Annual Report: Hayleys MGT Knitting Mills PLC

A N N UAL REPOR T
2011
HAYLEYS MG T KNITTING MILLS PLC

Hayleys MGT Knitting Mills PLC was incorporated in
1993 as a public limited liability Company and was
listed in Colombo Stock Exchange in 2003.
The Company carries a BBB (lka) credit rating
by Fitch Ratings.
Summary of Financial Performance 2 Cash Flow Statements 34

Chairman's Statement 3 Notes to the Financial Statements 35
Board of Directors 5 Income Statements translated into SLR 47
Financial Review 6 Balance Sheets translated into SLR 48
Corporate Social Responsibility 9 Ten Year Summary 49
Corporate Governance 11 Shareholder Information 50
Annual Report of the Board of Directors 22 Notice of meeting 51
on the affairs of the Company
Form of Proxy (insert)
Financial Calendar 26
Corporate Information
Statement of the Directors' Responsibilities 27
Audit Committee Report 28
Independent Auditors' Report 30
Income Statements 31
Balance Sheets 32
Statement of Changes in Equity 33
Mission
Customers To be a Partner in our Customers success
Employees A Better tomorrow for our Employees
Shareholders Optimize the Shareholder worth
Environment To be a Green Manufacturer
Vision
To become the supplier of choice for weft
knitted fabric in Sri Lanka & Bangladesh
Values
Safety First
Achievement
Integrity, Fairness & Transparency
Team work
Compliance
Annual Report 2011

Summary of Financial Performance
Year ended 31st March 2011 2010 Change

USD '000 USD '000 %
Restated
Revenue 58,322 50,057 17
Prot/(Loss) before tax (7,290) 3,271 (323)
Prot/(Loss) after tax (7,079) 3,164 (324)
Dividend - 1,108 (100)
Shareholders' funds at year end 15,811 23,556 (33)
Investment in property, plant and equipment 2,521 2,047 23
Per share
Earnings /(Loss) (0.139) 0.062 (324)
Market value(USD) at year end 0.320 0.279 15
Net assets (USD) at year end 0.311 0.464 (33)
Dividend (USD) - 0.022 (100)
Price earnings (times) based on year end price Negative 4.471 -
Ratios
Dividend payout (%) - 35
Interest cover (times) Negative 3.22
Gearing (%) 59.99 40.99
Return on capital employed(%) (18.45) 8.19
Current ratio (times) 0.73 1.04
02 Hayleys MGT Knitting Mills PLC

Annual Report 2011
Chairmans Statement
I am pleased to present the Financial Statements of The net negative impact of the above on the prot of
the Company for the year ended 31st March 2011. the Company was USD 6,504,146.
In line with the above mentioned announcements a

RESULTS comprehensive physical verication of stocks was
completed on 15th December 2010 and the
During the period under review the volume of sales
verication of receivables on the 20th of January
was marginally higher than the previous year.
2011. Due to the large discrepancies that arose from
The turnover grew by 17% largely due to the higher
these verications a forensic audit was conducted to
selling price which was driven by increase in cost of
determine the cause for such discrepancies and the
production as a result of sharp increase in cotton
ndings warranted a criminal investigation by the
yarn price. Average selling price increased to USD
relevant authorities and is proceeding.
6.39 per kg from USD 5.86 per kg in the previous
year, however that increase was not sucient to
absorb the increase in raw material prices for orders PROSPECTS
that were already committed. Consequently the
gross prot reduced by 27% to USD 7.47mn from The discrepancies as outlined above appear to have
USD 10.30mn of the previous year. occurred and accumulated over a period of time.
Nevertheless the timely intervention and quick
A sharp increase in administration costs by 136 % response by the present management to these
was seen during the year under review. Contributory discrepancies have enabled the management to
factors were arrest these negatives and necessary measures have
now been taken to ensure the sustainability and
1. A discrepancy that arose between the
physical balance of inventory and of that growth of the Company and its operations.
reected in the nancial records.
It is our pleasure to report that our order book is
2. Writing down a part of inventory to its net healthy, amidst these interim negatives. This is
realizable value. testimony to the level of condence that our
3. A correction to receivables which was overstated. customers have in the company, and we
acknowledge and appreciate this.
Though these charges have been eected in the The management team has since been strengthened
nancial year 2010/2011, it is to be noted that the and revamped through the recruitment of personnel
accumulation of these write os has taken place for key positions.
over a period of time. The Company made
disclosures in this regard to the Colombo Stock The Company has further upgraded its machinery
Exchange on 23rd November 2010 and 8th and ne-tuned its processes and is working closely
December 2010. The distribution cost too increased with the Hayleys Group Information Technology
from USD 0.84mn to USD 2.42mn largely driven by Division in order to strengthen and re-engineer
adjustments to receivables which too was in respect Management Information Systems, controls and
of an accumulation that took place over a period of processes.
time.
Hayleys MGT Knitting Mills PLC

Annual Report 2011 03
Chairmans Statement
I take this opportunity to reassure our stakeholders Mr. H.R.Peiris who served as a Director of the
that these actions have rendered business as usual Company resigned on 29th April, 2011. We thank
and thank the shareholders for their continued Mr. Peiris for the valuable contribution made to the
support and condence. Company during his directorship in the Company and
wish him well.
SOCIAL RESPOSIBILITY
In conclusion I wish to assure all stakeholders of our
The Companys Corporate Social Responsibility commitment to the growth and sustainability of the
activities continue and includes providing Company. I also with to thank our employees for
scholarships for deserving students from nearby their commitment and our customers for their
schools and maintaining of a medical ward at the valuable patronage.
Horana hospital.
DIRECTORATE
Mr. D. B. Weerasinghe tendered his resignation on

8th November 2010 once the verication into A.M.Pandithage.
inventory and receivables commenced. Chairman
11th May 2011
Mr. S.C. Ganegoda was appointed as Deputy
Chairman on 5th November 2010.

Annual Report 2011
Board of Directors
A M Pandithage H.R. Peries **
Chairman
Appointed to the Board of Hayleys MGT Knitting Mills PLC in Mr. Peries was appointed to the Board of Hayleys MGT in
July 2007 and its Chairman from July 2009. Joined Hayleys June 2002. He represents Equity Investments Lanka Limited
in 1969, Appointed Group Executive Director in 1996 and to (Equill) and is the Chief Executive Ocer.
its Board in 1998. Deputy Chairman of Hayleys from 2007 He counts for nearly 15 years at Equill and is a Director in
and Chairman & Chief Executive from July 2009. Fellow of several companies. He has over 30 years of Management
the Chartered Institute of Logistics & Transport. Director, expertise and possesses extensive experience in Finance
Sri Lanka Port Management & Consultancy Services Ltd. and Commerce in Sri Lanka and abroad.
Member of the Presidential Committee on Maritime
Matters. Committee Member of the Ceylon Chamber of R. Seevaratnam **
th
Commerce. Council Member of the Employers Federation Appointed to the Board on 16 May 2007. Former Senior
of Ceylon. Partner of M/s. KPMG Ford, Rhodes, Thornton &
Company, Chartered Accountants. Graduated from the
S.C. Ganegoda University of London, majoring in Botany and Zoology.
Deputy Chairman Fellow of the Institute of Chartered Accountants, England
Rejoined Hayleys in March 2007.Appointed to the Group & Wales and Fellow of the Association of Chartered
Management Committee in July 2007.Appointed to the Accountants of Sri Lanka.
Board of Hayleys MGT Knitting Mills PLC in November
2009 and Deputy chairman in April 2010. Fellow, Institute
of Chartered Accountants of Sri Lanka and Member, Mr.K.D.D.Perera *
Institute of Certied Management Accountants of Appointed to the Board in September 2009. Secretary to
Australia. Holds an MBA from the Postgraduate Institute of the Ministry of Transport, Sri Lanka and well-known
Management, University of Sri Jayewardenepura. prominent entrepreneur and investor whose business
Subsequently held several senior management positions in interests include Hydropower generation, Manufacturing,
large private sector entities in Sri Lanka and overseas. Has Hospitality , Entertainment, Banking & Finance.
responsibility for Group Corporate Finance and Strategic Serves as the Chairman of LB Finance PLC, The Fortress
Business Development. Resorts PLC, Vallibel Power Erathna PLC, Vallibel Finance
PLC, Greener Water Ltd, Vallibel One Ltd and holds
S. Spezza directorships in his other private sector companies.
Managing Director Deputy Chairman of Amaya Leisure PLC and Royal
Joined the company in 1993. Managing Director of
Ceramics Lanka PLC. Director Sampath Bank PLC, Sri Lanka
the Company since its inception. Founder of MGT Samoor
Insurance Corporation Ltd, Hayleys PLC, Haycarb PLC,
(Pvt) Ltd, Melbourne, Australia. Has over 46 years
Hunas Falls Hotels PLC, Dipped Products PLC, Hotel
experience in the Textile Industry in the areas of Knitting,
Services (Ceylon) PLC, Nirmalapura Wind Power (Pvt) Ltd
Finishing and Dyeing.
and Alutec Anodising & Machine Tools (Pvt) Ltd .
Member of the Board of Directors of Strategic Enterprise
M.C.D. Amalean *
Deshmanya Mahesh Amalean has been a member on the Management Agency (SEMA)
Board of Directors of the Company since 2001.
He is a Founding Member and Chairman of MAS Holdings
(Pvt) Ltd, a leading apparel manufacturer with design to
* Non Executive Director
delivery solutions for Intimate Apparel, Sports and
** Independent Non Executive Director
Activewear.
A chemical engineer from the Regional Engineering
College, Trichi, India, Mahesh, was the Chairman of the Sri
Lanka Apparel Exporters Association in 1998 & 1999 and
President of the Sri Lanka France Business Council from
2004 to 2006.
Mahesh was awarded the Deshamanya title in 2005.

