blue diamonds jewellery worldwide plc - annual report 2010

8/6/2019 Blue Diamonds Jewellery Worldwide PLC - Annual Report 2010

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ANNUAL REPORT 2009/2010 - Blue Diamonds Jewellery Worldwide PLC.



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CONTD..




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For the year ended March 31, 2010 2009

Note Rs. Rs.

Turnover 6 6,426,631 116,664,187

Cost of sales (6,324,332) (82,366,093)

Gross profit 102,299 34,298,094

Other income 7 2,075 373,750

Selling and distribution expenses (5,012,477) (35,718,982)

Administrative expenses (17,351,212) (23,693,060)

Creditors not payable written back 10 7,537,005 3,544,881

Finance costs (5,808,261) (4,576,016)

Finance income 523,370 6,855,654

Net finance costs 9 (5,284,890) 2,279,638

Loss before tax 8 (20,007,201) (18,915,679)

Income tax expense 11 (80,000) (463,413)

Loss for the year (20,087,200) (19,379,092)

Deficit per share 12 (0.24) (0.23)

INCOME STATEMENT




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W.G.B.M. Ranaweera Godfrey de Kretser

Managing Director Executive Director

20th

September 2010Colombo

As at 31st March 2010 2009

Note Rs. Rs.

ASSETS (Represented)

Non-current asse ts

Property, plant & equipment 13 16,817,575 23,540,049

Advance paid on leasehold land 14 2,284,227 2,314,431

Long term investments 15 162,000 162,000

Total non-current assets 19,263,802 26,016,480

Current asse ts

Inventories 16 135,225,628 127,227,326

Trade receivables 17 23,565,926 66,625,339

Other receivables 18 7,172,922 7,095,445

Amount due from related parties 19 1,764,104 2,248,532

Advance paid on leasehold land 14 27,117 24,030

Cash and cash equivalents 20 22,335,685 9,136,555

190,091,382 212,357,227

Total assets 209,355,184 238,373,707

EQUITY AND LIABILITIES

EquityStated capital 21 877,434,654 877,434,654

General reserve 135,000,000 135,000,000

Accumulated loss (888,479,625) (868,392,425)

Total equity 123,955,029 144,042,229

Non-current liabilities

Retirement benefit obligations 22 8,194,220 7,388,067

Debenture issued to related parties 23.1 5,485,417 5,385,085

Finance lease obligation to related parties 23.2 - -

Interest bearing loans and borrowings 24 17,731,375 22,934,363

31,411,012 35,707,515

Current liabilities

Trade payables 7,309,327 18,587,200

Amount due to related parties 23.3 359,022 359,022 Amount due to Ceylinco Investment Company Limited 23,876,991 24,154,409

Finance lease obligation to related parties 23.2 - 441,088

Other payables 25 4,459,881 5,810,917

Income tax payable 1,183 -

Interest bearing loans and borrowings 24 17,982,739 9,271,327

53,989,143 58,623,963

Total equity and liabilities 209,355,184 238,373,707

Net asset per share(Rs.) 1.47 1.70

The Accounting Policies and Notes form an integral part of these financial statements

Figures in the brackets indicate deductions.

……………………………………

Chief Accountant

The Directors are responsible for preparation and presentation of these financial statements

Signed for and on behalf of the board

……………………. …………………….

BALANCE SHEET

I certified that these financial statements have been prepared in compliance with the requirements of Companies Act No.7 of 2007.




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Stated General Accumulated Total

Capital Reserve Loss

Rs. Rs. Rs. Rs.

Balance as at 01 April, 2008 877,434,654 135,000,000 (849,013,333) 163,421,321

Loss for the year - - (19,379,092) (19,379,092)

Balance as at 31 March, 2009 877,434,654 135,000,000 (868,392,425) 144,042,229

Loss for the year - - (20,087,200) (20,087,200)

Balance as at 31 March, 2010 877,434,654 135,000,000 (888,479,625) 123,955,029

Figures in the brackets indicate deductions.

STATEMENT OF CHANGES IN EQUITY

The Accounting Policies and Notes form an integral part of these financial statements




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Rs. Rs.

Cash flow from operating activities

Loss before tax (20,007,201) (18,915,679)

Adjustments forCreditors not payable written back (7,537,005) (3,544,881)

Depreciation on Property, plant & equipment 3,632,191 4,345,079

Impairment of property, plant & equipment 3,108,283 -

Amortization of lease hold land 27,117 24,030

Provision/(reversal of provision) for bad & doubtful debts (16,869,906) 15,897,446

Provision of slow moving inventories 6,904,592 15,220,411

Provision for retiring gratuity 1,233,760 1,080,718

Interest expense 4,157,018 4,576,016

Interest & dividend income (523,370) (132,424)

(25,874,522) 18,550,716

(Increase)/Decrease in trade & other receivables 59,851,842 (7,929,979)

Increase in inventories (14,902,894) (3,076,274)

Increase/ (Decrease) in trade & other payables (12,628,909) 413,962

Increase/ (Decrease) in related party payables 7,126,196 (3,033,678)

