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+ Exchange Rates The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of November 20, 1998 were as follows:
Buying Selling 100 US Dollars Rs. 6633.45 Rs. 6767.45 The approximate middle exchange rates of following currencies calculated on the basis of cross rates quoted by Gulf International Bank, Bahrain as it appeared in Reuters Financial Information System on November 20, 1998 were as follows:
Saudi Arabia Riyal Rs. 17.87 Bahrain Dinar Rs. 177.74 Kuwait Dinar Rs. 220.36 Qatar Riyal Rs. 18.41 UAE Dirham Rs. 18.25 Oman Riyal Rs. 174.05 Average rates at which the following currencies were quoted by Commercial Banks in Colombo for Telegraphic Transfers at mid-day on November 20, 1998 were as follows:
Buying Selling 100 US Dollars Rs. 6725.20 Rs. 6772.60 100 Sterling Pounds Rs. 11155.20 Rs. 11289.62 100 Deutsche Marks Rs. 3966.70 Rs. 4035.66 100 French Francs Rs. 1180.59 Rs. 1204.54 100 Japanese Yen Rs. 55.84 Rs. 56.89 Average Weighted Prime Lending Rate (AWRP) and Lowest Prime Rate (LPR)
The Average Weighted Prime Lending Rate (AWPR) during the week ended November 13th 1998 was 14.5 per cent for all banks. The Lowest Prime Rate among banks during this week was 13.0 per cent.Average Weighted Deposit Rate of Commercial Banks (AWDR)
The Average Weighted Deposit Rate (AWDR) of Commercial Banks for the month ended October 31, 1998 was 9.2 percent.
* Unit Trust Prices
Eagle Gilt Edged Fund
Manager's Selling Price Rs. 10.96 (per unit) Managers Buying Price Rs. 10.84* (per unit)
Eagle Income Fund
Manager's Selling Price Rs. 10.96 (per unit) Managers Buying Price Rs. 10.84* (per unit)
Eagle Growth Fund
Manager's Selling Price Rs. 8.26 (per unit) Managers Buying Price Rs. 7.87* (per unit)
Comtrust Equity Fund
Manager's Selling Price Rs. 5.04 (per unit) Managers Buying Price Rs. 4.72 (per unit)
Ceybank Unit Trust
Manager's Selling Price Rs. 5.72 (per unit) Managers Buying Price Rs. 5.34 (per unit)
Ceybank Century Growth Fund
Manager's Selling Price Rs. 7.90 (per unit) Managers Buying Price Rs. 7.77 (per unit)
National Equity Fund
Manager's Selling Price Rs. 7.46 (per unit) Managers Buying Price Rs. 7.00 (per unit)
Namal Growth Fund
Manager's Selling Price Rs. 8.38 (per unit) Managers Buying Price Rs. 7.85 (per unit)
Namal Income Fund
Manager's Selling Price Rs. 10.47 (per unit) Managers Buying Price Rs. 10.36* (per unit)
* After deducting exit fees applicable for the first year
For alleged mismanagement
Asian Hotels may take legal action against major Malaysian shareholderMinority Shareholders of the Asian Hotels Corporation Limited (AHCL), the owning company of Hotel Lanka Oberoi, are considering legal action against the controlling Malaysian major shareholder, for alleged mismanagement.
They allege that a Malaysian company 'El Classique' which had been brought in by the owners and awarded the contract to refurbish the hotel at one time, had suddenly abandoned the site, reneging on its contract. However, the hotel had not been able to seek damages. This was because there was no proper contract, the sources said. The owners had apparently failed to sign the required documents such as Bid Bonds, Performance Bonds, Bank Guarantees etc., with their Malaysian Contractor. The Annual Report for that particular year (1994/95) refers to the abrupt abandoning of its contract by 'El Classique'. What is ironical is that the Tender Pre-qualification documents had been fashioned in such a way that it precluded local contractors from competing, due to a clause in the Bid document, requiring any prospective local contractor to tender for the work only in association with a foreign contractor.
Ironically, the Malaysian contractor suddenly abandoned the site reneging on his contract, causing the company an unforeseen additional expenditure of Rs. 50 million.