Financial Review
The period under review reects a signicant loss Operational Prot/(Loss) USD
due largely to the adjustments made for inventories
and trade receivables, reasons for which are stated
elsewhere in this report.
External environmental factors such as sharp

increase in cotton yarn price and restrictions
imposed on yarn exports by the Indian Government
rendered the circumstances more challenging,
nd
especially during the 2 half of the year.
This section provides an overview of the nancial Operating Prot/(Loss)

performance of the company during the period Operating Prot margin (%)
2010/11.
Turnover and Profit from Operations
Turnover USD 58.3 Mn during the year under review

reects an increase of 17% over the corresponding
amount of the previous year. The volume too
increased from 8,537 tons to 9,139 tons. However
the gross prot declined from USD 10.30 mn to 7.5
mn incurring a net loss of USD 7.1 mn in comparison
to USD 3.2 Mn prot in the preceding year.
Main contributing factors for the loss were: 2007 2008 2009 2010 2011
Discrepancies between the value of physical

balances of inventories and that of the
Financial Statements were corrected.
Net realizable value of certain inventories
was lower than that of weighted average
cost and was provided for during the year.
Trade receivables which were overstated as
some credit notes due had not been recorded
were provided for during the year.
The total impact of the above on the
Financial Statements for the year ended 31st
March 2011 was US$ 2,967,428 for
receivables and US$ 3,536,718 for
inventories which has been provided for in
full in the Financial Statements as at 31st
The main contributor to the companys turnover for
March 2011.
the year under review was Jersey fabric. The
turnover generated from Polar eece fabric
increased to 19% from 17 % during this year.
Contribution from interlock increased to 16 % from 13 %.
Rib decreased from 20% to 11%.

Annual Report 2011
Financial Review
Net cash flow from operations Finance cost
Net cash ow from operations for the year under Despite the increase in borrowings, the nance
review was USD (4.84) Mn negative compared to cost reduced by 16.18 % from 1.47 USD Mn to
USD 3.78 Mn positive in last year. 1.24 USD mn due to lower cost of borrowings.
Earnings before Interest, tax , depreciation and

amortisation (EBITDA)
(USD 000') 2010/11 2009/10
EBITDA (4,025) 6,660
Borrowings USD (mn)
Less: Depreciation (2,029) (1,915)
Interest (1,236) (1,474)

Tax 211 (107)
Net prot/(loss) (7,079) 3,164
Capital Structure
The Companys earnings before interest, tax,

depreciation and amortisation (EBITDA) for the year
under review was (USD 4.02 Mn) against USD 6.66
Mn during the previous year.

Financial Review
During the year the gearing ratio has increased Performance measurement
from 41% to 60% due to increased borrowings
from USD 16.36 Mn to USD 23.71 Mn and Companys earnings per share was negative
reduced shareholders fund from USD 23.5 Mn USD 0.14 when compared with USD 0.06
to USD 15.8 Mn due mainly to loss recorded positive in the previous year.
during the year.
Investments Results at a Glance

During this year the Company has invested USD Cumulative
2.52 Mn in plant and machineries. 2010/2011
up to 2009/2010
1st 2nd 3rd 4th
USD'000 Qtr. Qtr. Qtr. Qtr.
Turnover 13,690 32,820 46,124 58,322 50,057
Gross profit 2,155 5,735 6,432 7,469 10,296
Profit before
tax (199) 322 (5,235) (7,290) 3,270
Shareholders
fund 24,329 24,832 19,260 15,811 23,556
2007 2008 2009 2010 2011

Annual Report 2011
Corporate Social Responsibility
Hayleys MGT Knitting Mills PLC. treats Corporate Social Responsibility as an integral part of the business and believes that
it is much more than corporate philanthropy which in most cases are a show case for the companys social activities.
Community Relations
The Company actively promotes employment within
the neighboring villages to transfer the benets
directly to the community. The Company has
outsourced its transport, janitorial and other
services in a way that it oers more opportunities,
for the neighboring community in terms of indirect
employment and to earn a supplementary income.
The highlight for the year is the purchase of saw
dust for its energy requirement for the Mass boiler,
which amounted to Rs.64 million.
During this nancial year too the Company success- The company awarded another scholarship to a
fully conducted a workshop on "Positive Thinking & student studying in Grade 8 at Thebuwana M. V. Rs
Soft Skills Development for People Leadership" for 2,500 is paid monthly from March 2011 onwards till
the benet of the medical sta of Base Hospital, she nishes her G.C.E. (O/L) examination and the total
Horana on 8th and 29th July 2010 at the Hospital commitment is Rs. 115,000. All together 11 students
premises. 94 nurses and matrons attended the become beneciaries from this scholarship programme
workshop. The program which was highly appreci- and the total commitment is Rs 1.9 million.
ated by the participants was conducted by General
Manager - HR. A sum of approximately Rs 0.7 million was
spent in sponsoring educational, religious and social
events in the form of cash donations to temples, schools
and other NGO's in the area during this nancial year.
Company distributed dry rations and other essentials to

the neighboring people eected by oods.
For the fourth time a blood donation campaign was

organized on 28th July 2010 at our company premises.
More than 100 employees donated blood for this
worthy cause and the event was initiated and organized
by the employees themselves.

Corporate Social Responsibility
Environment Employee Relations
Being an ISO 14001 and SA 8000 certied company we The Company believes that its strength is in its people
have voluntarily consented to care for our environment. and their contribution is the key factor to its growth.
The company has made considerable investment in
improving euent treatment capabilities over the The company awarded gold coins to long standing
years and have now invested on environment friendly employees in appreciation and recognition of their loyal
dyeing machines which emits less waste to the waste and dedicated service of over 10 years to the company.
water treatment plant and utilizes less processed water.
In the month of December 2010 an annual get- together of
The Company recycles all of its waste including employees and their families was successfully held at
polythene through the small entrepreneurs having White Haven Hotel, Panadura. The event was organized
recycling facilities and there by providing them and a by the employees themselves (self manage work
few other people indirect employment. groups) with the guidance of the management.
Commissioning of the biomass boiler has signicantly

reduced the consumption of furnace oil and has created
environmental friendly method for the industry to dispose
saw dust and paddy husk. Biomass boiler generates 25
ton/hr of steam energy from saw dust and paddy husk.
This has contributed to a reduction of harmful gasses (e.g.
Methane) being emitted from dumping grounds. Shutting
down of the furnace oil boilers has resulted in reduction
of sulphur & nitrogen emission to the atmosphere.
Vehicle mileage has been rearranged to minimise the

distances travelled within a month to reduce amount of
fuel usage by the facility.
In January 2011, the Company started a canteen for the
Biodegradable waste is disposed of via a licensed benet of employees which was well appreciated by all
contractor in a timely manner to prevent any anaerobic employees.
decomposition of organic matter.
We are the rst Sri Lankan company to receive Post

Kyoto Protocol funding on carbon credits, amounting to
25,000 tons of CO2 per annum.
The following Energy saving measures were adopted

during the year.
Usage of CFL bulbs in all oces.
Initiating team supply line modications, to
optimize the Steam Distribution system.
Hot water recovery system and processed
Water/ Energy recovery system.
Introducing day light harvesting: Translucent
roong sheets have been installedin the factory
oor areas resulting in saving of electricity used
for lighting during the day time.
Use of LCD Display Units: While promoting
good health practices, the Company has initiated
replacing CRT displays in the oces with
energy saving compliant LCD units. This has
resulted in reducing direct and indirect energy
consumption in the oce.

Annual Report 2011
Corporate Governance
Introduction
Corporate Governance is the application of best Hayleys MGT Knitting Mills PLC is in the business
management practices, compliance of laws, rules, of manufacturing of knitted fabric.
regulation and adherence to standards to achieve the
objects of the Company, enhance shareholder Our Governance Guidelines provide Directors and
value and discharge of social responsibility. The management with a road map of their respective
Corporate Governance Structure in the Company responsibilities. These guidelines, which will be
assigns responsibility and authority to Board of updated periodically, detail clearly those matters
Directors, its committees and the executive requiring Board and Committee approval, advice or
management, senior management, employees etc. review. Our Governance Framework is depicted in the
following diagram.
We set out below the Corporate Governance

Companys Philosophy on Code of Corporate Practices adopted and practiced by the
Governance Company against the background of the Code of
Hayleys MGT Knitting Mills PLC continues to be Best Practice on Corporate Governance issued
committed to conducting the Companys business by the Institute of Chartered Accountants of Sri
ethically and in accordance with high standards of Lanka and the Rules set out in Section 7.10 of
good governance. the Colombo Stock Exchanges Listing Rules.

Corporate Governance principle Compliance
The Board of Directors In the year under review, the Board consisted of 7 Directors. Names of
the Directors and their prole are given on page 05. The Board
consisted of four Non-Executive Directors of which 02 are
independent. The Board meets quarterly as a matter of routine.
None of the Directors are related and each of the Directors are able
to express their views independently and objectively.
Board Meetings Board Meetings were held six times during the nancial year and was
presided over by the Chairman.
The Attendance by each of the Directors is given below.
Name of Director Attendance

A.M. Pandithage 6/6
S.C. Ganegoda 6/6
S. Spezza 5/6
D.B.Weerasinghe-(Tendered resignation on 8/11/2010) 3/3
M.C.D Amalean* (Alternate Mr. S.D.Amalean) 6/6
H.R.Peris** 4/6
R. Seevaratnam** 6/6
K.D.D.Perera* 3/6
* Non-Executive
**Independent Non-Executive
Responsibilities of the Board Enhance shareholder value.
Ensure all stakeholder interest are considered in corporate decisions
Formulate and communicate business policy and strategy to assure

sustained growth, and monitor its implementation.
Approve any change in the Companys business portfolio and sanction

major investments and disinvestments in accordance with parameters
set.
Ensure Executive Directors have the skills/ knowledge to implement

strategy eectively, with proper succession arrangements in place.
Ensure eective remuneration, reward and recognition policies are in

place to ensure employee commitment and motivation.
Set and communicate values/ standards, with adequate attention

being paid to accounting policies and practices.
Ensure eective information, control, risk management and audit

systems are in place.

Annual Report 2011
Financial Highlights 2011
Ensure compliance with established laws and ethical standards.
Approve annual budgets and monitor performance against these.
Adopt annual and interim results before these are published.
Inter alia, Directors Must bring independent judgment to bear and consider foremost the
interests of the Company as a whole.
Must stay abreast of developments in management practice, the

global and domestic economic developments and other matters
relevant to the Company
May convey concerns to the Chairman, or if that is not appropriate to

a Non- Executive Director, if and when a need arises.
May, where necessary and with the concurrence of the Chairman

consult and consider inputs from experts in relevant areas.
Should declare their interests in contracts under discussion at a Board
meeting, and refrain from participating in such discussion.
Possessing price- sensitive information concerning the company

should not trade in the Companys shares until such information has
been adequately disseminated in the market.
Company Secretary The services and advice of the Company Secretary are made available
to Directors as necessary. The Company Secretary keeps the Board
informed of new laws, regulations and requirements coming into
eect which are relevant to them as individual Directors and
collectively to the Board. All Directors have access to the Company
Secretary.
Chairmans Role The Chairman is as an outstanding business leader, provides

leadership to the Board, controls and preserves order at Board
meeting and provides the Board with strategic direction and guidance
in managing the aairs of the Company. The Chairman is responsible
for the ecient conduct of Board meetings. The Chairman maintains
close contact with all Directors, and holds informal meetings with
Non-Executive Directors as and when necessary.
The Chairman ensures that shareholders are given adequate

opportunity to raise relevant questions and seek clarications at
meetings of shareholders.