Decrease in related party receivables 484,428 942,869

Cash generated from operating activities 14,056,142 5,867,616

Retiring gratuity paid (427,606) (539,260)

Interest paid-

(8,560)

Income taxes paid (78,817) -

Net cash flow from operating activities 13,549,719 5,319,796

Cash flow from investing activities

Interest received 523,370 132,424

Purchase & construction of property, plant & equipment (18,000) (1,640,669)

Advance payment of lease hold land - (529,146)

Cash flow from investing activities 505,370 (2,037,391)

Cash flow from financing activitie s

Lease rentals paid during the year (441,088) (948,960)

Cash flow from financing activities (441,088) (948,960)

Net increase/(decrease) in cash & cash equivalents 13,614,001 2,333,445

Cash & cash equivalents at beginning of the year 8,720,378 6,386,933

22,334,379 8,720,378

Analysis of cash & cash equivalents

Cash in hand and at bank 22,335,685 9,136,555

Bank overdraft (1,307) (416,177)

22,334,378 8,720,378

CASH FLOW STATEMENT




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NOTES TO THE FINANCIAL STATEMENTS

1. Reporting Entity

Blue Diamonds Jewellery Worldwide PLC. is a Company incorporated and domiciled in Sri

Lanka. The registered office of the of the Company is located at No.55 1/2, Iceland Building,Galle Road, Colombo 03.

The Company’s principal activities are manufacture and export of diamond studded gold jewellery.

2. Basis of Preparation

2.1 Statement of compliance

The financial statements have been prepared in accordance with Sri Lanka Accounting Standards(SLASs) promulgated by The Institute of Chartered Accountants of Sri Lanka (ICASL), and the

requirements of the Companies Act No. 07 of 2007.

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis.

2.3 Functional and presentation currency

The financial statements are presented in Sri Lankan Rupees, which is the Company’s functionalcurrency.

2.4 Use of Estimates and Judgments

The preparation of financial statements in conformity with SLASs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reportedamounts of assets, liabilities, income and expenses. Judgments and estimates are based on historicalexperience and other factors, including expectations that are believed to be reasonable under thecircumstances.

Hence actual experience and results may differ from these judgments and estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimates are revised and in any future periods

effected.

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements isincluded in the following notes:

Note 22 – Retirement benefit obligations




3. Significant accounting policies

The accounting policies set out below are consistent with those used in the previous year.

Certain comparative information has been reclassified to conform to the current year’s presentation.

The Directors have made an assessment of the Company's ability to continue as a going concern in theforeseeable future, and they do not foresee a need for liquidation or cessation of trading.

3.1 Foreign Currency

3.1.1 Foreign currency transactions

Transactions in foreign currencies are translated to Sri Lankan Rupees at the exchange rateapplicable on the dates of the transactions. Monetary assets and liabilities denominated in foreigncurrencies at the reporting date are retranslated to the Sri Lankan Rupees at the exchange rateruling at that date. Foreign exchange differences arising on translation are recognised in profit

and loss.

3.2 Assets and bases of their Valuation

Assets classified as current assets on the Balance Sheet are cash and bank balances and thosewhich are expected to be realised in cash during the normal operating cycle or within one year from the reporting date, whichever is shorter.

3.2.1 Property, plant and equipment3.2.1.1 Recognition and Measurement

Items of property, plant & equipment are measured at cost less accumulated depreciation andaccumulated impairment losses.

3.2.1.2 Owned Assets

The cost of property, plant & equipment includes expenditure that is directly attributable to theacquisition of the asset.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directlyattributable to bringing the asset to a working condition for its intended use, and the costs of dismantlingand removing the items and restoring the site on which they are located.

When parts of an item of property, plant & equipment have different useful lives, they are accounted for as separate items (major components) of property, plant & equipment.

3.2.1.3 Subsequent expenditure

The cost of replacing a part of an item of property, plant & equipment is recognised in thecarrying amount of the item if it is probable that the future economic benefits embodied withinthe part will flow to the Company and its cost can be measured reliably. The carrying amount of these parts that are replaced is derecognised in accordance with the derecognition policy given below.

The cost of the day-to-day servicing of property, plant & equipment are recognised in profit andloss as incurred.


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3.2.1.4 Derecognition

The carrying amount of an item of property, plant and equipment is derecognised on disposal; or when no future economic benefits are expected from its use or disposal. Gains and losses on

derecognition are recognised in profit and loss and gains are not classified as revenue.

3.2.1.5 Depreciation

Depreciation is recognised in profit and loss on a straight-line basis over the estimated usefullives of items of each part of an item of property, plant and equipment.

The estimated useful lives for the current and comparative periods are as follows.

Plant &Machinery 20 years

Plant & Machinery which was written down to itsrecoverable amount in the year ended 31st March 2000are depreciated over the balance 11 years of theestimated useful life.Buildings 13.33 years

Furniture &Fittings 4 years

Equipment 4yearsLease hold land is amortized over the lease period of 99 years.

