their quoted share price at the reporting date if quoted; or if unquoted either using discounted cash flow analysis using expected future cash flows and a market related discounted rate, or based on the adjusted net assets of the investee company.

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For the year ended 31st March NoteGROUP COMPANY

2021 2020 2021 2020 (Rs.) (Rs.) (Rs.) (Rs.)

4 REVENUETotal revenue excluding services charges and taxes 4.1 751,343,665 1,108,258,744 - -

751,343,665 1,108,258,744 - -

4.1 Composition of total revenue

Accommodation revenue 273,530,716 472,128,859 - -Food & Beverage revenue 470,001,983 546,180,152 - -Other revenue 7,810,966 89,949,733 - -

751,343,665 1,108,258,744 - -

4.2 Timing of revenue recognition

At a point in time 751,343,665 1,108,258,744 - -

Over time - - - -

751,343,665 1,108,258,744 - -

5 OTHER INCOME / EXPENSES

Shop rental income - 19,388,273 - - Dividend income 3,496,507 183,913 31,855 105,043 Loss on disposal of property, plant and equipment (614,068) - - -Foreign exchange gain/(loss) (15,844,357) 4,381,387 - - Foreign currency encashment 410,607 1,567,900 - - Rental income from investment properties - - 1,650,000 1,500,000 Other operational income 4,308,711 3,184,834 222,300 108,555 Gain/(loss) on fair valuation of other FVTPL instruments 1,952,215 (518,414) 1,279,490 (379,064)

(6,290,385) 28,187,893 3,183,645 1,334,534

6 PERSONNEL COSTS

Salaries, wages and other benefits 282,929,408 268,202,233 - - Contribution to EPF 19,636,498 17,068,709 - - Contribution to ETF 4,876,017 4,290,514 - - Retirement benefit cost 25.2 12,894,448 6,516,465 - -

320,336,371 296,077,921 - -

7 RESULTS FROM OPERATING ACTIVITIESResults from operating activities are stated after charging all expenses including following:Auditors’ fees and expenses 7.1 6,693,527 3,439,072 250,000 241,500 Legal expenses 2,441,925 1,734,920 459,983 157,500 Secretarial fees 7,208,786 4,974,015 1,428,000 1,447,429 Professional fees 109,032,201 44,619,259 329,088 340,900 Advertising related expenses 3,777,367 12,844,144 64,490 - Donations 19,116 72,242 - - Management fee 11,872,916 23,930,258 - - Impairment of trade receivable - 12,446,044 - - Depreciation of property, plant and equipment 11 402,817,583 218,417,185 - - Amortisation of right-of-use assets 13 52,728,847 485,145 - - Amortization of intangible assets 14 1,773,433 67,083 - -

7.1 Auditors’ fees and expenses

Remuneration forAudit related services 6,580,496 3,331,388 250,000 241,500 Non-audit related services 113,031 107,684 - -

6,693,527 3,439,072 250,000 241,500


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For the year ended 31st March GROUP COMPANY

2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

8 NET FINANCE COSTSInterest expense on;Overdraft and other short-term borrowings 1,127,617,040 1,835,297,445 333,725,354 301,963,130 Long term borrowings 381,955,975 445,022,223 - -Interest on lease obligations 208,301,675 1,414,261 - -

1,717,874,690 2,281,733,929 333,725,354 301,963,130 Less: Interest income from deposits and loans (97,434,085) (84,896,560) (17,199) (34,512)

1,620,440,605 2,196,837,369 333,708,155 301,928,618

9 INCOME TAX EXPENSEThe business profit of Sun and Fun Resorts Ltd is exempted from income tax under BOI agreement dated October 27, 2011 for a period of 15 years from the year in which the enterprise commences to make profits or any year of assessment not later than two (02) years reckoned from the date of commencement of commercial operations, which year is earlier.

The business profits and income of companies involved in the promotion of tourism are liable to tax at a concessionary rate of 14% as per the first schedule of the Inland Revenue Act No.24 of 2017 and amendments thereto. Other sources of income are taxable at 24%. The business profits and income of Bodufaru Beach Resort (Pvt) Ltd, Browns Ari Resort (Pvt) Ltd, Browns Raa Resort (Pvt) Ltd and Browns Kaafu N Resort (Pvt) Ltd Companies incorporated in the Republic of Maldives is liable for corporate tax in Maldives at a rate of 15% as per Business Profit Tax Act of the Republic of Maldives.

9.1 Major components of income tax expense are as follows:

For the year ended 31st MarchGROUP COMPANY

Note2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

Current tax expense 9.3 1,892,334 - - - Deferred tax expense 26.3 (38,060,357) 18,606,395 - - Income tax expense reported in the statement of profit or loss (36,168,023) 18,606,395 - -

9.2 Numerical Reconciliation of accounting profits to income tax expenseLoss before income tax expense (2,209,184,027) (2,435,004,270) (170,422,874) (17,408,397)(+)Disallowable expenses 866,045,557 1,260,490,859 8,334,957 1,534,512 (-)Allowable expenses (216,147,183) (250,662,813) - - (-) Non business income (179,317,336) (1,260,491) (175,063,544) (289,635,491)(+)Tax losses incurred 1,826,496,078 1,548,444,802 338,818,660 307,043,888 (-)Tax losses utilized (53,762,814) (122,008,087) (1,667,199) (1,534,512)Taxable income 34,130,275 - - - Income tax @24% 8,191,266 - - - 14% - - - - Tax expense on current year profits 8,191,266 - - -


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9 INCOME TAX EXPENSE CONT...

For the year ended 31st MarchGROUP COMPANY

Note2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

9.3 Current tax expenseTax expense on current year profits 9.2 8,191,266 - - - Over provision in respect of previous years (6,298,932) - - -

1,892,334 - - -

9.4 Income tax recognized in other comprehensive incomeDeferred tax on revaluation (1,787,552,816) - - - Deferred tax on fair value gains 11,980,156 (7,166,703) - -Tax on defined benefit plan actuarial gain/(loss) (1,741,745) (318,525) - -

(1,777,314,405) (7,485,228) - -

9.5 Tax Losses carried forwardLosses brought forward 3,755,940,619 2,794,545,666 964,507,402 659,594,492 Acquisition of subsidiaries 946,582,418 - - - Adjustments for brought forward tax losses 251,089,235 (465,041,762) - (596,466)Losses incurred 1,826,496,078 1,548,444,802 338,818,660 307,043,888 Losses utilized (53,762,814) (122,008,087) (1,667,199) (1,534,512)Losses carried forward 6,726,345,536 3,755,940,619 1,301,658,863 964,507,402

10 LOSS PER SHARE

10.1 Basic earnings/(loss) per share

The calculation of basic loss per share is based on loss for the year attributable to the ordinary shareholders and the weighted average number of ordinary shares being outstanding during the year and calculated as follows;

For the year ended 31st March

GROUP COMPANY

2021 2020 2021 2020

Loss attributable to equity holders of the company (Rs.) (1,113,810,372) (1,551,249,825) (170,422,874) (17,408,397)

Weighted average number of shares 43,267,000 43,267,000 43,267,000 43,267,000

Loss per share (Rs.) (25.74) (35.85) (3.94) (0.40)

10.2 Diluted loss per share

There were no potentially dilutive ordinary shares outstanding at any time during the year or previous year. Therefore, diluted loss per share is equal to basic loss per share.


45


11

PRO

PERT

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46


11.8 Details of the Group's land and buildings are indicated below;

Property Land extent Building extent Revalued amount Revalued date Palm Garden Hotels PLCMain land - Aluthgama 17A-3R-32.54P - 3,333,000,000 31.03.2021 Eden Hotel Lanka PLCHotel land - Aluthgama 5A-0R-30P - 996,000,000 31.03.2021 Staff quarters land- Aluthgama 0A-0R-40P - 36,000,000 31.03.2021 Staff quarters land- Moragalla 0A-3R-10.16P - 71,588,000 31.03.2021 Bare land - Aluthgama 0A-0R-20P - 18,000,000 31.03.2021 Dickwella Resorts (Pvt) LtdHotel land- Dickwella 6A-2R-3.93P - 1,252,716,000 31.03.2021 Beach front land- Dickwella 1A-3R-29.25P - 185,550,000 31.03.2021 Green Paradise (Pvt) LtdHotel land- Dambulla 11A-0R-13.27P - 177,327,000 31.03.2021 Serendib Hotels PLCHotel land - Bentota 0A-0R-20P - 6,000,000 31.12.2020 Dolphin Hotels PLCHotel land - Waikkal 14A-2R-10P - 560,340,000 31.12.2020 Frontier Capital Lanka (Pvt) LtdLantern Botique land - Mirissa 0A-1R-30.80P - 141,600,000 31.12.2020 Ubuntu 1 Beach Villa land - Mirissa 0A-1R-34P - 148,000,000 31.12.2020 Ubuntu 2 Beach Villa land - Mirissa 0A-1R-38.40P - 156,800,000 31.12.2020 Ubuntu 1 Beach Villa bare land - Mirissa 0A-1R-5.24P - 88,218,000 31.12.2020

7,171,139,000Hotel Building & Swimming PoolEden Hotel Lanka PLC - 251,615 sqft 2,132,098,400 31.03.2021 Dickwella Resorts (Pvt) Ltd - 100,648 sqft 633,000,000 31.03.2021 Green Paradise (Pvt) Ltd - 115,216 sqft 1,050,684,056 31.03.2021 Sun & Fun Resorts Ltd - 121,655 sqft 795,680,625 31.03.2021 Serendib Hotels PLC - 72,532 sqft 582,584,338 31.12.2020 Dolphin Hotels PLC - 220,339 sqft 1,256,092,196 31.12.2020 Hotel Sigiriya PLC - 65,763 sqft 324,439,050 31.12.2020 Frontier Capital Lanka (Pvt) Ltd -Lantern Botique - 11,149 sqft 125,087,500 31.12.2020 Frontier Capital Lanka (Pvt) Ltd -Ubuntu 1 Beach Villa - 10,403 sqft 121,637,500 31.12.2020 Frontier Capital Lanka (Pvt) Ltd -Ubuntu 2 Beach Villa - 10,403 sqft 121,637,500 31.12.2020

7,142,941,165

11.9 Details of the group's reclaimed land are indicated below;Property Land extent Currency Revalued amount Revalued date Bodufaru Beach Resort (Pvt) LtdKaafu islands (3) located at North Male Atoll 73A-2R-8.125P USD 56,810,000 01.10.2020

Browns Ari Resort (Pvt) LtdBodufinolu island in South Ari Atoll 17A-0R-18.125P USD 24,342,500 01.10.2020

Browns Raa Resort (Pvt) LtdBodufarufinolhu island in Raa Atoll 12A-2R-16.875P USD 3,937,500 01.10.2020

NOTES TO THEFINANCIAL STATEMENTS ....... 11 PROPERTY, PLANT AND EQUIPMENT - GROUP CONT... 11.1 Property, plant and equipment included fully depreciated assets that are still in use having a gross amount of Rs. 1,124,711,647 as at

31st March 2021 (2019/20 - Rs. 492,033,804). 11.2 The capitalized borrowing costs related to the construction of property, plant and equipment during the year is Rs. 685,015,932

(2019/20 - Rs. 90,120,114) calculated using a capitalisation rates between 9% and 11%. 11.3 The capitalized depreciation costs related to the construction of property, plant & equipment during the year is Rs. 8,496,286 (2019/20 - Rs. 8,118,832). 11.4 Capital work-in-progress represent the amount of expenditure recognised under property plant and equipment during the construction in Kaluwamodara, Aluthgama Sri Lanka and Bodufarufinolhu Island, Bodufinolhu in South Ari Atoll Island, Plots of Lagoons in Male Atoll in Republic of Maldives. 11.5 The Group engaged Mr.W.M Chandrasena, as independent valuation expert who holds a recognised and relevant professional

qualification and who has recent experience in the location to determine the fair value of its land, buildings and reclaimed lands. 11.6 The improvements to land included in “Land and improvements to Land” above amounts to Rs. 34,652,030 as at 31st March 2021 (2019/20 - Rs.35,752,658). 11.7 The Group has 120 Buildings as at 31st March 2021 (2019/20 - 53 Buildings).