Board Balance The composition of the Executive and Non- Executive Directors (the
latter are over one third of the total number of Directors) satises the
requirements laid down in the Listing Rules of the Colombo Stock
Exchange. The Board has determined that two Non -Executive Directors
satisfy the criteria for independence set out in the Listing Rules. The
Board believes the independence of Mr. H.R.Peries is not
compromised by the shareholding of Equity Investment Lanka Limited
in the Company in which he serves as a Director.
Non-Executive Directors proles reect their caliber and the weight

their views carry in Board deliberations. Each is independent of
management and free from any relationship that can interfere with
independent judgment. The balance of Executive, Non-Executive and
Independent Non-Executive Directors on the Board ensures that no
individual Director or small group of Directors dominates board
discussion and decision making.
The Chairman of the Company is also the Chairman of Hayleys PLC.

The distinction between the position of the Chairman and
ocers wielding executive powers in the Company ensures the
balance of power and authority.
Financial Acumen The Board includes two senior Chartered Accountants, who possess
the necessary knowledge and competence to oer the Board guidance
on matters of nance. One of them serves as Chairman of the Audit
Committee. These Directors add substantial value and independent
judgment on the decision making of the Board on matters concerning
nance and investment.
Supply of Information The Company has an organized and eective management

information management system in place, which includes a
comprehensive annual budget with key performance indicators both
nancial and operational which are reviewed monthly and quarterly.
The Board Members are circulated with appropriate documents in a
timely and ecient manner. Board papers contain nancial and
operational reports of the Company, updates on the business and
industry scenario locally, regionally and internationally, business
opportunities, risks and other matter requiring decision. Any
additional information requested by the Board Members are
presented accurately and promptly to the Board.

Annual Report 2011
Appointments to the Board A formal and transparent procedure is adopted for the appointment of
Directors to the Board.
Upon the appointment of a new Director to the Board, the Company

informs the Colombo Stock Exchange with a brief resume of such
Director containing the nature of his expertise, other Directorships
held, memberships in Board Committees and whether the Director is
Independent.
The Directors are elected by the shareholders of the Company in
terms of the Articles of Association. The Articles of Association of the
Company empowers the Board of Directors to either ll a casual
vacancy in the directorate or to appoint additional Directors. Directors
so appointed hold oce until the next Annual General Meeting at
which they are eligible for re-election.
Re-Elections of Directors The provisions of the Companys Articles require a Director appointed
by the Board to hold oce until the next Annual General Meeting, and
seek re-appointment by the shareholders at that meeting.
The Articles call for one third of the Directors in oce to retire at each
Annual General Meeting. The Directors who retire are those who have
served for the longest period after their appointment /re -
appointment. Retiring Directors are generally eligible for re-election.
Directors Remuneration
The Remuneration Committee The Remuneration Committee consists of:
Chairman: M.C.D.Amalean
M.C.D.Amalean - Non- Executive Director

H.R.Peris - Independent Non- Executive Director
R.Seevaratnam - Independent Non-Executive Director
Remuneration Procedure The composition of the Remuneration Committee satises the

requirements laid down in the Listing Rules of the Colombo Stock
Exchange.
Committee recommends the remuneration of Executive Directors and

sets guidelines for the remuneration of the management sta within
the Company. The Committee is chaired by one of the Non-Executive
Directors, Mr. M.C.D.Amalean.

Disclosure of Remuneration The Annual Report of the Directors is in Note 07 and 25 of the
Financial Statements sets out the aggregate remuneration and fees
paid to Executive Directors of the Company.
Relations with Shareholders
Constructive use of the

Annual General Meeting The Notice of Meeting is included in the Annual Report. The Notice
contains the agenda for the AGM as well as instructions on voting for
shareholders, including appointment of proxies.
Shareholders who are not in a position to attend the Annual General

Meeting in person are entitled to have their right to vote and speak,
exercised by a proxy of their choice.
A Form of Proxy is enclosed with the Annual Report. The period of

notice prescribed by the Companies Act No 7 of 2007 has been met.
The active participation of shareholders at the Annual General

Meeting is encouraged. The Board believes the AGM is a means of
continuing eective dialogue with shareholders.
The external auditors and the Companys lawyers are invited to attend
the Annual General Meeting and render any professional assistance
that may be requested.
The Board oers clarications and responds to concerns shareholders

have over the content of the Annual Report as well as other matters
which may be of importance to them. The AGM is also used to adopt
the Financial Statements for the year.
Major Transactions There have been no transactions during the year under review which
fall within the denition of Major Transactions in terms of the
Companies Act.
Communication with Shareholders Shareholders are provided with Quarterly Financial Statements and
the Annual Report, which the company considers as its principal
communication with them and other stakeholders. These reports are
also provided to the Colombo Stock Exchange.
Shareholders may bring up concerns they have, either with the

Managing Director or the Groups Secretarial Department as
appropriate.

Annual Report 2011
Price Sensitive Information Due care is exercised with respect to share price sensitive information.
Accountability and Audit
Financial Reporting The Board places great emphasis on complete disclosure of nancial
and non nancial information within the bounds of commercial reality,
and on the adoption of sound reporting practices. Financial
information is disclosed in accordance with the Sri Lanka Accounting
Standards and the Companies Act No 7 of 2007. The Company has duly
complied with all the requirements prescribed by the regulatory
authorities including the Colombo Stock Exchange and the Registrar of
Companies. Revisions to existing accounting standards and adoption
of new standards are carefully monitored.
The Annual Report includes non nancial content through which an

attempt is made to provide stakeholders with information to assist
them make more informed decisions.
The Statement of Directors Responsibilities for the Financial

Statements is given in page 27 of this report.
The Annual Report of the Directors and

the Statement by the Audits The Annual Report of the Directors is on pages 22 to 25 of the Annual
Report. The Independent Auditors Report on the Financial Statement
for the year ended 31st March 2011 is presented on page 30 of this
Annual Report.
Management Report The nancial review (pages 06 to 08) in this report provides an analysis
of the Companys performance during the nancial year.
Chairmans Review (pages 03 to 04) in this report provides briey the

performance, key initiative during the year and future outlook.
Going Concern The Directors, after making necessary inquiries and reviews including
reviews of the Company budget for the ensuing year, capital
expenditure requirements, future prospects and risks, cash ows and
borrowing facilities, have a reasonable expectation that the Company
has adequate resources to continue in operational existence for the
foreseeable future. Therefore the going concern basis has been
adopted in the preparation of the Financial Statements.
Internal Control The Board is responsible for the Companys system of internal
nancial controls and its eectiveness. The system is designed to

safeguard assets against unauthorised use or disposition and to ensure

that accurate records are maintained and reliable nancial
information is generated. However, there are limits to which any
system can ensure that errors and irregularities are prevented or
detected within a reasonable period.
The Management Audit & System Review Department of Hayleys PLC

assess the eectiveness and successful implementation of existing
controls and makes recommendations on both measures required for
strengthening these and on new controls where necessary.
The Company also obtains the services of independent professional

accounting rms other than the statutory auditors to carry out
internal audits and reviews.
The Company also obtains the services of independent professional

accounting rms other than the statutory auditors to carry out
internal audits and reviews to supplement the work done by the
Groups Management Audit & System Review Department.
The Board has reviewed the eectiveness of the system of nancial

control for the period up to the date of signing the accounts.
Audit Committee The Company constituted its own Audit Committee in 2007. The
Committee consists entirely of Non- Executive Directors and is chaired
by Mr. R Seevaratnam. Deputy Chaiman & General Manager-Finance
of the Company are invited to attend meetings. The input of External
Auditors is obtained where necessary.
The Audit Committee has written terms of reference and is

empowered to examine any matters relating to the nancial aairs of
the Company and its internal and external audits.
The Committee reviewed the Financial Statements, internal control

procedures, accounting policies, compliance with accounting
standards, emerging accounting issues and other related functions
that the Board required. It also reviews the adequacy of systems for
compliance with the relevant legal, regulatory and ethical
requirements. Signicant issues discussed by the Committee at the
reviews were communicated to the Board of Directors for their
consideration and action.
The Audit Committee helps the Company achieve a balance between

conformance and performance.

Annual Report 2011
The Audit Committee consists of:
Chairman: R.Seevaratnam
R.Seevaratnam Independent Non- Executive Director

H.R.Peries Independent Non- Executive Director
K.D.D.Perera Non- Executive Director
The Audit Committee recommends the appoinment and

fees of the External Auditors, having considered their
independence and performance.
The Audit Committee Report appears on pages 28 to 29 of this report.
Maintaining appropriate Relationship

With the External Auditors The Audit Committee has a responsibility to evaluate the performance
of the External Auditors and make its recommendation to the Board of
Directors on their re appointment or removal which is subject to the
approval of the shareholders at the Annual General Meeting.

