Annual Report of the Board of Directors on the Affairs of the Company

The Directors of The Lighthouse Hotel PLC present their Report together with the Audited Financial Statements of the Company for the year ended 31st March, 2013.

The details set out herein provide the pertinent information required by the Companies Act No. 07 of 2007, Listing Rules of the Colombo Stock Exchange and are guided by recommended best accounting practices.

Review of the Year

The Chairman’s Message and, the Management Discussion and Analysis describes the year’s operations, financial performance, sustainability review and details of the future development of the Company.

The Principal Activity of the Company

The principal activity of the Company is hoteliering and there has been no change in the nature of such activity during the year.

Financial Statements

The Financial Statements of the Company duly signed by Directors are given in Financial Reports of this Annual Report.

Auditors’ Report

The Auditors’ Report on the financial statements is given in the Financial Reports.

Accounting Policies

The accounting policies adopted by the Company in the preparation of financial statements are given in Notes to the Financial Statements of this Annual Report.

These Financial Statements for the year ended 31st March, 2013 are the first the Company has prepared in accordance with SLFRS’ effective periods beginning on or after 1st January, 2012. Subject to certain transition elections and exceptions disclosed in Note 2.5, the Company has consistently applied the accounting policies used in preparation of its opening SLFRS statement of financial position at 1st April, 2011 through all periods presented, as if these policies had always been in effect. Note 2.5 discloses the impact of the transition to SLFRS on the Company’s reported financial position and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company’s financial statements for the year ended 31st March, 2012 prepared under SLAS.

Interests Register

Directors’ Interests in Transactions

The Directors of the Company have made the general disclosures provided for in Section 192 (2) of the Companies Act No. 07 of 2007. The related party disclosures and the Directors of each of those related parties are given in Related Company Transactions respectively.

Directors’ Interests in Shares

There were no changes in the Directors’ shareholdings during the year.

Jetwing Eco Holidays (Pvt) Ltd., of which Messrs N.J.H.M. Cooray, R.A.E. Samarasinghe and C.S.R.S. Anthony are also Directors, purchased 292,499 shares in the Company during the year.

Directors’ Remuneration

The aggregate emoluments paid to the Non-Executive Directors during the year, amounted to Rs. 1,650,000/- is reflected in Note 23.1 to the Financial Statements.

Insurance and Indemnity

The Company has obtained a Corporate Guard insurance policy from CHARTIS Insurance Ltd. to indemnify Directors and Officers (D&O) of the Company. The policy is extended worldwide excluding USA and Canada with a total cover of Rs. 25,000,000/-. The premium is Rs. 507,178/- +Taxes.

Directors’ Shareholding

Directors	Directors’ Direct Shareholding
	As at 31st March, 2013	As at 1st April, 2012
Mr. N.J.H.M. Cooray	748,803	748,803
Ms. N.T.M.S. Cooray	789,803	789,803
Mr. R.A.E. Samarasinghe	50,000	50,000
Mr. C.S.R.S.Anthony	1,000	1,000
Mr. R. de Silva	10,000	10,000
Mr. A.T.P. Edirisinghe	1,000	1,000

Donations

At the last Annual General Meeting shareholders authorized Directors to determine contributions to donations. The donations given during the year amounted to Rs. 620,834/-.

Directorate

Names of the Directors who held office during the financial year are given below:

Executive Directors

Mr. N.J.H.M. Cooray (Chairman), Mr. R.A.E. Samarasinghe (Managing Director), Mr. C.S.R.S. Anthony.

Non-Executive Directors

Ms. N.T.M.S. Cooray, Ms. A.M. Ondaatjie.

Non-Executive Independent Directors

Mr. N. Wadugodapitiya, Mr. V.K. Wickremasinghe (resigned w.e.f. 9th August, 2012),
Mr. R. de Silva, Mr. E.P.A. Cooray, Dr. C. Pathiraja, Mr. T. Nadesan, Mr. A.T.P. Edirisinghe.

Auditors

Messrs Ernst & Young, Chartered Accountants are deemed reappointed, in terms of Section 158 of the Companies Act No. 07 of 2007 as Auditors of the Company.

A resolution proposing the Directors be authorized to determine the remuneration of the Auditors will be submitted to the Annual General Meeting.

Auditors’ Remuneration

Messrs Ernst & Young were paid Rs. 515,600/- as audit fees and expenses by the Company. In addition, they were paid Rs. 608,070/- by the Company for non-audit related work, which consisted mainly of tax consultancy and other assurance related services.

