• LOLC abandons plans to offer dollar leases
• Bloodbath - says brokers
• Siedles TV Industry to de-list
• Hayleys sustain bonus track record
• Globalization and Industrial Relations II
• CIC tightens controls after accounts falsification
• East Asian currency slide brings Italpolo to its knees
• Mercantile Leasing launches capital restructuring process

• Liberty Plaza owners to branch to new fields
• Richard Pieris goes into specialised shoe soles
• New chief at Bata
• Shopping malls part of expansion plans
  Record year at Richard Pieris
• Hotel Developers share trading suspended
• CISCO holds plans for Indonesian joint venture
• Brown's report negative trading result after interest

Lanka Orix Leasing Co. Ltd. (LOLC), which pioneered the leasing industry in Sri Lanka, has abandoned plans to offer dollar denominated leases here and decided to cancel a dollar loan it had negotiated for this purpose, LOLC Chairman C.P. de Silva has told shareholders.

This loan was to be obtained from the International Finance Corporation (IFC), the World Bank's soft loan window. LOLC will convert the IFC loan and line of credit to a guarantee by the IFC against which the company will borrow rupee funds to fund its leasing operations, he said.

The chairman said that at the time they had thought of extending dollar denominated leases to BOI companies, there was a big demand for such leases. Subsequently, with the drop in the interest rate here this demand waned.

"The advantage of dollar denominated leases over rupee leases was the substantial interest difference between dollar funds and rupee funds. With the significant drop in rupee interest rates in Sri Lanka during the year, this differential was sharply reduced.

"Further, many exporters expected a devaluation of the rupee against the dollar in the light of the East Asian crisis and preferred rupee borrowings to dollar borrowings as they stood to gain from a devaluation strategy. As a result the demand for dollar loans decreased substantially resulting in LOLC finding it difficult to disburse these funds,'' de Silva said.

The company is also not proceeding with a private placement of up to 12% of its present issued equity, for which shareholder approval had been obtained, due to the downturn in the share market. LOLC feels that its share price is not high enough for the purpose and will go ahead with the issue only once conditions are favourable, de Silva said.

The year ended March 31, 1998, saw the company raise turnover 13% to Rs. 1.93 billion and profit after tax 6.5% to Rs. 170.5 million. The chairman said this was a satisfactory performance given unfavourable economic conditions and uncertainty in the country.

He also warned that the massive devaluation of East Asian currencies will see Sri Lanka facing difficulties in the future as our industrial exports will have to compete with those from South and South East Asia.

With commercial banks entering the leasing industry, LOLC felt it would be imprudent to depend entirely on the banks for funding. They therefore successfully turned to the capital markets for funds issuing innovative debt instruments like unsecured debenture, interest rate swaps, interest caps, asset backed debentures and zero coupon bonds.

The quality of the company's lease portfolio was being maintained with bad debts written off during the period under review amounting to 0.8% of net investment leases. "In fact, over the last eight years we have been able to maintain our write-offs of bad debts to less than 1% per year. As such we felt that your company's provision for bad debts was over conservative and it was decided to reduce it from 3% of net receivables to 2.5% which is still conservative compared to provisioning policies adopted by banks and finance companies.''

De Silva also reported that IFC has approved an investment of Rs. 15.4 million (USD 245,000) in the equity of their subsidiary, Lanka Orix Factoring Company Ltd. (LOFAC) and a foreign currency loan of USD 1.5 million. This facility will enable LOFAC to advance foreign currency against export invoices.

LOFAC had, after much negotiation, now received Central Bank approval for export factoring, de Silva said.

The directors of LOLC are Messrs. C.P. de Silva (chairman), L.S. Jayawardena (deputy chairman), Y. Miyauchi, N. Ratnasabapathy, M.T.L. Fernando, S.S. Jayawickrama, G. Cumaranatunge and E.C.R. Muttupulle (managing director).

"Another bloodbath.'' That was the brief description a stock analyst used to sum up what's been happening in the Colombo Stock Exchange where the benchmark all share index has plunged below the 600 point resistance barrier.

Asia Securities said that with foreign investors dumping blue chips they had long favoured even at give-away prices and locals cautiously staying out of the market, the all share index went as low as 568.8. It has since picked up a little but remains below 600.

With the market closing on Friday with the all share index a shade below 600, brokers said that the aggressive foreign selling had stopped at least for the moment. Hence the strengthening of particularly the sensitive share index which dragged the whole market down. But had it finally bottomed of? They were not guessing.

Foreigners were selling market heavies like NDB (down 23% a week ago), JKH (down 18%), Aitken Spence (down 10%) and Hayleys (down 14%). Hayleys which has a lower percentage of foreign shareholding, and which announced a 1 for 6 bonus share issue at last week's AGM, has demonstrated some resilience.