Motor Vehicles 4 years

Depreciation of an asset begins when it is available for use and ceases at the earlier of the dateson which the asset is classified as held for sale or is derecognised.

Depreciation methods, useful lives and residual values are reassessed at the reporting date.

3.2.2 Inventories

Inventories are stated at lower of cost and net realizable value. Net realizable value is the estimatedselling price in the ordinary course of business, less the estimated cost of completion and sellingexpenses. The general basis on which cost is determined is as follows.

All inventory items except Finished Products, Work-in-Progress and Gold Frames are stated at weightedaverage cost and include expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Finished Products and Work-in-Progress based on the standard costing which included all directexpenditure and production overheads.

Gold, and Gold frames stock are valued based on market prices prevailed at the reportingdate.

A provision is made for all non-moving and obsolete items of inventory.





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3.2.3 Trade and other receivables

Trade and other receivables are stated at their estimated realisable amounts.

3.2.4 Cash and cash equivalents

Cash and cash equivalents comprise cash balances and demand deposits.

Bank overdrafts that are repayable on demand and form an integral part of the Company’s cashmanagement are included as a component of cash and cash equivalents for the purpose of theStatement of Cash Flows.

3.3.4 Impairment

The carrying amounts of the Company’s assets are reviewed at each reporting date to determine

whether there is any indication of impairment. If any such indication exists then the asse3t’srecoverable amount is estimated.

3.3.4.1 Calculation of Recoverable Amount

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair valueless costs to sell. In assessing value in use, estimated future cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. A cash-generating unit is the smallest identifiable assetgroup that generates cash flows that largely are independent from other assets and groups.

3.3.4.2 Impairment/Reversal of Impairment

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds itsrecoverable amount. Impairment losses are recognised in profit and loss. Impairment losses recognised in

prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine therecoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed thecarrying amount that would have been determined, net of depreciation or amortisation, if no impairment losshad been recognised.

3.4 Liabilities and ProvisionsLiabilities classified as current liabilities on the Balance Sheet are those which fall due for paymenton demand or within one year from the reporting date. Non-current liabilities are those balances thatfall due for payment later than one year from the reporting date.

All known liabilities have been accounted for in preparing the financial statements.




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3.4.1 Employee benefits

3.4.1.1 Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Theliability recognised in the balance sheet in respect of defined benefit plan is the present value of thedefined benefit obligation at the reporting date. The defined benefit obligation is calculated annuallyusing the Projected Unit Cost Method. The present value of the defined benefit obligation isdetermined by discounting the estimated future cash flows using the interest rates that apply to thecurrency in which the benefit will be paid and that have terms to maturity approximating to the termsof the related liability.

Provision has been made for retirement gratuities from the first year of service for all employees, inconformity with SLAS 16 on Retirement Benefit Costs. However, under the Payment of Gratuity

Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continuedservice.

The liability is not externally funded nor is it actuarially valued. 3.4.1.2 Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixedcontributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to Provident and Trust Funds covering all employees arerecognised as an expense in profit and loss when incurred.

3.4.1.3 Short-Term Benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as therelated service is provided.

3.4.2 Provisions

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic

benefits will be required to settle the obligation.

3.4.3 Trade and other payables

Trade and other payables are stated at their cost.

3.4.4 Capital commitments and contingencies

Capital commitments and contingent liabilities of the Company are disclosed in the respective notesto the financial statements.




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3.5 Income Statements

For the purpose of presentation of the Income Statement, the “function of expenses method” isadopted, as it represents fairly the elements of Company performance.

3.5.1 Revenue

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts. Revenue is recognised when thesignificant risks and rewards of ownership have been transferred to the buyer, recovery of theconsideration is probable, the associated costs and possible return of goods can be estimated reliably,there is no continuing management involvement with the goods, and the amount of revenue can bemeasured reliably.

Gains and losses on disposal of an item of property, plant & equipment are determined by comparingthe net sales proceeds with the carrying amounts of property, plant & equipment and are recognised

net within “other income” in profit and loss. When revalued assets are sold, the amounts included inthe revaluation surplus reserve are transferred to retained earnings.

3.5.2 Expenses

All expenditure incurred in the running of the business has been charged to income in arriving at the profit for the year.Repairs and renewals are charged to profit and loss in the year in which the expenditure is incurred.

3.5.2.1 Borrowing costs

Borrowing costs are recognized as an expense in the period in which they are incurred, except to the

extent that they are directly attributable to the acquisition, construction or production of a qualifyingasset, in which case they are capitalised as part of the cost of that asset.

3.5.2.2 Financing income and expenses

Finance income comprises interest income on funds invested, and gains on translation of foreigncurrency. Interest income is recognized in the profit and loss as it accrues.Finance expenses comprise interest payable on borrowings and losses on translation of foreigncurrency.

3.5.2.3 Income tax expense

As per the agreement under section 17 of BOI Law No.4 of 1978 after the expiration of taxexemption period which ceased from year 2003/2004 the company pays income tax at 2% on theturnover of the enterprise for a period of 15 years commencing from the last day of the year inwhich profits and income of enterprise is exempt.