47


11 PROPERTY, PLANT AND EQUIPMENT - GROUP CONT...

11.10 If the land and buildings were stated on the historical cost basis, the amount would be as follows.

Cost Acc. depreciation Net book valueLand 237,278,277 - 237,278,277

Buildings 4,946,809,934 944,380,186 4,002,429,748

5,184,088,211 944,380,186 4,239,708,025

11.11 Land and building of Eden Hotel Lanka PLC (Plan 4490 dated 07 February 2014) which is situated at Kaluwamodara, Aluthgama has been kept as mortgage against the credit facility (Rs.1.9Bn) obtained from Seylan Bank PLC.

Building of Sun & Fun Resorts Ltd which is situated at Passikuda, has been kept as mortgage against the credit facility (Rs. 250 Mn) obtained from Sampath Bank PLC.

Land and building of Dolphin Hotels PLC which is situated at Waikkala, has been kept as mortgage against the credit facility (Rs. 2.8 Bn) obtained from HSBC Sri Lanka.

Land and building of Frontier Capital Lanka (Pvt) Ltd (Plan 3625B dated 07 December 2010 and Plan 21031 dated 28 November 2010 ) which is situated at Mirissa, Matara has been kept as mortgage against the credit facility (Rs. 62Mn) obtained from DFCC Bank PLC.

Land and building of Frontier Capital Lanka (Pvt) Ltd (Cadastral Map No. 820079 ) which is situated at Mirissa, Matara has been kept as mortgage against the credit facility (Rs. 31Mn) obtained from National Development Bank PLC.

11.12 The fair value measurement of land, reclaimed land and building of the Group is categorized under "Level 3" of the fair value hierarchy. Details of the methods adopted in determining fair value and the significant unobservable inputs used are explained below.

Property Method of valuation Significant unobservable inputs

Sensitivity of the fair value to the inputs

Land of Palm Garden Hotels PLC

Sales comparison approach - A value indication is derived by comparing the property being appraised to

similar properties that have been sold recently, applying appropriate units of comparison, and making adjustments to the sales price of the comparable

properties based on the various elements of comparison.

Estimated price per perch Rs. 1 MN - Rs. 1.225 MN Positively correlated

Land of Eden Hotel Lanka PLC Estimated price per perch Rs. 550,000 - Rs. 1.2 MN Positively correlated

Land of Dickwella Resorts (Pvt) Ltd

Estimated price per perch Rs. 600,000 - Rs. 1.2 MN Positively correlated

Land of Green Paradise (Pvt) Ltd Estimated price per perch Rs. 100,000 Positively correlated

Land of Serendib Hotels PLC Estimated price per perch Rs. 300,000 Positively correlated

Land of Dolphin Hotels PLC Estimated price per perch Rs. 220,000 Positively correlated

Land of Frontier Capital Lanka (Pvt) Ltd

Estimated price per perch Rs. 1.95 MN - Rs. 2 MN Positively correlated

Buildings of Eden Hotel Lanka PLC

Depreciated replacement cost - Depreciated replacement cost uses

the current cost of reproduction or replacement of an asset less

deductions for physical deterioration and all relevant forms of obsolescence

and optimization.

Estimated price per square foot Rs. 500 - Rs.13,500 Positively correlated

Buildings of Dickwella Resorts (Pvt) Ltd


Buildings of Green Paradise (Pvt) Ltd

Estimated price per square foot Rs. 1,500 - Rs.15,000 Positively correlated

Buildings of Sun & Fun Resorts Ltd


Buildings of Serendib Hotels PLC Estimated price per square foot Rs. 1,500 - Rs.8,500 Positively correlated

Buildings of Dolphin Hotels PLC Estimated price per square foot Rs. 2,000 - Rs.9,000 Positively correlated

Buildings of Hotel Sigiriya PLC Estimated price per square foot Rs. 200 - Rs.10,000 Positively correlated

Buildings of Frontier Capital Lanka (Pvt) Ltd

Estimated price per square foot Rs. 5,000 - Rs.12,500 Positively correlated


48



GROUP COMPANY

As at 31 March 2021(Rs.)

2020(Rs.)

2021(Rs.)

2020(Rs.)

12 INVESTMENT PROPERTYBalance as at 01 April 48,500,000 37,632,000 3,160,915,000 2,872,540,000 Change in fair value during the year 2,500,000 10,868,000 172,085,000 288,375,000 Balance as at 31 March 51,000,000 48,500,000 3,333,000,000 3,160,915,000

During the financial year 2016/17 property of the Company valued at Rs. 2,585,286,000 was transferred from property, plant and equipment to investment property, since this is leased out to Riverina Resorts (Pvt) Ltd, for a non-cancellable period of 26 years.

An analysis of the rentals to be received on such operating leases are as follows - Company (Rs.)Receivable within one year 1,650,000 Receivable within 1-5 years 7,095,500 Receivable after 5 years 44,069,057 Total 52,814,557

12.1 Details of the Companie's investment property portfolio

Property Land extentRevalued

amountRevalued date

Land at Aluthgama 17A-3R-32.54P 3,333,000,000 31.03.2021

12.2 Details of the Group's investment property portfolio

Property Land extentRevalued

amountRevalued date

Land at Wattala 0A-1R-26.65P 51,000,000 31.03.2021

12.3 Relevant income and expenditure relating to investment property

GROUP COMPANYFor the Year ended of 31st March 2021

(Rs.)2020(Rs.)

2021(Rs.)

2020(Rs.)

Rent income earned - - 1,650,000 1,500,000

12.4 Valuation of investment property - Company

The fair value measurement of investment property of the Company is categorized under "Level 3" of the fair value hierarchy. Details of the methods adopted in determining fair value and the significant unobservable inputs used are explained below.

The Company engaged Mr.W.M Chandrasena,as independent valuation expert who holds a recognised and relevant professional qualification and who has recent experience in the location to determine the fair value of its investment property.

Details of the Company’s investment property valuation;

Property Method of valuation Significant unobservable inputs Sensitivity of the fair value to the inputs

Land of Palm Garden Hotels PLC

Sales comparison approach Estimated price per perch Rs. 1.1 MN - Rs. 1.225 MN

Positively correlated

11 PROPERTY, PLANT AND EQUIPMENT - GROUP CONT...



Reclaimed Land of Bodufaru Beach Resort (Pvt) Ltd

Sales comparison approach - A value indication is derived by comparing the property being appraised to

similar properties that have been sold recently, applying appropriate units of comparison, and making adjustments to the sales price of the comparable


Estimated price per perch USD. 4,827 Positively correlated

Reclaimed Land of Browns Ari Resort (Pvt) Ltd


Reclaimed Land of Browns Raa Resort (Pvt) Ltd


49


12.5 Valuation of investment property - Group

The fair value measurement of land and building of the Group is categorized under "Level 3" of the fair value hierarchy. Details of the methods adopted in determining fair value and the significant unobservable inputs used are explained below.

The Group engaged Mr.W.M Chandrasena,as independent valuation expert who holds a recognised and relevant professional qualification and who has recent experience in the location to determine the fair value of its investment property. Details of the Company’s investment property valuation;

Property Method of valuation Significant unobservable inputs Sensitivity of the input to the fair value

Wattala Land Sales comparison approach Estimated price per perch Rs. 600,000 - Rs. 900,000

Positively correlated

As at 31st MarchGROUP

2021 2020(Rs.) (Rs.)

13 RIGHT-OF-USE ASSETS

Cost

Balance as at 01 April 3,768,658,966 -

Adjustment on initial application of SLFRS 16 - 3,755,300,187

Acquisition on subsidiaries 328,082,025 -

Transferred from lease prepayments - 665,909,367

Transferred from lease equalisation - (834,853,297)

Revaluation 214,211,840 -

Reversal on early termination (11,573,025) -

Adjustment on changes in the estimation (1,895,201) -

Effect of movement in exchange rate 207,466,587 182,302,709

Balance as at 31 March 4,504,951,192 3,768,658,966

Accumulated amortisation

Balance as at 01 April 102,048,033 -

Adjustment on initial application of SLFRS 16 - 19,327,125

Acquisition on subsidiaries 3,686,390 -

Charge to income statement 52,728,847 485,145

Capitalised to property plant and equipment 40,573,917 77,308,500

Revaluation (428,152) -

Effect of movement in exchange rate 10,195,777 4,927,263

Balance as at 31 March 208,804,812 102,048,033

Carrying amount as at 31 March 4,296,146,380 3,666,610,933

13.1 Maturity analysis – Contractual undiscounted cash flows

Less than one year 157,539,406 51,242,136

Between one and five years 1,643,100,215 1,270,722,530

More than five years 20,800,333,635 20,099,178,586 22,600,973,256 21,421,143,252

13.2 Amount recognised in income statement

As per SLFRS 16 – Leases

Interest on lease liabilities 208,301,675 1,414,261

Recognised in interest expenses 208,301,675 1,414,261

Depreciation – right-of-use assets 52,728,847 485,145

Recognised in other expenses 52,728,847 485,145

13.3 Head lease rights of Browns Ari Resort Private Limited situated in Bodufinolhu Island, Alifu Dhaalu Atoll, Republic of Maldives has been kept as mortgage against the credit facility (USD 10 Mn) obtained from People's Bank.


50


As at 31st MarchGROUP COMPANY

Note 2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

14 INTANGIBLE ASSETS Goodwill 14.1 85,597,113 85,597,113 - - Other intangible assets 14.4 14,747,061 3,957,867 - -

100,344,174 89,554,980 - -

As at 31st MarchGROUP

2021 2020(Rs.) (Rs.)

14.1 Goodwill

Balance as at 01 April 116,873,973 116,873,973 Additions - - Allowance for impairment (31,276,860) (31,276,860)Balance as at 31 March 85,597,113 85,597,113


13.4 Details of the group's right-of-use assets are indicated below;Property Land extent Currency Revalued amount Revalued dateBodufaru Beach Resort (Pvt) LtdKaafu islands (3) located at North Male Atoll 73A-2R-8.125P USD 9,269,000 01.10.2020Browns Ari Resort (Pvt) LtdBodufinolu island in South Ari Atoll 17A-0R-18.125P USD 5,390,125 01.10.2020Browns Raa Resort (Pvt) LtdBodufarufinolhu island in Raa Atoll 12A-2R-16.875P USD 4,620,000 01.10.2020Green Paradise (Pvt) LtdHotel land- Dambulla 4A-0R-1.04P Rs. 19,403,416 01.10.2020Sun & Fun Resorts LtdHotel land- Pasikudah 7A-1R-27.43P Rs. 201,000,000 01.10.2020Serendib Hotels PLCHotel land - Bentota 3A-1R-23P Rs. 206,937,275 31.12.2020Hotel Sigiriya PLCHotel land - Sigiriya 9A-2R-39.2P Rs. 57,924,089 31.12.2020Frontier Capital Lanka (Pvt) LtdBeach house land - Mirissa 0A-2R-9.21P Rs. 48,475,103 31.12.2020

13.5 The Group engaged Mr.W.M Chandrasena, as independent valuation expert who holds a recognised and relevant professional qualification and who has recent experience in the location to determine the fair value of its right-of-use assets.

13.6 The fair value measurement of right-of-use assets of the Group is categorized under "Level 3" of the fair value hierarchy. Details of the methods adopted in determining fair value and the significant unobservable inputs used are explained below.