Levels of compliance with the CSEs new listing rules section 7.10. Rules on Corporate Governance are given in
the following table.
Rule No. Subject Applicable requirement Compliance Details

Status
7.10(a) Non-Executive Directors At least one third of the total number of Compliant Four of Seven Directors
Directors should be Non-Executive are Non-Executive
Directors Directors
7.10.2(a) Independent Directors Two or one third of Non-Executive Compliant Two of the Four Non-
Directors, whichever is higher should be Executive Directors are
Independent Independent
7.10.2(b) Independent Directors Each Non-Executive Director should Compliant Non-Executive
submit a declaration of independence/ Directors have
non-independence in the prescribed submitted the
format. declaration.
7.10.3(a) Disclosure relating to Names of independent Directors should Compliant Please refer page 12
Directors be disclosed in the Annual Report
7.10.3(b) Disclosure relating to The basis for Board to determine a Compliant Given in page 14 under
Directors Director as independent, If specied the heading of Board
criteria for independence is not met. Balance
7.10.3(c) Disclosure relating to A brief resume of each Director should Compliant Please refer page 05
Directors be included in the Annual Report
including the areas of Expertise
7.10.3(d) Disclosure relating to Forthwith provide a brief resume of Compliant A brief resume
Directors new Directors appointed to the Board provided to the
with details specied in7.10.3 to the Exchange
Exchange
7.10.5 Remuneration Committee A listed company shall have a Compliant Please refer page 15 of
Remuneration Committee this Report
7.10.5(a) Composition of Shall comprise of Non-Executive Compliant Remuneration

Remuneration Committee Directors a majority of whom will be committee consists of
independent three Non Executive
Directors, two of
whom are
independent
7.10.5(b) Functions of The Remuneration Committee shall Compliant Please refer the
Remuneration Committee recommend the remuneration of Chief Remuneration
Executive Ocer and Executive Procedure in page 15
Directors of this Report

Annual Report 2011
7.10.5(c) Disclosure in the Annual The Annual Report should set out;
Report relating to a) Names of directors comprising the
Remuneration Committee Remuneration Committee Compliant Please refer the page
b) Statement of Remuneration Policy 15
c) Aggregated remuneration paid to Compliant Please refer the page
Executive & Non-Executive Directors 40
Compliant
7.10.6 Audit Committee The company shall have a Audit Compliant Names of the members
Committee of the Audit
Committee are stated
on page 19
7.10.6(a) Composition of Audit Shall comprise of Non-Executive Compliant Audit Committee
Committee Directors a majority of whom will be consists of
independent Independent Non-
Executive Directors
A Non-Executive Director shall be Compliant Chairman of the Audit
appointed as the Chairman of the Committee is an
committee Independent Non-
Executive Director
Managing Director and the Chief Compliant Chief Executive Ocer
Financial Ocer should attend Audit and Chief Financial
Committee Meetings. Ocer attend by
invitation
The Chairman of the Audit Committee Compliant Chairman of the Audit
or one member should be a member of Committee is a
a professional accounting body Chartered Accountant.
7.10.6(b) Audit Committee Should be as outlined in the Section Compliant The terms of reference
Functions 7.10.6 (b) of the listing rules of the Audit
Committee agreed by
the Board
7.10.6(c) Disclosure in the Annual a) Names of Directors comprising the Compliant Please refer page 19
Report relating to Audit Audit Committee
Committee b)The Audit Committee shall make a
determination of the independence of Compliant Please refer Audit
the Auditors and disclose the for such Committee Report on
determination page 28
c)The Annual Report shall contain a
Report of the Audit Committee setting Compliant Please refer Audit
out of the manner of Compliance of the Committee Report on
functions page 28

Annual Report of the Board of Directors on
the aairs of the Company
The Board of Directors of Hayleys MGT Knitting Mills Directors Interests in Transactions
PLC have pleasure in presenting their Report on the The Directors of the Company have made the
aairs of the Company together with the audited general disclosures provided for in Section 192(2) of
Financial Statements for the year ended 31st March, the Companies Act No.7 of 2007. Note 25 to the
2011. Financial Satements dealing with related party
disclosures includes details of their interests in
The details set out herein provide the pertinent transactions.
information required by the Companies Act No.7 of
2007, the Colombo Stock Exchange Listing Rules and
are guided by recommended best accounting Directors Interests in Shares
practices. Directors of the Company who have relevant
interests in the shares of the Company have
disclosed their shareholdings in compliance with
PRINCIPAL ACTIVITIES & BUSINESS REVIEW Section 200 of the Companies Act.
The principal activity of the Company is
manufacturing knitted fabric. A review of Company Details of Directors shareholdings in the Company
performance during the year with brief comments are given later in this report.
on the nancial results and prospects is contained in
the Chairmans Review of this Annual Report. These There were no changes to the Directors
reports together with the nancial statements shareholding other than the following:
reect the state of aairs of the Company. Mr. D.B. Weerasinghe who tendered his resignation on
8th November 2010 held 157,311 non voting class B
The Directors, to the best of their knowledge and shares.
belief, conrm that the company has not engaged in
any activities that contravene laws and regulations.
Directors Remuneration
Executive Directors remuneration is established
FINANCIAL STATEMENTS within an established framework. The total
The Financial Statements of the company are given remuneration of Executive Directors for the year
st
on pages 31 to 46 ended 31 March 2011 is USD 201,016. (USD
254,400), which includes the value of perquisites
granted to them as part of their terms of service. The
total remuneration of Non Executive Directors for
AUDITORS REPORT the year ended 31st March 2011 is USD 4,784 (USD
The Auditors report on the Financial Statements is 4,664) determined according to scales of payment
given on page 30 decided upon by the Board. The Board is satised
that the payment of this remuneration is fair to the
Company.
ACCOUNTING POLICIES
The accounting policies adopted in the preparation Insurance and indemnity
of Financial Statements are given on pages 35 to 39. A Corporate Guard has been obtained from Chartis
There were no changes in the accounting policies Insurance Limited to indemnify all past, present and
adopted. future Directors and Ocers (D & O) of the
Company.
INTERESTS REGISTRER
The Company, in compliance with the Companies Policy No. P/233108/2006/1
Act No.7 of 2007, maintains an Interests Register. Limit of Liability US$ 5,000,000
Particulars of entries in the Interests Register are Policy Premium US$ 4,184
detailed below. Coverage Worldwide(Excluding USA/Canada)
Period 01/06/2010 to 31/05/2011

Annual Report 2011
DIRECTORS SHAREHOLDINGS Special Notice has been given pursuant to Section
Direct Holdings 211 of the Companies Act No.7 of 2007 (the Act) of
Name of Director As at As at the intention to propose ordinary resolution for re-
31/03/11 01/04/10 election of Mr. S. Spezza notwithstanding the age
Mr.S. Spezza* 171,930 171,930 limit of 70 years stipulated by Section 210 of the
Mr.K.D.D. Perera** 1,000 1,000 Companies Act.
Indirect Holdings AUDITORS

* Mr. S. Spezza holds 100% of Shantoro The Financial Statements for the year have been
Proprietary Ltd, Australia, which has audited by Messrs KPMG Ford, Rhodes, Thorntaon
1,170,848 shares in Hayleys MGT Knitting & Company.
Mills PLC .He also holds 170,930 shares
through his nominee, P E Paradiso. The Auditors, Messrs. KPMG Ford, Rhodes, Thornton
& Co., was paid USD 10,105 (USD 8,922) as audit
** Mr. K.D.D. Perera holds 25.34% directly of the fees by the Company. In addition, they were paid
total issued shares of Hayleys PLC which has USD 1,408 (USD 346) by the Company for non-audit
28,138,452 shares in Hayleys MGT Knitting related work, which consisted mainly of tax
Mills PLC. consultancy services.
CORPORATE DONATIONS As far as the Directors are aware, the Auditors do

No donations were made to Goverment approved not have any relationships (other than that of an
charities during this year and last year. auditor) with the Company other than those
disclosed above. The Auditors also do not have any
DIRECTORATE interests in the Company.
The names of the directors who held oce at the A resolution proposing Messrs Ernst & Young,
end of the nancial year are given below and their Chartered Accountants to be appointed as
brief proles appear on page 05 Auditors of the Company for the Year 2011/2012
and to authorise the Directors to determine their
A. M.Pandithage (Chairman) remuneration will be submitted at the Annual
S. C. Ganegoda (Deputy Chairman) General Meeting.
S.Spezza (Managing Director)
M.C.D.Amalean* (Alternate Mr.S.D.Amalean)*
H.R.Peiris**(Resigned w.e.f.29/4/2011)
R.Seevaratnam** TURNOVER
K.D.D.Perera* The turnover of the Company was USD 58,322,307
(USD 50,056,501)
*Non-Eexecutive
** Independent Non-Executive
RESULTS AND DIVIDENDS
Mr. D.B.Weerasinghe who served as Joint Managing The Companys loss before tax amounted to USD
Director of the Company tendered his resignation on 7,289,559.(Prot USD 3,270,528) After reversal of
8 November 2010
th
USD 210,963 for taxation (Expense USD 106,901) net
loss for the year was USD 7,078,596 (Prot USD
Mr. H.R Peiris who served as a Director of the 3,163,627) The Companys prot available for the
Company resigned on 29th April 2011. appropriation, inclusive of brought forward retained
prot of USD 9,393,973 (USD 7,548,895) amounted
Mr. A.M.Pandithage who retires by rotation and to USD 1,649,017.
being eligible oers himself for re-election. The Directors did not recommend any dividends for
the year. (Previous year Rs.2.50 per share).
Mr. M.C.D.Amalean who retires by rotation and
being eligible oers himself for re-election.

INVESTMENT ENVIRONMENTAL PROTECTION
The capital expenditure of the Company on property, The Companys business activities can have direct
plant and equipment during the year under review and indirect eects on the environment. It is the
amounted to USD 2,521,447 (USD 2,047,024). policy of the Company to conduct its activities in an
Information relating to movement in property, plant environmentally responsible manner in order to
and equipment during the year is given in note 11 to keep adverse eects to a minimum and to ensure
the Financial Statements. compliance with the relevant regulations.
STATED CAPITAL AND RESERVES

The issued and paid up stated capital of the CORPORATE GOVERNANCE/ INTERNAL
Company is USD 6,534,102 (50,781,106 shares). CONTROL
There was no change in stated capital during the Adoption of good governance practices has become
year. Total Company reserves as at 31st March 2011 and essential requirement in todays corporate
amounted to USD 9,276,862 (USD 17,021,818) culture. The Company has complied with the
comprising capital reserve of USD 7,331,976 (USD Corporate Governance rules laid down by the
7,331,976) and revenue reserve of USD 1,944,886 Colombo Stock Exchange. The practices carried out
(USD 9,689,842). Movements are shown in the by the Company is explained in the Corporate
Statement of Changes in Equity in the Financial Governance statement on pages 11 to 21..
Statements.
The Directors acknowledge their responsibility for
the Companys system of internal control. The system
TAXATION is designed to give assurance, interalia, regarding the
The Company has not provided income tax payable safeguarding of assets, the maintenance of proper
for the year since it enjoys a tax holiday period accounting records and the reliability of nancial
under BOI law for 15 years till 31st March 2011. information generated. However, any system can
However the eect of deferred tax has been taken in only ensure reasonable and not absolute assurance
retrospectively by restating the Financial Statements. that errors and irregularities are either prevented or
Net eect of reversal of temporary dierences and detected within a reasonable time period.
Economic Service Charge (ESC) paid USD 210,963.
(Expense USD 106,901). The Board, having reviewed the system of internal
controls, is satised with its eectiveness for the
period up to the date of signing the Financial
SHARE INFORMATION Statements.
Information relating to earnings, dividend, net assets
per share and share trading is given on pages 31 and GOING CONCERN
50. The Directors, after making necessary inquiries and
reviews including reviews of the Companys budget for
the ensuing year, capital expenditure requirements,
EVENTS OCCURING AFTER THE BALANCE future prospects and risks, cash ows and borrowing
SHEET DATE facilities, have a reasonable expectation that the
No circumstances have arisen since the Balance Company has adequate resources to continue
Sheet date that would require adjustment to or in operational existence for the foreseeable
other disclosure in the Financial Statements. future. Therefore the going concern basis has been
adopted in the preparation of the Financial
Statement.
STATUTORY PAYMENTS
The Directors, to the best of their knowledge and
belief are satised that all statutory payments due in
relation to employees and the Government have
been made promptly and are up to date.

