The Island business

Aitken Spence to press on with international share issue

Aitken Spence and Co. Ltd., one of the conglomerates quoted on the Colombo Stock Exchange, plans to press on with its proposed international share placement despite the buffeting its share price, along with those of other blue chips, has taken in the worldwide plunge of recent weeks.

Lehman Brothers Asia Ltd., an investment bank with a global reputation, who have been selected to be the placing agent has, according to the directors of Aitken Spence, reported "that a number of foreign investors have identified the company as a leader in the region.''

"These foreign investors have expressed their confidence in the company and have indicated their willingness to invest in a new issue of shares,'' the Aitken Spence directors have told shareholders.

An extraordinary general meeting of the company has been summoned for June 30 to consider a resolution authorising the new issue by way of an open offer/placement which the placing agent and financial advisors have said is the best way of issuing the new shares.

The directors will decide on the price at which the new shares will be issued based on market value at the time of the offer. Well informed sources said that the offer is likely to be timed for some time before November when it is hoped that the current downturn that has dragged the Aitken Spence share to a lowly Rs. 115 on the CSE last week would be somewhat mitigated.

Existing shareholders, already profiting from a 1 for 3 bonus, will not be shut out of the placement. If they wish to maintain their proportionate holding in the company, by taking new shares at the placement price, they would be given the opportunity to invest. Requests by such shareholders for additional shares will be treated on a uniform basis as in the case of unsubscribed shares in a rights issue.

The directors propose to issue up to 10.4 million new shares by the placement reserving for themselves the right to determine the exact number immediately prior to the proposed open offer/placement. Analysts expect that this would be determined by the price that can be commanded - higher the price the lower the number of shares issued.

The cash to be raised by the issue of new shares will be utilised for investment in the plantations, in a third Maldivian resort, and power projects. The funds would also help restructure highly geared existing investments in the Maldives and assist working capital and other non-project related capital investment, the directors have said.

The company has already invested Rs. 336 million in plantations by taking, along with a consortium of strategic partners, 51% each of Elpitiya and Talawakelle Plantations. Short term bridging finance helped pay for this investment.

The third Maldivian resort lease, costing about USD 12 million (about Rs. 775 million) is expected to be wrapped-up before the end of this year.

The power projects involving a Rs. 350 million investment in two 20 MW stations will be a joint venture with the Tomen Corporation of Japan and the Commonwealth Development Corporation. The bids for these projects are in and Aitken Spence says their's are very competitive. The company is hopeful about swinging the deal.

Hilton International helps with insurance
Hotel Developers push business loss claim after bomb blow

Loss adjusters are now working on the business interruption claim made on account of damage suffered by the Colombo Hilton Hotel from last October's Galadari bomb, shareholders of Hotel Developers (Lanka) Ltd. have been told.

The hotel, which was made partly operational within a month of the blast, is now being repaired and refurbished where required, the owners have said.

"The major part of the programme is expected to be completed this year and the balance completed in the first quarter of next year with least disturbance to the operation of the hotel,'' they have said.

Of the Rs. 350 million soft loan pledged by the government, Rs. 150 had been received. The 15-year loan with five years grace on interest and capital, carries a 2% interest rate and a 1% commitment fee during the grace period.

"Hilton International has confirmed that business interruption insurance has been covered and consequential loss and profits claims are being pursued by loss adjusters. The company is also pursuing, with the assistance of Hilton International, insurance claim in respect of the damage caused to the hotel,'' the owners have said.

According to provisional figures, there had been a decline in both turnover and operating profits of the company during the nine months ending Dec. 31, 1997. Turnover was down to Rs. 680.3 million from Rs. 729.8 million a year earlier while the gross operating profit declined to Rs. 547.3 million from Rs. 591.4 million during the comparative period the previous year.