Right-of-use assets of Bodufaru Beach Resort (Pvt) Ltd

Sales comparison approach - A value indication is derived by comparing the

property being appraised to similar properties that have been leased

recently, applying appropriate units of comparison, and making adjustments to the leased price of the comparable


Estimated price per perch USD. 788 Positively correlated

Right-of-use assets of Browns Ari Resort (Pvt) Ltd


Right-of-use assets of Browns Raa Resort (Pvt) Ltd


Right-of-use assets of Green Paradise (Pvt) Ltd

Estimated price per perch Rs 30,269 Positively correlated

Right-of-use assets of Sun & Fun Resorts Ltd


Right-of-use assets of Serendib Hotels PLC


Right-of-use assets of Hotel Sigiriya PLC


Right-of-use assets of Frontier Capital Lanka (Pvt) Ltd


51



Note 2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

14.2 Goodwill is attributable to the acquisitions of following subsidiariesEden Hotel Lanka PLC 20,929,959 20,929,959 Dickwella Resorts (Pvt) Ltd 31,276,860 31,276,860 Green Paradise (Pvt) Ltd 4,185,622 4,185,622 Sun & Fun Resorts Ltd 60,481,533 60,481,533

116,873,974 116,873,974 14.3 Allowance for impairment

Dickwella Resorts (Pvt) Ltd (31,276,860) (31,276,860) (31,276,860) (31,276,860)

The recoverable amounts of goodwill is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by the management covering five year periods.The key assumptions used are given below;Business growth rate – Based on the long term average growth rate of each cash generating unit and the industry. Inflation rate – Based on current inflation rate.Discount rate – Risk free rate adjusted by the addition of an appropriate risk premium.Margin – Based on past performance and budgeted expectations.


2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

14.4 Other Intangible Assets Computer SoftwareCost/ValuationBalance as at 01 April 9,161,444 5,136,494 3,576,183 3,576,183 Acquisition on subsidiaries 17,037,893 - - - Additions - 4,024,950 - - Balance as at 31 March 26,199,337 9,161,444 3,576,183 3,576,183

Accumulated amortization and impairment lossesBalance as at 01 April 5,203,577 5,136,494 3,576,183 3,576,183 Acquisition on subsidiaries 4,475,266 - - - Charge for the year 1,773,433 67,083 - - Balance as at 31 March 11,452,276 5,203,577 3,576,183 3,576,183

Carrying amount 14,747,061 3,957,867 - -

Other intangible assets included fully amortized computer software that are still in use.


As at 31st March2021 2020

% Holding (Rs.) % Holding (Rs.)

15 INVESTMENTS IN SUBSIDIARIES

15.1 Company

Eden Hotel Lanka PLC 49.54% 3,089,043,480 46.21% 961,370,620

Riverina Resorts (Pvt) Ltd 100.00% 350,500,000 100.00% 350,500,000

Bodufaru Beach Resort (Pvt) Ltd 42.26% 435,075,000 42.26% 435,075,000

Browns Ari Resort (Pvt) Ltd 49.88% 319,400,000 49.88% 319,400,000

4,194,018,480 2,066,345,620

52



2021 2020

Principal Activity No of Shares Control Holding

No of Shares

Control Holding

15.2 Group Holdings in Subsidiaries

Eden Hotel Lanka PLC Hotelier 261,564,230 49.54% 48,796,944 46.21%

Riverina Resorts (Pvt) Ltd Pre-operational 35,050,000 100.00% 35,050,000 100.00%

Dickwella Resorts (Pvt) Ltd Hotelier 481,314 99.99% 481,314 99.99%

Bodufaru Beach Resort (Pvt) Ltd Pre-operational 180,700 76.63% 180,700 76.63%

Green Paradise (Pvt) Ltd Hotelier 5,000,009 100.00% 5,000,009 100.00%

Sun & Fun Resorts Ltd Hotelier 57,233,463 51.00% 57,233,463 51.00%

Browns Ari Resort (Pvt) Ltd Pre-operational 40,099 100.00% 40,099 100.00%

Browns Kaafu N Resort (Pvt) Ltd Pre-operational 99 99.00% 99 99.00%

Browns Raa Resort (Pvt) Ltd Pre-operational 99 99.00% 99 99.00%

Serendib Hotels PLC Hotelier 62,187,841 55.76% - -

Dolphin Hotels PLC Hotelier 20,609,378 65.18% - -

Hotel Sigiriya PLC Hotelier 3,696,047 63.08% - -

Serendib Leisure Management Ltd Hotelier 6,050,000 100.00% - -

Sanctuary Resorts Lanka (Pvt) Ltd Hotelier 2 100.00% - -

Frontier Capital Lanka (Pvt) Ltd Hotelier 3,216,295 100.00% - -

15.3 Eden Hotel Lanka PLC

Although the Group owns less than half of Eden Hotel Lanka PLC and consequentially has less than half of the voting power, it is able to govern the financial and operating policies of Eden by virtue of de facto control on the basis that the remaining voting rights in the investee are widely dispersed and there is no indication that all other shareholders will exercise their votes collectively. Consequently, the group consolidates Eden Hotel Lanka PLC.

Market price per share as at 31st March 2021 is Rs. 10.40 (31st March 2020 - Rs. 15.40)

15.4 Acquisition of Dickwella Resort (Private) Limited

In November 2013, Eden Hotel Lanka PLC (ERS), one of the subsidiaries of Palm Garden Hotels PLC acquired 99.99% of the voting rights of Dickwella Resort (Private) Limited whose principal activity is operating as a hotelier. The acquisition has been accounted for using the acquisition method.

15.5 Investment in Bodufaru Beach Resort (Private) Limited

Bodufaru Beach Resort (Pvt) Ltd is a limited liability company incorporated in the Republic of Maldives to develop a resort hotel. As a result of the investment made by Palm Garden Hotels PLC, Eden Hotel Lanka PLC and Dickwella Resorts (Pvt) Ltd, Bodufaru Beach Resort (Pvt) Ltd treated as a subsidiary of Palm Garden Hotels PLC.

15.6 Acquisition of Green Paradise (Pvt) Limited and Sun and Fun Resorts Limited

In April 2018, Eden Hotel Lanka PLC, a subsidiary of Palm Garden Hotels PLC acquired 100% stake in Green Paradise (Pvt) Ltd and 51% stake in Sun and Fun Resorts Limited both of whose principle activity is operating as hoteliers. The acquisition has been accounted for using the acquisition method. The purchase consideration on these acquisitions were effected through the current account, due to Browns Investment PLC.

15.7 Acquisition of Serendib Hotels PLC

In December 2020, Eden Hotel Lanka PLC, a subsidiary of the Palm Garden Hotels PLC acquired 56.84% voting shares and 53.48% non voting shares in Serendib Hotels PLC whose principal activity is operating as hotelier. With this acquisition Dolphin Hotels PLC, Hotel Sigiriya PLC, Serendib Leisure Management Ltd, Sanctuary Resorts Lanka (Pvt) Ltd, Frontier Capital Lanka (Pvt) Ltd became subsidiries of Palm Garden Hotels PLC. The acquisition has been accounted for using acquisition method.

53



The provisional fair values of the identifiable assets and liabilities (based on un-audited financial statements) as at the date of acquisition were;

AssetsProperty, plant and equipment 3,964,489,463 Right-of-use assets 324,395,635 Intangible assets 12,562,627 Investment securities 128,392,739 Inventories 35,904,535 Trade and other current assets 1,251,746,488 Current tax receivables 48,680,965 Cash and cash equivalents 316,936,451

6,083,108,904 LiabilitiesLoans and borrowings 1,075,088,456 Retirement benefit obligations 80,321,259 Deferred tax liabilities 340,506,334 Trade and other payables 1,420,465,357 Current tax payables 96,080,989 Bank overdrafts 19,632,106

3,032,094,500

Fair value of Identifiable net assets acquired 3,051,014,404

Goodwill is recognized as a result of the acquisition as follows;

Fair value of consideration paid 794,480,000 Non-controlling interests acquired 2,052,029,096

2,846,509,096 Fair value of Identifiable net assets acquired 3,051,014,404 Gain on bargain purchase (204,505,308)

Net cash used in acquisition;Purchase consideration paid (794,480,000)Cash & cash equivalents acquired 297,304,345

(497,175,655)

Transaction cost on acquisition of Serendib Hotels PLC is Rs. 5,864,304.

15.8 The following table summarises the information relating to each of the Group's subsidiaries that has material NCI

Eden Hotel Lanka PLC


Bodufaru Beach Resort (Pvt) Ltd

Green Paradise (Pvt) Ltd

Sun & Fun Resorts Ltd

Serendib Hotels PLC

Dolphin Hotels PLC

Hotel Sigiriya PLC Total

NCI percentage 50.46% 50.46% 55.62% 50.46% 74.74% 72.38% 82.00% 82.57% -

Total Assets 10,773,798,343 2,547,495,484 14,446,192,371 1,500,855,102 1,053,054,515 2,201,251,722 3,222,039,697 566,817,369 -

Total Liabilities 6,219,530,374 1,962,791,358 4,019,693,152 227,772,885 1,223,360,976 1,405,851,523 1,118,087,485 132,645,029 -

Equity 4,554,267,969 584,704,126 10,426,499,219 1,273,082,217 (170,306,461) 795,400,199 2,103,952,212 434,172,340 -

Carrying amount of NCI (570,075,431) 410,275,245 5,892,078,650 16,296,362 (378,230,553) 575,684,909 1,725,166,848 358,515,059 8,029,711,088

Revenue 300,710,815 108,600,759 - 107,143,812 16,439,009 39,380,235 111,095,073 59,006,151 -

Profit/(loss) after tax (1,115,965,251) (225,325,752) (199,196,594) (39,308,410) (193,539,146) (41,004,319) 7,525,155 7,513,664 -

Other comprehensive income 405,052,147 167,606,611 6,181,034,233 151,191,810 173,740,845 479,540 3,387,221 1,416,683 -

Total comprehensive income (710,913,104) (57,719,141) 5,981,837,639 111,883,400 (19,798,301) (40,524,779) 10,912,376 8,930,347 -

Profit/(loss) after tax allocated to NCI (563,130,797) (113,702,349) (110,787,443) (19,835,543) (144,642,008) (29,677,598) 6,170,363 6,204,360 (969,401,015)

Other comprehensive income allocated to NCI 204,394,660 84,576,508 3,437,714,285 76,293,383 129,845,694 347,076 2,777,402 1,169,817 3,937,118,826

Total comprehensive income allocated to NCI (358,736,137) (29,125,840) 3,326,926,843 56,457,841 (14,796,314) (29,330,523) 8,947,765 7,374,177 2,967,717,811

54



As at 31st March GROUP COMPANY2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

16 TRADING ASSETS - FAIR VALUE THROGH PROFIT OR LOSSEquity securities 4,503,151 2,550,936 3,177,586 1,898,096

4,503,151 2,550,936 3,177,586 1,898,096

Details of the equity trading portfolioGROUP GROUP

As at 31 March 2021 2020No. of Cost Fair Value No. of Cost Fair ValueShares (Rs.) (Rs.) Shares (Rs.) (Rs.)

Hapugastenna Plantation PLC 100 1,000 1,480 100 1,000 1,070 DFCC Bank PLC 3,810 - 227,076 3,810 - 230,886 Sierra Cables PLC 7,400 22,200 42,180 7,400 22,200 15,540 Vallibal Finance PLC 33,900 497,200 3,567,975 33,900 497,200 1,817,040 Lanka Indian Oil Company PLC 27,800 750,600 528,200 27,800 750,600 439,240 Raigam Wayamba Salterns PLC 26,200 65,500 136,240 26,200 65,500 47,160

1,336,500 4,503,151 1,336,500 2,550,936

COMPANY COMPANYAs at 31 March 2021 2020

No. of Cost Fair Value No. of Cost Fair ValueShares (Rs.) (Rs.) Shares (Rs.) (Rs.)

Hapugastenna Plantation PLC 100 1,000 1,480 100 1,000 1,070 DFCC Bank PLC 3,810 - 227,076 3,810 - 230,886 Sierra Cables PLC 7,400 22,200 42,180 7,400 22,200 15,540 Vallibal Finance PLC 22,600 248,600 2,378,650 22,600 248,600 1,211,360 Lanka Indian Oil Company PLC 27,800 750,600 528,200 27,800 750,600 439,240

1,022,400 3,177,586 1,022,400 1,898,096

GROUP COMPANYAs at 31 March 2021 2020 2021 2020

Note (Rs.) (Rs.) (Rs.) (Rs.)