There have been bonuses from JKH (1 for 4) and Aitken Spence (1 for 3) earlier this year. The NDB has not made any bonus share issue since its initial public offer but compensated shareholders with a big 65% dividend. The DFCC, also a market heavy whose share price has taken a battering, is also making a 1 for 6 bonus issue with the new shares qualifying for the 30% dividend declared.

Asia said that they do not expect foreign investors to re-enter the market in a big way in the short term owing to currency turmoil in the region. Also "the political turmoil in India and Pakistan - both of which seem to be driving away the generalist foreign investor from these markets now.''

They expected market sentiment to remain weak in the sort term, but expected it to re-attract investor attention in the medium term as concerns over currency gradually evaporated. The brokers, whose business depends on the value and volume of transactions, project an eventual upward movement.

For the moment, they all advocate "bottom fishing'' for fundamentally strong growth stock with strong cash flows and sustainably strong earnings growth over the next two years. Asia pointed out that many such stocks were now trading at their historically low price earnings ratios with the share prices of several growth companies bottoming out. They would thus be not significantly vulnerable to downward selling pressure, the brokers said.

Siedles TV Industry Ltd. has failed to revive its failed black and white television receiver assembly and has decided to seek a de-listing from the Colombo Stock Exchange, shareholders have been informed by the company's managing director.

"Once approval is received from the authorities, proposals concerning the purchase of individual shareholdings will be notified to shareholders,'' he has said.

In his last annual report (1996/97) the company's chairman advised shareholders of the difficulty in procuring quality raw materials vital for their main activity of assembling black and white TVs. He also said that attempts to at least partly utilise the factory by assembling radio cassette recorders had turned impractical "for reasons outside the company's control.''

The chairman said that all those circumstances combined into a situation where the company "fails to fulfil the requirements of a going concern.''

The managing director has now said that there has been no change in the situation since then and the board had taken the de-listing decision "in the interests of all concerned.''

He also said that adequate steps had been taken to avoid any serious erosion of the company's assets.

Four of the main listed companies of the Hayleys Group including the parent have announced bonus share issues following the publication of their 1997/98 financial year results.

Hayleys are making a 1 for 6 bonus issue, a substantial improvement on the previous year's 1 for 11. The company has the best track record for bonus issues among companies listed on the Colombo Stock Exchange.

The other bonuses announced this year by subsidiaries and associates of Hayleys are: Haycarb 1 for 6, Dipped Products 1 from 5 and Hayleys Exports 1 for 7.

by Kanes
In the 17 years 1980/81-1997, the number of the employed, as shown in the table, increased by 719,700 or 14.8 per cent; mainly as a result of expansion of economic activity after the launching of liberalization policies. The largest increases in absolute terms took place in personal services, manufacturing, and trade sectors while the biggest increases in relative terms occurred in finance, banking and insurance, manufacturing and personal services. As shown in the table, employment in finance, banking and insurance increased by 117 per cent — the highest — while that in electricity, gas and water rose by 9 per cent — the lowest. The easy availability of imports was perhaps the crucial factor underlying economic expansion. Import volume for instance trebled between 1975 and 1980; imports for industries came in freely and industries were able to operate at higher capacity; capacity utilization in industry rose from 64 per cent in 1976 to 73 per cent in 1980 and 84 per cent in 1995. Imports of buses and lorries expanded transport business; the number of new private omnibuses registered rose from 81 in 1976 to 2,658 in 1980 and 3,347 in 1994 while the number of new lorries registered increased from 451 in 1976 to 9,323 in 1980 and fell slightly to 7,293 in 1995. The gigantic Mahaweli diversion scheme, new Parliamentary complex, government buildings and housing programmes provided an impetus to construction. The entry of foreign banks and insurance strengthened the financial services; the number of branch bank offices for example increased from 737 in 1978 to 1,332 in 1996. Investment in tourist hotels was another important source of new employment, tourist arrivals increased from 73,149 in 1976 to 215,650 in 1980 and to 407,511 in 1994 and direct employment in the tourist industry rose from 11,752 in 1976 to 36,260 in 1995 and indirect employment from 15,900 to 51,100.

In the six years 1992-1997, the country’s labour force has increased by about 53,000 a year on the average while employment opportunities have risen annually by about 78,000 or 1.6 per cent in the context of an average annual economic growth rate of 5.2 per cent. New employment creation of 487,000 exceeded the increase in the labour force of 324,000 in this period by 163,000. This resulted in bringing down the figure of the unemployed by the same amount from 810,000 to 647,000 or from 13.3 per cent of the labour force in 1992 to 10.4 per cent in 1997. In 1980/81, unemployment was as high as 857,168 or 15.3 per cent: the reduction in unemployment between 1980/81 and 1997 was 210,168 or 24.5 per cent.