Annual Report 2011
MAJOR SHAREHOLDING
The twenty major shareholders and the percentages held by each are;
No. of Shares No. of Shares
Name of Shareholder As at 31/03/11 % As at 31/03/10 %
Hayleys PLC 28,138,452 57.22 28,138,452 57.22
Employees Provident Fund 4,063,200 8.26 3,904,400 7.94
MAS Holdings (Pvt) Limited 3,011,364 6.12 3,011,364 6.12
Equity Investments Lanka Limited 2,637,364 5.36 3,012,364 6.13
Hayleys Advantis Limited 1,231,230 2.50 1,231,230 2.50
Shantiro Proprietary Limited 1,170,848 2.38 1,170,848 2.38
Haychem (Private) Limited 848,774 1.73 848,774 1.73
Freudenberg Shipping Agencies Limited 600,000 1.22 600,000 1.22
Pan Asia Banking Corporation PLC/Mr.C.N.Rajahmoney 494,700 1.01 -
National Savings Bank 460,900 0.94 -
Dee Investments (Pvt) Ltd 348,600 0.71 -
South Asian Investment (Pvt) Limited 299,300 0.61 299,300 0.61
David Pieris Motor Company Limited 256,400 0.52 -
Mr.B.C.Tay 201,000 0.41 -
Waldock Mackenzie Limited/Mr.L.P.Hapangama 200,000 0.41 -
Mr.P.E.Paradiso 171,930 0.35 171,930 0.35
Mr.S.Spezza 171,930 0.35 171,930 0.35
Seylan Bank PLC - A/C No.3 168,500 0.34 -
Commercial Bank of Ceylon PLC/K.Fernando 152,500 0.31 -

Mr.C.T.M.Pathirana 118,900 0.24 -
Total 44,745,892 90.99 42,560,592 86.55
As at 31st March 2011 there were 1,207 ( 1,170) registered shareholders. The percentage of shares held
by public as per the Colombo Stock Exchange Rules at 31st March 2011 was 35.47% (35.47%).
ANNUAL GENERAL MEETING

The Annual General Meeting will be held at the Registered Oce of the Company, No.400, Deans Road,
Colombo 10 at 10:30 a.m. on 23rd June 2011. The Notice of the Annual General Meeting appears on
page 51.
For and on behalf of the Board
A.M. Pandithage S.C.Ganegoda

Chairman Deputy Chairman
Hayleys Group Services (Pvt) Ltd

Secretaries
th
11 May 2011

Financial Calendar
Ist Quarter Report 2nd August 2010
2nd Quarter Report 3rd November 2010
3rd Quarter Report 1st February 2011
Annual Report 2010/11 30th May 2011
19th Annual General Meeting 23rd June 2011
Financial Reports
Statement of Directors Responsibilities 27
Audit Committee Report 28
Independent Auditors Report 30
Income Statements 31
Balance Sheets 32
Statement of Changes in Equity 33
Cash Flow Statements 34
Notes to the Financial Statement 35

Annual Report 2011
Statement of Directors Responsibilities
The Directors are responsible, under section 150 (1), The external Auditors, Messrs KPMG Ford Rhodes,
151 of the Companies Act No. 7 of 2007, to ensure Thornton & Co., were deemed re- appointed in terms
compliance with the requirements set out therein to of Section 158 of the Companies Act No. 7 of 2007 and
prepare Financial Statements for each nancial year were provided with every opportunity to undertake
giving a true and fair view of the state of aairs of the inspections they considered appropriate to
the Company as at the end of the nancial year and enable them from their opinion on the Financial
of the Prot & Loss of the Company for the nancial Statements. The report of the Auditors, shown on
year. The Directors are also responsible, under page 30. Sets out their responsibilities in relation to
section 148 for ensuring that proper accounting the Financial Statement.
records are kept to disclose, with reasonable
accuracy, the nancial position and enable Compliance Report
preparation of the Financial Statements. The Directors conrm that to the best of their
knowledge, duties and levies payable by the
The Board accepts responsibility for the integrity and Company, all contributions, level and taxes payable
objectivity of the Financial Statements presented. on behalf of and respect of the employees of the
The Directors conrm that in preparing the Financial Company and all other known statutory dues as
Statements, appropriate accounting policies have were due and payable by the Company as at the
been selected and applied consistently while Balance Sheet date have been paid or where
reasonable and prudent judgments have been made relevant, provided for.
so that the form and substance of transactions are
properly reected. By order of the Board
They also conrm that the Financial Statements have
been prepared and presented in accordance with
the Sri Lanka Accounting Standards. The Financial
HAYLEYS GROUP SERVICES (PVT) LTD
Statements provide the information required by the
Secretaries
Companies Act and the listing rules of the Colombo
Stock Exchange.
11th May 2011
The Directors have taken reasonable measures to
safeguard the assets of the Company and, in that
context, have instituted appropriate systems of
internal control with a view to preventing and
detecting fraud and other irregularities.
The Directors are also required to ensure that the

Company has adequate resources to continue in
operation to justify applying the going concern basis
in preparing these Financial Statement.
The Directors have provided the Auditors with every

opportunity to carry out any reviews and tests that
they consider appropriate and necessary for the
performance of their responsibilities.

Audit Committee Report
TERMS OF REFERENCE, PRINCIPAL FOCUS AND
MEDIUM OF REPORTING appropriate. The proceedings of the Audit
Committee are regularly reported to the Board of
The responsibilities of the Committee ow from the Directors, and the minutes of the meetings are made
Audit Committee Charter approved and adopted by available to the Audit Committee of Hayleys PLC.
the Board. The terms of reference comply with and
go beyond the requirements of the Listing Rules of ACTIVITIES
the Colombo Stock Exchange (CSE). The Committee carried out the following activities
during the year.
ROLE OF THE AUDIT COMMITTEE
The principal focus of the Committee was to provide The Committee reviewed the nancial reporting
assistance to the Board of Directors of the Company system adopted by the Company in the
in fullling their oversight responsibility to the preparation of its quarterly and annual Financial
Shareholders, potential shareholders, the Statements to ensure reliability of the process
investment community and other stakeholders and consistency of the accounting policies and
relating to: methods adopted and their compliance with the
The integrity of the Companys and Financial Sri Lanka Accounting Standards. The
Statements methodology included obtaining statements of
The eectiveness of the Companys internal compliance from the Deputy
controls over nancial reporting Chairman/Managing Director and the Head of
The Companys compliance with legal and Finance. The Committee recommended the
regulatory requirements Financial Statements to the Board for its
deliberations and issuance. The Committee, in
COMPOSITION AND ROLE its evaluation of the nancial reporting system,
The Audit Committee, appointed and responsible to also recognized the adequacy of the content
the Board of Directors, comprises two Non-Executive and quality of routine management information
Directors. Deputy Chairman and the General report forwarded to it members.
Manager-Finance of the Company attend meetings The Committee reviewed the process to assess
of the Committee by invitation. The Chairman of the the eectiveness of the internal nancial
Audit Committee is a senior Chartered Accountant. controls that have been designed to provide
reasonable assurance to the Directors that
Mr. R. Seevaratnam has been Chairman of the Audit assets are safeguarded and that the nancial
Committee throughout the year. Mr. H.R. Peries has reporting system can be relied upon in
been the other member of the audit Committee preparation and presentation of the Financial
during the year. Mr.K.D.D.Perera was appointed to Statements.
the Committee during the year. During the year it was discovered that the Board
of Directors had been mislead on the
MEETINGS performances of the Company. An investigation
Four meetings of the Committee were held during was carried out by two rms of independent
the year. The attendance of the members at these Chartered Accountants who carried out a
meetings is as follows: physical verication of the inventory and a
verication of receivables. These verications
Mr. R. Seevaratnam (Chairman) 4/4 revealed the following;
Mr. H.R. Peries 3/4
Mr.K.D.D.Perera 2/2 I. There were discrepancies between the
value of physical balances of
Other members of the Board and the external inventories and that of the Financial
auditors were present at discussions where this was Statements.

Annual Report 2011
Audit Committee Report
II. Net realizable value of certain The Committee reviewed reports tabled by the
inventories was lower than that of company certifying its compliance with relevant
weighted average cost. revenue regulations.
III. Trade receivables were overstated as The Committee met the External Auditors after
some credit notes due had not been the completion of the audit to discuss their
recorded. ndings and that the meeting will be held with
IV. The total impact of the above on the them to plan the audit.
Financial Statements for the year ended The Committee held meetings to review Audit
31st March 2011 was US$ 2,967,428 for Management Letters of the Company. Actions
receivables and US$ 3,536,718 for taken by the management in response to the
inventories which has been provided issues raised, as well as the eectiveness of the
for in full in the Financial Statements internal controls in place, were discussed with
as at 31st March 2011. the Deputy Chairman. Remedial action was
V. A forensic audit was carried out and recommended wherever necessary.
completed .The ndings warranted a The Committee reviewed the nature and value
criminal investigation by the relevant of non-audit work the External Auditors had
authorities, which is being carried out. undertaken, to ensure that it did not
compromise their independence.
The Audit Committee has recommended to the

Board of Directors that Messrs Ernst & Young,
Chartered Accountants, be appointed as Auditors for
the nancial year ending March 31, 2012.
R. Seevaratnam
Chairman
Audit Committee
th
11 May 2011

INDEPENDENT AUDITORS REPORT
TO THE SHAREHOLDERS OF HAYLES MGT KNITTING MILLS PLC
Report on the Financial Statements
We have audited the accompanying financial statements of Hayles MGT Knitting Mills PLC, as at31st
March 2011 which comprises the balance sheet as at 31st March 2011, and the income statement,
statement of changes in equity and cash flow statement for the year then ended, and notes to the financial
statements set out on pages 31 to 46.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing
and maintaining internal control relevant to the preparation and fair presentation of financial statements
that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance whether the financial statements are free from
material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting policies used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
We have obtained all the information and explanations which to the best of our knowledge and belief
were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable
basis for our opinion.
Opinion
In our opinion, so far as appears from our examination, the Company maintained proper accounting
records for the year ended 31st March 2011 and the financial statements give a true and fair view of the
Companys state of affairs as at 31st March 2011 and its loss and cash flows for the year then ended in
accordance with Sri Lanka Accounting Standards.
Report on Other Legal and Regulatory Requirements
These financial statements also comply with the requirements of Section 151(2) of the Companies Act
No. 07 of 2007.
Chartered Accountants
11th May 2011
Colombo

Annual Report 2011
Income Statements
For the year ended 31st March 2011 2010
Notes USD USD
Restated
Revenue 58,322,307 50,056,501
Cost of sales (50,853,036) (39,760,005)
Gross profit 7,469,271 10,296,496
Other operating income 5 35,793 888
Distribution expenses (2,420,901) (839,412)
Administrative expenses (11,138,012) (4,713,195)
Financing costs 6 (1,235,710) (1,474,249)
Profit/(Loss) before tax 7 (7,289,559) 3,270,528
Income tax (expense) / reversal 8 210,963 (106,901)
Profit/(Loss) for the year (7,078,596) 3,163,627
Earnings/(Loss) per share 9 (0.14) 0.06
Dividend per share 10 - 0.02
Figures in brackets indicate deductions.