17 INVESTMENT SECURITIESFinancial assets measured at fair value through other comprehensive income 17.1 563,904,795 285,154,934 218,300,490 142,606,812

Financial assets at amortized cost 17.3 19,904,000 17,960,000 - - 583,808,795 303,114,934 218,300,490 142,606,812

17.1 Designated FVOCI investment securitiesGROUP GROUP


Rainforest Ecolodge (Pvt) Ltd 1,284,001 12,840,010 5,574,502 84,000 840,000 492,998 LOLC (Pvt) Ltd 1,413,200 150,742,000 436,192,876 1,413,200 150,742,000 284,661,936 Jada Resort & Spa (Pvt) Ltd 24,449,480 318,106,475 122,137,417 - - -

481,688,485 563,904,795 151,582,000 285,154,934

COMPANY COMPANYAs at 31 March 2021 2020

No. of Cost Fair Value No. of Cost Fair ValueShares (Rs.) (Rs.) Shares (Rs.) (Rs.)

Rainforest Ecolodge (Pvt) Ltd 47,000 470,000 204,052 47,000 470,000 275,844 LOLC (Pvt) Ltd 706,600 75,376,000 218,096,438 706,600 75,376,000 142,330,968

75,846,000 218,300,490 75,846,000 142,606,812

55


As at 31st March

Note

GROUP COMPANY2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

18 INVENTORIESConsumables, maintenance and spares 13,724,469 9,348,564 - - Food and beverages 27,840,796 17,168,766 - - Others 20,770,629 6,435,510 - -

62,335,894 32,952,840 - -

19 TRADE AND OTHER RECEIVABLESTrade receivables 19.1 75,471,756 315,531,865 - - Amounts due from related parties 19.2 1,167,090,000 1,124,639,172 2,941,257 7,514,170 Amounts due from share holders 2,030,185 1,942,823 - - Prepayments and other advances 211,195,563 201,233,404 154,713 154,713 Mobilisation advance - 247,160,689 - - Material advance 156,107,248 156,107,248 - -

1,611,894,752 2,046,615,201 3,095,970 7,668,883

19.1 Trade receivablesTrade receivables 108,414,940 344,152,764 - - Less: Impairment for trade receivable (32,943,184) (28,620,899) - -

75,471,756 315,531,865 - -

19.2 Amounts due from related partiesTropical Villas (Pvt) Ltd 13,900,738 13,851,058 13,723,858 13,723,858 Sierra Construction (Pvt) Ltd - 6,224,291 - 6,224,291 Riverina Resorts (Pvt) Ltd - - 2,906,913 1,254,663 Dickwella Resorts (Pvt) Ltd - - 1,694 2,566 LOLC Finance PLC - 2,118,453 - - LOLC Land Holdings Limited 483,685 483,685 - - NPH Investments Limited * 1,147,218,356 959,253,021 - - Browns Investments PLC * 8,950,328 156,208,019 - - Browns Engineering and Construction (Pvt) Ltd 202,445 191,853 - - Samudra Beach Resorts (Private) Limited 9,636,517 - - - Kammala Hotleliers (Pvt) Ltd 389,139 - - - Less: Impairment on amount due from related parties Tropical Villas (Pvt) Ltd (13,691,208) (13,691,208) (13,691,208) (13,691,208)

1,167,090,000 1,124,639,172 2,941,257 7,514,170 * These advances are unsecured and receivable on demand


17.2 Following gains/(losses) were recognised in other comprehensive income

GROUP COMPANYFor the year ended 31 March 2021 2020 2021 2020

(Rs.) (Rs.) (Rs.) (Rs.)

Balance as at 01 April 285,154,934 176,791,842 142,606,812 88,435,317 Gains recognised in other comprehensive income 150,357,122 108,363,092 75,693,678 54,171,495 Acquisition of subsidiaries 128,392,739 - - - Balance as at 31 March 563,904,795 285,154,934 218,300,490 142,606,812

17.3 Financial assets at amortized costGROUP GROUP


Investments in debentures 100,000 17,960,000 19,904,000 100,000 17,960,000 17,960,000 17,960,000 19,904,000 17,960,000 17,960,000

56



22 STATED CAPITAL

Issued and fully paid 2,436,090,770 2,436,090,770 2,436,090,770 2,436,090,770

43,267,000 Ordinary Shares 2,436,090,770 2,436,090,770 2,436,090,770 2,436,090,770

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meeting of the Company. All shares are ranked equally with regard to the Company's residual assets.


2021 2020 2021 2020 22.1 Movement in stated capital

Balance at the beginning of the year (Rs.) 2,436,090,770 2,436,090,770 2,436,090,770 2,436,090,770

Balance at the end of the year (Rs.) 2,436,090,770 2,436,090,770 2,436,090,770 2,436,090,770

22.2 Movement in number of shares

Balance at the beginning of the year (Nos.) 43,267,000 43,267,000 43,267,000 43,267,000

Balance at the end of the year (Nos.) 43,267,000 43,267,000 43,267,000 43,267,000


2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

23 RESERVES

Revaluation reserve 23.1 9,263,311,682 3,598,286,444 1,930,775,680 1,930,775,680

Fair value reserve 23.2 211,001,788 92,086,657 142,454,488 66,760,811

Foreign currency translation reserve 23.3 1,048,346,869 625,152,506 - -

Capital reserve 23.4 (429,025,594) (429,025,594) (161,022,309) (161,022,309)

10,093,634,745 3,886,500,013 1,912,207,859 1,836,514,182


2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

20 CURRENT TAX RECEIVABLES

Value Added Tax 84,253,240 32,884,228 9,116,914 9,116,066

Withholding Tax 6,068,136 7,204,269 290,109 290,091

Income Tax 14,152,880 5,456,782 3,959,884 3,959,884

Economic Service Charge 17,110,457 12,031,333 - -

Goods and Services Tax 138,354,740 121,155,063 - -

259,939,453 178,731,675 13,366,907 13,366,041

21 CASH AND CASH EQUIVALENTS

21.1 Cash in hand and favourable bank balances

Cash in hand 5,891,896 8,140,203 135,411 135,411

Cash at banks 803,262,807 467,763,643 2,514,474 1,825,084

809,154,703 475,903,846 2,649,885 1,960,495

21.2 Unfavourable bank balances

Bank overdrafts (57,825,974) (53,850,771) - -

Net cash and cash equivalents 751,328,729 422,053,075 2,649,885 1,960,495

57


As at 31st March NoteGROUP COMPANY

2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

24 LOANS AND BORROWINGSLease liabilities 24.1 5,122,353,510 4,303,295,979 - - Borrowings 24.2 6,399,383,982 4,782,246,093 1,192,415,575 1,070,149,192

11,521,737,492 9,085,542,072 1,192,415,575 1,070,149,192

24.1 Lease liabilitiesDiscounted operating lease commitments balance as at April 1, - 3,735,973,062 - -

Opening Balance 4,303,295,979 - - -

Acquisition of subsidiaries 173,096,878 - - -

Adjustment on the lease term and consideration (15,192,666) - - - Amortized interest 406,196,069 361,108,196 - -

Lease rentals paid during the year (4,700,000) (2,000,000) - -

Effect of movement in exchange rate 259,657,250 208,214,721 - -

Net lease liability 5,122,353,510 4,303,295,979 - -

24.2 BorrowingsGross balance as at 01 April 3,933,292,371 2,287,552,021 725,250,000 725,250,000 Acquisition on subsidiaries 901,991,578 - - - Obtained during the year 403,363,083 2,444,987,831 - - Repaid during the year (179,909,580) (938,025,000) - - Effect of movement in exchange rate 184,029,164 138,777,519 - - Gross borrowings as at 31 March 5,242,766,616 3,933,292,371 725,250,000 725,250,000 Loan interest payable 1,156,617,366 848,953,722 467,165,575 344,899,192 Balance as at 31 March 6,399,383,982 4,782,246,093 1,192,415,575 1,070,149,192

Borrowings - current 3,574,110,779 2,610,060,101 1,192,415,575 1,070,149,192 Borrowings - non-current 2,825,273,203 2,172,185,992 - -

6,399,383,982 4,782,246,093 1,192,415,575 1,070,149,192

Analysis of non-current portion of borrowings

Repayable within 3 years 2,100,775,975 1,759,100,308 - - Repayable after 3 years 724,497,228 413,085,684 - -

2,825,273,203 2,172,185,992 - -

24.3 Analysis of loans and borrowingsCurrent 3,312,253,082 2,259,170,015 1,192,415,575 1,070,149,192 Non current 8,209,484,410 6,826,372,057 - -

11,521,737,492 9,085,542,072 1,192,415,575 1,070,149,192


23.1 Revaluation reserve

The revaluation reserve relates to the revaluation surplus of property, plant and equipment. Once the respective revalued items are disposed, the relevant portion of revaluation surplus is transferred to retained earnings.

23.2 Fair value reserve

Fair value reserve represents the cumulative net changes in fair value financial assets until such investments are derecognized or impaired.

23.3 Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

23.4 Capital reserve

Capital reserve wholly consists of the amalgamation reserve arising on amalgamation of Riverina Hotels PLC with Palm Garden Hotels PLC.

58




25 RETIREMENT BENEFIT OBLIGATIONS 25.1 Movement in the present value of the defined

benefit obligationBalance as at 01 April 30,079,780 28,159,460 - - Acquisition of subsidiaries 80,321,259 - - - Benefits paid during the year (6,371,117) (2,320,962) - - Expenditure recognized in profit or loss 25.2 12,894,448 6,516,465 - - Actuarial gains recognized in other comprehensive income (12,441,026) (2,275,183) - -

Transfers during the year (80,000) - - -

Balance as at 31 March 104,403,344 30,079,780 - -

25.2 Expense recognized in profit or lossCurrent service costs 2,140,095 3,418,921 - - Interest costs 10,754,353 3,097,544 - -

12,894,448 6,516,465 - - Actuarial assumptionsGratuity liability is based on the actuarial valuation carried out by Messrs Actuarial and Management Consultants (Pvt) Ltd, as at 31 March 2021. The projected unit credit method has been used for the valuation. The principal assumptions used are as follows.


2021 2020 2021 2020Discount rate 8.0% 10.5% - - Salary increment rate 6.5% 9% - - Staff turnover factor 20% 20% - - Retirement age 55 Years 55 Years - -

It is also assumed that the Group will continue in business as a going concern and the liability is not externally funded.

24.4 Details of the Company's related party loans are as follows;

Lender Relationship Interest rate Carrying amount 2021 2020

Eden Hotel Lanka PLC Subsidiary 16.75% 175,000,000 175,000,000 Browns Investments PLC Intermediate Parent AWPLR + 4.5% 250,250,000 250,250,000 Browns Engineering and Construction (Pvt) Ltd Subsidiary of Ultimate Parent AWPLR + 4.5% 300,000,000 300,000,000

725,250,000 725,250,000 These loans are unsecured and payable on demand.