Much of the gross operating profit has been absorbed by the reserve to replace furniture, fittings and equipment (Rs. 31.4 million), management fee (Rs. 57.1 million), interest on the Mitsui-Taisei loan (Rs. 134.8 million) and interest on the government loan (Rs. 18 million).

This left a balance profit of Rs. 10.7 million, down sharply from the profit of Rs. 98.4 million earned during the comparative period the previous year.

The Indian budget and domestic industry

By Kanes
The Indian Prime Minister announced on March 19, 1998 the "National Agenda" under which the new government would continue with the reform process but would give it a "strong Swadeshi (self-reliance) thrust to ensure that the economy grows on the principle that India shall be built by Indians". The new budget introduced on June 1 is based on his approach. The Finance Minister stated in this speech the following: "This budget is rooted in Swadeshi which will be unfolded as we go along. We shall hasten to add that Swadeshi does not mean isolation. Swadeshi means making India strong and self-reliant so that we compete with the world and win".

The budget reflects the new government's cautious and pragmatic approach to liberalization and integration with the global economy and its desire to strengthen and protect domestic industry instead. It is neither based on free market econimics nor rules of the IMF/World Bank; on the contrary, some of its proposals are bound to be disapproved by them. The general approach is in marked contrast to that of Sri Lanka which in its hurry to integrate with the global economy is exposing domestic industry to unfair foreign competition instead of protecting it and inviting foreign investment into sectors which should be preserved fo domestic investment.

The budget which was described by the Prime Minister as development and growth oriented has increased allocations to agriculture, infrastructure, education, health and scientific affairs quite substantially. In order to revive the rural economy, plan allocation for agriculture, where two thirds of the people work, has been raised by 50 per cent with emphasis on irrigation, rural credit, rural housing and cooperatives.

The government does not want to "have a society where we have islands of very high consumption and vast seas of deprivation and poverty". Funds for infrastructure — energy, transport and communications — have been increased by 35 per cent, on education by 50 per cent, on health by 34 per cent, on atomic energy by 68 per cent, on space research by 62 per cent and on defence by 14 per cent. This increase in expenditure is to be met by new revenue from higher import duties, new services taxes, excise taxes, increase in price of petrol, cigarettes and increase in postal rates. Total expenditure is estimated to increase by 14 per cent. The fiscal deficit which was 6.1 per cent of GDP in 1997/1998 is to be reduced to 5.6 per cent in 1998/1999. It is not proposed to go into a detailed study of India's budget here. Our main concern is to see what lessons we can learn from the budget for our own industrial development, privatization and foreign investments.

Protection for Indian Industry
Indian domestic industry has been complaining that liberalized imports and incentives and concessions to foreign investors introduced by reforms had put Indian entrepreneurs in a position of disadvantage. While the large increase in imports as a result of liberalization had adversely affected many industries such as chemicals, electrical machinery, iron and steel, pig iron based items, pharmaceuticals, paper and paper board, sugar and several captial goods, lower import duties had undermined domestic industries further, reduced their profits, slowed down production and new investment, for example, in iron and steel ,pharmaceuticals and drugs. Further, zero import duty on imports for infrastructure had reduced the demand for local manufactures of supplies to sectors such as refineries. Domestic industrialists pointed out further that the import duties on many imports were even lower than those committed to the WTO. They also complained on dumping which resulted in unfair competition.

One of their main grievances was that while domestic manufacturers had to pay local excise and sales taxes which inflated costs and reduced competitiveness by 5 to 14 per cent, importers were exempted from such taxes. In some instances, duty on inputs was higher than on the finished product so that it was more profitable to import rather than manufacture locally. For example, textile machinery and intermediates attract 20 per cent duty whereas inputs such as some steel tools carry 30 per cent.

