Lanka Century Investments PLC

Independent Advisors Report to the Board of Directors and

Shareholders of Lanka Century Investments PLC on the Voluntary
Offer made by Taprobane Holdings PLC

















CORPORATE ADVISORY & CAPITAL MARKETS DIVISION
BOC Merchant Tower
18
th
Floor, 28 St Micheals Road
Colombo 03.
Tel: 4711711 Fax: 4711741

DATE: 28 July 2014
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Contents
1. KEY MEMBERS INVOLVED IN THE INDEPENDENT OPINION ADVISORY ............ 4
2. THE TRANSACTION .............................................................................................. 5
3. LANKA CENTURY INVESTMENTS PLC (GREG) .................................................... 6
Recent performance ................................................................................................... 9
Subsidiary and Associate Companies ..................................................................... 10
Ceylon Leather Products PLC (CLPL) ........................................................................................ 10
Dankotuwa Porcelain PLC (DPL) ................................................................................................ 12
Royal Fernwood Porcelain Ltd (RFPL) ....................................................................................... 14
South Asia Textile Industries Lanka (Pvt) Limited (SAT) ........................................................... 15
Palla & Company (Pvt) Limited (PALL) ...................................................................................... 16
Colombo City Holdings PLC (PHAR) .......................................................................................... 17
OLANCOM (Pvt) Limited (OLAN) ................................................................................................ 19
Enterprise Technology (Pvt) Limited (ETPL) ............................................................................... 20
Senit technologies (Pvt) Limited (SENT) ..................................................................................... 21
Browns Investment PLC (BIL) ........................................................................................................ 22
4. TAPROBANE HOLDINGS PLC ............................................................................ 24
Top 20 Shareholders as at 30 June 2014 .................................................................. 25
5. THE VALUATIONS .............................................................................................. 26
Free Cash Flow (FCF) valuation ................................................................................ 26
Relative valuations..................................................................................................... 28
Sector based valuation ................................................................................................................ 28
Market based valuation............................................................................................................... 28
Peer based valuation ................................................................................................................... 29
Market Price based valuation .................................................................................. 30
Market Value of Investments .................................................................................... 31
6. INDEPENDENT OPINION ................................................................................... 32
Risk Factors specifically associated with the offer .................................................. 32
7. DECLARATION TO THE SHAREHOLDERS AND DIRECTORS OF GREG .............. 33

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Contents
Tables
Table 1- Corporate profile ........................................................................................................................ 6
Table 2- Top 20 Shareholders as at 17 July 2014................................................................................... 8
Table 3- Top 20 Warrant- 2015 Holders (GREG.W0006) as at 17 July 2014 ...................................... 8
Table 4- Financial Highlights ..................................................................................................................... 9
Table 5 - Sectorial performance 2014 ................................................................................................. 9
Table 6- CLPL's group financial indicators ........................................................................................... 11
Table 7- DPLs financial indicators......................................................................................................... 13
Table 8- RFPLs financial Indicators ....................................................................................................... 14
Table 9- SATs financial indicators ......................................................................................................... 15
Table 10- PALLs financial indicators ..................................................................................................... 16
Table 11- PHARs financial indicators ................................................................................................... 17
Table 12- OLANs financial indicators ................................................................................................... 19
Table 13- ETPLs financial indicators ...................................................................................................... 20
Table 14- SENTs financial indicators ..................................................................................................... 21
Table 15 - BIL's financial indicators ........................................................................................................ 23
Table 16- Top 20 Shareholders as at 30 June 2014 ............................................................................ 25
Table 17- Results of FCF valuation ......................................................................................................... 26
Table 18 - GREG Offer details ................................................................................................................ 28
Table 19 - GREG Sector PBV Valuation ................................................................................................ 28
Table 20 - GREG Market PBV Valuation ............................................................................................... 28
Table 21 - Peer based PBV valuation ................................................................................................... 29
Table 22 - GREG price statistics ............................................................................................................. 30
Table 23- Realizable Market Values ...................................................................................................... 31
Table 24- Summary of valuations .......................................................................................................... 32

Figures
Figure 1- Transaction Structure ................................................................................................................ 5
Figure 2- GREG group structure ............................................................................................................... 7
Figure 3- CLPL one year price trend ..................................................................................................... 10
Figure 4- DPL one year price trend ....................................................................................................... 12
Figure 5- PHAR one year price trend .................................................................................................... 18
Figure 6- BIL One year price trend ........................................................................................................ 23
Figure 7- Taprobane Group Structure .................................................................................................. 24
Figure 8- GREG One year price trend .................................................................................................. 30


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In preparing this document, we have placed reliance, on the information
contained in the offer document prepared by Taprobane Wealth Plus (Pvt)
Ltd, company profiles and financial information provided by Lanka Century
Investments PLC and its group companies, information available on the
Colombo Stock Exchange, information gathered from explanations
provided and discussions had with Lanka Century Investments PLCs senior
management and information available from any public domain. These
information was adequate to facilitate an informed view of the offer and to
form a reasonable basis for the opinion.
We have not verified in detail, the information made available by Lanka
Century Investments PLC or the group companies to us and not conducted
any independent investigation into the business affairs of Taprobane
Holdings PLC. While MBSL has taken reasonable care to ensure full and fair
disclosure, nothing has come to the attention of the independent advisor to
believe that the facts and data set forth in the report are incorrect.
However, Merchant Bank of Sri Lanka PLC does not assume responsibility for
any investment decisions made by the investors based on the information
contained herein. In making an investment decision, prospective investors
must rely on their own examination and assessments of the Company,
including the risks involved. Recommendations given in this report is valid as
at the report date and for a period of 6 months period from the report date.

This document has been approved by the Securities and Exchange Commission of
Sri Lanka (SEC) in terms of the Takeovers and Mergers Code. However, the SEC
assumes no responsibility for the content of the Report including but not limited to
the statements made and opinions expressed in the Independent Advisors
Report.
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1. Key members involved in the Independent Opinion Advisory
Mr A M A Cader
Deputy General Manager - Corporate Advisory & Capital Markets
E-mail - cader@mbslbank.com / Tel: 011 - 4 711 769
Specialized by 35 years of industry proficiency, Mr Cader is currently heading the Corporate
Advisory & Capital Markets division of MBSL for 21 years. During his professional career Mr
Cader has gained experience as a competent investment banker with specialization in
services such as IPOs, Pre-IPO Restructuring & Advisory, Business Plans, Corporate Valuations,
Portfolio Management, Employee Share Option Plans, Debt Syndications, Securitizations and
delivering training Programs.
Fellow Member of the Chartered Institute of Management Accountants, UK
Fellow Member Society of Certified Management Accountants of Sri Lanka
Associate Member of the Institute of Financial Accountants, London
M.Sc. In Information Technology from Sri Lanka Institute of Information Technology (SLIIT)
Masters of Business Studies (MBS) from University of Colombo

Ms Lalangi Goonawardena
Manager - Corporate Advisory
E-mail- lalangig@mbslbank.com / Tel: 011 - 4 711 746
The long-standing industry exposure of 20 years is indeed a recourse to the bank. Her sound
technical awareness of listing procedures and legislative guidelines has generated much
comfort and value to the clients in successful listings of companies in the Colombo Stock
Exchange.
B.Sc.(Hons) Physical Science from versity of Sri Jayewardenepura
Diploma in Credit Management from Institute of Bankers, Sri Lanka