It is significant that while employment increased in recent years in most sectors, it declined in the largest sector of all — agriculture, fisheries, livestock and forestry — by 14.1 per cent between 1980/81 and 1997 and in unspecified activities by 21.0 per cent. The agricultural sector, as mentioned earlier, benefited little by liberalization policies and its share in GDP as well as in total exports shrank in this period, mainly on account of unfavourable world prices for the major export plantation crops.

In the public sector, employment increased in the government but it declined in the semi-government sector (public corporations, state-owned banks and universities). Employment in the former, i.e. government departments, provincial councils and local authorities increased by 315,982 or by 71 per cent from 446,085 in 1978 to 762,067 in 1997 reflecting the creation of new ministries and departments, establishment of provincial councils under the devolution programme and expansion of staff including recruitment to the armed services to fight terrorism. Public sector reforms such as privatization, early retirement with golden handshakes, pruning expenditure and staff, resulted in a fall in employment in the semi-government sector by 371,371 or by 55 per cent from 681,034 to 309,663 in the same period. Thus, there was an overall increase in public sector employment.

In the private sector, while liberalized imports led to retrenchment of labour in some of the protected domestic industries such as handlooms, fabricated metal works, iron and steel, tyres and tubes, chemicals, tea making machinery and textiles, and measures to increase productivity and competitiveness of existing industries resulted in cuts in labour force in some sectors, the new labour-intensive export-oriented industries created new employment to more than offset it. Some idea of the new employment created in the private sector can be obtained from the increase in the number of active member accounts of the Employees’ Provident Fund by 569,015 or by 5-7 per cent from 1,002,985 to 1,572,000 between 1978 and 1996. The new export oriented industries in Export Processing Zones described as Board of Investment (BOI) approved projects had created employment for 258,185 by the end of 1997; of this 62 per cent were employed in textiles, garments and leather products as shown in Table II.

Opportunities for self-employment multiplied with liberalized imports and extension of special loans for the self-employed by the commercial banks. Perhaps the largest increase in the number of self-employed was in retail trade and transport, particularly as pavement hawkers, vendors and drivers of owner-driven buses, wagons and trishaws: in addition there has been an increase in repair shops for motor vehicles and electrical and electronic equipment, handicraft workshops and tailoring establishments.

Higher economic growth is an essential prerequisite to reduction of unemployment. If the rate of unemployment is to be reduced from the current 11.6 per cent to about 6 per cent by 2001, the economy needs to generate about 158,000 new employment opportunities annually and this in turn requires the economy to grow at an annual average rate of 7 per cent. Central bank studies show that employment increases by 1.0 per cent for every 3.7 per cent increase in economic growth.

In addition to new employment opportunities created at home, there were new employment avenues created abroad, and a large number of Sri Lankans found employment, particularly in the Middle East and East Asia. There are no figures available on the total number employed abroad but it is sizeable; the number of persons who left the country in search of employment overseas, for instance, was 170,130 in 1995 and 162,511 in 1996. Private remittances by migrant workers amounted to the substantial sum of Rs. 46.5 billion in 1996; 58 per cent of this came from the Middle East, 15 per cent from the European Community, 7.9 per cent from East Asia, 7.1 per cent from North America and 5.5 per cent from other European countries. About 91 per cent of female migrants are employed as housemaids while About 44 per cent of the male migrants are unskilled.

Unemployment
The number of unemployed in Sri Lanka has declined from about 1.01 million or 19.8 per cent of the labour force to 644,870 or 10.3 per cent in 1997 as shown in the Table III.

Unemployment in Sri Lanka is essentially a problem concerning the youth as about 80 per cent of the unemployed are between 15 and 30 years. The age group which has the largest proportion of unemployment is 20-24 years. Unemployment rate is generally higher in the rural than the urban sector. Female unemployment rate appears to be higher than male unemployment rate. In 1997, the rate of female unemployment was 16.2 per cent as compared to 7.6 per cent of males. Over one-third of the unemployed population is in the Western Province. The largest number of unemployed are those who have passed grades 6-10 and the GCE (Ordinary Level). Unemployment rate among persons with GCE (Advanced Level) and above is higher in the Southern Province (27.9 per cent) and lowest in the Western Province (12.9 per cent) in 1996. Most of the unemployed youth aspire for white collar jobs and shun agricultural occupations.