24.5 Details of the Group's loans are as follows;

Lender Relationship Interest rate Carrying amount 2021 2020

Seylan Bank PLC Associate of Ultimate Parent AWPLR + 2% 790,847,812 838,575,000 Browns & Company PLC Intermediate Parent AWPLR + 4.5% 60,000,000 60,000,000 Browns Investments PLC Intermediate Parent AWPLR + 4.5% 597,627,021 597,627,021 Browns Engineering and Construction (Pvt) Ltd Subsidiary of Immediate Parent AWPLR + 4.5% 600,000,000 600,000,000 Sampath Bank PLC Not applicable 17% 138,982,795 115,900,000 People's Bank Not applicable 9% 2,035,061,146 1,697,612,400 Chain Holdings (Pvt) Ltd Not applicable 7% 28,198,732 23,577,950 LOLC Holdings PLC Ultimate Parent 11% 61,240,901 - B Commodities ME(FZE) Subsidiary of Ultimate Parent 10% 10,407,218 - Hatton National Bank PLC Not applicable AWPLR + 1% 57,243,465 - Hatton National Bank PLC Not applicable 4% 58,833,330 - HSBC Sri Lanka Not applicable GBP LIBOR +2.4 % 322,411,400 - HSBC Sri Lanka Not applicable EURO LIBOR +2.6 % 372,011,640 - Commercial Bank of Ceylon PLC Not applicable 4% 33,333,328 - DFCC Bank PLC Not applicable WAYR + 1 % 61,862,447 - National Development Bank PLC Not applicable 12% 14,705,381 -

5,242,766,616 3,933,292,371

* Asset pledge details related to these borrowings has been disclosed in Note 11.11 (Page 47) and Note 13.3 (Page 49)


59




26 DEFERRED TAX ASSETS AND LIABILITIES

26.1 Recognised deferred tax liabilitiesDeferred tax liabilities are attributable to the origination of following temporary differences:

Property, plant and equipment 3,696,105,452 2,223,929,893 - - Investment property 13,368,000 10,868,000 460,460,000 288,375,000 Revaluation of buildings 6,592,790,686 4,187,000,083 - - Revaluation of reclaimed lands 11,681,879,898 - - - Unutilized tax losses (1,224,716,558) (667,068,603) (460,460,000) (288,375,000)Unrealized loss on exchange (97,976) 119,703,596 - - Retirement benefit obligations (104,403,344) (30,079,779) - - General provisions (7,590,274) - - - Net lease liability (149,141,398) - - - Net taxable temporary difference 20,498,194,486 5,844,353,190 - - Total recognized deferred tax liabilities 2,984,900,400 811,541,906 - -

26.2 Movement in recognised deferred tax liabilitiesBalance as at 01 April 811,541,906 785,450,283 - - Acquisition on subsidiaries 340,506,334 - - - Recognised in statement of profit or loss 26.3 (38,060,357) 18,606,395 - - Effect of movement in exchange rate 93,598,112 - - - Recognised in other comprehensive income 1,777,314,405 7,485,228 - - Balance as at 31 March 2,984,900,400 811,541,906 - -

Deferred tax assets have not been recognised in respect of tax losses carried forward amounted to Rs. 5,501,628,978 as at 31st March 2021 (2019/20 - Rs. 3,088,872,016) , because it is not probable that future tax profits will be available against which the Company can utilize the benefits therefrom.

For the Year Ended of 31st MarchNote


26.3 Deferred tax expenseRecognised in statement of profit or lossReversal of temporary differences (38,060,357) 18,606,395 - -

(38,060,357) 18,606,395 - -

25.3 Sensitivity of the actuarial assumptionsSensitivity analysis on discount rate and salary increment rate to statement of financial position and statement of profit or loss and other comprehensive income.

Assumption Rate change

GROUP COMPANY

Financial Position - Liability

Statement of profit or loss and

OCI - Charge for the period

Financial Position - Liability

Statement of profit or loss

and OCI - Charge for the

periodDiscount rate +1 (4,190,333) 4,190,333 - -

-1 4,560,437 (4,560,437) - - Future salary increases +1 4,296,433 (4,296,433) - -

-1 (4,017,596) 4,017,596 - -

25.4 Maturity analysis of the paymentsThe following payments are expected on employee benefit liabilities in future years


2021 2020 2021 2020Within the next 12 months 18,604,432 6,551,600 - - Between 1 and 2 years 26,988,856 7,903,563 - - Between 2 and 5 years 35,231,691 8,094,194 - - Between 5 and 10 years 18,607,210 5,923,511 - - Beyond 10 years 4,971,155 1,606,912 - - Total expected payments 104,403,344 30,079,780 - -

The Group's weighted average duration of defined benefit obligation is 4.3 years(2019/20 - 4.3 years)


60


As at 31st March GROUP COMPANY

2021 2020 2021 2020 (Rs.) (Rs.) (Rs.) (Rs.)

27 TRADE AND OTHER PAYABLESTrade payables 150,212,363 92,639,948 - - Amounts due to related parties 27.1 14,074,917,310 13,256,707,488 3,545,442,676 1,200,534,776 Retention payable 61,743,018 116,254,036 - - Unclaimed dividends 9,238,803 715,492 - - Advances received 29,206,133 21,089,791 - - Accrued expenses and other payable 294,338,907 185,199,738 1,590,561 1,187,276

14,619,656,534 13,672,606,493 3,547,033,237 1,201,722,052

27.1 Amounts due to related partiesLOLC Holdings PLC 8,669,784,058 6,034,359,803 3,530,321,407 1,186,824,567 Browns Hotels and Resorts Ltd 440,061,305 582,906,043 1,393,917 1,393,917 Eden Hotel Lanka PLC - - 11,534,546 11,551,486 Tropical Villas (Pvt) Ltd 786,730 536,730 - - Excel Restaurants (Pvt) Ltd 78,253 228,125 - - Browns Investments PLC 4,739,030,958 4,811,601,525 - - LOLC Technology Services Ltd 2,210,107 2,361,665 - - LOLC Motors Ltd 18,000 96,435 - - LOLC Finance PLC 10,240 21,011 - - LOLC Corporate Services (Pvt) Ltd 2,452,369 1,613,837 2,192,806 764,806 Brown & Company PLC 108,032,900 1,816,809,350 - - Browns Engineering & Construction (Pvt) Ltd 111,523,892 6,143,627 - - Commercial Leasing & Finance PLC - 29,337 - - LOLC Life Assurance Ltd 928,498 - - -

14,074,917,310 13,256,707,488 3,545,442,676 1,200,534,776

28 CURRENT TAX PAYABLESIncome tax 12,279,243 6,298,933 - - Value Added Tax 1,293,327 459,180 459,180 459,180 Nation Building Tax 184,096 184,096 184,096 184,096 Other taxes 87,914,725 5,555,218 - -

101,671,391 12,497,427 643,276 643,276

29 COMMITMENTS AND CONTINGENCIESRiverina Resorts (Pvt) Ltd and Bodufaru Beach Resort (Pvt) Ltd, which are subsidiaries of Palm Garden Hotels PLC, are currently constructing hotels and the estimated capital commitment pertaining to this are as follows;

As at 31 March 2021 2020 (Rs.) (Rs.)

Approximate amount approved but not contracted for 715,403,765 715,709,015 Approximate amount contracted for but not incurred 3,858,064,590 4,032,423,458

4,573,468,355 4,748,132,473

29.1 There are no material capital commitments and contingent liabilities that require adjustment to or disclosure in the financial statements except for amounts mention above as at 31 March 2021.

30 EVENTS OCCURRING AFTER THE REPORTING DATE

There have been no material events occurring after the reporting date that requires adjustment to or disclosure in the Financial Statements.

31 RELATED PARTY DISCLOSURES

31.1 Transactions with key management personnel

The Group and Company carries out transactions in the ordinary course of business with the parties who are defined as related parties in Sri Lanka Accounting Standard – LKAS 24 (Related Party Disclosures), the details of which are reported below.

Terms and conditions of transactions with related parties The Group and Company carried out transactions in the ordinary course of business with the following related entities. The list of Directors

at each of the subsidiary companies have been disclosed in the Note 31.3.

Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at year end are unsecured and settlement occurs in cash.


61


Recurrent and non-recurrent related party transactions Non- recurrent related party transactions which aggregate value exceeds 10% of the equity or 5% of the total assets whichever is lower

of the Company as per 31 March 2020 audited financial statements, which required additional disclosures in the 2020/21 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13 (c)of the Security Exchange Commission Act.

All the transactions which are disclosed under note 31.2 with Related Parties which are recurrent, and which is necessary for day-to-day operations of the company and subsidiaries, in the opinion of the Related Party Transactions Review Committee, terms for all these transactions are not favourable to the Related Party than those generally available to the public.

Except the above, there were no any recurrent related party transactions which in aggregate value exceeds 10% of the consolidated revenue of the Group as per 31 March 2020 audited financial statements, which required additional disclosures in the 2020/21 Annual Report under Colombo Stock Exchange listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Security Exchange Commission Directive issued under Section 13 (c) of the Security Exchange Commission Act.

Transactions with Key Management Personnel (KMP) According to Sri Lanka Accounting Standard LKAS 24 – ‘Related Party Disclosures’, Key Management Personnel (KMP) are those persons

having authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly, including any Director (whether executive or otherwise) of that entity. Accordingly, the Board of Directors, Director/Chief Executive Officer, Key Employees of the Company holding directorships in subsidiary companies have been classified as Key Management Personnel (KMP) of the Group.

Key management personnel compensation There are no short term employment benefits, long-term employment benefits, post -employment benefits or termination benefits paid to

the Key Management Personnel during the year.

31.2 Transactions with Related Parties The Company carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka

Accounting Standard 24 “Related Party Disclosures”. The Pricing applicable to such transactions are based on the assessment of the risk and pricing model of the Company and is comparable with what is applied to transactions between the Company and its unrelated Customers.

COMPANY

Aggregate value of Related Party

Transactions as a % of Net Revenue/Income

Company Relationship Nature of Transactions

2021 2020 2021 2020 (Rs.) (Rs.) % %

LOLC Holdings PLC Ultimate Parent Fund transfers in 2,132,005,000 8,500,000

> 100% 61%Expenses shared 32,870 104,047 Interest on C/A 211,458,971 167,017,277

Eden Hotel Lanka PLC SubsidiaryInterest on loans 29,312,500 28,211,279

17%10%

Expenses shared 16,940 18,345

Dickwella Resorts (Pvt) Ltd SubsidiaryExpenses shared 16,940 18,345

0.00%0.00%

Fund transfers in 17,812 17,069

Riverina Resorts (Pvt) Ltd SubsidiaryExpenses shared 2,250 117,042

0.94%0.21%

Lease rental income 1,650,000 1,500,000 Fund transfers in - 1,000,000

Sierra Construction (Pvt) Ltd Subsidiary of Ultimate Parent

Expenses shared 443,467 1,485,977 3.55% 0.51%

Written off 6,667,758 -

LOLC Corporate Services (Pvt) Ltd

Subsidiary of Ultimate Parent

Expenses shared 1,428,000 1,602,663 0.81% 0.18%

Fund transfers out - 1,083,183

Browns Investment PLC Intermediate Parent Interest on loans 43,928,522 48,035,159 0.00% 16.58%

Browns Engineering and Construction (Pvt) Ltd

Subsidiary of Ultimate Parent Interest on loans 49,025,361 53,608,473 0.00% 18.5%

LOLC Holdings PLC Ultimate Parent

Fund transfers in 2,314,505,000 344,500,000

> 100% > 100%Fund transfers out 655,302,057 266,666,038 Expenses shared 156,326,555 208,426,774 Interest on C/A 819,894,757 854,964,823

Browns Hotels and Resorts Ltd Immediate Parent

Fund transfers in 119,065,859 -

-19.01% 12.46%Fund transfers out 388,355,772 16,847,910 Expenses shared 49,309,733 83,148,679 Management Fee 11,872,916 23,930,258 Interest on C/A 65,262,526 47,807,056


62


31 RELATED PARTY DISCLOSURES CONT... 31.2 Transactions with Related Parties cont...

GROUP

Aggregate value of Related Party

Transactions as a % of Net Revenue/Income

Company Relationship Nature of Transactions

2021 2020 2021 2020 (Rs.) (Rs.) % %

Browns Investment PLC Intermediate Parent

Fund transfers in 818,705,334 1,133,000,000

-9.66% > 100%Fund transfers out 1,555,476,424 77,500,000

Interest on C/A 673,150,851 631,805,202

Interest income 8,950,328 21,183,892

LOLC Finance PLC Subsidiary of Ultimate Parent

Fund transfers in - 14,072,986

0.00% 0.01%Expenses shared 259,399 452,291

Fund transfers out 270,170 14,633,876

LOLC Technology Services Ltd Subsidiary of Ultimate Parent

Expenses shared 3,881,092 4,805,938 -0.02% 0.14%

Fund transfers out 4,032,650 3,263,726

LOLC Corporate Services (Pvt) Ltd


Expenses shared 3,297,002 3,629,561 0.11% 0.11%

Fund transfers out 2,458,470 2,439,840

Excel Restaurant (Pvt) Ltd Subsidiary of Ultimate Parent

Expenses shared 149,872 4,700 0.02% 0.00%

Fund transfers out 299,744 4,700

Sierra Construction (Pvt) Ltd Subsidiary of Ultimate Parent

Expenses shared 443,467 1,485,977 -0.83% 0.13%

Written off 6,667,758 -

Tropical Villas (Pvt) Ltd Subsidiary of Immediate Parent Expenses shared 49,680 59,880 0.01% 0.01%