Notes from pages 35 to 46 form an integral part of these Financial Statements.

Balance Sheets
As at 31st March 2011 2010
Notes USD USD
Restated
ASSETS
Non-Current Assets
Property, plant & equipment 11 27,230,300 26,737,822
Total Non-Current Assets 27,230,300 26,737,822
Current Assets
Inventories 12 13,204,133 12,245,678
Trade receivables 13 3,736,144 9,433,679
Other receivables & prepayments 14 1,952,746 998,939
Cash and cash equivalents 15 94,197 749,851
Total Current Assets 18,987,220 23,428,147
Total Assets 46,217,520 50,165,969
EQUITY & LIABILITIES

Equity
Stated capital 16 6,534,102 6,534,102
Reserves on amalgamation 6,203,893 6,203,893
Capital reserves 1,128,083 1,128,083
Revenue reserves 1,944,886 9,689,842
Total Equity 15,810,964 23,555,920
Non-Current Liabilities
Interest bearing loans and borrowings 17 1,816,425 1,401,354
Deferred tax liabilities 18 1,382,646 1,653,483
Retirement benefit obligations 19 1,363,011 1,074,307
Total Non-Current Liabilities 4,562,082 4,129,144
Current Liabilities
Trade payables 2,664,569 6,030,358
Current portion of the interest bearing loans & borrowings 17 1,906,324 747,484
Amounts due to Hayleys PLC 79,151 210,890
Other payables and accruals 20 1,211,061 1,278,794
Short term interest bearing borrowings 21 19,983,369 14,213,379
Total Current Liabilities 25,844,474 22,480,905
Total Liabilities 30,406,556 26,610,049
Total Equity and Liabilities 46,217,520 50,165,969

It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies
Act no.7 of 2007.
Dinusha Perera
General Manager -Finance
The Directors are responsible for the preparation and presentation of these Financial Statements.
Signed for and on behalf of the Board,
A.M.Pandithage S.C.Ganegoda
Chairman Deputy Chairman
11th May 2011

Annual Report 2011
Statement of Changes in Equity
For the year ended 31st March,2011
Stated Reserve on Revaluation General Retained Total

capital amalgamation reserve reserve earnings
USD USD USD USD USD USD
Balance as at 1st April,2009 as previously stated 6,534,102 6,203,893 985,352 295,869 9,147,107 23,166,323
Adjustments due to deferred tax (Note 18) (1,598,212) (1,598,212)

Restated balance as at 1st April 2009 6,534,102 6,203,893 985,352 295,869 7,548,895 21,568,111
Gain on revaluation of property plant & equipment 142,731 142,731
Dividends paid - - - - (1,318,549) (1,318,549)
Net profit for the year (Restated) - - - - 3,163,627 3,163,627
Restated balance as at 31st March 2010 6,534,102 6,203,893 1,128,083 295,869 9,393,973 23,555,920
Dividends paid - - - - (666,360) (666,360)
Net loss for the year - - - - (7,078,596) (7,078,596)
Balance as at 31st March 2011 6,534,102 6,203,893 1,128,083 295,869 - 1,649,017 15,810,964
Descriptions of specific reserves are given below

This amalgamation reserve has been arisen as a result of amalgamation of Hayleys ADC Textiles Ltd into Hayleys MGT on 1st of April 2007.
Revaluation reserve relates to the revaluation of Property Plant and Equipment.
General reserve consists of the part of revenue reserve transferred during previous financial periods.


Cash Flow Statements
USD USD
Cash flows from operating activities
Profit/(Loss) before tax (7,289,559) 3,270,528
Adjustments for:
Depreciation on property, plant & equipment 2,028,969 1,914,757
Provision for retiring gratuity 263,939 264,126
Net gain on translation of foreign currency (30,801) (130,058)
Finance costs 1,235,710 1,474,249
Profit on disposal of property, plant & equipment (35,793) (888)
Provision made /(reversed) for bad and doubtful debts 1,356,682 (355,343)
Provision for slow moving inventories (377,844) 122,662
Loss from write-down of inventories 3,970,525 -
Operating profit before working capital changes 1,121,828 6,560,033
(Increase)/Decrease in trade and other receivables 3,387,043 (11,394)
(Increase)/Decrease in inventories (4,551,135) (2,906,123)
Increase/(Decrease) in trade and other payables (3,565,260) 1,541,417
Cash generated from /(used in) operating activities (3,607,524) 5,183,933
Retiring gratuity paid (20,278) (19,486)
Interest paid (1,149,444) (1,329,261)
Economic service charge paid (59,874) (51,630)
Net cash flows from operating activities (4,837,120) 3,783,556
Cash flows from investing activities

Purchase and construction of property, plant & equipment (2,521,447) (2,047,024)
Proceeds from disposal of property, plant & equipment 35,793 888
Net cash flows from investing activities (2,485,654) (2,046,136)
Cash flows from financing activities

Proceeds from new term loans 2,788,311 -
Repayment of term loans (1,224,821) (1,190,095)
Capital payment on finance lease - (60,225)
Dividends paid (666,360) (1,318,549)
Net cash flows from financing activities 897,130 (2,568,869)
Net decrease in cash & cash equivalents (6,425,644) (831,449)

Cash and cash equivalents at beginning of the year (13,463,528) (12,632,079)
Cash and cash equivalents at end of the Period (Note A) (19,889,172) (13,463,528)
Note A
Analysis of cash and cash equivalents
Bank and Cash Balances 94,197 749,851
Short term borrowings (19,983,369) (14,213,379)
(19,889,172) (13,463,528)


Annual Report 2011
Notes to the Financial Statements
Accounting Policies
1. REPORTING ENTITY to a signicant extent in the operations and is useful

1.1 Domicile and legal form to reect the economic substance of the underlying
Hayleys MGT Knitting Mills PLC is a Limited Liability events and circumstances relevant to the enterprise.
Company incorporated and domiciled in Sri Lanka.
2.3.3 Use of Estimates and judgments
The ordinary shares of the Company are listed on the
The preparation of Financial Statements are in
Colombo Stock Exchange. The address of the
conformity with SLASs requires managements to make
Companys registered oce is given on inner back
judgments, estimates and assumptions that aect the
cover.
application of accounting policies and the reported
1.2 Principal activities and nature of operations amounts of assets, liabilities, income and expenses.
The Companys principal activity is manufacturing of Actual results may dier from those estimates and
knitted fabric. judgmental decisions.
1.3 Parent enterprise Estimates and underlying assumptions are reviewed on

Companys ultimate parent company is Hayleys PLC. an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is
1.4 Number of employees revised if the revision aects only that period or in the
Number of Employees engaged by Hayleys MGT periods if revision aects both current and future
Knitting Mills PLC at the end of the year was 917. periods.
(2010- 823).
3. SIGNIFICANT ACCOUNTING POLICIES
2. BASIS OF PREPARATION
The accounting policies set out below have been
The Financial Statements of the Company comprise consistently applied to all the periods presented in
the Balance Sheet, Income Statement, Statement of these Financial Statements.
Changes in Equity and Cash ow Statement together
with the Accounting Policies and Notes to the Certain comparative amounts have been reclassied to
Financial Statements. conform to the current years presentation.
2.1 Statement of compliance The Directors have made an assessment of the

The Financial Statements have been prepared in Companys ability to continue as a going concern in the
accordance with Sri Lanka Accounting and Auditing foreseeable future and they do not foresee a need for
Standards Act No 15 of 1995, which requires liquidation or cessation of trading.
compliance with Sri Lanka Accounting Standards
(SLASs) promulgated by The Institute of Chartered 3.1 FOREIGN CURRENCY TRANSACTIONS
Accountants of Sri Lanka (ICASL), and with the
requirements of Companies Act No 7 of 2007. Transactions in foreign currencies are translated to US
Dollars at the foreign exchange rate ruling at the date
The Financial Statements were authorized for issue of transaction. Monetary assets and liabilities
by the Directors on 11th May, 2011. denominated in foreign currencies at the Balance Sheet
date are translated to US Dollars using the exchange
1.2 Basis of measurement rate ruling at that date. Foreign exchange dierences
The Financial Statements are presented in US Dollars arising on translation are recognized in the Income
(hereafter referred to as the USD). They are Statement
prepared on the historical cost convention. No
adjustment has been made for inationary factors 3.2 ASSETS AND BASES OF THEIR VALUATION
aecting the Financial Statements. The accounting
policies are consistent with those used in the Assets classied as current assets on the Balance Sheet
previous year. are cash and bank balances and those which are
expected to be realized in cash during the normal
2.3 Functional and presentation currency operating cycle or within one year from the Balance
The Company adopted US Dollars as the Sheet date, whichever is shorter.
measurement and reporting currency since it is used