Mr Hijas Suhair
Assistant Manager - Corporate Advisory & Capital Markets
E-mail - hijass@mbslbank.com
Having started his professional career at PricewatrerhouseCoopers followed by DFCC
Stockbrokers, Mr Hijas stands out with the ideal combination of know-how in investment
banking, business advisory and portfolio management.
MBA - University of Wales
Chartered Institute of Management Accountants (CIMA)
The Institute of Chartered Accountants of Sri Lanka (CA)

Mr Angelo Brandan Keil
Analyst/ Executive - Corporate Advisory and Capital Markets
E-mail - angelob@mbslbank.com
Qualified with a strong academic background, Mr Angelo Keil has experience in Tax advisory,
corporate advisory, portfolio management and other investment banking activities.
M.Sc. in Applied Finance from University of Sri Jayewardenepura
Bachelor of Business Management (Finance) special from University of Kelaniya
Chartered Institute of Management Accountants (CIMA) - Pass Finalist
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2. The Transaction

On the 13 March 2014 Taprobane Holdings PLC (herein after referred to as Taprobane or the
Offeror) acquired 100% of issued shares of Capital Trust Partners (Pvt) Ltd (CTP), which held
Sixty Million Three Hundred Five Thousand Six Hundred and Nine (60,305,609) Ordinary Voting
shares of Lanka Century Investments PLC (herein after referred to as GREG or the Offeree)
amounting to 17.26% of the issued Ordinary Voting shares of GREG.
Prior to this, Taprobane directly owned 28.91% of the issued Ordinary Voting shares of GREG
and indirectly via its fully owned subsidiary, Taprobane Wealth Plus (Pvt) Ltd owned 0.02% of
the issued Ordinary Voting shares of GREG. Hence, the entire shareholding of GREG held by
Taprobane directly and indirectly amounts to 46.19%. Further, as at 13 March 2014 a Director
of Taprobane, Mr R.R Anthony had 19,925 shares of GREG, amounting to 0.01% of the
shareholding of the Offeree, which have subsequently disposed.

Figure 1- Transaction Structure

As such in compliance with the Takeovers and Mergers Code, the Offeror has made a
Voluntary Offer to purchase the balance One Hundred Eighty Seven Million Nine Hundred
Seventy Six Thousand Five Hundred and Ten (187,976,510) Ordinary Voting shares constituting
approximately 53.81% of the total shareholding of the issued Ordinary Voting shares of GREG
at a price of Eleven Rupees (LKR 11.00) per share, being the highest price paid by the Offeror
during the period of one year, prior to the date of the acquisition.
In this regard, Merchant Bank of Sri Lanka PLC - Corporate Advisory and Capital Markets
Division (MBSL) was appointed by the Directors of the Lanka Century Investments PLC to act
as the Independent Advisor to the shareholders of Lanka Century Investments PLC in
connection with the above offer made to GREG by the Offeror.
Taprobane
Holdings PLC
Capital Trust
Partners Pvt Limited
Lanka Century
Investments PLC
17.26%
28.93% 100.00%
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3. Lanka Century Investments PLC (GREG)

Lanka Century Investment PLC is a leading investment holding company in Sri Lanka executing
complex corporate restructuring investments. GREG creates sustainable value addition for
investors and the companies in which they invest. The GREG group holding consist companies
in diversified sectors such as manufacturing, information technology, retail , distribution, and
real estate development and employees over 3,000 personnel.
Domicile & Legal Form
Lanka Century Investments PLC is a Public Limited Liability
Company incorporated and domiciled in Sri Lanka.
Principal Activity &
Nature of the Company
Investment Holding
Company Reg. No.
PQ 26
Board of Directors
Mr A.G. Weerasinghe Chairman
Mr Eric B. Wikramanayake Deputy Chairman
Mr Kelly T. Ehler
Independent Director/ Non-
Executive
Mr D.S.K. Amarasekara
Independent Director/ Non-
Executive
Mr R.P. Sugathadasa Non-Executive Director
Mr Thomas Scanlan Non-Executive Director
Mr I. C. Nanayakkkara Non-Executive Director
Secretaries
P W Corporate Secretarial (Private) Limited
3/17, Kynsey Road, Colombo 08.
Registrars
S P Corporate Services (Private) Limited
101, Inner Flower Road, Colombo 3
Auditors Ernst & Young
Chartered Accountants,
No. 201, De Saram Place, Colombo 10.
Bankers Pan Asia Banking Corporation PLC
Nations Trust Bank PLC
Deutsche Bank
Seylan Bank PLC
Registered Address No. 10, 5th Floor, Gothami Road, Colombo 08
Contact details
Telephone +94 11 570 0700

Fax +94 11 268 0225

E mail info@lci.lk

Website www.lci.lk


Table 1- Corporate profile

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Figure 2- GREG group structure
Source: GREG management and 2012/2013 annual report
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Name of Shareholder No. of Shares %
1. Seylan Bank PLC/Taprobane Holdings PLC 101,000,000 28.91
2. Caledonian Securities Limited 96,852,800 27.72
3. Capital Trust Partners (Pvt) Limited 60,305,609 17.26
4. Octagon Asset Management INC 17,542,317 5.02
5. Dr N Kasim 11,676,834 3.34
6. Lionhart Investments Limited 6,364,717 1.82
7. Carlines Holdings (Private) Limited 2,211,971 0.63
8. Phillip Securities Pte Limited 1,989,899 0.57
9. Mr N Balasingam 1,906,500 0.55
10. Knight Trade (Private) Limited 1,754,137 0.50
11. Mellon Bank N.A. The Frontier Emerging Markets Fund 1,668,159 0.48
12. National Wealth Corporation Limited 1,657,355 0.47
13. Sampath Bank PLC/Capital Trust Holdings PLC 908,480 0.26
14. First Capital Markets Limited/Mr P R B Perera 635,427 0.18
15. Peoples Leasing & Finance PLC/Mr D M P Disanayake 623,000 0.18
16. Peoples Leasing & Finance PLC/M I M Rizly & F R Hassan 604,700 0.17
17. Pan Asia Banking Corporation PLC/Mr V P K A Palpita 577,755 0.17
18. Pan Asia Banking Corporation PLC/Mr Ravindra Erle
Rambukwelle 565,000 0.16
19. Mr P Anandaraja 527,500 0.15
20. Pan Asia Banking Corporation PLC/Mr Mohottallage Nihal
Ranasinghe 521,500 0.15