However,Company's export income from gold, jems or jewellery is exempt from income tax isexempt from tax as per section 15 (i) (ii) of the Inland Revenue Act No. 38 of 2000.




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3.6 General

3.6.1 Events occurring after the Balance Sheet date

All material post Balance Sheet events have been considered and where appropriate adjustments or disclosures have been made in the respective notes to the Financial Statements.

3.6.2 Earnings/(deficit) per share

The company presents basic earnings/(deficit) per share for its ordinary shares. BasicEarnings/(deficit) is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

3.7 Cash Flow Statement

The Cash Flow Statement has been prepared using the "indirect method".

Interest paid is classified as an operating cash flow. Dividend and interest income are classified ascash flows from investing activities.

Dividends paid are classified as financing cash flows.

4. New Standards and Interpretations not yet adopted

The Institute of Chartered Accountants of Sri Lanka has issued the following new standards, which become effective for annual periods beginning on or after January 1, 2011.Accordingly; theseStandards have not been applied in preparing these Financial Statements as they are not effective for

the year ended March 31, 2010.

·Sri Lanka Accounting Standard 44 - Financial Instruments : Presentation (SLAS 44)

·Sri Lanka Accounting Standard 45 - Financial Instruments : Recognition AndMeasurement (SLAS 45)

·Sri Lanka Accounting Standard 39 - Share-Based Payment

The Company is currently in the process of evaluating the potential effect of these Standards.However, the impact of the above requirements has not been quantified as at the reporting date.




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5 GOING CONCERN

The Management is of the view that the Company will be in a position to continue as a going concern despite the

reduction in export orders anticipating the revival and stabilizing of the international market for the jewellery over the

next few months which was badly affected by the Global Credit Crunch.

Furthermore the Company has taken following steps;

-

-

-

The financial in-flow from the rights issue will be utilized to;

- Automate the factory production sections

- Invest in setting up of a traditional jewellery manufacturing division using coloured gem stones, pearls etc.

- Set-up a silver jewellery production unit

- Invest in new markets and product developments

- Finance other working capital requirements

2010 2009

Rs. Rs.

6 REVENUE

Gross revenue 46,191,437 119,333,289

Less: Sales return (Note 6.1) (39,764,806) (2,669,102)

Net sales 6,426,631 116,664,187

Note 6.1

AGI Singapore did not have any alternative other than handing over the jewellery purchased from us in lieu of our

outstanding which reduced our losses on bad debtors.

Due to the global economic slow down and the recession created, a major buyer in Singapore (AGI Singapore) a related

company had to close down its operation in 2009. The Company had to act quickly to avoid substantial losses and

arranged to send a team from the Marketing Division to recover whatever quantities of jewellery that remained un-sold or

not paid for as the Company feared that if it did not act fast and recover the monies due to the Company or at least the

goods at a crisis situation such as this the Company will stand to lose greatly as its experience is that most Jewellers will

just close their business and declare bankruptcy. The Company had collected items of jewellery amounting to US$

357,789/-(Rupee equivalent of 39,764,806/-) which had been recognized as sales in previous financial years and returned

as sales returns during the financial year under review.

In addition, the Company have taken steps to introduce fresh equity capital by way of a rights issue with the

remarkable investor confidence shown in the recent market price increase of our shares. The main purpose of the

rights issue is to convert our operation into a profit making venture in the very near future.

It is with this plan, preparation and confidence that the Company will continue as a going concern.

Re-positioning the company in the Australian market in 2010/11 and negotiations are underway to enter

into a formal sales agreement for a long term business relationship.

The company is now receiving substantial orders from our traditional buyers after the slowdown

experienced due to the Global Credit Crunch with a 50% sales growth from traditional buyers whencompared to the previous year corresponding period.


Blue Diamonds Jewellery Worldwide PLC (BDJW) has shown positive signs of recovery after a major reduction of export orders which slowdown commenced during the year 2009 with a gradual improvement from January 2010.

The Company had increased its production capacity by over 50% in the first five months of the financial year 2010/11

and is in a cash sufficiency level to meet its financial obligations in the normal course of business in the ensuing

financial year.

Have developed and strengthened the East Asian market to a great extent to avoid over dependence on

the Middle East market. In the first five months of the financial year 2010/11 30% of our total production

was exported to china and Hongkong.

The recovery of goods given on deferred payment terms during the Global Slowdown is the method and the usualpractice

adopted by the jewellery trade internationally. The recovered value of raw materials and the value of jewellery is very

much higher when compared to the value of jewellery handed over to buyer which is due to the world market price

increases of Diamonds and Gold.




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2010 2009

Rs. Rs.