The budget has recognized these legitimate concerns of domestic industry. In order to provide a level playing field to domestic industry, the budget imposed an additional levy of 8 per cent on all imports except some specified items such as crude oil and newspirint, raised import duties on specific items further and lowered the tariff on industrial raw materials. This is in contrast to the policies in Sri Lanka which favour reduction or elimination of import duties to remove protection to domestic industry — e.g. textiles. Thus, import duties were raised from 25 per cent to 30 per cent on cold rolled coils of iron and steel to assist the steel industry, and those on wrought copper were raised from 30 per cent to 35 per cent and on paper and paper board from 20 per cent to 30 per cent. On the other hand, import tariffs were reduced on several industrial inputs such as photographic chemicals, citric acid, i.c. engines and parts for motor vehicles, industrial diamonds, rayon-grade wood pulp, newsprint, cinematographic films, stainless steel melting scrap and refractory ceramics goods (steel industry), machinery for leather industry and information technology, equipment and parts. The textile industry was provided with special tariff concessions. Import duties were reduced on caprolacturm and paraxylene — raw materials required for synthetic fibre and yarn, raw wool, wool waste, acetate and cuprammonium filament yarn and machinery for viscose filament yarn and woollen industries. All these concessions have been welcomed by domestic industry. The President of the Federation to Indian Chambers of Commerce and Industry — Mr. K. K. Modi — has described it as a bold budget and that "domestic industry will emerge stronger now and will be able to compete in global markets".

The budget pays special attention to small-scale industry which provides employment to 16 million people and accounts for 40 per cent of total manufacturing and 35 per cent of manufacturing exports. This sector has been provided with expanded credit facilities, lower taxes and less harassment by "inspector raj".

Privatization
The budget announced that the government shareholding in public sector enterprises, in the generality of cases, will be brought down to 26 per cent. In enterprises involving strategic considerations, however, the government will continue to retain majority holding. The government expects to receive Rs. 50 billion from disinvestment from some public enterprises this year. In the case of Indian airllines, the government has proposed to bring down the government equity holding to 49 per cent. Those public undertakings which have constantly incurred losses are to be closed with a liberal and attractive compensation package for workers from a Restructuring Fund to be constituted.

There is no indication that State banks and State insurance companies would be privatized, but insurance sector is to be open to competition from private Indian companies in order to augment the flow of long-term resources for financing the infrastructure. The budget is very clear that no foreign insurance companies will be permitted. It is not clear from the budget speech whether foreign investors will be allowed to buy shares in privatized public enterprises but if insurance is a guide, it would appear that Indian investors would be given preference.

Foreign Capital
Foreign investment flows to India in 1997-1998 are estimated at $3.1 billion. About 60 per cent of investment approvals were in the energy and infrastructure sectors. The budget expects to double this inflow within two years by creating "conditions in which foreign investors will find India an attractive investment destination". It proposes to introduce hassle-free procedures to give a decision on foreign investment proposals within 90 days. There are no new incentives or concessions for foreign investment. Although the budget has not identified the areas where foreign investment is allowed, the National Agenda had made in clear that it will be permitted in "core" areas like infrastructure but not in "non-priority" areas such as consumer goods. The BJP had summarized its position during he election compaign by the catchy phrase "computer chips, not potato chips".

The government apparently is not worried about the possible effects on the economy of sanctions particularly by the USA. In fact, the Minister of Finance does not expect the sanctions to have any significant adverse effect on the inflow of private capital or the country's exports. He stated in the budget speech: "While the people of India have reacted with pride over the events of May 11, some of our friends abroad have responded negatively. I am confident that these initial negative responses will be moderated as our position gets better understood, and will not have any significant impact on our economic development". The Finance Secretary explained further; "what happens to private capital flows willl depend on foreign investors’ perceptions of the economy and I think the budget has moved to shore up their confidence". The former Finance Minister Manmohan Singh, however, called the budget "half-baked" as it does not include the impact of the sanctions.

Foreign investors, however, seem to have been unimpressed with the budget. The country head at foreign brokerage W.I. Carr Securities International Limited — Brian Brown — for instance said: "There are no real incentives for either foreign portfolio or direct investors. So foreign investors will pull out money just as they are doing now in several emerging markets".