LOLC Motors Ltd Subsidiary of Ultimate Parent

Expenses shared 269,560 96,435 -0.01% 0.01%


Brown & Company PLC Intermediate Parent Interest on C/A 185,581,651 342,683,089 > 100% 57.96%

Fund transfers out 1,877,150,248 985,000,000

LOLC Land Holdings Limited Subsidiary of Ultimate Parent Trading - 18,667 0.00% 0.00%

NPH Investments Limited Subsidiary of Immediate Parent

Fund transfers out 52,527,253 329,363,008 17.97% 35.03%

Interest income 82,478,195 58,912,070

Browns Engineering and Construction (Pvt) Ltd


Interest on loans 98,050,722 107,216,946

14.03% 15.64%Supply of service 7,329,543 36,129,575

Fund transfers out - 29,985,948

Commercial Leasing & Finance PLC


Expenses shared 32,918 39,892 0.00% 0.00%


Samudra Beach Resorts (Private) Limited


Expenses shared 9,636,517 -

1.28% 0.00%Fund transfers out 3,288,471 -

Fund transfers in 3,288,471 -

LOLC Life Assurance Ltd Subsidiary of Ultimate Parent Expenses shared 928,498 - 0.12% 0.00%

* Closing balances of above related parties has been disclosed in Note 19.2 (Page 55) and Note 27.1 (Page 60).


63


31.3 Group Companies/Directors

Company Name/Relationship Directors

LOLC Holdings PLC(Ultimate Parent)

I C Nanayakkara, W D K Jayawardena, Mrs. K U Amarasinghe, M D D Pieris, R A Fernando, F K C P N Dias

Brown & Company PLC(Intermediate Parent)

I C Nanayakkara, H P J De Silva, W D K Jayawardena, Mrs. K U Amarasinghe, T. Bandaranayake, D Abeyrathne, Ms. D E Amarasinghe (Alternate Director to Mrs.K U Amarasinghe)

Browns Investments PLC(Intermediate Parent)

I C Nanayakkara, D S K Amarasekera, S Furkhan, Mrs. K U Amarasinghe, W D K Jayawardena, Dr. J M Swaminathan, Ms. D E Amarasinghe (Alternate Director to Mrs.K U Amarasinghe)

Browns Hotels and Resorts Ltd(Immediate Parent) K A K P Gunawardena, Mrs. V G S S Kotakadeniya,J B W Kelegama, D S K Amarasekera

Eden Hotel Lanka PLC(Subsidiary)

W D K Jayawardena, Mrs. K U Amarasinghe, D S K Amarasekera, M T A Furkhan, S Furkhan, Dr. J M Swaminathan

Dickwella Resorts (Pvt) Ltd(Subsidiary) J B W Kelegama, P D G Jayasena

Tropical Villas (Pvt) Ltd(Subsidiary of Immediate Parent) D S K Amarasekera, J B W Kelegama, P D G Jayasena

Riverina Resorts (Pvt) Ltd(Subsidiary) W D K Jayawardena, Mrs. K U Amarasinghe, D S K Amarasekera, K A K P Gunawardena

Green Paradise (Pvt) Ltd(Subsidiary) D S K Amarasekera, Mrs. K U Amarasinghe, K A K P Gunawardena

Sun & Fun Resorts Ltd(Subsidiary) C Melappati, V K Vemuru, D S K Amarasekera, K A K P Gunawardena, T Selviah

Serendib Hotels PLC(Subsidiary)

W D K Jayawardena, Mrs. K U Amarasinghe, Dr. J M Swaminathan, D S K Amarasekera, J P S Kurumbalapitiya, W A T M Wijesinghe, S A Chojnacki, E J D Rajakarier

Dolphin Hotels PLC(Subsidiary)

W D K Jayawardena, Mrs. K U Amarasinghe, Dr. J M Swaminathan, D S K Amarasekera, J P S Kurumbalapitiya, B S M De Silva, A R Gamage, L D K B Gamage (Alternate Director to A R Gamage)

Sigiriya Hotels PLC(Subsidiary)

W D K Jayawardena, Mrs. K U Amarasinghe, Dr. J M Swaminathan, D S K Amarasekera, J P S Kurumbalapitiya, B S M De Silva, A R Gamage, L D K B Gamage (Alternate Director to A R Gamage)

Serendib Leisure Management Limited(Subsidiary)

K A K P Gunawardena, Mrs. K U Amarasinghe, Dr. J M Swaminathan, D S K Amarasekera, J P S Kurumbalapitiya, E J D Rajakarier

Frontier Capital Lanka (Private) Limited(Subsidiary)

K A K P Gunawardena, Mrs. K U Amarasinghe, Dr. J M Swaminathan, D S K Amarasekera, J P S Kurumbalapitiya

Sanctuary Resorts Lanka (Private) Limited(Subsidiary)

K A K P Gunawardena, Mrs. K U Amarasinghe, Dr. J M Swaminathan, D S K Amarasekera, J P S Kurumbalapitiya

Bodufaru Beach Resort (Pvt) Ltd(Subsidiary) D S K Amarasekera, K A K P Gunawardena, M Niham

Browns Ari Resort (Pvt) Ltd(Subsidiary) I C Nanayakkara, D S K Amarasekera, K A K P Gunawardena, M Niham, S Mohmed

Browns Raa Resort (Pvt) Ltd(Subsidiary) I C Nanayakkara, D S K Amarasekera, K A K P Gunawardena, M Niham

Browns Kaafu N Resort (Pvt) Ltd(Subsidiary) I C Nanayakkara, D S K Amarasekera, O A Razzak

31.4 Related party transactions exceeding 10% of the equity or 5% of the total assets of the entity as per audited financial statements, whichever is lower.

There are no related party transactions those require specified disclosure in accordance with the continuing listing requirements of Colombo Stock Exchange.


32 VALUATION OF FINANCIAL INSTRUMENTS 32.1 Fair Value Hierarchy

The Group’s accounting policy on fair value measurements is discussed in accounting policy Note 3.27

Group Note

Level 1 Level 2 Level 3 Total As at 31 March 2021 (Rs.) (Rs.) (Rs.) (Rs.)

Other financial assetsTrading assets - Fair Value Throgh Profit or Loss 16 4,503,151 - - 4,503,151 Investment securities 17 - - 563,904,795 563,904,795

4,503,151 - 563,904,795 568,407,946

64



32 VALUATION OF FINANCIAL INSTRUMENTS CONT... 32.1 Fair value hierarchy contd...

Group Level 1 Level 2 Level 3 Total As at 31 March 2020 (Rs.) (Rs.) (Rs.) (Rs.)

Other financial assetsTrading assets - Fair Value Throgh Profit or Loss 16 - 2,550,936 - 2,550,936 Investment securities 17 - - 285,154,934 285,154,934

- 285,154,934 287,705,870

All the listed equity instruments were transferred from level 1 to level 2 as at 31 March 2020 as it shows factors which are indicative of an inactive market due to COVID 19 pandemic. There was a significant decline in the world equity market and the share prices did not reflect the accurate fair value of the instrument. Hence management decided to recognize all its listed equity instruments in level 2.

Company Level 1 Level 2 Level 3 Total As at 31 March 2021 (Rs.) (Rs.) (Rs.) (Rs.)

Other financial assetsTrading assets - Fair Value Throgh Profit or Loss 16 3,177,586 - - 3,177,586 Investment securities 17 - - 218,300,490 218,300,490

3,177,586 - 218,300,490 221,478,076

Company Note

Level 1 Level 2 Level 3 Total As at 31 March 2020 (Rs.) (Rs.) (Rs.) (Rs.)

Other financial assetsTrading assets - Fair Value Throgh Profit or Loss 16 - 1,898,096 - 1,898,096 Investment securities 17 - - 142,606,812 142,606,812

- 1,898,096 142,606,812 144,504,908

All the listed equity instruments were transferred from level 1 to level 2 as at 31 March 2020 as it shows factors which are indicative of an inactive market due to COVID 19 pandemic. There was a significant decline in the world equity market and the share prices did not reflect the accurate fair value of the instrument. Hence management decided to recognize all its listed equity instruments in level 2

32.2 Financial instruments not measured at fair value

As at 31st March Note

GROUP COMPANY 2021 2020 2021 2020

Carrying amount

Carrying amount

Carrying amount

Carrying amount

Rs. Rs. Rs. Rs.Financial assetsTrade receivables 19.1 75,471,756 315,531,865 - - Amounts due from related parties 19.2 1,167,090,000 1,124,639,172 2,941,257 7,514,170 Cash and cash equivalents 21.1 809,154,703 475,903,846 2,514,474 1,825,084

2,051,716,459 1,916,074,883 5,455,731 9,339,254 Financial liabilitiesTrade payables 27 150,212,363 92,639,948 - - Amounts due to related parties 27.1 14,074,917,310 13,256,707,488 3,545,442,676 1,200,534,776 Retention payable 27 61,743,018 116,254,036 - - Interest bearing borrowings 24 11,521,737,492 9,085,542,072 1,192,415,575 1,070,149,192 Bank overdrafts 21.2 57,825,974 53,850,771 - -

25,866,436,157 22,604,994,315 4,737,858,251 2,270,683,968

There are various limitations inherent in this fair value disclosure particularly where prices may not represent the underlying value due to dislocation in the market. Not all the Group’s financial instruments can be exchanged in an active market. The Group obtains the fair values for investment securities from quoted market prices where available. Where securities are unlisted and quoted prices are not available, the Group obtains the fair values using other valuation techniques that are commonly used by market participants.

The following table shows the valuation techniques used by the Group in measuring Level 3 fair value together with significant observable and unobservable inputs.

Asset Valuation technique Significant observable & unobservable

inputs Sensitivity of the input to the fair value

Investment securities Net asset basis Carrying value of the assets and liabilities adjusted for market participants

assumptions.

Variability of inputs are insignificant to have an impact on fair value.