Table 2- Top 20 Shareholders as at 17 July 2014

Name of Warrant holder No. of Shares %
1. Caledonian Securities Limited 248,158,695 71.37
2. Lionhart Investments Limited 68,391,004 19.67
3. Peoples Leasing & Finance PLC/Mr D M P Disanayake 1,659,900 0.48
4. Mrs H P Gin 1,504,991 0.43
5. Mr W M S K Weerasekara 1,203,900 0.35
6. Mr P Poongunaseelan 917,398 0.26
7. Mr S M Masoor 907,172 0.26
8. Mr K O D Jayaratne 850,000 0.24
9. Mr W B L Perera 769,000 0.22
10. Mr U L N K Perera 603,881 0.17
11. Mr A B Damunupola 561,700 0.16
12. Mr U G K Udayanka 510,000 0.15
13. Mrs R N R Aziz 426,300 0.12
14. Pan Asia Banking Corporation PLC/Mr R P L Eheliyagoda 323,401 0.09
15. Flyasia SND. BHD 320,216 0.09
16. Mr H J De Silva 300,000 0.09
17. Mr B W Kundanmal 282,500 0.08
18. Mrs P Poonkulavathani 281,500 0.08
19. Mr M N M Shiyam 257,899 0.07
20. Mr P Thevarajah 241,430 0.07

Table 3- Top 20 Warrant- 2015 Holders (GREG.W0006) as at 17 July 2014
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Recent performance

Unaudited Audited Audited


2013/2014 2012/2013 2012/2011
Financial Performance
Revenue LKR 000 8,633,438 7,184,808 5,997,943
Operating Profit / (Loss) LKR 000 (56,462) (130,986) 276,379
Profit / (Loss) Before Tax LKR 000 (240,888) (183,421) 138,434
Profit / (Loss) After Tax LKR 000 (304,179) (225,274) 75,944
Interest Cover Time -0.45 0.04 1.72
Return on Equity % -3.43% -2.47% 0.80%
Return on Investment % -2.37% -1.84% 3.32%

Financial Position
Total Assets LKR 000 12,837,692 12,250,594 12,813,039
Total Debt LKR 000 2,386,340 1,739,968 1,734,181
Total Equity LKR 000 8,855,891 9,122,790 9,507,483
No. of shares in Issue 349,367,119 349,367,119 349,367,119
Net Assets per share LKR 22.08 22.97 23.69
Debt/Equity % 25.82% 19.07% 18.24%
Debt/Total Assets % 18.59% 14.20% 13.53%
Net Investments LKR 000 (217,446) 2,273,155 2,049,964

Market/shareholder Information
Market Price of share LKR 12.30 15.60 16.80
Market Capitalization LKR 000 3,877,975 5,450,127 5,869,368
Table 4- Financial Highlights
Source: Annual Reports and Unaudited Financial Statements published as at the report date

The Groups revenue rose to LKR 8.63 Bn in year 2013/2014, mainly contributed from the
revenue of textile manufacturing - LKR 4.84 Bn followed by footwear manufacturing - LKR 1.73
Bn and manufacturing porcelain with LKR 1.79 Bn. Net profit wise the Textile, Services and
Property sectors contributed the highest with LKR 139.83 Mn, LKR 117.40 Mn and LKR 51.70 Mn
respectively whilst the losses were attributed from Investments sector with LKR 108 Mn and
Porcelain sector with LKR 19 Mn.
Sectors Revenue Net profit/(loss) Total assets Return on
investments
Manufacturing Footwear
1,733,888 3,297 2,608,154 0.13%
Manufacturing Porcelain
1,787,976 (19,228) 2,496,017 -0.77%
Manufacturing Textile
4,837,122 139,830 2,823,070 4.95%
Investment
65,916 (108,039) 287,595 -37.57%
Property
45,902 51,703 1,123,695 4.60%
Services
162,634 117,402 279,416 42.02%

8,633,438 184,965 9,617,947
Table 5 - Sectorial performance 2014
Source: Annual Reports and interim Financial Statements published as at the report date
Inter Company Transactions have been eliminated in arriving at net profit/ (loss) for the year.
Segment assets do not include investments in subsidiaries & associates, goodwill,
investment in group preference shares and intercompany current account balances.
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Subsidiary and Associate Companies

Ceylon Leather Products PLC (CLPL)

Ceylon Leather Products PLC is a local pioneer in processing, manufacturing and marketing
of leather, leather footwear and leather products. The business was established in year 1939
by the British Government to produce boots, shoes and accessories for the British Armed Forces.
After the Second World War, the factory diversified its activities to produce shoes and leather
accessories to the domestic market. In year 2009, Environmental Resources Investments PLC
(Lanka Century Investments PLC) took over the controlling interest of CLPL. As at date CLPL is,
a 91.39% held subsidiary of GREG.
CLPL has three distinct production facilities namely,
A. Tannery - Leather been produced from raw hides and skins. The factory is located
in Mattakuliya, Western province, Sri Lanka with a production capacity of 200,000
sq.ft. Leather per month. There are about 140 employees working in this process.
B. Shoe factory - Produces Leather footwear for gents, women and schoolchildren out
of genuine leather. The factory is located in Belumahara, Western Province, Sri
Lanka and embraces a production capacity of 45,000 shoe pairs per month. There
are about 264 employees working at this facility.
C. Leather goods factory - Produces all types of leather products and accessories.
CLPL owns 9 retail stores covering the main cities and over 350 dealers island wide.
CLPL has strategic investments in Ceylon Leather Products Distributors (Pvt) Ltd (100.00%), South
Asia Textile Industries Lanka (Pvt) Ltd (51.55 % equity control and with effect from 18 July 2014
changed to 80.39% equity control via a rights issue of 8-for-1 at LKR0.10 ) and Palla & Company
Pvt Ltd (60.00%).


50.00
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70.00
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20,000
30,000
40,000
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70,000
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
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CLPL
Figure 3- CLPL one year price trend
Source: Colombo Stock Exchange
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According to the unaudited financial statements as at 31 March 2014, CLPL group generated
a net revenue of LKR 6.53 Bn (25%) mostly from the textile sector of LKR 4.84 Bn. CLPLs gross
profit and net profit before tax stood at LKR 918.53 Mn (14%) and LKR 190.76 Mn (51%)
respectively. CLPLs earnings per share is LKR 3.59 (31%) and the Net Assets Value per share
is LKR 89.90 as at 31 March 2014.
Based on discussions held with the senior management and budgets prepared, CLPL has
targeted to realize net sales of LKR 1.40 Bn while maintaining a gross margin of 23% and net
margin of 10 % only from its shoe/leather business next year. CLPL expects to improve its
margins and sales mix and anticipates a lower growth after year 2015, since more than 70% of
revenue is from Sri Lanka Armed forces.
As at 13 July 2014 CLPLs share was trading at LKR 69.20 and during the past year, the price
volatility generated a negative return of 2.24%. The annualized standard deviation is about
44.44%.
2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 6,529,347 5,203,031 25%
Gross profits LKR 000 918,531 805,818 14%
Net profits LKR 000 135,687 97,206 40%
Earnings per share LKR 3.59 2.75 31%
Total assets LKR 000 5,699,989 5,508,006 3%
Net assets per share LKR 89.90 87.72 2%
Market price LKR 57.30 62.30 -8%
Table 6- CLPL's group financial indicators
Source: Annual Reports and interim Financial Statements published as at the report date











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Dankotuwa Porcelain PLC (DPL)