The budget has made some concessions to mobilize non-resident Indian deposits to build up its foreign reserves and augment resources for investment.

Economic Recovery
The Indian economy is not doing too well at the moment. Its average annual growth rate of 7 per cent in the three years 1994/1995, 1995/1996 and 1996/1997 has come down to 5.0 per cent in 1997/1998 which is the slowest growth since 1992/1993. Agricultural growth was negative in 1997/1998, industrial growth was only 4.2 per cent and export growth 3 per cent. The capital market is in the doldrums and economic growth is obstructed by infrastructural bottlenecks. The Rupee has fallen in value to Rs. 42 per US dollar. The budget expects an economic growth rate of 6.5 to 7.0 per cent in 1998/1999, but analysts believe it will be lower. It further expects inflation to be 6.5 to 7.0 per cent. Whether the measures announced in the budget will boost industrial production, revive investor confidence and kickstart the economy remains to be seen.

Citadel prepares to meet new challenges in Kandy

Kandy Walk Inn Ltd., the owners of The Citadel, which has been able to profit by the shortage of rooms in the hill capital since its commissioning in 1983 is taking up the challenge posed by the new hotels and increased room supply in Kandy, shareholders have been told.

Mr. K. Balendra, the chairman of the owning company, has told members that renovation and air-conditioning of 42 rooms have been completed and these rooms are now of a "very high quality''. The remaining 50 rooms were closed in April for renovation and they are expected to be ready by end-September.

Once this work is done, "all 121 rooms of your hotel will be of a very acceptable standard enabling it to compete effectively with those newly opened and newly refurbished hotels in Kandy.'' Balendra also said that work on improving the public areas would begin once the room renovation is completed and funds are available.

The year ended March 31, 1998, saw the company paying an unprecedented 127.5% dividend, tax free in shareholders' hands, out of retained profits made in previous years. The company drew on Rs. 66.9 million of its reserves to make this payment and the directors have not recommended a final dividend on top of it.

With tourist arrivals up 16.4% last year, The Citadel was able to record a slight increase in its year round occupancy which gained 4 percentage points to reach 50%. Turnover was up marginally to Rs. 99.6 million and the pre-tax profit was up 21% to Rs. 27.2 million. The net profit after tax, however, dropped to Rs. 10.3 million on account of a provision of Rs. 11 million for deferred taxation.

The net profit in fiscal 1997/98 was the lowest posted by the company since 1990/91.

The tax holiday of the company, which has been declaring dividends on every year of operation since the opening of the hotel in 1983, ended on March 31, 1997. However, future profits will be taxable only at the special rate of 15% announced in the 1997 budget.

Balendra warned that with 50 rooms closed for five months of the financial year, both turnover and profitability of the hotel will be down in the first half of the current financial year.

"But if we have a good winter season, we are confident that the performance could be as good as the current year if not better.''

The directors of the company are Messrs. K. Balendra (chairman), V. Lintotawela, C.J. Fernando, R.T. Molligoda, V. Leelananda and S.N. Dharmadasa.

Government lost Rs.500 million in duty free imports - Chamber

A study done by the Import Section of the Ceylon Chamber of Commerce showed that the Government lost revenue to the value of Rs.500 million last year on duty free imports.

This was disclosed by Mr. D. J .A .Abeysekera, Chairman of the Import Section, at its 63rd Annual General Meeting last Friday. He also expressed the Import Section's concern on a number of other issues as well, including

the implementation of the Goods and Services Tax (GST), smuggling and high lending rates.

Industrial Development Minister C. V. Gooneratne, the Chief Guest at the meeting, said the Government was addressing these issues and assured its full commitment to the promotion of the private sector in the country.