65


33 MATURITY ANALYSIS OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES 33.1 Maturity analysis of financial assets-Group

For the year ended 31 March 2021

NoteCarrying amount

Gross cash inflow

Less than 1 month

1-3 months 4 - 12 months 13 - 60 monthsMore than 60

months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) Assets

Cash and cash equivalents 21.1 809,154,703 809,154,703 809,154,703 - - - - Other financial assets

Trading assets - Fair Value Throgh Profit or Loss

16 4,503,151 4,503,151 - - - 4,503,151 -

Investment securities 17 583,808,795 583,808,795 - - - 583,808,795 -

Trade and other receivableFinancial assets 19 1,244,591,941 1,244,591,941 169,213,691 88,941,705 986,436,545 - -

2,642,058,590 2,642,058,590 978,368,394 88,941,705 986,436,545 588,311,946 -


Note Carrying amount

Gross cash inflow

Less than 1 month


months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) AssetsCash and cash equivalents 21.1 475,903,846 475,903,846 475,903,846 - - - -

Other financial assets

Trading assets - Fair Value Throgh Profit or Loss

16 2,550,936 2,550,936 - - - 2,550,936 -

Investment securities 17 303,114,934 303,114,934 - - - 303,114,934 - Trade and other receivableFinancial assets 19 1,442,113,860 1,442,113,860 88,518,629 153,143,262 1,200,451,969 - -

2,223,683,576 2,223,683,576 564,422,475 153,143,262 1,200,451,969 305,665,870 -

33.2 Maturity analysis of financial liabilities-Group



Gross cash outflow

Less than 1 month


months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) Liabilities

Bank overdrafts 21.2 57,825,974 57,825,974 57,825,974 - - - -

Loans and borrowings

Operating lease obligations

24.1 5,122,353,510 5,122,353,510 - - 213,712,599 1,747,566,829 3,161,074,082

Borrowings 24.2 6,399,383,982 6,399,383,982 3,611,113 32,657,975 479,554,104 2,938,995,864 2,944,564,927

Financial liabilities 27 14,286,872,691 14,286,872,691 174,130,457 98,016,765 14,014,725,468 - -

25,866,436,157 25,866,436,157 235,567,544 130,674,740 14,707,992,172 4,686,562,693 6,105,639,009



Gross cash outflow

Less than 1 month


months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

Liabilities

Bank overdrafts 21.2 53,850,771 53,850,771 53,850,771 - - - -


Operating lease obligations

24.1 4,303,295,979 4,303,295,979 - - 51,155,674 1,186,740,100 3,065,400,205

Borrowings 24.2 4,782,246,093 4,782,246,093 - 37,582,114 2,572,477,987 2,172,185,992 -

Financial liabilities 27 13,465,601,472 13,465,601,472 14,755,771 66,946,067 13,383,899,634 - -

22,604,994,315 22,604,994,315 68,606,542 104,528,181 16,007,533,295 3,358,926,092 3,065,400,205


66


33 MATURITY ANALYSIS OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES CONT...

33.1 Maturity analysis of financial assets-Company

For the year ended 31 March 2021 Note

Carrying amount

Gross cash inflow / (outflow)

Less than 1 month

1-3 months

4 - 12 months

13 - 60 months

More than 60 months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

AssetsCash and cash equivalents 21.1 2,649,885 2,649,885 2,649,885 - - - -

Other financial assetsTrading assets - Fair Value Throgh Profit or Loss

16 3,177,586 3,177,586 - - - 3,177,586 -

Investment securities 17 218,300,490 218,300,490 - - - 218,300,490 -

Trade and other receivableFinancial Assets 19 2,941,257 2,941,257 - - 2,941,257 - -

227,069,218 227,069,218 2,649,885 - 2,941,257 221,478,076 -


Carrying amount

Gross cash inflow/

(outflow)

Less than 1 month

1-3 months

4 - 12 months

13 - 60 months

More than 60 months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

AssetsCash and cash equivalents 21.1 1,960,495 1,960,495 1,960,495 - - - - Other financial assetsTrading assets - Fair Value Throgh Profit or Loss

16 1,898,096 1,898,096 - - - 1,898,096 -

Investment securities 17 142,606,812 142,606,812 - - - 142,606,812 - Trade and other receivableFinancial Assets 19 7,514,170 7,514,170 - - 7,514,170 - -

153,979,573 153,979,573 1,960,495 - 7,514,170 144,504,908 -

33.2 Maturity analysis of financial liabilities-Company


Carrying amount

Gross cash inflow/

(outflow)

Less than 1 month

1-3 months

4 - 12 months

13 - 60 months

More than 60 months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

Liabilities


Borrowings 24.2 1,192,415,575 1,192,415,575 - - 1,192,415,575 - -

Financial liabilities 27 3,545,442,676 3,545,442,676 193,975 - 3,545,248,701 - -

4,737,858,251 4,737,858,251 193,975 - 4,737,664,276 - -


Carrying amount

Gross cash inflow/

(outflow)

Less than 1 month

1-3 months

4 - 12 months

13 - 60 months

More than 60 months

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

Liabilities


Borrowings 24.2 1,070,149,192 1,070,149,192 - - 1,070,149,192 - -

Financial liabilities 27 1,200,534,776 1,200,534,776 14,118 1,173,159 1,199,347,499 - -

2,270,683,968 2,270,683,968 14,118 1,173,159 2,269,496,691 - -


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34 FINANCIAL RISK MANAGEMENT – GROUP AND COMPANY

The group has exposure to the following risks from financial instruments:

1. Credit risk2. Liquidity risk 3. Market risk

This note presents information about the group’s exposure to each of the above risks, the group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the group’s risk management framework. The Board has established the audit committee, which is responsible for developing and monitoring risk management policies in their specified areas. All Board committees have both executive and non-executive members and report regularly to the Board of Directors on their activities.

The group’s risk management policies are established to identify and analyze the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations.

The company audit committee is responsible for monitoring compliance with the group’s risk management policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the group. The company audit committee is assisted in these functions by enterprise risk management division (ERM).

1 Credit risk

Credit risk is the risk of financial loss to the group if a customer or counterparty fails to meet its contractual obligations. For risk management reporting purposes, the group considers and consolidates all elements of credit risk exposure.

The group’s/company’s maximum exposure to credit risk on trade receivables as at the year-end based on the carrying value in the statement of financial position is given below.

As at 31st

March


Trade receivables

108,414,940 344,152,764 - -

Impairment (32,943,184) (28,620,899) - -

75,471,756 315,531,865 - -

The creditworthiness of each customer is evaluated prior to sanctioning credit facilities. Appropriate procedure for follow-up and recovery are in place to monitor credit risk.

Age analysis of trade receivables:

As at 31st March

GROUP COMPANY2021 2020 2021 2020

(Rs.) (Rs.) (Rs.) (Rs.)

0-60 days 432,629 182,785,652 - -

61 to 180 days 12,666 69,869,495 - -

181 to 365 days - 39,305,432 - -

Over 365 days 107,969,645 52,192,185 - -

Gross Trade receivables

108,414,940 344,152,764 - -

Impairment (32,943,184) (28,620,899) - -

Net Trade receivables

75,471,756 315,531,865 - -

Management of credit risk

The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers various statistics and characteristics of the customer base, including the default risk, business relationships with due attention given to past performances, stability in the industry and creditworthiness, as these factors may have an influence on credit risk.

In monitoring customer credit risk, customers are grouped according to their business volumes and consider separately for granting credit limits. Based on the volume of the transaction and based on the relationship, the customers are ranked. For the customers who identified as "High Risks Customers", sales are made once they made an advance or full payment.

The group has established a credit policy under which each new customer is analyzed individually for credit worthiness. Credit limits are established for each customer and these limits are reviewed frequently.

The following steps also taken to reduce the credit risk.

1) Outstanding credits are followed up on a daily basis.

2) Steps taken to obtain advances from travel agents and tour operators wherever possible.

3) Opting for legal action for customers defaulting settlements.

Regular audits of hotel and company credit processes are undertaken by ERM.

Impairment

Trade receivables are written off where there are no reasonable expectations of recovery. Indication that there is no reasonable expectation of recovery include, among others, the failure of a debtor to engage in a repayment plan with the Company and a failure to make contractual payments for a period of greater than 365 days. Group applies the SLFRS 9 simplified approach to measure the expected credit loss which uses a lifetime expected loss allowance for all trade receivables.

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The group limits its exposure to credit risk on bank balances by maintaining balances with reputable and credit worthy banks having high credit ratings.

Bank of Ceylon - AA - (lka) Nations Trust Bank PLC - A (lka) Cargills Bank PLC - AA - (lka) Sampath Bank PLC - AA - (lka) Citi Bank N.A - A + (lka) Seylan Bank PLC - A (lka) National Development Bank PLC - A + (lka) Hatton National Bank PLC - AA - (lka)

2 Liquidity risk

Liquidity risk is the risk that the group will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Management of liquidity risk

The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

The group/company continuously prepares and monitors rolling cash flow forecasts to ensure it has sufficient cash to meet operational needs. Regular reviews are also carried out to check actual performance against budgeted targets.

As at the reporting date, the group has a higher liability in relation to the external borrowings. This is mainly due to the new loan obtained from Seylan Bank and People’s Bank and intercompany borrowings, financing the increase in investment into leisure sector locally and Maldives, apart from that short term loans obtained to meet the working capital requirements of group companies.


2021 2020 2021 2020(Rs.) (Rs.) (Rs.) (Rs.)

Non current portion of loans and borrowings 2,825,273,203 2,172,185,992 - -

Non current portion of operating lease liabilities 4,908,640,911 4,252,140,305 - -

Trade payables 150,212,363 92,639,948 - -

Current portion of loans and borrowings 3,574,110,779 2,610,060,101 1,192,415,575 1,070,149,192

Current portion of operating lease liabilities 213,712,599 51,155,674 - -

Bank overdrafts 57,825,979 53,850,771 - -

In the maturity analysis disclosure, contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements has been disclosed.

3 Market Risk

Market risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s/issuer’s credit standing) will affect the group’s income or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.

The group being involved in hoteliering operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect of the US dollar, UK pound and Euro. More than 90% of room contracts are entered into in foreign currencies and invoiced in SLR using the conversion rates established by the industry. Purchases such as import of capital goods for hotel operations are also transacted in foreign currency.

In order to reduce the foreign exchange risk, the group implements the following strategies.

1) Negotiation of room rates and enters into agreements in strong currencies.

2) Matching inflows and outflows of the same currency to the extent that is permitted by prevailing laws.

3) Monitors exchange rates on a daily basis and use best rates for foreign currency conversions.

Sensitivity analysis - Foreign exchange risk

Foreign exchange risk arises from recognised assets and liabilities that are denominated in currencies other than Sri Lankan Rupees. If Sri Lankan Rupee weakened/strengthen by 5% against the US dollar with all other variables held consistent, the post tax loss for the year would have been Rs. 19,096,950 higher/lower, total comprehensive income and total equity would have been Rs. 19,096,950 higher/ lower.

Interest rate risk

Interest rate risk is the risk of fluctuation of the value or cash flows of an instrument due to changes in the market interest rates.

In order to reduce the Interest rate risk, the group implements the following strategies.

1) Debt has been structured through fixed interest rates in order to manage the volatility in the market.

2) Proper mechanism to monitor the fluctuations in interest rates.

3) Work towards the low gearing ratio.

4) Internal funding sources rather than the external funding sources.

Variable rate instruments

Related party borrowings are at AWPLR plus a margin of 4.5%.

Management is of the view that the Group’s exposure to interest rate risk is minimal as Group does not expect significant changes in AWPLR.

Carrying amounts of these loans has been disclosed in loans & borrowings note.


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35 OPERATIONAL RISK

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the group’s involvement with regard to operational activities, including processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior.

The group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management. This responsibility is supported by the development of overall standards for the management of operational risk in the following areas:

1) Requirements for appropriate segregation of duties, including the independent authorization of transactions;

2) Requirements for the reconciliation and monitoring of transactions;

3) Compliance with regulatory and other legal requirements;

4) Documentation of controls and procedures;

5) Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;

6) Requirements for the reporting of operational losses and proposed remedial action;

7) Development of contingency plans;

8) Training and professional development; and

9) Ethical and business standards

36 CAPITAL MANAGEMENT

The Groups objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of the capital.

The capital of the company consists of the following

Equity Capital• Ordinary share capital

Debt• Long term borrowings• Short term borrowings

The Group monitors capital on the basis of the debt to equity ratio. The following factors are also objectively taken into consideration in managing capital of the Group.

1) Maintain sufficient capital to meet minimum regulatory requirements (Companies Act).

2) Maintain strong equity base as opposed to debt capital Group's future developments, investments and business strategies.

3. Group further developments, investment and business strategies.

37 COVID 19 IMPACT ON BUSINESS

COVID-19 pandemic has resulted in a substantive shift in management’s focus towards ensuring the continued safety of people, connectivity of customers, compliance with guidelines issued by various government authorities and continuity of critical business operations.

The outbreak and the associated developments impacted the business, our customers and staff due to restrictions on movement and economic slowdown. Due to lock down, credit extensions are provided


to keep customers connected. The current unprecedented situation is yet evolving and the future impact will heavily depend on the time taken for economic activity to rebound to pre- COVID-19 levels. The overall impact on consumer spending and the recovery of the country’s enterprises will also be key determinants of future impact on our business.

Based on present trends, we expect an impact on the Group’s financial performance and financial position.