7 OTHER INCOME

Sundry income 2,075 373,750 2,075 373,750

8 LOSS FROM OPERATIONS IS STATED AFTER CONSIDERING

Profit/(Loss) before tax is stated after charging all expenses including the following

Auditors' Remuneration-Statutory Audit 760,210 718,950

Non audit fee 80,000 77,500

Depreciation on Property Plant & Equipment 3,632,191 4,345,079

Provision/(reversal of provision) for doubtful debts (16,869,906) 15,897,446

Staff cost (8.1) 29,349,138 34,262,572

Provision for slow moving inventories 6,904,592 15,220,413Registrars & Secretarial fees 529,185 480,000

Legal Fees 239,575 175,000

Surcharge on default of statutory payments - 451,743

8.1 Staff cost

Salaries & wages 25,764,827 30,323,633

Defined Contribution Plan cost - EPF & ETF 2,323,466 3,165,107

Defined Benefit Plan cost - Retiring Gratuity 1,260,845 1,080,718

29,349,138 34,262,572

Average number of employees 64 90

9 NET FINANCE COSTS

(a). Finance Income

Interest on Call Deposits 523,370 132,424

Gain on translation of foreign currency - 6,723,230

523,370 6,855,654

(b). Finance cost

Loss on translation of foreign currency (1,751,574) -

Interest Expense (9.1) (4,056,686) (4,576,016) Total finance cost (5,808,261) (4,576,016)

Net finance cost (5,284,890) 2,279,638

9.1 Interest Expense

Term Loan - related companies (3,923,294) (4,256,744)

Interest on finance lease obligation (33,392) (210,712)

Interest on debentures (100,000) (100,000)

Interest on bank overdraft - (8,560)

(4,056,686) (4,576,016)





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For the year ended March 31, 2010 2009 2007

Rs. Rs. Rs.

10 Creditors not payable written back

Amount payable to Trade Creditors written back Note 1 7,537,005 3,544,881 1,087,229

7,537,005 3,544,881 1,087,229

11 Income Tax Expense

Corporate Tax

11.1 The Company's export income from gold, jems or jewellery is exempt from income tax is exempt from tax as per section

13 (i) of the Inland Revenue Act No. 10 of 2006 .

2010 2009

Rs. Rs.

Non business income- interest and other income 525,445 132,424

Deductions (Note 1) - (44,327)

Taxable income 525,445 88,097 5,798,275

Note 1-Section 32 deductions

Losses b/f - 44,327

35% of statutory income - 46,348

Deductible losses (whichever is lower) - (44,327)

Tax liability

Income tax @ 15% 78,817 13,215

Turnover @ 2% - - 869,741

Social Responsibility Levy 1.5% 1,183 198 -

Income tax for the current year 80,000 13,413 869,741

12 DEFICIT PER SHARE

The deficit per ordinary share has been calculated by dividing the loss for the year by the weighted

average no of shares in issue during the year

2009

Rs.

12.1 Loss for the year (Rs.) (20,087,200) (19,379,092) 8,478,212

Weighted average no of Shares (Note 12.2) 84,584,475 84,584,475 84,584,475

Basic deficit per Share (Rs.) (0.24) (0.23) 0.10

12.2 Qualifying Ordinary Shares at the beginning of the year 84,584,475 84,584,475 84,584,475

Weighted average number of shares for the year 84,584,475 84,584,475 84,584,475

Four non voting shares of Rs. 2/50 each have been considered as one non voting share of Rs. 10/- each for the calculation of

basic deficit per share.


Note 1 - Long outstanding non operative Companies trade creditors which are not payable was written back to the Income

statement. .




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13 PROPERTY, PLANT & EQUIPMENT

Balance Additions Balance

As at 01.04.2009 During the year As at 31.03.2010

Rs. Rs. Rs.

Cost

Buildings 14,162,449 - 14,162,449

Plant & Machinery 147,519,553 - 147,519,553

Furniture & Fittings 4,695,515 - 4,695,515

Software 11,927,500 - 11,927,500

Office & Factory Equipment 24,352,089 18,000 24,370,089

Motor Vehicles 3,084,427 - 3,084,427

205,741,533 18,000 205,759,533

Assets on finance lease

Plant & Machinery 4,338,000 - 4,338,000 210,079,533 18,000 210,097,533

Depreciation / Amortization Balance Depreciation Balance

As at 01.04.2009 for the year Impairment As at 31.03.2010

Rs. Rs. Rs. Rs.

Buildings 10,390,226 451,587 - 10,841,813

Plant & Machinery 133,996,684 1,879,784 3,108,283 138,984,751

Furniture & Fittings 4,267,707 185,914 - 4,453,621

Software 11,567,084 100,000 - 11,667,084

Office & Factory Equipment 22,799,556 798,006 - 23,597,562

Motor Vehicles 3,084,427 - - 3,084,427

186,105,684 3,415,291 3,108,283 192,629,258

Assets on finance lease

Plant & Machinery 433,800 216,900 - 650,700

186,539,484 3,632,191 3,108,283 193,279,958

Carrying amount 23,540,049 16,817,575

Capital work in progress -

23,540,049 16,817,575

14 ADVANCE PAID ON LEASEHOLD LAND 2010 2009

Rs. Rs.