Dankotuwa Porcelain PLC is a leading manufacturer and exporter of Porcelain Tableware
which was incorporated on 6 January 1984. DPL is 65.51% owned subsidiary of GREG and listed
on the Colombo Stock Exchange. With the Japanese skills, German Technology and
adaptability to the changing market trends of the industry, DPL has a reputed client base
including Macys Department Stores, British Home Stores, John Lewis, Jashanmal, El Corte Ingles,
Berghoff, Galeria Kaufhof and many others scattered throughout USA, Asia and Europe. DPL is
the first tableware manufacturer in Sri Lanka to obtain ISO 9001/2008 certification.
With a white ware production capacity of 700,000 pieces per month and other decorative
product capacity more than 675,000 pieces per month, DPL has recognized the necessity of
increasing production capacity and innovativeness in competing globally, while constantly
upgrading its machinery and plant. DPL uses local material combined with imported materials
from countries such as New Zealand, India, Germany and China, to produce the unique brand
of quality porcelain for which Dankotuwa is famed. DPL employees a workforce of
approximately 1,000 personnel.
The demand for DPLs products spans across over 25 countries with buyers from Belgium, Czech
Republic, Colombia, Dubai, Germany, Greece, India, Ice Land, Italy, Japan, Kuwait, Norway,
Brazil Egypt, France, Kenya, Bahrain, Poland, Russia, Spain, Switzerland, U.S.A, U.K, Qatar,
Maldives and Ukraine, etc. DPL is a supplier of Upstairs or up-market tableware to some of the
bigger departmental stores in the United States and Europe. DPL will continue to cater the
upmarket with niche markets strategies to customers with less cost consciousness.
DPL made revenue of LKR 1.7 Bn (9%), gross profit of LKR 294 Mn (17%) and a net profit of
LKR 16.5 Mn (52%) during the year ended 31 March 2014. During the year 2013/2014, DPL
acquired 76% of Royal Fernwood Porcelain Limited for a consideration of LKR 300 Mn.



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16.00
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200,000
400,000
600,000
800,000
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1,800,000
15-Jul 15-Aug 15-Sep 15-Oct 15-Nov 15-Dec 15-Jan 15-Feb 15-Mar 15-Apr 15-May 15-Jun 15-Jul
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Figure 4- DPL one year price trend
Source: Colombo Stock Exchange
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DPL expects a turnaround through its investment in Royal Fernwood Porcelain Limited and
replacement of the existing Glost Klin with new energy efficient Fast Firing Klin. The Fast
Firing Klin will reduce the energy consumption drastically and reduce the furniture requirement
in the production process. DPL has already curtailed the work force by nearly 100 employees
last year & wishes to reduce the numbers further in the coming years. DPL strategizes moving
from the traditional export markets in the Europe to Emerging markets such as India, Brazil,
South Africa with a view to get more volumes at relatively higher prices with high value added
products.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 1,668,766 1,528,652 9%
Gross profit LKR 000 294,009 352,939 -17%
Net profit LKR 000 16,484 34,675 -52%
Earnings per share LKR 0.23 0.48 -52%
Total Assets LKR 000 1,658,598 1,353,355 23%
Net assets per share LKR 11.26 11.43 -1%
Table 7- DPLs financial indicators
Source: Annual Reports and Unaudited Financial Statements published as at the report date






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Royal Fernwood Porcelain Ltd (RFPL)

Royal Fernwood Porcelain Limited is a 49.79% owned subsidiary of GREG, manufactures
supreme quality tableware, achieved through superb craftsmanship and unique design
creation that give new meaning to elegance and good taste. RFPL has a monthly production
capacity of 670,000pcs, a blend of modern technology from Germany, Japan and the United
Kingdom, while retaining traditional skills in craftsmanship.
Through its own operation, RFPL has the advantage of producing the highest quality hand
painted tableware; transparent and opaque colour glazed tableware as well as two-tone
colour glazes.
RFPL is able to develop individual designs to customer's preferences within the shortest possible
time. Behind this success story is a highly professional, totally dedicated workforce committed
to achieving only the best with a vastly experienced management team to back them all the
way. With its present customer base predominantly located in the USA, Europe, Australia and
Asia, RFPL uses their high productivity rate to ensure that new customers are offered extremely
competitive prices.
RFPL has the technical know-how and capacity to produce porcelain ware with designs
under glaze, in glaze as well as on glaze decorations.
RFPL products are made to the highest international standards such as ASTM as well as being
the only manufacturer in Sri Lanka to have SLSI standard for porcelain tableware.
Further, RFPL is the only porcelain manufacturing company to have been awarded the
prestigious national quality award and national productivity award for excellence in
manufacturing and productivity.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 654,672 645,134 15%
Gross profit LKR 000 44,907 16,421 173%
Net loss LKR 000 (110,335) (115,505) -4%
Loss per share LKR (0.27) (0.46) -41%
Total Assets LKR 000 1,067,462 1,114,561 -4%
Net assets per share LKR 0.67 1.41 -52%
Table 8- RFPLs financial Indicators
Source: Audited Financial Statements & draft financial statements prepared by the management

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South Asia Textile Industries Lanka (Pvt) Limited (SAT)

South Asia Textiles was incorporated in year 2004 as a subsidiary of South Asia Textiles -
Singapore. SAT, started as a liaison office in 2002 with the objective of marketing fabric in Sri
Lanka from the plant in Singapore. It subsequently set out on an ambitious project of setting
up a fabric manufacturing facility. In June 2010, through a joint acquisition by Ceylon Leather
Products PLC and Lanka Century Investments PLC (GREG) acquired 51.55% and 8.09% of SAT
respectively (totalling a 55.19% effective controlling interest of SAT) for a consideration of LKR
710 Mn. SAT is located in a land area of 73 hectares in Pugoda which is under a 25 year lease
agreement with the BOI and out of which 15 years are still remaining. After this period, the
ownership of the land would be transferred to SAT.
SAT has a fully-fledged manufacturing plant that engages in Weft Knitting, Dyeing, Printing,
Sueding, Brushing and Finishing, with a total monthly capacity to produce 630,000 KG of
finished fabric, catering to world renowned buyers such as M&S, NEXT, Tesco, Bhs, Victoria
Secret, Azda, TEMA, Columbia Sportswear, Sainsbury, Mother Care, H&M, Takko, GAP, JC
Penney, Reebok etc.
The ultra-modern textile manufacturing facility of SAT specializes in Printing, brushing, sueding
and making Anti Pilling Micro Polar Fleece. Currently, SAT produces 100% cotton and Polly
cotton blends and the factory is equipped with 140 lbs circular weft knitting machines, 24
dyeing machines, 4 washing plants 10 coloured and 16 color flatbed printing machines and a
physical testing lab, audited and certified by independent buyer nominated companies. As
Sri Lankas third largest knit fabric manufacturing plant, SAT cater to over 95% of the capacity
for local garment exporters and still the opportunity on exports has not been exploited by SAT.
SAT has turned around the operations and in year 2013 and 2014 and ended continues profits
since the acquisition. Operating through a challenging year, SAT recorded a net profit of LKR
107 Mn as at 31March 2014.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 4,837,122 3,801,508 27%
Gross profit LKR 000 958,925 623,700 54%
Net profit LKR 000 131,088 154,895 -15%
Earnings per share LKR 0.17 0.21 -19%
Total Assets LKR 000 2,838,188 2,682,454 6%
Net assets per share LKR 1.41 1.23 15%
Table 9- SATs financial indicators
Source: Audited Financial Statements & draft financial statements prepared by the management

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Palla & Company (Pvt) Limited (PALL)