In March 2020, each company in the group evaluated the resilience of its businesses considering a wide range of factors under multiple stress tested scenarios, relating to expected revenue streams, cost management, profitability, the ability to defer non-essential capital expenditure, debt repayment schedules, if any, cash reserves and potential sources of financing facilities, if required, and the ability to continue providing services to ensure businesses continue as least impacted as possible.

Group hotels were temporarily suspended its commercial operations during the lock down period. Europe, Russia, India, China, UK, Germany are the main market segments for these hotels. The management has considered the short term to medium term strategies for all the properties and is currently in the process of operating these properties as quarantine hotels which will support cash flows. The management is in constant dialog with foreign tour operators and local destination management companies, to ascertain the current market conditions of the target market segments. Even though the industry is having a temporary drawback, those local and foreign tour operators are positive for the medium term with possible opening of airports. Resumption of operations in the inbound travel sector will depend on commencement of international travel and the stability of the key source markets.

Due to Group’s investment in technology most of the key staff were able to manage their functions from home with secured access to operating systems even during the lock down period and thereafter.

The Group expects the economy to revive with the resumption of business activities where the Group is already seeing positive momentum. Given the volatile and evolving landscape, the Group will continue to monitor the impacts on its operations and pro-actively take measures to ensure the business continues as seamlessly as possible.

38 GOING CONCERN

The Company incurred a net loss of Rs. 170,422,874 (2020: Rs. 17,408,397) during the year ended 31 March 2021. The Company's current liabilities exceeded current liabilities by Rs. 4,720,979,324 (2020: Rs. 2,249,519,101) as at 31 March 2021. In determining the basis of preparing the financial statements for the year ended 31 March 2021, based on available information, the management has assessed the existing and anticipated effects of COVID-19 on the Group Companies and the appropriateness of the use of the going concern basis.

Having critically scrutinized the outlook of the industry and after due consideration of the range and the probability of outcomes, the Palm Garden Hotels Board is satisfied that the Company with its subsidiaries have adequate resources along with the financial support of the ultimate parent company LOLC Holdings PLC to continue in operational existence for the foreseeable future and therefore shall continue to adopt the going concern basis in preparing and presenting these financial statements.

In the meantime, management is in the process of evaluating several options for capital restructure in order to de-leverage the gearing position of the Company & the Group. The Directors are confident that the Group would return to profitability, and the net current liability position would improve as a result of the aforementioned capital restructure. Furthermore, the Company is supported with continuous financial assistance by the ultimate parent company, LOLC Holdings PLC, in the event the Company or Group requires such assistance in the short term.

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Statement of Profit or Loss and Other Comprehensive Income (Rs.'000)

For the 3 months ended2020/2021

30th-Jun 30th-Sep 31st-Dec 31st-Mar

Gross income - - - -

Cost of sale - - - -

Other income/ (expenses) 655 811 504 173,299

Other operating expenses (788) (1,644) (8,140) (1,409)

Results from operating activities (133) (834) (7,637) 171,891

Net finance expenses (74,818) (70,598) (72,431) (115,863)

Loss before income tax expense (74,951) (71,431) (80,068) 56,028

Income tax expense - - - -

Loss after tax (74,951) (71,431) (80,068) 56,028

Statement of Financial Position (Rs.'000)

As at30th-Jun 30th-Sep 31st-Dec 31st-Mar

Assets 5,396,088 5,396,805 7,518,383 7,767,610

Liabilities 2,348,792 2,420,940 4,622,586 4,740,092

Net assets 3,047,296 2,975,865 2,895,797 3,027,518

Share capital 2,436,091 2,436,091 2,436,091 2,436,091

Reserves 611,205 539,774 459,706 591,427

Share capital and reserves 3,047,296 2,975,865 2,895,797 3,027,518

For the year ended 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21

Rs."000" Rs."000" Rs."000" Rs."000" Rs."000" Rs."000" Rs."000" Rs."000" Rs."000" Rs."000"

Turnover (Gross) 10,343 - - - - - - - - -

Add: Other income 9,594 4,141 8,164 674 350 19,296 289,061 1,185 289,710 175,269

19,937 4,141 8,164 674 350 19,296 289,061 1,185 289,710 175,269

Less: Value of bought outMaterials and services (251,363) (219,453) (13,110) (25,100) (2,479) (12,766) (4,277) (6,064) (5,189) (11,966)

Value Added (231,426) (215,312) (4,946) (24,426) (2,129) 6,530 284,784 (4,879) 284,521 163,302

Distributed as follows

To employees as remuneration

46,083 114,675 49 - - - - - - -

To government as taxes

2,051 - - - 20 46 26 - - -

To providers of loan capital

76,654 156,218 169,191 138,984 30,910 118,972 167,267 266,040 301,963 333,725

To shareholders - - - - - - - - - -

To business growth (356,214) (486,205) (174,187) (163,410) (33,059) (112,489) 117,490 (270,919) (17,442) (170,423)

(231,426) (215,312) (4,946) (24,426) (2,129) 6,530 284,784 (4,879) 284,521 163,302

SUMMARIZEDQUARTERLY STATISTICS .......

STATEMENT OF VALUE ADDED .......

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NOTICE OF MEETING .......

NOTICE IS HEREBY GIVEN THAT THE FORTY SEVENTH ANNUAL GENERAL MEETING of the Company will be held on 23rd September 2021 at 10.00 a.m. as an on-line audio-visual meeting with arrangements for the on-line meeting platform made at the registered office of the Company at No.100/1, Sri Jayawardenapura Mawatha, Rajagiriya, for the following purposes :

ORDINARY BUSINESS

1. To receive and consider the Report of the Directors and Statement of Accounts for the year ended 31st March 2021 with the Report of the Auditors thereon.

2. To re-elect as a Director Mr. D S K Amarasekera who retires by rotation in terms of Article 86 of the Articles of Association of the Company.

3. To re-elect as a Director Dr. J M Swaminathan who retires in terms of Section 210 of the Companies Act No. 7 of 2007. Special Notice has been received from a shareholder of the intention to pass a resolution which is set out below in relation to his re-election (see note 4 (a) below).

4. To re-appoint M/s PricewaterhouseCoopers, Chartered Accountants as External Auditors of the Company for the ensuing year at a remuneration to be agreed by the Directors.

5. To approve in terms of the Companies (Donations) Act No.26 of 1951, the making of donations by the Directors as determined by them for the current Financial Year and until the next Annual General Meeting of the Company.

By order of the Board

PALM GARDEN HOTELS PLC

LOLC CORPORATE SERVICES (PVT) LTD

Secretaries

30 August 2021

Rajagiriya (in the greater Colombo)

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NOTE:

1) A member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and vote instead of him/her. A Proxy need not be a shareholder of the Company.

2) The completed Form of Proxy should be received by the Company at its Secretaries’ office No. 100/1, Sri Jayawardenapura Mawatha, Rajagiriya not later than forty eight (48) hours before the start of the meeting.

3) A Form of Proxy accompanies this Notice.

4) IMPORTANT NOTICE:

(a) **Special Notice was received by the Company from a shareholder of the Company giving Notice of intention to move the following Resolution at the above Annual General Meeting :

“Resolved that Dr. J. M. Swaminathan who reached the age of 70 years in 2011, be and is hereby re-elected a Director of the Company and it is further specifically declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Dr. J. M. Swaminathan.”

(b) This year the Annual Report and Financial Statements of the Company are available on the:

(1) Corporate Website – https://lolc.com/palm-garden-hotels-annual-reports

(2) The Colombo Stock Exchange – https://www.cse.lk/pages/companyprofile/company profile.component. html?symbol =PALM.N0000

Members may also access the Annual Report and Financial Statements on their electronic devices by scanning the following QR code:

For clarifications on how to download and/or access the Annual Report and Financial Statements, please contact Dunisha on 011 5880359 during normal office hours (8.30 a.m. to 5.00 p.m.) or email [email protected]

Should Members wish to obtain a hard copy of the Annual Report, they may send a written request to the registered office of the Company by filling the request form attached to the Form of Proxy. A printed copy of the Annual Report will be forwarded by the Company within eight (8) market days from the date of receipt of the request.

In the event the Company is required to take any further action in relation to the Meeting, in the best interests of the Meeting attendees due to the COVID-19 pandemic; and/or any communications, guidelines, directives or orders issued by the Government of Sri Lanka, Notice of such action shall be given by way of an announcement to the Colombo Stock Exchange and publication on the Company website -

https://lolc.com/palm-garden-hotels-annual-reports

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PALM GARDEN HOTELS PLCFORM OF PROXY

I/We ………………………………………………………………………………………………………………………………………………………………………………………… of ………………………………………….………………………………… being a member/members of the above named Company hereby appoint …………………………………………………………….……………………………… of …………………………………………………………………whom failing;

Waduthanthri Darshan Kapila Jayawardena of Colombo or failing him

Mrs. Kalsha Upekha Amarasinghe of Colombo or failing her

Don Soshan Kamantha Amarasekera of Colombo or failing him

Dr. Jayanta Mootatamby Swaminathan of Colombo

as my/our proxy to represent me/us and vote on my/our behalf at the Forty Seventh Annual General Meeting of the Company to be held on 23rd September 2021 at 10.00 a.m.and any adjournment thereof and at every poll which may be taken in consequence of the aforesaid Meeting.

FOR AGAINST

1 To re-elect as a Director Mr. D S K Amarasinghe who retires by rotation in terms of Articles 86 of the Article of Association of the Company.

2 To re-elect as a Director Dr. J. M. Swaminathan, who retires in terms of Section 210 of the Companies Act No. 7 of 2007..

3 To re-appoint M/s PricewaterhouseCoopers, Chartered Accountants as External Auditors of the Company for the ensuing year at a remuneration to be agreed by the Directors.

4 To authorize the Directors to make donations

Dated this ………………… day of …………………….2021

……………………………………

Signature of Shareholder

74


74

NOTE:

1) A proxy need not be a member of the company

2) Instruction as to completion appear below

INSTRUCTIONS AS TO COMPLETION

1 1 Please return the completed Form of Proxy after filling in legibly your full name and address, signing on the space provided and filling in the date of signature.

2 The completed Form of Proxy should either be:

(i) addressed to the ‘Company Secretary’ and posted or hand delivered to the registered office of the Company at 100/1, Sri Jayawardenapura Mawatha, Rajagiriya;

or

(ii) Scanned and emailed to the email address: [email protected] with the email subject titled “PALM AGM PROXY” not less than 48 hours before the time appointed for the holding of the Meeting.

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To: LOLC Corporate Services (Pvt) Ltd Secretaries to Palm Garden Hotels PLC 100/1, Sri Jayewardenapura Mawatha, Rajagiriya

Details of shareholder

1 Full name 1. Primary : Primary :

2. Joint * :

2 Address/s

3National Identify Card number/ Company Registration number

4 CDS Account number/s

5 Contact number/s Land line (residence/work): Mobile:

6Email address/s (to which the on-line meeting link should be forwarded by the Company)

8 Name of the Proxy Holder

9 Proxy holder/s’ NIC/Passport No.

10 Proxy holder/s’ Contact number/s

11 Proxy holder/s’ email

*strike out if not applicable

I/We hereby certify that the details given above are true and accurate and are furnished for the purpose of enabling my/our online participation at the Annual General Meeting. I/We acknowledge that the Company shall have the right to disable my/our participation in the event the above information furnished are found to be incorrect or inconsistent with shareholding records.

…………………………../…………………. …………………………../………………….

Shareholder’s signature & Date Shareholder’s signature & Date

Note:

1. It is mandatory for the shareholder/s to provide the email address in the space provided above in order to forward the log in information to facilitate the online participation at the meeting

2. Duly completed registration of Shareholder Details Form should be forwarded to [email protected] or by facsimile on 011-2865602, to reach the Company Secretaries not less than five (05) days before the date of the meeting.

Only registered shareholders and registered proxy holders will be permitted to log in and participate in the AGM on-line

47TH ANNUAL GENERAL MEETING

REGISTRATION OF SHAREHOLDER DETAILS FOR ONLINE PARTICIPATION

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NOTES

palm garden hotels plc annual report 2020 - 2021

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