As far as the Directors are aware, the Auditor does not have any relationship (other than that of an Auditor) with the Company other than those disclosed above. The Auditors also do not have any interests in the Company.

Turnover

The turnover for the year was Rs. 614,727,300/- (2011/12 - Rs. 539,191,674/-).

Profit/(Loss)

	2013 Rs.	2012 Rs.
Net Profit/(Loss) for the year after providing for all expenses, known liabilities and depreciation of fixed assets was	112,153,962	111,097,360
Other Comprehensive Income	(1,449,070)	(1,280,059)
Final Dividend for 2012 - Rs. 2/- per share (2011 - Rs. 1/-)	(92,000,000)	(46,000,000)
Transferred to Special Reserve during the Year	(1,325,671,060)	–
Prior Year Retained Profit	1,554,092,044	1,490,274,743
Retained Profit at the End of the Year	247,125,876	1,554,092,044

Dividends

The Board of Directors recommend a payment of final dividend of Rs. 2/- per share for financial year 2012/13 to holders of the issued ordinary shares of 46,000,000 of the Company.

Reserves

	2013 Rs.	2012 Rs.
Revaluation Reserve	369,921,676	357,535,737
Special Reserve	1,325,671,060	–
Available-for-Sale Reserve	811,802	–
	1,696,404,538	357,535,737

Revaluation Reserve

	2013 Rs.	2012 Rs.
On: Freehold Land
As at 1st April,	357,535,737	357,535,737
Effect of Revaluation Carried Out in 2013	12,385,939	–
As at 31st March,	369,921,676	357,535,737

Special Reserve

As at 1st April,	–	–
Transferred from Retained Earnings	1,325,671,060	–
As at 31st March,	1,325,671,060	–

With the adoption of SLFRS, the Company opted to reflect its building at deemed cost as stated in Note 2.5 to the financial statements. The Board resolved to transfer such impact to a Special Reserve during the year 2013. This Special Reserve is available to be used in a manner determined by the Board from time to time.

Available-for-Sale Reserve

	2013 Rs.	2012 Rs.
As at 1st April,	–	–
Gain on Available-for-Sale Financial Assets	811,802	–
As at 31st March,	811,802	–

Taxation

Pursuant to an agreement dated 29th January, 1994 entered into with Board of Investment under Section 17 of the Board of Investment Law the Company is taxed at the rate of 2% of the turnover from 1st April, 2008 for a period of 15 years in accordance with the said agreement. However, taxation on interest income earned has been provided for, based on the provisions of the Inland Revenue Act. Income tax on operation of ERA Beach, Galle Heritage Villa and Kurulubedda are computed on taxable profits at prevailing rates stipulated by the Inland Revenue Act.

Property, Plant and Equipment

The total expenditure on acquisition of Property, Plant and Equipment during the year amounted to Rs. 110,597,298/- (2012 - Rs. 50,803,230/-) details of which are given in Note 4.1 to the financial statements.

Market value of the land including the valuation method and the effective date of the valuation are provided in Note 4.4 to the financial statements.

Stated Capital

There were no changes in the Company’s Stated Capital during the year under review. In terms of the Companies Act No. 07 of 2007, the Stated Capital of the Company was Rs. 460,000,974/- as at 31st March, 2013. (comprising 46,000,000 ordinary shares)

Post-Balance Sheet Events

There have been no material events occurring after the Balance Sheet date, that require adjustments to or disclosures in the Financial Statements, other than proposed dividends which is disclosed in Note 14 to the Financial Statements.

Statutory Payments

The Directors confirm that to the best of their knowledge all taxes and dues payable by the Company and all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and all other known statutory dues as were due as at the balance sheet date have been paid or provided.

Public Shareholding

As at 31st March, 2013, 16.82% of the issued capital of the Company was held by the public.

Going Concern

The Directors, after making necessary inquiries and reviews including reviews of the Company budget for the ensuing year, capital expenditure requirements, future prospects and risks, cash flows and borrowing facilities have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, the going concern basis has been adopted in the preparation of the Financial Statements.

For and on behalf of the Board,

N.J.H.M. Cooray Chairman	R.A.E. Samarasinghe Managing Director
Corporate Services (Pvt) Ltd. Secretaries

The Lighthouse Hotel PLC
24th April, 2013.