Palla & Company (Pvt) Ltd is a footwear manufacturer, incorporated on 27 February 2004. The
factory complex is formed by 4 acres land with total build area of over 5,000 square meters
and is situated at the Katunayake Export Processing Zone, being one of the most convenient
location in the island to conduce industrial operations focused on the exports.
The build area covers the production floor, office, sample room, show room, engineering, raw
material stores, finished goods warehouse attached to a final inspection line. The production
floor is divided into sections such as cutting, stitching, preparation, and assembly. PALL
maintains an independent quality control department. PALL has installed capacity to
manufacture up to 1,500 pairs per day of high quality leather shoes covering the main
categories of casual and dress shoes offering a range of pumps, oxfords, flats, sandals, ankle
boots and boots. Raw materials such as Upper Leather, Lining Leather, Midsoles, Outsoles, etc.
are sourced locally and imported from countries such as Italy, India, Pakistan, Argentina, Saudi
Arabia, China, etc. PALL also maintains a team of foreign consultants from Italy, India and
Romania overlooking all the steps of the production.
In the year ending on the 31 March 2014, PALL ended with a revenue of LKR 301Mn (18%), a
gross loss of LKR 19 Mn (53%) and a net loss of LKR 124 Mn (31%). PALLs negative outlook is
mainly due to reduced quantities from the slow recovery from the economic recession in the
west. With customer portfolio diversifications and filled capacity, the management is confident
that positive results could be generated.
In November 2011, CLPL made an investment to acquire 60% of Palls share capital and
effectively GREG holds 54.8% of PALL.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 301,294 366,118 -92%
Gross loss LKR 000 (18,893) (41,473) 54%
Net loss LKR 000 (123,983) (179,768) -31%
Loss per share LKR (1,378) (1,997) 31%
Total Assets LKR 000 258,145 250,087 3%
Net deficit per share LKR (3,506) (2,128) -65%
Table 10- PALLs financial indicators
Source: Audited Financial Statements & draft financial statements prepared by the management

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Colombo City Holdings PLC (PHAR)

Colombo City Holdings PLC (formerly known as The Colombo Pharmacy Company PLC)
established as a chemists store named Norris Canal Stores goes back to over a century to its
more humble beginnings in 1876.
With the acquisition of a majority holding of PHAR by GREG in the year 2010, PAHR has
undergone significant changes planned to drive it towards achieving strong growth prospects
in the future. In spite of this initiative, the Union Place building was improved by implementing
a refurbishment program that significantly increased the growth prospects of PHAR. As at
today PHAR is a 66.40% owned subsidiary of GREG.
Due to the strategic importance of the two locations at Union Place & Bambalapitiya PHAR
discontinued its pharmaceutical operations in year 2013 and directed towards high value real
estate business.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 45,902 90,472 -49%
Gross profit LKR 000 45,902 32,500 41%
Net profit LKR 000 48,463 42,606 14%
Earnings per share LKR 38.07 33.47 14%
Total Assets LKR 000 1,129,092 1,121,202 1%
Net assets per share LKR 771.86 733.79 5%
Table 11- PHARs financial indicators
Source: Audited Financial Statements & interim financial statements published as at the report date


According to the unaudited financial statements ended 31 March 2014 PHAR generated
revenue of LKR 45.90 Mn (49%) and a gross profit of the same due to not incurring any cost
of sales. The fair value gain on revaluation of investment property and the decline in
operational expense enabled the PHAR to realize a net profit of LKR 48.46 Mn (14%). PHARs
earnings per share is at LKR 38.07, for the year ended 31 March 2014.
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During the last one year PHARS share price trading generated a return of 5.61% to close at
LKR 501.00 on the 14 July 2014. PHARs share was volatile with an annualized standard deviation
of about 41.32%. Nevertheless, PHAR shares have a public float of 18.7% as at 31 March 2014.

350.00
400.00
450.00
500.00
550.00
600.00
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
15-Jul 15-Aug 15-Sep 15-Oct 15-Nov 15-Dec 15-Jan 15-Feb 15-Mar 15-Apr 15-May 15-Jun
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Figure 5- PHAR one year price trend
Source: Colombo Stock Exchange
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OLANCOM (Pvt) Limited (OLAN)

OLANCOM (Pvt) Limited was founded in year 2000 with a small team of professionals to provide
e-commerce solutions. Operating in the ICT sector with a highly skilled set of employees OLAN
offers a diverse range of products and services targeted at individuals, SMEs and large public
and private enterprises. OLAN through its subsidiary companies, Enterprise Technology (Pvt)
Limited, Roomsnet international (Pvt) Limited and Senit technologies (Pvt) Limited is one of the
largest e-commerce operators based in Sri Lanka. It is also one of the leading Systems
integrators in the country, having completed some of the largest systems integration projects
in Sri Lanka.
In year 2014 OLAN alone produced a revenue of LKR 4.5 Mn (29%) while the group achieved
revenue worth of LKR 167 Mn (40%), gross profit of LKR 57 Mn and net profit of LKR 30 Mn.
OLAN expects to benefit from the booming tourism sector and earn increased commission
and package income in times to come.
GREG acquired OLAN on 31 March 2011 and OLAN acquired ETPL on 30 June 2010. At present
OLAN is 93.15% subsidiary of GREG.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 4,534 6,393 -29%
Gross profit LKR 000 (1,135) (1,753) -35%
Net Loss LKR 000 (103,725) (114,429) -9%
Loss per share LKR - (0.01) -
Total Assets LKR 000 81,492 56,759 44%
Net deficit per share LKR (0.04) (0.03) -15%
Table 12- OLANs financial indicators
Source: Audited Financial Statements & draft financial statements prepared by the management
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Enterprise Technology (Pvt) Limited (ETPL)

Enterprise Technology (Pvt) Limited is one of Sri Lanka's premier Network Systems Integrators
with over 15 years of experience in providing business-critical Information Communication
Technology (ICT) solutions for major Sri Lankan Corporations. ETPLs clientele includes
organisations from the Telecommunication, Government, Transportation, Financial,
Manufacturing sector and Universities.
ETPL offers customers secured high performing end-to-end Information Communication
Technology solutions through a team of Sales, Design & Consultancy, Project Implementation
and Support professionals. These solutions include:

ETPL has developed a seamless organizational structure to provide comprehensive services for
deploying the state of art of Information Communication Technology solutions by a team of,

ETPL is 100.0% owned subsidiary of Olancom (Pvt) Ltd, which makes ETPL effectively a 93.15%,
owned subsidiary of GREG.