Abeysekera said the study showed that 91% of video cassette recorders, 46% of refrigerators, 73% of colour television sets, 69% of air conditioners, 60% of radio cassette recorders, and 70% of washing machines, were among items imported duty free last year.

"In fact, Sri Lanka has now become a duty free state for a favoured few" he said.

In addition to this recorded volumes and values appearing in Customs statistics, there is also large scale smuggling, he said. The Imports

Section has represented matters to the Customs authorities on the large scale entry of foreign liquor into the local market without payment of

duty. The unaccompanied baggage clearing houses have been increased from one to six and in the opinion of the Imports Section this provides further opportunities for smuggling particularly of consumer durables.

"We believe the only solution to this perennial problem of smuggling and other duty free inflows is to further reduce duties with adequate protection given to the local industry", Abeysekera said.

He said that while the commercial banks have reduced deposit rates to levels as low as 10% to 11%, lending rates still range from 17% to 19%. He requested the commercial banks to reduce the spread between the deposit rate and the lending rate and have a more reasonable lending rate.

While welcoming the introduction of the GST, he said that this tax system could be fine tuned for its application to be more effective. He

expressed reservations on the ability of the Inland Revenue Department to properly monitor it.

Minister Gooneratne said that the importing community of Sri Lanka has a vital role to play in the process of economic development since the Government is committed to the pursuit of an open economic policy.

He said that concepts such as globalisation and liberalisation provide many opportunities, but, the challenges these systems offer are also

daunting. "We should achieve a level playing field if these concepts are to be meaningful to us", he said .

Referring to SAPTA and SAFTA, the Minister said that there must be no non-tariff barriers. "We have to ensure that not only tariff barriers, but also non-tariff barriers should go if we are to have a level playing field", he said.

Belgium firm sets up company in Sri Lanka to export computer software

A company called Ecode Lanka Software has been established in Sri Lanka by Datika International, a Belgium Information Technology company belonging to the Mitiska Group, to export computer software to Europe.

Mr. John Brillon, the Managing Director of Datika, said Board of Investment approval had been obtained for Ecoda Lanka Software which was set up to meet partly increasing demand for software development in Europe due to the year 2000 problem and the introduction of the European single currency system.

He told a press conference in Colombo last week that due to a shortage of software professionals in Belgium his company looked around for an overseas development centre and selected Sri Lanka mostly due to the availability of high caliber IT professionals in this country.

"They are qualified, experienced and above all possess the right attitude", he said.

Brillon said the Unit in Sri Lanka is producing several well-designed and innovative packages for the European market. A unique feature of the systems developed by Ecode is the ability to support major European languages in addition to English. These systems do not have the Year 2000 problem and most can handle the single European Currency in additional to several other currencies.

At present Ecode has a staff of 25 local IT professionals, hand picked for their professional skills. A Resident Technical Director from the Netherlands provides the European Management skills. A Sri Lankan Sales Manager, resident in Belgium, handles marketing and promotional activities in the European market.

Brillon said future plans envisage a substantial increase in sales for which 150 programmers would be recruited locally. A local senior project Leader has been entrusted the task of human resource development by providing further training for the staff in Sri Lanka and also in Belgium

The company also believes in providing "job variety" and exposure to different tools, methodologies and technologies by rotating staff between projects, he said.

Straight talk from CEO of successful manufacturing industry
Dipped Products MD stresses essential policy reforms

Mr. N.G. Wickramaratne, the managing director of Dipped Products Ltd., one of the country's most successful manufacturing industries adding value to local raw material, has made a strong case for urgent policy reforms that would ensure both increased productivity and better utilisation of the country's available manpower resources.

In the just published annual report of the company, one of the world's biggest manufacturers of rubber hand protection wear, Wickramaratne says that the single most important issue the country faces today is the need to improve productivity.

He says: "Improvements to infrastructure, even to the extent that budgetary resources permit, can have an immediate effect. An educational system more attuned to the needs of industry will redress a long running deficit.