3.2.1 Property, plant & equipment The costs of the day-to-day servicing of property,
plant & equipment are recognised in prot and
3.2.1.1 Freehold assets
as incurred.
Items of property, plant and equipment are
measured at cost (or at fair value in the case of land) 3.2.1.5 Derecognition
less accumulated depreciation and accumulated The carrying amount of an item of property, plant &
impairment loses, if any. The charge for depreciation equipment is derecognised on disposal; or when no
is provided for on the basis specied in paragraph future economic benets are expected from its use.
3.2.1.6. Gains and losses on derecognition are recognised in
prot and loss and gains are not classied as
3.2.1.2 Owned assets revenue.
The cost of property, plant & equipment includes
expenditure that are directly attributable to the 3.2.1.6 Depreciation
acquisition of the asset. The cost of self-constructed Depreciation is recognised in prot and loss on a
assets includes the cost of materials and direct straight-line basis over the estimated useful lives of
labour, any other costs directly attributable to each part of an item of property, plant & equipment.
bringing the asset to a working condition for its Assets held under nance leases are depreciated
intended use, and the costs of dismantling and over the shorter of the lease term and the useful
removing the items and restoring the site on which lives of equivalent owned assets unless it is
they are located. Purchased software that is integral reasonably certain that the Company will have
to the functionality of the related equipment is ownership by the end of the lease term. Freehold
capitalised as a part of that equipment. land is not depreciated.
When parts of an item of property, plant & The estimated useful lives for the current and
equipment have dierent useful lives, they are comparative periods are as follows;
accounted for as separate items (major components)
of property, plant & equipment. Buildings 40 years
Plant & Machinery 15- 20 years
A revaluation of land is done when there is a
Factory & Oce Equipment 6 2/3years
substantial dierence between the fair value and the
carrying amount of the land, and is undertaken by Motor Vehicles 5 years
professionally qualied valuers. Furniture & Fittings 6 2/3years
Increases in the carrying amount on revaluation are
credited to the revaluation reserve in shareholders Depreciation of an asset begins when it is available
equity. Decreases that oset previous increases of for use and ceases at the earlier of the dates on
the same individual asset are charged against which the asset is classied as held for sale or is
revaluation reserve directly in equity. All other derecognized. Depreciation method, useful lives and
decreases are expensed in prot and loss. residual values are reassessed at the reporting date.
3.2.1.3 Leased assets 3.2.2. Current Assets

Leases in terms of which the Company assumes Assets classied as current assets on the Balance Sheet
substantially all the risks and rewards of are cash and bank balances and those which are
ownership are classied as nance leases. Upon expected to be realised in cash during the normal
initial recognition the leased asset is measured at operating cycle or within one year from the reporting
an amount equal to the lower of its fair value and date, whichever is shorter.
the present value of minimum lease payments.
Subsequent to initial recognition, the asset is 3.2.2.1 Inventories
accounted for in accordance with the accounting Inventories are measured at the lower of cost and net
policy applicable to that asset. realisable value. Net realisable value is the estimated
selling price in the ordinary course of business, less the
3.2.1.4 Subsequent expenditure estimated costs of completion and selling expenses.
The cost of replacing part of an item of property, The general basis on which cost is determined is as
plant & equipment is recognised in the carrying follows:
amount of the item if it is probable that the future
economic benets embodied within the part will (a) All inventory items except nished goods and
ow to the Company and its cost can be measured work-in-progress are measured at weighted average
reliably. The carrying amount of the replaced part cost.
is derecognised in accordance with the
derecognition policy given below.

Annual Report 2011
(b) Finished goods and work-in-progress are legal or constructive obligation to pay further
measured at weighted average factory cost which amounts. Obligations for contributions to Provident
includes all direct expenditure and appropriate share
of production overhead based on normal operating and Trust Funds covering all employees are recognized
capacity. as an expense in prot and loss as incurred.
3.2.2.2. Trade and other receivables 3.3.1.2 Dened benet plans

Trade and other receivables are stated at their A dened benet plan is a post-employment benet
estimated realizable amounts. plan other than a dened contribution plan. The
dened benet is calculated by independent actuaries
3.2.2.3. Cash & cash equivalents using Projected Unit Credit (PUC) method as
Cash and cash equivalents comprise cash balances recommended by SLAS16 Employee benets. The
and call deposits. Bank overdrafts that are repayable present value of the dened benet obligation is
on demand and form an integral part of the determined by discounting the estimated future cash
Companys cash management are included as a outflows using interest rates that are denominated in
component of cash and cash equivalents for the the currency in which the benets will be paid, and
purpose of the Statement of Cash Flows. that have terms to maturity approximating to the
terms of the related liability.
3.3 Impairment/ Reversal of impairment
An impairment loss is recognised if the carrying Provision has been made for retirement gratuities from
amount of an asset or its cash-generating unit the rst year of service for all employees, in conformity
exceeds its recoverable amount. Impairment losses with Sri Lanka Accounting Standard (SLAS) No. 16-
are recognised in prot and loss. Impairment losses (Revised 2006) Retirement Benet Costs. However,
recognised in respect of cash-generating units are under the Payment of Gratuity Act No. 12 of 1983, the
allocated rst to reduce the carrying amount of any liability to an employee arises only on completion of 5
goodwill allocated to the units and then to reduce years of continued service.
the carrying amount of the other assets in the unit
on a pro rata basis. The liability is not externally funded. This liability is
In respect of other assets, impairment losses computed on the following basis:
recognised in prior periods are assessed at each Length of service No. of months
reporting date for any indications that the loss has salary for
decreased or no longer exists. An impairment loss Each completed year
is reversed if there has been a change in the 5 and Up to 20 years 1/2
estimates used to determine the recoverable Over 20 & up to 25 years 3/4
amount. An impairment loss is reversed only to
Over 25 & up to 30 years 1
the extent that the assets carrying amount does
not exceed the carrying amount that would have Over 30 & up to 35 years 1
been determined, net of depreciation or Over 35 years 1
amortization, if no impairment loss had been The liability recognized in the Balance Sheet in respect
recognised. of dened benet plan is the present value of the
dened benet obligation at the Balance Sheet date.
3.3. LIABILITIES AND PROVISIONS
The dened benet obligation is calculated annually
Liabilities classied as current liabilities on the
using the projected unit credit method. The present
Balance Sheet are those which fall due for payment
on demand or within one year from the Balance value of the dened benet obligation is determined
Sheet date. Non-current liabilities are those balances by discounting the estimated future cash ows using
that fall due for payment later than one year from the interest rates that are denominated in the currency
the Balance Sheet date. in which the benets will be paid, and that have terms
to maturity approximating to the terms of the related
All known liabilities have been accounted for in liability.
preparing the Financial Statements. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
3.3.1 Employee benets are charged or credited to equity in statement of
recognised income and expense in the period in
3.3.1.1 Dened contribution plan which they arise. Past service costs are recognised
A dened contribution plan is a post-employment immediately in Income Statement.
benet plan under which an entity pays xed
contributions into a separate entity and will have no

The transitional liability is more than the liability that Finance expenses comprise interest payable on
would have been recognised as at that date under borrowings and losses on translation of foreign
the entitys previous accounting policy and the currency. The interest expense component of
increasing liability is recognised as an expense over 5 nance lease payments is allocated to each period
year period on straight line basis. during the lease term so as to produce a constant
The key assumptions used in determining the periodic rate of interest on the remaining balance of
retirement benet obligations are given in Note 19. the liability.
3.3.2. Provisions 3.4.5. Income Tax Expenses

A provision is recognized if, as a result of a past The Statutory income from business of the Company
event, the company has a present legal or is exempt from taxation for a period of 15 years,
constructive obligation that can be estimated ended 31st March 2011. Income tax expense comprises
reliably, and it is probable that an outflow of Economic Service Charge (ESC) and deferred tax.
economic benets will be required to settle the
obligation. ESC is charged to the Income Statement, since the
company is not expected to incur any income tax
3.3.3. Trade and other payables liability during the year in which ESC is recoverable.
Trade and other payables are stated at their cost. Deferred tax is recognised using the balance sheet
method, providing for temporary dierences between
3.3.4. Interest bearing borrowings the carrying amounts of assets and liabilities for
Interest bearing borrowings are recognised at cost. nancial reporting purposes and the amounts used for
taxation purposes. Deferred income tax is not
3.3.4 Capital commitments and contingencies accounted for if it arises from initial recognition of an
Capital commitments and contingent liabilities of the assets or liability in a transaction other than a business
Company are disclosed in the respective Notes to the combination that at the time of the transaction aects
Financial Statements. neither accounting nor taxable prot or loss.
3.4. INCOME STATEMENT Deferred income tax is determine using tax rates (and
laws) that have been enacted or substantially enacted
3.4.1 Revenue by the Balance Sheet date and is expected to apply
Revenue from the sale of goods is recognized in the when the related deferred income tax liability is
Income Statement when the signicant risks and settled. Deferred income tax assets are recognized to
rewards of ownership have been transferred to the the extent that it is probable that future taxable prot
buyer. will be available against which the temporary
dierences can be utilized Deferred tax assets are
Gains or losses on disposal of an item of property, reviewed at each reporting date and are reduced to
plant and equipment are determined by comparing the extent that it is no longer probable that the related
the net sales proceeds with the carrying amounts of tax benet will be realized.
property, plant and equipment and are recognized
net within other income in the prot and loss . 3.5. CASH FLOW STATEMENT
The Cash Flow Statement has been prepared using the
3.4.2 Expenses indirect method.
All expenditure incurred in running of the business
has been charged to income in arriving at the prot Interest paid are classied as operating cash ow,
for the year. interest and dividend received are classied as
investing cash ows while dividends paid are classied
3.4.3. Borrowing cost as nancing cash ows for the purpose of presenting of
Borrowing cost is recognized as an expense in the Cash Flow Statement.
Income Statement as incurred.
3.4.4. Financing Income and Expenses 3.6. GENERAL

Finance income comprises interest income on funds
invested, and gains on translation of foreign 3.6.1. Events occurring after the Balance Sheet date
currency. Interest income is recognised in prot and All material post Balance Sheet events have been
loss as it accrues. considered and where appropriate adjustments or
disclosures have been made in the respective notes to
the Financial Statements.