The management thereafter had announced 'As your company could not find an equally good contractor to substitute locally, it had to seek for contractors from abroad to continue the balance work'. The local shareholders who read this official statement by the company in a Rights Issue circular dated 27th March 1996, were greatly perturbed since this statement added insult to injury as they felt there were competent local contractors and technical expertise available at hand. They also felt that this second bad decision on the part of the company, opened the flood gates for another influx of Malaysians to come into the country and perform duties which local staff could perform better. The Malaysian major shareholder who has benefitted immensely from Bhumi Puthra policies of his own country is in no mood to apply a local equivalent 'Sinha Putra'.
In our scramble for 'everything foreign' we have 50% of the 5 Star Hotel rooms in Colombo in the Hands of Asian Hotels which is 80% owned by foreigners.
The sources said that in terms of the very evident visual shortcomings at the hotel, entrance to the newly opened lobby area of the hotel on a rainy day, visitors would see eight buckets placed to collect the water that drips down from the ceiling, which practice has now become more a rule rather than an exception, furthermore, the hotel bar has a hole in the ceiling just above it; we have observed this ourselves. In fact, these leaks put together are similar to an inverted volcanic crater. The sources further stated that such shortcomings were not being attended to since both the Malaysian company with controlling interests and the management that is Oberoi India were each viewing it as being the responsibility of the other. As minor as it seems, this is the sort of unsolved problem which brings down the repute of this 5 star hotel, mainly due to the fact that the owners are resident in Malaysia and the Managing Services are resident in New Delhi India, both of whom are insensitive to these problems, being locked in an ego battle (now into arbitration) much to the detriment and financial loss to the company.
One shareholder, a senior citizen in Colombo, stated that where the Oberoi is concerned 'it was the Indians who were ripping us off so far, and now it's the Malaysians!'
It is a well known fact that an appreciable quantity of the material (valued at over Rs. 55 million) which was imported for the refurbishment of the hotel, by El Classique is still lying deteriorating in the stores; since the project has now been completed by the new contractor who has used other material imported/supplied directly by him.
Furthermore, another contractor, Bell and Order Bhd. was brought in to handle the electrical works, when here again, local expertise was available. It has been revealed at the proceedings of the arbitration in progress that some of the directors have undisclosed interest in Bell & Order Bhd.
The aggrieved shareholders believe that the current trend in good corporate governance is to ensure greater disclosure to shareholders. However, in the case of this company it has been the reverse:
1. The AHCL in its annual report for the year ended March 31, 1998, has failed to include its profit and loss account for the year with the comparative profit and loss account for the previous year, which is what gives an indication of the company's performance on its own prior to consolidation. The report instead gives only the consolidated profit and loss account for the year. While the company's profit and loss account would be the profit and loss account of Hotel Lanka Oberoi, the consolidated account would include Hotel Services (Ceylon) Limited, Transasia Hotels Limited and Crescat Developments Limited in which AHCL holds 51.63 percent, 42.45 per cent and 100 per cent respectively.
When several shareholders complained at the last Annual General Meeting that the company accounts had not been shown separately, but only the consolidated accounts was presented in the annual report for 1996/97, the chairman gave the assurance that this will be ensured in the following year's Annual Report. Regretfully this change was not effected even in the 1997/98 annual report, prompting the shareholders to complain to the Stock Exchange.
2. Reducing the disclosure of the shareholding of the company from top twenty shareholders to only the top ten.
3. Emoluments of the all the Directors which would no doubt include the CEO have been shown as NIL (zero). Shareholders take this as an insult to their intelligence.
They say that on the contrary, it is a well known fact that the company, jointly and severally, picks up a remuneration package of Rs. 1.5 million per month to sustain the lifestyle of an expatriate hotel manager who in effect is currently functioning as CEO in charge of the largest property development project in the country. Therefore it is not surprising that these comparatively new buildings are in such a pathetic state.
Due to the total lack of experience of the management in property development it is also not surprising that there are no takers for the Crescat apartments. The total design concept of 'Kitchen in Sitting Room' has been rejected by the market. With only 50 apartments out of a total of 160 having been sold for the last 4 years.