Balance at the beginning of the year 2,338,461 1,833,345

Advanced payment - 529,146

Amortized during the period (27,117) (24,030)

2,311,344 2,338,461

Amount falling within one year (27,117) (24,030)

Amount falling after one year 2,284,227 2,314,431

14.1 Leasehold land has been obtained from Government of Sri Lanka on a 99 years lease. This lease commenced on

7th March 1991.





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Rs. Rs.

15 LONG TERM INVESTMENTS

Quoted InvestmentsRenuka City Hotels PLC 12,000 12,000

300 ordinary shares

Market value as at 31/3/10 Rs. 72,300/-

Non-quoted Investments

MBSL Savings Bank Limited 150,000 150,000

15,000 ordinary shares 150,000

Energen Holding Company Ltd.

5,000,000 ordinary shares 15.1 287,500,000 287,500,000

Provision for fall in value of investment (287,500,000) (287,500,000)

162,000 162,000

15.1 The Company holds an investment of Rs. 287.5 Mn in Energen Holding Company Ltd. In the opinion of the

Directors there are no future economic benefit to the Company and therefore same amount has been fully

provided during the year 2000/2001.

16 INVENTORIES

Diamonds 44,237,786 15,240,011

Gems 1,928,160 1,928,160

Gold Frames 19,983,620 8,100,140

Consumables 6,257,765 7,605,502

Work in Progress 626,707 50,000

Finished goods 58,824,618 57,615,313

Stocks on consignment basis 21,928,877 48,076,094

Stocks on sample basis 9,220,433 9,489,850

163,007,966 148,105,070

Provision for slow moving inventories (27,782,338) (20,877,746)

135,225,628 127,227,324

17 TRADE RECEIVABLES

Trade Debtors - related parties 24,388,732 52,218,966

Trade Debtors - Others 23,884,150 55,983,234

48,272,882 108,202,200 Less: Provision for doubtful debts -related parties (24,188,732) (39,906,810)

Provision for doubtful debts -others (518,224) (1,670,051)

Trade debtors net of provision 23,565,926 66,625,339





32


Rs. Rs.

18 OTHER RECEIVABLES

Advances & loans to employees( Note 18.1) 2,422,070 2,180,418

Others Debtors 1,588 1,078,754

Deposits and advances 1,774,548 1,272,115

Value Added Tax Recoverable 2,915,306 2,971,879

ESC recoverable 59,410 547,074

7,172,922 8,050,240

Note 18.1 : Loan given to Director 1,112,740 1,556,418

19 RELATED PARTY RECEIVABLES

Ceylinco Coloured Stones (Pvt) Limited 359,798 428,072

Ceylinco Diamonds Trading Co. Limited 104,306 819,532

Ceylinco Insurance Co. PLC - 46,133

Fior Drissage Jewellers Ltd 1,300,000 -

1,764,104 1,293,737

20 CASH AND CASH EQUIVALENTS

Cash at bank 14,734,496 7,017,708

Call deposits 5,100,000 1,117,500

Treasury bills 1,575,374 168,847

Fixed deposits 925,815 832,500

22,335,685 9,136,555

Bank overdraft (1,307) (416,177)

Cash and cash equivalents in the statement of cash flow 22,334,378 8,720,378

21 STATED CAPITAL

No of shares

Voting 59,033,947 59,033,947

Non voting 102,202,114 102,202,114

Value

Voting 621,929,369 621,929,369

Non voting 255,505,285 255,505,285 877,434,654 877,434,654

The holders of the ordinary shares are entitled to receive dividends as declared from time to time and

voting ordinary shares are entitled to one vote per share at meetings of the company.





33

2010 2009

22 RETIREMENT BENEFIT OBLIGATIONS Rs. Rs.

Present Value of unfunded gratuity 8,194,220 7,388,067

Total present value of the obligation 8,194,220 7,388,067

Balance as at the beginning of the year 7,388,067 6,846,609

Amortization of transitional liability - 306,886

Current service costs 675,180 630,591

Interest cost 696,046 800,323

Actuarial (gains) losses (137,467) (657,082)

Benefits paid/payable by the plan (427,606) (539,260)

Balance at the end of the year 8,194,220 7,388,067

Expenses recognized in profit or loss

Administrative expenses 1,233,760 773,832

1,233,760 773,832

Amortization of transitional liability

Amortization for the year - 306,886

- 306,886

Amounts to be amortized in the future -

SLAS 16 Employee Benefits (revised 2006) requires the use of actuarial techniques to make a reliable estimate of the amount of retirement

benefit that employees have earned in return for their service in the current and prior periods and discount that benefit

using the Projected Unit Credit Method in order to determine the present value of the retirement benefit obligation and

the current service cost. This requires an entity to determine how much benefit is attributable to the current and prior

periods and to make estimates about demographic and financial variables that will influence the cost of the benefit. The

following key assumptions were made in arriving at the above figure

Expected salary increment 5%

Discounting/Interest 10%

Staff Turnover Factor 36%

The demographic assumptions underlying the valuation are with respect to the retirement age, early withdrawal; from

service and retirement on medical grounds


The company' retirement benefit obligation would have been Rs. 7,701,072/- as at the Balance Sheet date had their retirement benifit

obligation been calculated as per the requirements of the Payment of Gratuity Act No. 12 of 1983.