2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 110,873 150,063 -26%
Gross profit LKR 000 44,038 60,866 -28%
Net Loss LKR 000 122,197 (21,993) >100%
Earnings/(Losses) per share LKR 0.31 (0.06) >100%
Total Assets LKR 000 52,476 255,286 -79%
Net deficit per share LKR (0.41) (0.71) -43%
Table 13- ETPLs financial indicators
Source: Audited Financial Statements & draft financial statements prepared by the management
Multilayer Routing and Switching IP Networks

IP Telephony and Video Conferencing

Wireless Networks

Information Security

Internet / Enterprise Data Center

Storage and Disaster Recovery Solutions

Unified Messaging and Call Centers /Contact Centers

Consultancy

Design

Project Management and Implementation

Support and Outsourcing services

Application Delivery Networks

Video surveillance

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Senit technologies (Pvt) Limited (SENT)

Senit Technologies (Pvt) Limited is an e-commerce software solution services provider mainly
concentrating on Online Hotel Reservation Solution, Online Shopping Cart Solution, and Online
Payment Gateway Integrations.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 4,198 3,116 35%
Gross profit LKR 000 4,198 3116 35%
Net Loss LKR 000 (3,946) (30,003) -87%
Loss per share LKR 000 (3,946) (30,003) -87%
Total Assets LKR 000 10,194 9,969 2%
Deficit per share LKR 000 (61,536) (57,589) 7%
Table 14- SENTs financial indicators
Source: Audited Financial Statements & draft financial statements prepared the management
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Browns Investment PLC (BIL)

Browns Investment was incorporated in November 2008 as in investment company and has
interests in several sectors namely; plantations, leisure, manufacturing, construction &
engineering, telecommunication and power sector. BIL was initially incorporated as Browns
Plantation Investments Pvt Limited and subsequently changed to Browns Investments Limited.
The main course of business is diversifying investments into different sectors deriving investment
income, dividend income and capital gains. BIL was listed on the Colombo Stock Exchange
on 26 July 2011.
BIL is a subsidiary of Brown & Co PLC. BIL invests in fast growing areas of the Sri Lankan economy.
BIL operates as the strategic investment vehicle of the Browns Group and may invest on its own
or in concert with other investors.
BIL holds 100% ownership in Browns Hotels & Resorts Ltd (formerly LOLC Leisure Ltd.) Browns
Hotels & Resorts owns and operates the five star Eden Resort & Spa as well as Dickwella Resort
& Spa. Browns Hotels & Resorts also has within its portfolio the properties, which were formerly
Riverina, Club Palm Garden and Tropical Villas. The first stage of the 367 roomed mega project
in the property housing the former Palm Gardens, Riverina and Tropical villas is progressing
according to plan. The 172-roomed hotel is nearing completion. The project site, which is
unique in nature, has the sea beach on the west with two water bodies in the north and south,
adjacent to the turtle hatchery. While this location is unique, negotiations are in the final stages
to have an international chain to manage this 5 star hotel.
BIL acquired a controlling interest in the Green Paradise Resort in Dambulla. This unique
property houses 67 rooms, include superior duplex, deluxe and garden suites. The property new
to the region complete with luxury finishes beautiful landscaped gardens and is within close
proximity to the cultural triangle and other tourist sites. BIL also acquired a controlling interest
in the Sun & Fun Resort in Passikudah. The resort is still under construction and it will be a 71
roomed luxury resort.
BILs policy in managing hotels is a hybrid, being relatively new to the leisure sector. Some
properties are managed and operated by the group. Other properties would be managed
by international chains to capitalize on their capabilities and skills in hotel management and
marketing.
In a strategic restructuring of sectors, the travel segment, under Brown and Company PLC is in
the BIL since year 2013. With over 45 years of experience in the travel industry and with expertise
in destination management, the Travel segment fully complements the work of the Leisure
sector. The travel segment through BG Air Services (Pvt) Ltd, acts as the general sales agents
(GSA) for Austrian Airlines and Scandinavian Airlines in addition to handling outbound travel
and inbound travel through Browns Tours (Pvt) Ltd. Inbound travel has been successful in
capturing the aviation market by providing assistance to airlines to obtain permission with the
Civil Aviation Authority in Sri Lanka to operate flights in and out of Colombo, SLOT clearance
from Sri Lankan Airlines, landing and parking clearance to park craft overnight, aircraft
catering services, customs and immigration formalities for crews etc. BIL is also building a name
in event management by providing the MICE (Meetings, Incentives, Conferences and Events)
market with specialized services.
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BILs subsidiary Excel Global Holdings has a subsidiary called Millennium Development (Pvt) Ltd.
This subsidiary has leasehold rights to property termed Excel World. This is a well-known property
situated in the centre of Colombo with easy access. It is planned to build a one of a kind mix
mega development on this property. This property will include shopping, super marketing,
conferencing facilities, gymnasiums and spas as well as restaurants, pubs and entertainment
arcades. In the short term, the property has been upgraded and continues to operate as an
entertainment location as well as a conferencing facility. It also houses the popular KEG pub
and restaurant.



2013/2014
Unaudited
2012/2013
Audited
%
Revenue LKR 000 2,881,984 2,624,821 10%
Gross profit LKR 000 483,298 447,321 8%
Net Profits LKR 000 20,052 33,928 -41%
Earnings per share LKR 0.02 -0.02 >100%
Total Assets LKR 000 22,160,641 12,697,974 75%
Net Assets LKR 000 15,284,524 12,654,077 20%
Property Plant & Equipment LKR 000 10,679,978 2,881,570 >100%
Net assets per share LKR 5.72 5.73 -0.2%
Table 15 - BIL's financial indicators
Source: Annual Reports and Unaudited Financial Statements published as at the report date
On 10 June 2014, BIL has resolved to issue 1,860,000,000 ordinary voting shares via a rights issue
in the proportion of 1-for-1 based on the shareholding as at 5 August 2014. The rights issue will
raise LKR 2.325 Bn to settle debts of BIL. Lanka Century Investments PLC has in principle agreed
to invest LKR 465 Mn in this regard for its holding of 20% in BIL and is expected to be sourced
from external funding.
As at 11 July 2014, BILs share is trading at LKR 1.80 and during the past one year have
generated a negative price return of LKR 30.20%. BILs annualized return volatility during the
past year is 52.95%.

Figure 6- BIL One year price trend
Source: Colombo Stock Exchange
1.00
1.50
2.00
2.50
3.00
3.50
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
12-Jul 12-Aug 12-Sep 12-Oct 12-Nov 12-Dec 12-Jan 12-Feb 12-Mar 12-Apr 12-May 12-Jun 12-Jul
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4. Taprobane Holdings PLC

Taprobane Holdings PLC incorporated in September 2006 was formed with the vision of
becoming a leading investment powerhouse by generating a large fund base and mobilizing
such funds, by investing in the government securities market, debt securities market, equity
market and real estate market. Marking our presence in the investment market as a company
with integrity and honesty in its dealings, Taprobane is known for its flair for creativity in
mobilizing funds and identifying strategic investment options.
The special feature of this fund is that it provides investors with unique combinations of risk and
return options through various combinations of asset classes. In May 2012, Taprobane was
successfully listed on the Diri Savi Board of the Colombo Stock Exchange, boosting and
strengthening stakeholder confidence.
The myriad of financial services offered by its group companies, which includes Money
Brokering, Stock Brokering, Margin Trading and Corporate Finance is well supplemented by the
extensive expertise into the government securities market, possessed in-house. Apart from its
notable investments into the financial services sector, the groups investment strategy
implements a multi-disciplinary approach, marking presence in an array of sectors, including
real estate and commercial property management.