Some of those who have purchased these apartments even having to change this concept completely and at their cost. Further the air-conditioning system which is very poorly designed may have to be replaced completely due to the recurrent faults in the system which has resulted from using the wrong material for the water piping.
The smells and streaming hot fumes emanating from the open kitchens incorporated into the living area is a typical example of low-cost housing designs in Europe, which is most unbecoming of a prime property such as 'CRESCAT' is being thrust on the local market.
4. The Dept. of Inland Revenue has an ongoing Business Turnover Tax claim amounting to over Rs. 100.0 million on a contract awarded to MITSUI, which is not disclosed in the accounts under contingencies.
It is understood that an attempt is being made by the management to reconstitute the contracts separating the original contract in to 3 different contracts for material, labour and consultancy, with a view to evading these tax payments.
It appears that many shareholders of the company has already appraised the Director General of the Securities Exchange Control. The Colombo Stock Exchange that the company's accounts do not comply with sections 144-148 of the Companies Act No. 17 of 1982. Some shareholders urges the SEC to take necessary steps to cause the company directors to forward an amended Consolidated Profit and Loss Account incorporating the Company's Profit and Loss Account with comparative figures of the previous year before the next annual general of the company scheduled for December 16th, in the alternative to postpone the AGM.
The controversial rights issue too was raised by the sources as a telling example of the mismanagement of the company. The controlling interests infused USD 4 million into Crescat Development Limited that is a wholly owned subsidiary of AHCL. Sources said that following the loan of USD 4 million into Crescat by the Malaysian Company, a rights issue had been declared. Following the shortfall in subscription the SEC and Colombo Stock Exchange had pressured the controlling company to acquire the unsubscribed shares, which had apparently agreed to subscribe. The USD 4 million lent to Crescat that the sources asserted would have been perceived by these who subscribed in the rights issue to be operating capital or loan capital had been rerouted to acquire shares. In effect the USD 4 million perceived as being working capital became share capital according to the sources.
The sources also said that the interest on the loan running into Rs. 700 million borrowed from the National Development Bank for the construction of Crescat Luxury Apartments were not fully recognized in the accounts, while noting that it was possible to include the interest in the cost of Crescat or the capital costs prior to the completion of the structure. They noted that if it were not so the Rs. 80 million interest would be a drag on the profit.
The sources also said that the cost of Crescat was three times the national average alleging that costing had been very high. They added that there was confusion concerning whether Crescat was in fact complete, in which case the Rs. 80 million interest would have to be included in the interim results announced in September, 1998.
They also pointed out that so far only 30 to 35 per cent of the 152 Crescat apartments had been sold but that even in these cases the Deeds of ownership had not been given as Crescat had yet to be recognized as a condominium.
This is blatantly impossible as a current common amenities such as car parking cannot be provided within their own property, particularly since it now appears that phase II will never get underway. This in turn will affect AHCL shareholders.
Considering all above, the shareholders strongly feel that a change in management and Directorate at this juncture is essential if the company is to survive.
There was a general decline in prices for Low Grown. With auction quantities remaining steady the lower prices were more a feature of the reduction in demand rather than an increase in supply. Excluding the best Pekoes, better Tippy teas and the best OPAs, all other grades recorded price drops. In most instances price gains achieved over the past two weeks were erased.
In the Ex Estate catalogues the market was generally firm. A feature was the continued strong demand for BOPFs which, once again moved up in value. There was a tendency however for some of the plainer BOPs to lose out this week. The market for Dust continued strong, but prices dropped sharply in the Off Grade catalogue.
September production figures were lower than August reflecting the adverse weather pattern. The October and November harvests have been similarly affected, particularly in the High Grown areas. Our estimates are that last year's production figures for these two months will not be achieved and could well cancel off the gains achieved during August and September.
News has reached us that last week's tea auction in Chittagong Bangladesh was suspended. Brokers report that an opposition led countrywide general strike prevented the auction being held. On Tuesday this week however, an auction was concluded successfully; with 1.4 million kilos of tea coming under the hammer. The market was slightly lower. The next sale is scheduled for Tuesday the 24th with 1.6 mkg on offer.
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