34




35

26 RELATED PARTY DISCLOSURE

a Parent and ultimate controlling party

Company does not have an identifiable parent of its own.

b Transactions with key management personnel

Key management personnel consists of the directors of the company.

Loans to directors

During the year under review the Company has recovered Rs. 387,730/- from a loan given to a director of the Company.

Key management personnel compensation 2010 2009

Key management personnel compentation comprises. Rs. Rs.

Short term employemnt benefits 7,089,000 7,285,300

Post employment benofits 278,640 1,798,619

7,367,640 9,083,919

c Transactions with related parties during the year

Name fo the related party Director Relationship Nature of Value of Balance as

transaction transaction at 31st March2010

Rs. Rs.

Ceylinco Insurance Company PLC Dr.J.L.B. Kotelawala Chairman Insurance premium paid 748,250 -

Nation Lanka Finance PLC Mr. W.G.B.M. Ranaweera Managing Director Payment for secretarial and register services 276,000

Interest payable on debenture 25,000 (1,372,917)

Asian Finance Limited Mr. W.G.B.M. Ranaweera Deputy Chairman Lease Rentals paid 441,088 (59,837)

Interest payable on debenture 25,000 (1,372,917)

Ceylinco Cisco Security Dr.J.L.B. Kotelawala Chairman Payments for security services 1,082,884 (112,272)

Corporation Ltd

Ceylinco Land Exchange Ltd Mr. W.G.B.M. Ranaweera Deputy Chairman Interest payable on debenture 25,000 (1,370,833)

Ceylinco Developers Ltd Mr. W.G.B.M. Ranaweera Deputy Chairman Interest payable on debentures 25,000 (1,368,750)

Ceylinco Printing and stationary Dr.J.L.B. Kotelawala Chairman Payment of the printing of annual report 792,400 (29,785)

Ceylinco Diamond Trading Co. Mr. W.G.B.M. Ranaweera Deputy Chairman Sale of jewellery 410,000 2,003,249

(Pvt) Ltd Mr. Godfrey de Kretser Executive Director Receipts 548,979

A.G.I.(Singapore) Ltd Mr. W.G.B.M. Ranaweera Director Sales return 39,764,806 21,857,826

Mr. Godfrey de Kretser Director

Damas LLC - Core customer Sales 23,545,034 14,006,091

Fior Drissage Jewellers Ltd Mr. W.G.B.M. Ranaweera Director Funds advanced 1,300,000 1,300,000

Mr. Godfrey de Kretser Director

Mr. K.V.D.D.A.Dias Director

Mr. M.M.N. Priyantha Director

Ceylinco Coloured Stones (Pvt) Ltd Mr. W.G.B.M. Ranaweera Deputy Chairman Settlements 68,274 359,798





36

27 CAPITAL COMMITMENTS

There are no material capital commitments as at 31st March 2010.

28 CONTINGENT LIABILITIES

DC COLOMBO CASE NO.24263/MR-BDJWL VS. D.R. Senanayake

Case Laid by on October 2009.

COMMERCIAL HIGH COURT CASE HC (CIVIL) No 320/2002

The next date is 13/10/2010 for fresh interrogatories.

D C COLOMBO CASE NO.27920/MR

This is an action by Blue Diamond Jewellery Worldwide Ltd against Mr. D. R. Senanayaka ( defendant ) for

the recovery of sum of Rupees 2 Billion for the loss and damage suffered by the plaintiff company as

defendant has defrauded the plaintiff Company, misused his position in the company to defraud the

company, failed to discharge his duties as Managing Director and/or Chief Executive Director of the Plaintiff

Company, breached his fiduciary duty misappropiated monies belonging to the Company and wrongfully

and/or unlawfully and/or fraudulently and/or contrary to law convened to his own use monies belonging to

the company and unjustly enriching himself in a sum of US$ Two Million. Defendent filed the answer

seeking to dismiss the plaintiff's action and for Rupees 200,000,000 for loss of reputation and character, loss

of business and income and pain of mind etc.

This matter is coming up for trial 20/10/2010


The following cases have been filed against the company or claims have been made in reconvention . No

provision is made in the financial statements as the lawyers of the opinion that the outcome of the potential

on any of these cases can not be assessed at this stage.

This is an action by Blue Diamond Jewellery Worldwide PLC against D.R. Senanayake(defendant) for the

recovery of sum of Rs.1 Billion for the loss and damages suffered by the plaintiff company as a result of his

not performing his duties properly, fraudulently misappropriating funds of plaintiff company converting

plaintiff's fund for his own use, failure to properly and duly exercise his duty of care and failed to properly perform his duties as Chief Executive Director/Deputy Chairmen/Managing Director. Answer has been filed

by defendant seeking that the action filed by BDJWP be dismissed and claims a sum of Rupees two

thousand million and other relief and cost.