Underemployment and disguised unemployment are also major concerns. In the rural sector where food crop cultivation is seasonal, underemployment is quite high in the off-season as alternative employment avenues are not available to meet the demand. Even the educated in both urban and rural areas are in the early stages of their career, forced by circumstances, to accept low-payment jobs or parttime jobs normally meant for the less educated. Sometimes graduates are engaged in ordinary manual labour until they find better employment, in the unorganized or informal sector of the economy characterized by poor wages, long hours of work, non-payment of overtime, denial of leave, and no bonus, social security, health cover, housing facilities or accident compensation. The informal sector constitutes about 40-60 per cent of the GDP and account for 40-50 per cent of the labour force. Apart from those who cannot find more suitable employment in the formal sector, some of those who are retrenched by semi-government bodies too have no alternative but to seek employment in the informal sector without any of the rights and social benefits they enjoyed earlier. The "crowding" of the informal sector leads to low income and low productivity jobs being created. Further, given the fact that the informal sector is unregulated where labour laws are difficult to apply means that poor quality jobs are created and workers in many cases have to work under very poor and hazardous conditions.

There is also increasing pressure for casualization of employment even in the organized sector. This is mainly because the employers want to avoid labour regulations which make it very difficult to retrench workers. Thus, the recruitment of causal labour tends to discourage the creation of permanent employment. This will be discussed further in the section on labour legislation.

Employment of Women and Children
The number of women seeking employment has been increasing rapidly in recent years partly because of their high literacy and education and partly because land in the rural economy is incapable of supporting the rising population. Female enrolment in schools is about the same number as male enrolment while in senior secondary grades it is actually higher; in the school years 12-13 for instance, the percentage of girls was nearly 58 per cent in 1988. The proportion of women student in the universities was 40 per cent in 1987 and 70 per cent of them are from the rural sector. In the past quite a large number of village maids found employment as domestic servants and as producers of handloom cloth. With better education, domestic service with poor wages ceased to be attractive; with free imports consequent to liberalization the handloom industry collapsed. The higher educated and the skilled found employment as doctors, lawyers, teachers, nurses, secretary/typists and clerks, but the majority of women tended to be concentrated in low-status, low-skill and low-paid jobs in domestic or plantation, agriculture, industry, trade and domestic service, or were unemployed. Unemployment rate of women has been double that of men since the late sixties and over 60 per cent of the unemployed are women.

Liberalization, export processing zones and foreign capital investment after 1978 however provided a fairly large number of new employment opportunities in labour-intensive industries. Over 80 per cent of the workers in garments, lapidary, electronic and other assembly line industries are unmarried women between 18 and 25 years of age. The majority of the total employed in BOI enterprises — 241,970 — are women. These women are paid relatively low wages, made to work long hours and to difficult work targets; they lack security of employment, live in congested lodgings and subject sometimes, even to physical abuse. There are also a large number of women employed in non BOI garments factories and batik and handloom workshops. New employment opportunities for women — particularly as housemaids — have also been created in the Middle East and East Asia; about 76 per cent of unskilled migrant workers going abroad for employment are women. Female unemployment fell from 32.9 per cent in 1986 to 21 per cent in 1992.

Labour participation rate among women, as shown earlier, was 31.3 per cent as compared to 66.2 per cent in males. About 56 per cent of the employed women are paid employees, 18 per cent workers on their own account and 25 per cent unpaid family workers. (Unpaid family workers among males was only 8 per cent).

Although legally no person below 14 years can be employed, there are thousands illegally employed in various activities — domestic labour, garages and bicycle repair shops, drying of fish, wrapping beedies (crude cigarettes) and matches and incense sticks. Children seek employment because of poverty, when the parents income is insufficient to feed all the members of the family, and the parents do not consider it wrong to make their children work to supplement the family income. Perhaps the largest number of children are employed illegally as domestic servants in middle-class houses with poor wages and under difficult conditions. The global demand for competitiveness and cheap labour tends to increase the demand for children to work in activities hidden from the public eye, while poverty ensures a regular supply. Child labour can be eradicated only by removing poverty; stopping child labour for moral reasons, can aggravate poverty, as many poor children have no other way of feeding themselves than by selling their labour.

Generally, wages of women workers in industries and plantations are lower than those of men. Many child workers, particularly domestic servants, may not receive any wages as such, but even if they are paid wages they tend to be very low. In 1983 for instance, daily average wage rates in Tea Cultivation (tea plucking) was Rs. 17.32 for females in contrast to Rs. 24.30 for males; in rubber tapping Rs. 21.83 for females as compared to Rs. 24.87 for males; in coconut manuring Rs. 22.08 for females and Rs. 30.94 for males and in paddy harvesting Rs. 28.48 for females and Rs. 34.97 for males.