"We have advocated changes to the labour laws which entrench practices that yield low work output from work places otherwise rich in assets. Their effect is to suppress investment and job creation.

"It is unfortunate that in this country a large segment of the workforce must necessarily go overseas to earn a living as we deny them employment opportunity at home. It is our firm belief that the amendments to the law should be effected in a manner to facilitate higher productivity leading to improved standards in living of those who toil for it through proportionate increases in pay.

"We remain strongly in disagreement with the management of the exchange rate.

"We are of the view too that the targeting of industry to carry the brunt of our environmental consciousness is folly as we all litter our surroundings with man-made waste and add our own to poisonous gases emitted from an aging population of vehicles.

"There thus remains an impressive list of policy reforms which can help the private sector in the development of our country. We do our duty to point them out. The urgency to reform is greater in terms of professed development goals of the country.

"We are confident that early focus on policy reforms would have a multi-fold effect on the company's growth rate as well as that of industry ads a whole.''

The Dipped Products Group had a very good year ending March 31, 1998 with pre-tax profits growing 77% from Rs. 213 million to Rs. 377 million. Profits attributable to the company was up to Rs. 238 million from Rs. 158 million the previous year.

The major contributor to the profits was Kelani Valley Plantations Ltd. which more than doubled its profits before tax to Rs. 212 million - the third successive year when the same level of profit growth had been achieved, Dipped Products Chairman Sunil Mendis noted.

"The manufacturing segment of the group continued to perform strongly posting a 22% profit growth despite severe competition arising from depreciation in South East Asian currencies,'' he said.

Wickramaratne reported that though developments in SE Asia "have of necessity made us pause,'' the company is pressing on with expansion of its dipping capacity by 35% this year with two new lines being installed at its Kottawa factory. The project which envisages capital outlays of over Rs. 250 million will qualify for tax concessions allowed to thrust industries.

The expansion is being undertaken by a new company, Neoprex Ltd., and partly by Dipped Products. The MD said that steps were also being taken to recommission the company's latex thread factory which was a failure for manufacturing fabric supported gloves.

The Hayleys and Richard Pieris Groups are the main stakeholders in Dipped Products whose executive directors and employees are acquiring a substantial shareholding through an Employees Share Ownership Plan (ESOP) which has been in place since 1993/94.

The directors of the company are Messrs. Sunil Mendis (chairman), N.G. Wickramaratne (managing director), H.A. Pieris, P.I. Pieris, R. Yatawara, R.W. Soysa, J.A.G. Anandarajah, Dr. W.S.E. Fernando and G.K. Seneviratne.

Kirimetiya Farm to be returned to LRC, no deal yet on compensation for 1986 takeover
Elephant House holds back final dividend decision

Ceylon Cold Stores Ltd., best known as Elephant House, which has recorded its best ever performance in a history that goes back to 1866, has decided to defer a decision on a final dividend until a 1 for 1 bonus issue is finalised.

The company has already paid a 15% interim dividend absorbing Rs. 13 million in February. The bonus share resolution has now been carried by an extraordinary general meeting earlier this month and market watchers expect an announcement of a final dividend by the time the company's annual general meeting is held in early July.

The company has negotiated with the Land Reform Commission to hand back its Kirimetiya Farm to the LRC which has agreed in principle to the transaction. However, there had been "no meaningful response'' to its compensation claim for the 1986 takeover of the company.

In his just published annual report, the company's chairman, Mr. K. Balendra, has said that CCS had performed "exceptionally well'' in the year ended March 31, 1998, to record a gross turnover of Rs. 1.7 billion and a consolidated pre-tax profit of Rs. 250 million.

This compared with the previous year's turnover of Rs. 1.41 billion and pre-tax profit of Rs. 174.6 million, a gain of over 20% on turnover and 43% on pre-tax profit.