This is an action by Mr.D.R. Senanayake against Blue Diamonds Jewellery Worldwide PLC , and its

directors, Seylan Bank, Ceylinco Securities and Financial Services Limited and others against his removal

and for the recovery of damages from Blue Diamond Jewellery Worldwide PLC,Ceylinco Securities and

Financial Services Ltd, Seylan Bank Ltd, Mrs.Rohini Nanayakkara Deputy General Manager and C.KotigalaAssistance General Manager for a sum of Rupees five thousand five hundred million against BDJWP,

Chairmen and directors and other relied and cost.

An interim appeal has been made by BDJWP to the Supreme Court in SC CHC No.49 2004 on answering

interrogatories. The Order was delivered on 31/03/2010 and the petitioner is at liberty to file the same

interrogatories and/or a fresh set of interlocutory on any person than the 2nd Defendant. The Defendant

reserves their rights to file objections, if any, subject to this.




28 CONTINGENT LIABILITIES(Contd.)

COMMERCIAL HIGH COURT CASE NO.232/2002

(D C COLOMBO CASE NO.5636/SPL-D. R. SENANAYAKE VS BDJWP AND OTHERS)

Case is fixed for Oral Submission on 03/11/2010

COMMERCIAL HIGH COURT HC (CIVIL) CASE NO.243/2002

29 EVENTS AFTER THE BALANCE SHEET DATE

Following events had occurred subsequent to the reporting date of the financial year 2009/10.

-

-

-

-

This is an action by Mr.D.R.Senanayake against Blue Diamond Worldwide PLC and its directors and others for declaration that

proxi given by Seylan Bank to the 2nd defendant in respect of 4,800,513 shares of BDJWL held by Gold Lada Ltd is wrongfuland

unlawful and is null and void, and defendant disallowing the plaintiff to vote in respect of the 4,800,513 shares was wrongful and

unlawful,ruling by the 2nd defendant as chairman of the 1st defendant permitting the right of voting on the proxy in respect of the

said shares was wrongful and unlawful, Resolution regarding his removal was unlawful declaration that he was not removed as

Deputy Chairman and Managing Director of BDJWL etc., 2nd defendant has abused or misused his office as Chairman and not fit

to hold office as Chairman and for recovery of damages (from BDJWL and directors) Rs.2,000,000,000/- from 2nd to 16th

defendant US$ 200 million from Chairman BDJWL, US$ 25 million from Directors 3rd to 15th defendants, US$ 25 million from

Directors 3rd, 5th and 9th to 15th Defendants, US$ 25 million from 16th Defendant, US$ 200 million from 17th Defendant and

other relief and cost from BDJWL.

This is an action filed by Gold Lada against Seylan Bank its Directors, Blue Diamond Jewellery Worldwide PLC, CSFSL and CSE

for the sale of BDJWL shares and for and Enjoining order/ Interim Injunction/ Permanent Injunction from voting on and/or

transfering and or sell and/or alienting the 5,160,000 ordinary shares of Rs.10/- held by the Plaintiff Company in BDJWL without

the express consent or approval of the Plaintiff Company.

(D C COLOMBO CASE NO.5577/SPL - GOLD LADA VS. SEYLAN BANK LTD., BDJWL AND OTHERS)


The Company had invested in 500 shares of Fior Drissage Jewellers Ltd ordinary share capital as a percentage of

16.67% of the total share capital of Fior Drissage Jewellers Ltd.

The Company resolved that 59,033,947 Voting Shares and 102,202,114 Non Voting Shares be offered to the existing

Shareholders of the Company in the proportion of one (01) Voting Ordinary Share and One (01) Non Voting Ordinary

Share for every One Voting Share and One Non Voting Share held at a consideration of Rs.2.50 and 1.50 per share and

to all existing shareholders by way of a rights issue.

The Company had return of jewellery given to traditional buyers on consignment amounting to Rs.13,462,958/-. The

balance was included under inventories as at the reporting date.

Subsequent to the reporting date, the Company and Seylan Bank PLC agreed to appoint Arbitrator in accoradance with

the agreement signed by the Company and the Bank on 21st November 2003 in respect of the sale of jewellery that was

acquired by Seylan Bank in 1999 in lieu of the settlement of credit facilities obtained. The Arbitration process has not

commenced as yet. The jewellery acquired was secured by Seylan Bank and stored at the factory vault. The Company

had forwarded an invoice for a sum of Rs 29,700,000/- (Rupees twenty nine million and seven hundred thousand) as the

storage charges for the stored items for a period of 132 months on 20th May 2010. The Company would initiate legal

action to recover the amount due to us if the Bank fails to settle our claim.

Thereafter, we filed paper to release the former Directors of the Seylan Bank from this case, Accordingly, Court given Order on18th September, 2009 4th to 12th Defendants are released. Now trial is only against the 1st, 2nd, 3rd, 13th and 14th Defendants.

Further Trial was fixed on 14/12/2010.


blue diamonds jewellery worldwide plc - annual report 2010

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