Chemical Industries Colombo Ltd. (CIC), a lead player in the paints and chemical sector, has made some key personnel changes to improve operational efficiencies and strengthen internal control in the aftermath of the discovery that falsified financial statements had been presented to shareholders in the last few years.

The company's chairman, Mr. B.R.L. Fernando, has said in its just published annual report that shareholders were informed of the "serious nature of the issue'' last November. He said that they have since "restructured the organisation with a number of key changes of personnel to improve operational efficiencies and strengthen internal controls.'' Additionally, the company's internal audit function has been out-sourced to enable CIC to benefit from external specialists who would independently report to the board.

The year ended March 31, 1998, had seen an improvement in business performance over a year earlier in all areas of the company's activity despite intense competition with freer availability of the full range of industrial material CIC markets, the chairman said. However, their performance had been over-shadowed by the ``unprecedented problem'' of the financial scandal.

Provision of Rs. 15 million had been made by an extraordinary charge on the profit and loss account against amounts due on unauthorised advances to a software company which was at the core of the falsification. CIC, however, continues to take computer services from this company. Further, a sum of Rs. 36.8 million has been transferred from the general reserve last year to correct the net impact of the mis-statement of accounts.

A further extraordinary charge of Rs. 19.1 million has been made on the P and L account on the loss incurred in disposing a 50% stake in the subsidiary, Italpolo Footwear Ltd. to a strategic partner. The management of this company is no longer with CIC and is now being treated in its accounts as an associate.

The after tax profit for the year under review at Rs. 53.8 million, was up substantially from Rs. 8.1 million a year earlier. But this was reduced to Rs. 19.7 million following the extraordinary charges totaling Rs. 34.1 million.

The directors have recommended a final dividend of 25% to shareholders. The previous year an interim dividend of 15% too was paid but this had been withheld this year on account of prudence.

Fernando said that the group's core business of paints and agricultural inputs are poised to benefit from improvement of the economy. New products have been introduced in the paints, fertilizer and agro-chemical sectors during the year with further addition to be made in the coming year.

"These have enhanced the competitive edge of the portfolio of products we handle. In the consumer area, we are working more closely with Johnson and Johnson of India where we anticipate that the baby care and adult range to generate a higher turnover within the next two years. In the pharmaceuticals area, we have now tied up with a large Pakistani manufacturer, Hilton Pharma (Pvt.) Ltd., and once again expect an increase in turnover.

"In the light of these, we are confident that our business will see substantial improvement in the short term,'' Fernando said.

He said that although their profit after tax had grown Rs. 45.6 million the previous year, in terms of return it was a ``mere 7.7% on the net assets employed.'' Though this was an improvement from a year earlier, the ratio needed further correction by the disposal of some assets. Attempts to sell off some land purchased earlier for paint stores had been unsuccessful due to the downturn in the property market.

The directors of the company are Messrs. B.R.L. Fernando (chairman), C. Chanmugam, A.A. Jayawardena, N.G.R. Karunaratne, J.S. Mather, D.B.S. O'Shea, P.R. Saldin and L.H.G. Siritunga.

Chemical Industries (Colombo) Ltd. (CIC) has disposed of 50% of its stake in a footwear manufacturing subsidiary to form a strategic alliance which it hopes would turnaround the troubled Italpolo Footwear (Pvt) Ltd. which lost over Rs. 76 million million in the last financial year.

CIC Chairman B.R.L. Fernando informed his shareholders last year that they were negotiating a strategic alliance with a premier shoe manufacturing company in the country. Last September, CIC had taken a loss of Rs. 19.1 million in disposing 2.1 million shares in Italpolo to PIMA Holdings (Pvt.) Ltd. who manufacture around 16,000 pairs of shoes daily for export markets.

Fernando said that the Far Eastern currency crisis had aggravated Italpolo's problems with sports shoes from China, Indonesia, Vietnam and Thailand available at rock bottom prices that leave no margin for manufacturers.

In this situation, the PIMA Group has diversified the product range to produce items other than sports shoes for some British chains. For the first half year, a UK department store had placed a substantial trial order. The company hoped that its successful execution would generate orders for 300,000 pairs a year.

"There are also indications of two other independent retailers placing orders with the company in the short term,'' Fernando said. "While the order position seems satisfactory, the financial position of Italpolo has turned precarious on account of the losses todate.''

He said that the Rs. 76.1 million loss for the year ended March 31, 1998, had eroded the company's entire capital base.

CIC is no longer managing Italpolo and considers an associate, including its results on this basis in the consolidated accounts. Also, their foreign partner is no longer involved in marketing the company's products Fernando said.

Mercantile Leasing Ltd (MLL), one of the country's premier leasing establishments, is to undergo a major capital restructuring process.