Elephant House which is the market leader in both soft drinks and ice cream has invested Rs. 461 million in the year under review on the import and installation of a new bottling line at its Kaduwela factory. This was commissioned earlier this year.

Balendra said the company had further consolidated its dominant position on soft drinks and ice cream with aggressive marketing, strengthened distributor networks, new products, packaging and production floor efficiencies.

While the milk division "continues to deliver its premium products to the household and hotel sectors,'' no major investment is envisaged there. However there are plans to further improve the home delivery network. The management has decided to stop operations in its jams and cordials division and ice factory as a part of its resource rationalisation strategy.

The meat products division had continued to improve performance and introduced a range of new products which have been well received by the customer, Balendra said.

CCS made a 1 for 2 bonus issue last September and also offered shareholders rights at Rs. 80 on its ordinary shares in the proportion of 1 for 7. The rights issue was full subscribed and the cojmpanyn was unable to meet in full applications for additional shares. A resolution for a further 1 for 1 bonus has now been carried.

A CCS 8-rupee share commanded the highest price of Rs. 235 in 1997/98 and lowest of Rs. 90. It was last week transacted at Rs. 81 following the recent slump on the stock market.

The directors of the company are: Messrs. K. Balendra, V. Lintotawela, C.J. Fernando, G.S.A. Gunasekera (managing director), Ms. R.S. Goonewardena and D.S. Walpola.

We will never attain our full potential as long as war goes on
Maldivian investments insulate Aitken Spence Hotels

Mr. R. Sivaratnam, chairman and CEO of Aitken Spence Hotel Holdings Ltd., one of the lead players in Sri Lanka's tourism industry, has pointed out that Sri Lanka has lagged far behind its planned tourist arrivals targets and said that an extraordinary effort is needed to catch up the slack.

R. Sivaratnam

"So long as the terrorist war continues and security remains a matter of serious concern, we will never be able to exploit the full tourist potential of our country. It is therefore of paramount importance that all political parties work together to achieve a fair and lasting settlement. This is a matter of top priority and urgency,'' he has said in the just published annual report of his company.

While fiscal 1997/98 had seen a remarkable turnaround of the company, with turnover growing almost 50% to top Rs. 1 billion and the profit attributable to shareholders increasing nearly eightfold to reach Rs. 98.2 million, the major contributions had come from the Maldivian resorts.

Sivaratnam however noted that "our Sri Lankan hotels have demonstrated their ability to improve their profits substantially, even when local market conditions were not the most favourable.'' He said that the Lankan hotels had collectively posted a profit of Rs. 13.7 million, a distinct improvement from the previous year's loss of Rs. 57.7 million.

The Maldivian properties on the other hand contributed a profit of Rs. 89.8 million, up from the previous year's Rs. 58.7 million.

Sivaratnam said that the company which runs two Maldivian resorts is now wrapping-up a deal for the third. They are also considering further investments in the South Asian/Indian ocean archipelago.

"Your company has the required management skills and experience for successful overseas operations. This gives us the confidence to boldly venture beyond our national frontiers,'' he said. "These projects, which would not be affected by the ground situation in Sri Lanka, would add tremendous value to our hotel group and increase the return to you, our shareholders.''

The company which has already paid an interim 25% dividend in March has proposed a final 5% giving the shareholders a 30% return against 10% the previous year.

Aitken Spence Hotel Holdings has a number of 'firsts' to its credit. They were the first to build a 5-star resort hotel, the Triton at Ahungalle; the first to build what is claimed to be a 5-star "eco-friendly'' hotel, Kandalama at Dambulla; first to build a theme hotel - the Tea Factory at Kandapola and the first Lankan company to venture offshore with the Maldivian investments.

The directors of the company are: Messrs. R. Sivaratnam (chairman/CEO), E.P.A. Cooray (managing director), R.E.V. Casie Chetty, S. Rajendra, M.H.B. Ratnayake and U.C. Jayasinghe.