Figure 7- Taprobane Group Structure
Source: Company Profile

Brief description of the Taprobane group of companies
1. Heron Agro Products (Pvt) Ltd A farming project mainly involved in estate management.
2. Taprobane Securities (Pvt) Ltd A licensed Stockbroker of the Colombo Stock Exchange.
3. Capital Trust Partners (Pvt) Ltd - An investment holding company that has sizable
investment.
4. Taprobane Investments (Pvt) Ltd A licensed Money broker of the Central Bank of Sri Lanka.
5. Lexinton Holdings (Pvt) Ltd Involved in property management which extends to
maintaining commercial property. The subsidiaries of this company includes;
Lexinton Financial Services (Pvt) Ltd A Licensed Margin Provider of the SEC engaged
in Margin Trading activities
Lexinton Resorts (Pvt) Ltd Involved in real estate management
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Taprobane Plantations Ltd Involved in managing sports and recreational activity
centres of Excel World Entertainment Park
6. Taprobane Wealth Plus (Pvt) Ltd The Corporate Finance arm of the group primarily
involved in equity and debt issue management.
Top 20 Shareholders as at 30 June 2014

Name of Shareholder No. of Shares %
1. SEYLAN BANK PLC/ARC CAPITAL (PVT) LTD 355,526,332 35.46
2. MR. - ISHARA CHINTHAKA NANAYAKKARA 225,920,922 22.53
3. BROWNS INVESTMENTS PLC 200,587,305 20.00
4. SEYLAN BANK PLC/PUBUDHU SARANGA WIJAYAKUMARI
RUPASINGHE SEYLAN 84,497,064 8.43
5. COMMERCIAL BANK CEYLON PLC/ARC CAPITAL (PVT) LTD 51,190,106 5.11
6. SEYLAN BANK LIMITED/RUWAN PRASANNA
SUGATHADASA/ 18,241,706 1.82
7. WALDOCK MACKENZIE LIMITED/MRS.A.C.JAYASINGHE/ 18,241,669 1.82
8. L.A.C. HOLDINGS (PVT) LTD 12,702,671 1.27
9. MR. - RAJANIK ROSHAN ANTONY 8,629,762 0.86
10. MRS. - TERUNI MARIA WIKRAMANAYAKE 5,073,000 0.51
11. MR. - DHARSHAN ASHANTHA BANDARA DASSANAYAKE 4,046,465 0.40
12. SIERRA TELECOMMUNICATIONS PRIVATE LIMITED 2,095,238 0.21
13. SEYLAN BANK PLC/R.P.L. EHELIYAGODA & S.U.R.
EHELIYAGODA SEYLAN BANK 2,000,000 0.20
14. ENTRUST LIMITED 1,211,476 0.12
15. SEYLAN BANK PLC /CAPITAL TRUST HOLDINGS LIMITED 1,076,481 0.11
16. MR. - NADARAJAH MURALEE PRAKASH 1,047,619 0.10
17. SPRINGCARE HOLDINGS (PRIVATE) LIMITED 1,047,619 0.10
18. Mr CHARITHA PRASANNA DE SILVA 997,333 0.10
19. MR. - NICHOLAS ANDREW FOLEY 759,592 0.08
20. SAMPATH BANK PLC/CAPITAL TRUST HOLDINGS LIMITED 750,809 0.07
Table 16- Top 20 Shareholders as at 30 June 2014

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5. The Valuations
Free Cash Flow (FCF) valuation

The FCF valuation is based on the projected income statements and balance sheets of Lanka
Century Investments PLC and its subsidiary Companies provided by the respective companies,
senior management discussions and assumptions provided. We have derived the FCF to the
equity holders of Lanka Century Investments PLC and its companies and discounted them by
the relevant weighted average cost of capital to derive the value of equity. Then the
calculated equity value is taken into consideration based on the shareholding of the
respective company to calculate the Equity Value of Lanka Century Investments PLC.
The result of such FCF calculations are given in Table 17 below.
Entity
Enterprise value
LKR 000
Value of Equity
LKR 000
% of
holding
Value to GREG
LKR 000
GREG 361,233 355,927 100.00% 355,927
CLPL 1,026,382 878,079 91.39% 802,476
DPL 1,737,641 1,352,509 65.51% 886,029
RFPL 1,434,602 1,046,142 49.49% 517,736
SAT 7,014,891 5,901,073 86.08% 5,079,644
CCH 249,208 223,946 66.40% 148,700
OLAN 204,730 38,331 93.15% 35,705
PALL 23,332 - 55.19% -
BIL 20.00% -
Equity Value 7,826,217
Number of share 349,367
FCF value per share 22.40
Status of offer price Lower
Table 17- Results of FCF valuation
The forecasts and the respective assumptions of Browns Investments PLC was not made
available for Merchant Bank of Sri Lanka PLC as at the reporting date to calculate the Free
Cash flow Valuations and Equity Value of BIL. Lanka Century Investments PLC holds 20%
shareholding of BIL. Therefore, FCF valuations are excluding the value arising from BIL.
SATs previous control through CLPL of 51.55% and the direct control by GREG of 8.09% will
effectively change via a rights issue of 8:1 at a price of LKR 0.10 to CLPLs control of 80.39% and
GREGs direct control to 12.61%. Therefore, GREGs effective control will change from 55.19%
to 86.08% after the rights issues. The set of assumptions used in this valuation is listed below.
No sale of any assets or discontinuation of businesses of any companies during the next
five years.
The 347,721,600 Warrants of GREG outstanding will not be converted at the exercise
price of LKR 39.00 in year 2015.
The risk free rate is 8.93%, the 5 year bond rate
The expected market return is 12.50%.
Perpetual Growth rate of all the considered companies after the fifth year is 0.00%.
The projections for the FCF valuations were provided by the respective companies and
senior management of GREG.
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The total non-current liabilities were considered when arriving at the value of debt as
at today.
Therefore, the FCF value is significantly above the offer price of LKR 11.00 offered by Taprobane
Holdings PLC through the voluntary offer.
If the FCF valuation of BIL was calculated and incorporated in the FCF valuation of GREG, it
will have a positive impact on FCF valuation.

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Relative valuations

Sector based valuation
The sector based relative valuations are calculated based on the Price to book value multiples
of the Investment Trust sector. As at date there are nine listed companies (including GREG)
operating in this sector. The Price to Earnings ratio is not considered since GREG incurred a loss
during the financial year ended 31 March 2014.
The basic snapshot of the offer is given in Table 18 below.
Offer Price LKR 11.00
Group's net profit LKR "000" (304,179)
Groups EPS LKR (0.89)
Price Earnings ratio Times N/A
Group's Net assets ("000") LKR "000" 8,855,891
Group's Net assets per share 31 March 2014 LKR 22.08
Price to Book value based on offer price Times 0.50
No of Ordinary shares "000" 349,367
Table 18 - GREG Offer details
Price to book value based valuations
The valuation used in this methodology is the overall sector based net assets compared to the
sector market capitalization. Based on Table 19, below the offer price made on the voluntary
offer is significantly lower than the valuation presented from the sector based valuation.
Sector Investment Trust
Sector Price to book value 1.10
Sector PBV based valuation 24.30
Status of offer price Lower
Table 19 - GREG Sector PBV Valuation

Market based valuation
The valuation methodology used is the overall market net assets compared to the overall
market capitalization. Based on the Table 20 below, the offer price made on the voluntary
offer is significantly lower than the value presented from the sector based valuation.
Market
Market PBV as at 16 June 2014 2.07
Market PBV based valuation 45.70
Status of offer price Significantly lower
Table 20 - GREG Market PBV Valuation