N.U.Jayewardena, Chairman of MLL, said a new Rights Issue of 4.2 million shares priced Rs.30 per share would be made in a few weeks time, an Employees Share Ownership Trust of 2 million shares would be created and an offering of 3 million shares each to the National Development Bank (NDB) and the International Finance Corporation (IFC) would be made at Rs.35 per share.

Announcing this at a press conference last week, Jayewardena said this meant that MLL has the combined resources of the largest financial institution in Sri Lanka and the largest multilateral source of loan and equity financing in the world to provide a solid foundation for the future of MLL.

The company's issued capital, which currently stands at 8.2 million shares, on completion of the restructuring process would reach 23.9 million shares - a threefold increase.

Jayewardena said the new capitalization proposal would also include the issue of redeemable debenture stock for Rs.220 million which will be jointly guaranteed by the NDB and IFC and listed in the Colombo Stock Exchange.

He welcomed the initiative taken by the IFC to support the issue of a medium-term debt instrument which is a long-felt need and can offer investors an alternative to low interest deposit accounts and high risk shares. He said that this is the first time that the IFC has come out in support of a Domestic Corporate Bond in Sri Lanka.

In line with these developments, MLL has restructured its business units to be able to focus more effectively on customer needs within the market place. The restructuring would enable the company to make a fresh start as a leading player in the leasing market, the Chairman said.

Colombo Land Ltd., the owners of the Liberty Plaza in Kollupitiya and People's Park in Pettah, plans to expand into some new areas of business including condominium management and the development of metal quarries, shareholders have been told.

"Our main areas of investment will be in our core business of property development supported by investment in agriculture and plantations and in the manufacture or building materials,'' the company's chairman, Prof. T.K.N.P. de Silva has said in the company's just published annual report.

The company has seen an opportunity in utilising the expertise it has gained in the field to help manage condominiums in view of the large number of such buildings coming up in and around Colombo.

"In view of the experience we have gained in the management of condominium properties through our core business of property development, we are hoping to venture into the field of condominium management,'' de Silva said.

He said that in the building materials sector, they have been pursuing the development of metal quarries and related concrete products. "We hope to set up the first metal quarry in the near future, which would be a prelude to the establishment of a cement concrete based industry,'' he said.

Colombo Land had entered the field of plantation management in a joint venture with Magpek. This company, Magpek Colombo Land Plantation Management (Private) Ltd., had profited from this arrangement which is now being wound up ``having served its purpose.''

The associate had declared an 800% dividend during the year under review and Colombo Land, with a 42.7% stake in it, received a sum of Rs. 5.8 million. This had brought the return from their Rs. 0.85 million investment up to Rs. 7.7 million. A further dividend is due. The estate managers were responsible for the management of Malwatte Valley Plantations.

The final profit share attributable to the managers up to the time of sale of Malwatte Valley is now under computation. Colombo Land has said that according to the draft accounts, the profit share receivable by the managers for the six months ended June 30, 1997, is Rs. 27.2 million compared with Rs. 29.3 million for the full year ended Dec. 31, 1996.

Colombo Land therefore expects a higher dividend on this account than in the previous year. "Since Magpek Colombo Land Plantations Management (Private) Ltd. has served its purpose, it will be liquidated no sooner profits for 1997 are received,'' de Silva said.

Reporting a "modest improvement'' in the property market last year compared to the two previous years, de Silva said this enabled them to increase the company turnover to Rs. 43.5 million from the previous year's Rs. 34.2 million. Group turnover was up to Rs. 67.6 million from Rs. 48.2 million.

Retained profits for 1997 was Rs. 35.8 million, up 79% from the previous year's Rs. 19.9 million. This had helped increase earnings per share to Rs. 2.75 in 1997 from Rs. 1.54 the previous year, the chairman said.

Colombo Land has not been declaring dividends from 1995 when it declared a 135% tax-free dividend based on share linked debentures redeemable before February 2001. Rs. 6 (60%) of these debentures have already been redeemed and a further redemption of Rs. 2.50 (25%) is scheduled for July 6. This will leave a balance of Rs. 5 to be redeemed before Feb. 2001. No other dividend has been declared.

As in prior years, the auditors have said it would be prudent for the company to make provisions for loans where the payment has been in default. These are dues on sale agreements with prospective purchasers of units in Liberty Plaza and People's Park. Titles of the units are transferable only on completion of payment.

"The company has taken necessary action for the collection of these dues and legal action for the re-possession of units where necessary. The aggregate market value of all these units is approximately Rs. 200 million,'' de Silva said.

He said that the quantum of provisioning has been reduced from Rs. 51.7 million to Rs. 37.2 million, down 28%, by aggressive debt collection instituted last year and the year before.

They have also set up a fee levying car park at Liberty Plaza and just commenced a similar facility at People's Park, de Silva said.

Their subsidiary, Urban Developers (Private) Ltd., will press on with their Galle project despite the Galle Harbour development not yet being finalised. Colombo Lands expects that the new engineering faculty of the Ruhuna University adjacent to their Galle property will create demand for new housing. "We have accordingly decided to proceed in stages with this development in keeping with the demand.''

The first apartment block at Dehiwela providing middle class housing has been completed and sales of units are expected to be over by August. A second block there is under construction.

Although arrangements for a land exchange with the UDA to compensate for the Gas Company land taken over has not yet been completed, the company said that the matter was now receiving "the urgent attention of the UDA and we hope to finalise it soon.'' A major project is planned "no sooner a suitable land is obtained in Colombo in exchange for the Gas Co. land in Pettah''. Here too a middle class housing project is envisaged.

The main shareholder of Colombo Land is a Singapore company, Clarissa (Private) Ltd. with a 51.46% stake while the UDA owns 21.43%.

The directors of Colombo Land are: Prof. T.K.N.P. de Silva (chairman), Dr. M.E. Joachim (managing director), Ng Eng. Gee (alternate C. Ravishankar), D.J.M. Meegoda and R.R. Tudawe.

Richard Pieris and Co. Ltd. expects to commission a new BOI-approved factory manufacturing specialised shoe soling with Italian collaboration by September, shareholders have been told.

The company's chairman, Henry. A Pieris, has reported in the just published annual report that the technology used in this project had hitherto not been used in the Asian region and will produce high quality specialised sheets for export.

"In addition to the technology transfer, the group expects a significant contribution to earnings from this venture in the not too distant future,'' Pieris said.

Richard Piers is one of the largest and most diversified producers of value added rubber products in the country. Its products include moulded and extruded rubber products for export. A manufacturer of quality rubber mats and sealing rings, these products have earned an excellent reputation in European and North American markets.

The new shoe soling project has been in the pipeline for some time.

The following board appointments and resignations in listed companies have been published by the Colombo Stock Exchange (CSE).

Mr. B.C.S. Goonawardena (in place of Mr. J.B.V. Fernando) at Asian Cotton Mills Ltd., Mr. Rolf Rene Senoner to succeed Mr. F. Gracia R at Bata Shoe Company of Ceylon Ltd. and Mr. L.J. Udukumburage of Kapila Heavy Equipments Ltd.

Other resignations reported were Messrs. Upatissa Jayasinghe from Kapila Heavy Equipments and Mr. K.A. Wijesekera from Capital Development and Investment Co. Ltd.

Richard Pieris and Co. Ltd., Sri Lanka's pioneer rubber manufacturing industrialist, has reported what its chairman has called "exceptional results'' in fiscal 1997/98 with net profits growing 75% to record Rs. 282 million, the highest ever achieved by the company.

Said the company's chairman, Mr. Henry. A. Pieris: "We achieved remarkable growth in the year under review. Our net profits increased by a substantial 75% to record Rs. 282 million. Our earnings per share increased from Rs. 10.81 to Rs. 18.36. Return on equity improved from 15% to 23%. Our share price advanced from Rs. 80 to Rs. 112 reflecting a 40% increase in spite of the dilution in price following a bonus issue.''

Given the excellent results, the directors have recommended a 30% tax exempt dividend to shareholders representing an 82% increase on the previous year's return.

While indicating that these results had been possible in the climate of a more favourable business and economic climate, Pieris has warned that the recent devaluation of East Asian currencies will have an adverse impact on the country's exports, particularly rubber, in the long term. He urged that it was necessary that policy makers maintained a competitive exchange rate if exports were to be fostered and developed.

The plantation sector in which the group has invested in recent years had brought handsome returns with profits increasing 118%. RPK Management Services Ltd., in which the group has a 50% stake (JKH owns the rest) had achieved an after-tax profit of Rs. 380 million.

"This, I believe, is the highest profit recorded by any plantation company to date. I wish to congratulate the management of RPK Plantation Management Services for this excellent effort,'' Pieris said.

He said that the Richard Pieris Exports Group had achieved substantial increases in turnover and profits during the year through volume growth in the export of mats and foam rubber mattresses. Their associate, Dipped Products, had also achieved satisfactory growth in turnover and profit.

Their export oriented rubber businesses had done well despite severe competition from East Asia consequent to their recent currency devaluations. Rubber businesses catering to the local market had improved performance following rationalisation operations and labour reductions.

Pieris said that earnings in tyre retreading had been impressive with steady increases in market share and productivity. The plastic sector too had recorded satisfactory results through volume growth. Recent investments in state-of-the-art technology had helped improve performance both in rubber and plastics.