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Peer based valuation
The valuation methodology used is the peer based net assets compared to the peer market
capitalization. Based on Table 21 below, the offer price made on the voluntary offer is
significantly lower than the valuation presented from the peer based valuation.
Peer Company Ascot Holdings PLC
Price as at 13 Jul 2014 LKR 105.00
Net assets per share LKR 69.93
Price to Book value Times 1.50

Peer Company
Ceylon Guardian
Investment Trust PLC
Price as at 13 Jul 2014 LKR 192.30
Net assets per share LKR 166.93
Price to Book value Times 1.15

Average Peer Price to Book Value Times 1.33
GREG net assets value 31 March 2014 LKR 22.08
GREG value based on Peer PBV LKR 29.26
Status of offer price Significantly lower
Table 21 - Peer based PBV valuation

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Market Price based valuation

The average of closing prices for the last one-year commencing from 12 July 2013 to 11 July
2014 is considered to calculate the average market prices of GREG. Given in Table 22 below,
the offer price made on the voluntary offer is lower than the average closing prices for the last
1-year and last three months.



Starting date
12-Jul-13
Ending period
11-Jul-14


Number of trading days
240
Highest closing price
LKR 15.60
Highest traded price
LKR 16.00
Lowest closing price
LKR 10.00
Lowest traded price
LKR 9.90


Average daily price return/(loss)
% -0.09
Total Price return/(loss)
% -21.94
Annualized Volatility
% 38.33


One year average closing price
LKR 12.90
Three months average closing price
LKR 11.40
Status of offer price
Lower
Table 22 - GREG price statistics


Figure 8- GREG One year price trend
Source: Colombo Stock Exchange

8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Jul-13 Aug-
13
Sep-13 Oct-13 Nov-13 Dec-
13
Jan-14 Feb-14Mar-14 Apr-14 May-
14
Jun-14 Jul-14
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Market Value of Investments

The net realizable value (NRV) of assets is usually computed when the liquidation approach is
used to value a company. Marketable securities will be considered at the present value
considering a sale and other assets at the book values.
Stake of
GREG
No of
shares
Market
Price
Control
Premium
LKR "000"
CLPL

Voting Shares 91.39% 31,284,589 68.00 N/A 2,127,352
Warrant - 2014 73.65% 18,411,702 0.60 N/A 11,047
Warrant 2015 73.65% 18,411,702 3.00 N/A 55,235

BIL 20% 372,000,000 2.30 N/A 855,600

DPL 58.36% 42,163,000 12.00 505,956
PHAR 66.40% 845,159 520.00 20% 527,379
Textured Jersey Lanka PLC
Turn over (LKR) Bn 12.725
Market Cap (LKR) Bn 13.1
South Asia Textile Industries Lanka (Pvt) Limited 12.61% N/A 627,921
Turnover -(LKR) 4.873 Bn
Net Realizable Values from GREG - 31 March 2014
Cash & Cash Equivalents 346,423
Other assets 20,798
Total Net Realizable Value of assets 5,077,711
No of shares 349,367
Value per share 14.53
Status of offer price Lower
Table 23- Realizable Market Values

Market price as at 21 July 2014 except for BIL which is as at 6 June 2014 in order to adjust for
prices before the rights issue.
South Asia Textile Industries Lanka (Pvt) Limited has been valued based on Textured
Jersey Lanka PLCs Market capitalization weighted on turnover for the year ended 31 March
2014.
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6. Independent Opinion

The objective of this independent opinion is to examine whether the offer price of LKR 11.00
offered by Taprobane Holdings PLC for the existing shareholders of Lanka Century Investments
PLC is reasonable and fair. Merchant Bank of Sri Lanka PLC has adopted the following
valuation methodologies included in section 5 of this report with the detailed valuations. The
valuation outcomes of such methodologies are given below in Table 24.
Valuation method Value Status
Free Cash flow based 22.40 Lower
Sector Price to book value based

24.30 Lower
Market Price to book value based

45.70 Significantly lower
Peer Price to book value based 29.26 Significantly lower
One year Average market price based 12.90 Lower
Market Value of Investment 14.53 Lower

Table 24- Summary of valuations

Considering the valuation outcomes given Table 24 above, we are of the opinion that the offer
price of LKR 11.00 made by Taprobane Holdings PLC to the remaining shareholders of Lanka
Century Investments PLC is not attractive as the offer price is at a discount against all the
valuations methodologies adopted as at the valuation date 28 July 2014.
Risk Factors specifically associated with the offer

Shareholders who accepts the offer:

The share price of GREG will change in secondary market based on many factors. If a
shareholder accepts this offer and sell his shares and thereafter if the share price surge
in the secondary market, such shareholders will experience a lost opportunity of
retaining a higher capital gain.
After accepting the offer, if the Company declare dividends to its shareholder, such
shareholders who accepted this offer may not receive such dividends.
Shareholders who reject the offer

The share price of GREG will change in secondary market based on many factors. If a
shareholder rejects this offer and thereafter if the share price decline in the secondary
market, such shareholders may incur a capital loss.

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7. Declaration to the Shareholders and Directors of GREG

28 July 2014
DECLARATION BY THE INDEPENDENT ADVISOR, MERCHANT BANK OF SRI LANKA PLC
We, Merchant Bank of Sri Lanka PLC (MBSL) of No. 28, St. Michaels Road, Colombo 03 being
the Independent Advisor to the Voluntary offer made by Taprobane Holdings PLC (Offeror) to
acquire the remaining Ordinary Voting Shares, not already owned by Taprobane Holdings PLC
or any person acting in concert with Taprobane Holdings PLC, of Lanka Century Investments
PLC (Offeree) do hereby declare and confirm that we do not act as the financial advisor to
the Offeror Company nor we have any interest in or financial connection with either the
Offeror or the Offeree.
MBSL as the independent advisor has given and not withdrawn the consent to the publication
of the report to the Board of Directors and shareholders of Lanka century Investments PLC
Yours faithfully,
MERCHANT BANK OF SRI LANKA PLC


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Mr A M A Cader Ms Lalangi Goonawardena
Deputy General Manager Manager
Corporate Advisory & Capital Markets Corporate Advisory



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28 July 2014

The Board of Directors
Lanka Century Investments PLC
No. 10,
5th Floor, Gothami Road,
Colombo 08.

Dear Sir / Madam
INDEPENDENT ADVISORS REPORT ON THE OFFER MADE BY TAPROBANE HOLDINGS PLC TO THE
SHAREHOLDERS OF LANKA CENTURY INVESTMENTS PLC
At the request of the Board of Directors, we have carried out the valuation of the ordinary
shares of Lanka Century Investments PLC for the above purpose and pleased to submit
herewith our opinion in compliance with the rules and regulations contained in the Company
Takeovers and Mergers code 1995 (as amended in 2003) of the Securities and Exchange
Commission of Sri Lanka.
Thanking You
Yours faithfully
MERCHANT BANK OF SRI LANKA PLC


------------------------- ------------------------------------
Mr A M A Cader Ms Lalangi Goonawardena
Deputy General Manager Manager
Corporate Advisory & Capital Markets Corporate Advisory

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