The chairman reported that the group had expended Rs. 350 million on property, plant, equipment and equity investment during the year. Both Richard Pieris and Asia Capital have bought into each other in a strategic alliance under which Richard Pieris now has a presence in the financial services industry.

"Our timely entry into the financial services industry at a low cost will further enhance our business portfolio and position the group to take advantage of capital markets,'' he said. Richard Pieris plans to increase its present 13.3% stake in Asia Capital to about 20%. Asia Capital, in turn, has acquired 16.5% of Richard Pieris equity.

The chairman also said that they intended diversifying into property development in the near future by investing in the development and operation of shopping malls. They have already acquired two blocks of strategically located prime land in fast growing suburban areas ideal for the development of malls.

"Over a period of years, the group hopes to develop a network of shopping malls around the city of Colombo and its suburbs and in other high potential regional towns. This will position the company to exploit an inevitable surge in convenience retailing which will dawn with the country approaching a status of a middle income nation,'' Pieris said.

Among the ten major shareholders of Richard Pieris are Asia Capital, JKH and Hayleys in addition to some of the directors, companies in which they have interests and foreign fund.

The directors of the company are H.A. Pieris (chairman) P.I. Pieris (managing director), G.C.B. Wijeysinghe, M.F. Sproule, R.M.S. Fernando, N.J. Palihakkara, A.S. Jayatillake, S.E. Captain, L.N. de S. Wijeyratne and R. Pieris.

Dealings in the shares of the Colombo Hilton's owners, Hotel Developers Ltd., were suspended by the Colombo Stock Exchange (CSE) last week due to non-submission of accounts, a CSE spokesman said.

There have been four such suspensions in recent days with the previous suspension notified by the CSE being that of Ceylon Synthetic Textile Mills Ltd. whose audited accounts for the period ended March 31, 1997, had not been submitted.

Trading in the shares of over a dozen listed companies have remained suspended, some for a long period of time, for none compliance with the rules of the CSE.

Chemical Industries (Colombo) Ltd. (CIC) has delayed a planned expansion into a joint venture in Indonesia in view of the turbulent economic situation there and the risks involved, CIC shareholders have been told.

CISCO Specialty Packaging, a CIC subsidiary making PET bottles, was looking at a production facility in Indonesia. But the financial year ended March 31, 1998, had found exports to that country drastically dropping with farmers there not being able to afford fertiliser and the demand for PET bottles dropping sharply as a result.

These bottles manufactured here were being exported to Zeneca, Indonesia. But CIC said that while they reviewed their options, they were exploring the possibility of exporting PET bottles to other Zeneca companies in the Asian region.

"An order for a consignment of bottles to China via Indonesia has already been secured using the good offices of Zeneca,'' CIC Chairman B.R.L. Fernando said.

CISCO had also been looking a joint venture and expansion of their facility for the manufacture of bottles for carbonated soft drinks. But this did not materialise due to a decision by the local bottling company to delay the purchase of a PET filling line for the local market. CIC expected that they would be ready to introduce PET bottles for their soft drinks by late 1999.

CISCO had performed well during the year under review with turnover up 13.3% to Rs. 71.4 million and a net profit of Rs. 14.4 million achieved. Exports had accounted for 60% of turnover with local sales split between agrochemicals, mineral water, pharmaceuticals and edible oil producers.

Fernando said that they have embarked on a new product development programme. He expected the new products to gradually offset reduction of export turnover. "With the demand for PET bottles growing steadily, new product and market development is expected to secure an improvement in turnover and profitability,'' he said.

Brown and Co. Ltd. and its subsidiaries have seen a decline in its trading income during the year ended March 31, 1998, but caught up the slack with the profit share from associate companies according to provisional figures now with shareholders.

Brown's own a big stake in the highly profitable Hatton National Bank of which Mr. Chrisantha Cooray, the Brown's chief, is the chairman.

Despite higher turnover, up to Rs. 1.3 billion, up from Rs. 1.1 billion the previous year, the trading profit declined to Rs. 24.1 million from the previous year's Rs. 36.2 million. Other income too was down to Rs. 12.3 million from Rs. 18.5 million. Interest cost of Rs. 46.7 million (Rs. 32.6 million the previous year) exceeded trading plus other income during the year under review.

But the share of profits from associate companies grew to Rs. 215.1 million from Rs. 171.1 million a year earlier and this helped the bottom line. The after tax profit of Rs. 154 million was almost the same as the previous year's Rs. 153.5 million.

Brown's, who own valuable real estate in addition to its share of HNB, has a very modest issued share capital of Rs. 21 million. Until a 2 for 1 bonus last year, it was as low as Rs. 7 million.