Annual Report 2011
3.6.2. Earnings per share Following the convergence of Sri Lanka Accounting
The Company presents basic earnings per share (EPS) Standards with International Reporting Standards
for its ordinary shares. Basic EPS is calculated by with the International Financial Reporting Standards,
dividing the prot or loss attributable to ordinary all existing Sri Lanka Accounting Standards will be
shareholders of the Company by the weighted average prexed as SLFRS or LKAS which refer to Sri Lanka
number of ordinary shares outstanding during the Accounting Standards to IFRS or IAS, respectively.
period. Diluted EPS is determined by adjusting the The Council of the Institute of Chartered
prot or loss attributable to ordinary shareholders and Accountants of Sri Lanka has mandate all specied
the weighted average number of ordinary shares business enterprises to adopt these new Accounting
outstanding for the eects of all dilutive potential Standards eective for nancial periods beginning
ordinary shares. on or after January 1, 2012.
4. Eect of Accounting Standards Issued but not yet

Eective
The following Accounting Standards have been
issued by the Institute of Chartered Accountants
of Sri Lanka to be eective for the nancial periods
beginning on or after January 1, 2012.
Sri Lanka Accounting Standard SLAS 39 on

Share- based Payment

Financial Instruments ; Presentation

Financial Instruments; Recognition and
Measurement

Financial Instruments; Disclosures

5 Other operating income 2011 2010
USD USD
Profit on disposal of property, plant and equipment 35,793 888
35,793 888
6 Financing cost 2011 2010

USD USD
Interest on short term borrowings 1,006,241 1,168,582
Interest on long term loans 143,203 157,956
Interest on finance lease - 2,723
Net loss on translation of foreign currency 86,266 144,988
1,235,710 1,474,249
7 Profit before tax 2011 2010

USD USD
Profit before tax is stated after charging all expenses including the following ;
Directors fees 4,784 4,664
Directors' emoluments 201,016 254,400
Audit services 10,105 8,922
Non-audit services 1,408 346
Other audit services 23,015 677
Depreciation of property, plant & equipment 2,028,969 1,914,757
Legal fees 35,314 2,319
Provision /(reversal of provision) for slow moving inventories (377,844) 122,662
Loss from write-down inventories 3,970,525 -
Provision /(reversal of provision) for bad debts 1,356,682 (355,343)
Staff costs (Note 77.1)
1) 6 247 501
6,247,501 5 278 556
5,278,556
7.1 Staff costs

Defined contribution plan costs- EPF & ETF 449,846 337,955
Defined benefit plan costs- Retiring gratuity 263,939 264,126
Other staff costs 5,533,716 4,676,475
6,247,501 5,278,556
8 Income tax expense

The Statutory income from business of Hayleys MGT Knitting Mills PLC is exempt from taxation for a period of 15
years ending 31st March 2011. Thereafter the prevailing tax rate will be applicable.(2011/12 - 12%)
Economic Service Charge (ESC) is charged to the Income Statement, since the company is not expected to incur any
income tax liability during the year in which ESC is recoverable.
2010 2009
USD USD
Economic service charge 59,874 51,630
Provision / (Reversal of provision) for deferred tax (Note 18) (270,837) 55,271
(210,963) 106,901

Annual Report 2011
9 Basic earnings/(loss) per share
The calculation of basic earnings/(loss) per share is based on the profits/ (loss) attributable to the ordinary shareholders and the weighted average
number of ordinary shares outstanding during the year.
2011 2010
Net profit/(loss) for the year (USD) (7,078,596) 3,163,627
Weighted average number of shares 50,781,106 50,781,106
Basic earnings/(Loss) per share (USD) (0.14) 0.06
9.1 There are no potentially dilutive ordinary shares of the Company and as a result the diluted earning per share (EPS) is
the same as the basic EPS shown above.
2011 2010
USD USD
10 Dividend per share
Interim - Rs.1/- per share - 441,652
Final - Rs.1/50 per share - 666,360
- 1,108,012
Number of shares 50,781,106 50,781,106

Dividend per share (USD) - 0.02
11 Property, plant and equipment
11.1 Cost or valuation

Office, factory
2011 2010
Land Buildings Plant and Water Motor Furniture & & other
machinery treatment plant vehicles fittings equipment Total Total
USD USD USD USD USD USD USD USD USD

At the beginning of the year 2,180,347 5,684,268 27,340,275 1,671,959 97,551 623,131 3,207,995 40,805,526 38,041,248
Additions - 167,519 1,532,068 - - 141,034 423,768 2,264,389 2,625,736
Revaluation - - - - - - - 142,731
Disposals - - - - (47,164) (11,068) (58,232) (4,189)
At the end of the year 2,180,347 5,851,787 28,872,343 1,671,959 50,387 764,165 3,620,695 43,011,683 40,805,526
Depreciation
At the beginning of the year 1,224,339 10,061,276 798,139 97,551 480,657 2,429,738 15,091,700 13,181,132
Charge for the year 144,899 1,481,697 83,598 - 61,084 257,691 2,028,969 1,914,757
On disposals - - - (47,164) (11,068) (58,232) (4,189)
At the end of the year 1,369,238 11,542,973 881,737 50,387 541,741 2,676,361 17,062,437 15,091,700
Net book value at 31st march 2,180,347 4,482,549 17,329,370 790,222 - 222,424 944,334 25,949,246 25,713,826
Capital work in progress (Note 11.2) 1,281,054 1,023,996
Carrying amount 27,230,300 26,737,822
11.2 Capital work in progress 2011 2010

USD USD
At the beginning of the year 1,023,996 1,602,708
Additions during the year 2,448,921 1,899,044
Transferred to Property, plant & equipment (2,191,863) (2,477,756)
At the end of the year 1,281,054 1,023,996
11.3 Revaluation of property, plant & equipment

34.6 acrees land at Narthupana Estate, Neboda was last revalued on 31st March 2010 by K.Arthur Perera, independent qualified valuer.
The surplus arising from the revaluation was transferred to revaluation reserve.
11.4 Fully depreciated assets

The fully depreciated assets included in the property, plant & equipment as at balance sheet date were as follows:
2011 2010
USD USD
Furniture & fittings 386,684 231,720
Motor vehicles 50,387 97,552
Office, factory & other equipment 1,951,594 1,601,810
2,388,665 1,931,082

12 Inventories
USD USD
Raw materials 5,122,468 2,692,996
Provision for slow moving items (124,940) (68,977)
4,997,528 2,624,019
Work-in-progress 3,395,583 3,482,880
3,366,106 3,339,118
Finished goods 3,044,642 4,400,317
3,024,463 4,060,616
Spares and consumables 1,816,036 1,983,984
Goods in transit - 237,941
13,204,133 12,245,678
13 Trade receivables
USD USD
Trade receivables 4,704,537 9,748,279
Provision for bad & doubtful debts (968,393) (314,600)
3,736,144 9,433,679
14 Other receivables & prepayments

USD USD
Staff loans and advances 44,157 99,447
Deposits and prepayments 896,202 189,161
VAT recoverable 832,401 590,095
Claim receivable 24,497 11,714
Nation Building Tax 68,724 49,278
Employees' share ownership scheme 86,766 59,244
1,952,746 998,939
14.1 Loans given to Directors

Balance at the beginning of the year 4,491 9,118
Amount granted during the year - -
Recovered during the year (2,561) (4,627)
Balance at the end of the year 1,930 4,491
14.2 Staff loans and advances

Movements of the loans granted to employees more than USD 200 (Rs.20,000)during the year
are as follows:
Balance at the beginning of the year 95,798 126,251
Amount granted during the year 17,618 12,510
Recovered during the year (95,295) (42,963)
Balance at the end of the year 18,121 95,798

Annual Report 2011
15 Cash and cash equivalents
USD USD
Cash in hand 10,704 21,392
Cash at Bank 83,493 728,459
94,197 749,851
16 Stated Capital
No.of shares USD USD
Ordinary shares 49,177,492 6,182,227 6,182,227
Convertible Non Voting class "B" shares 1,603,614 351,875 351,875
50,781,106 6,534,102 6,534,102
In accordance with the Companies Act No.07 of 2007, Share capital and Share premium are been reclassified as
Stated Capital.
17 Interest bearing loans and borrowings
USD USD
A Non-current liabilities
Term loans (Note 17.1) 1,816,425 1,401,354
Finance lease obligations (Note 17.3) - -
1,816,425 1,401,354
B Current liabilities
Term loans (Note 17.1) 1,906,324 747,484
Finance lease obligations (Note 17.3) - -
1,906,324 747,484
17.1 Term loans repayable after one year
Loan obtained during the year 2,788,311 -
Exchange Fluctuation 10,421 2,774
4,947,570 3,338,934
Repayment during the year (1,224,821) (1,190,096)
Balance at the end of the year 3,722,749 2,148,838
Transfer to current liabilities (repayable within one year) (1,906,324) (747,484)
1,816,425 1,401,354
Analysis of term loans by year of repayment
Term loans repayable in 1year or less 1,906,324 747,484

Term loans repayable between 1 to 2 years 1,328,945 742,094
Term loans repayable between 2 to 5 years 448,581 592,458
Term loans repayable in 5 years or more 38,899 66,802
3,722,749 2,148,838

17 Interest bearing loans and borrowings (Contd.)
17.2 Terms and debt repayment schedule
As at 31st March 2011 2010 Loan Repayment Assets pledged as Security

Lender Rate of interest (p.a.) USD USD Granted
HSBC 6mts LIBOR + 1.75% 386,907 744,049 1,250,000 42 monthly installments of USD 29,761.90 each Primary mortgage over
Machinery
Commercial 6.50% 94,135 122,900 193,274 71 monthly installments of USD 2,545/-(Rs.280,000) Corporate guarantee
Bank of Ceylon each. Grace period - 02 years
Commercial 6.50% 204,908

, 233,919 277,034 96 monthlyy installments of USD 2,886/-(Rs.312,500)
( ) Mortgage over Machinery
Bank of Ceylon each. Grace period-02 years
Commercial 1mt LIBOR + 5.0% 748,488 1,047,970 1,200,000 48 monthly installments of USD 25,000/- each after Primary mortgage over
Bank of Ceylon grace period of 6 months Machinery
Bank of Ceylon 3mt LIBOR + 5.0% 975,811 - 1,288,311 42 monthly installments of USD 31,250/- each Mortgage over Machinery
HSBC 1mt LIBOR + 4.0% 1,312,500 - 1,500,000 48 monthly installments of USD 31,250/- each Agreed to mortgage machinery
3,722,749 2,148,838
17.3 Finance lease obligations

USD USD
At the beginning of the year - 62,975
Lease obligations entered into during the year - -
- 62,975
Repayment during the year - (62,975)
- -
Finance charges unamortised. -
Net lease obligations - -

Annual Report 2011
USD USD
18 Deferred taxation
Transfer from Income Statement (270,837) 55,271
At end of the year 1,382,646 1,653,483
The Company had the option of selecting the basis for payment of income tax either based on 2% of revenue or
at the prevailing rate of income tax on taxable profit of the Company, in accordance with the BOI agreement
dated 29th January 1993.
The Company has disclosed in the previous financial statements that no provision has been made for deferred
tax, as the Company opted to pay income tax at the rate of 2% of the turnover after expiration of the period of tax
exemption and accordingly, deferred tax liability had not been recognized in the previous financial statements.
However, the Company has submitted Annual tax returns to the Department of Inland Revenue for the previous
years on taxable profit method.
The error in not recognizing the effect on deferred tax has been corrected in the current financial year and the
corresponding figures have been restated as required by Sri Lanka Accounting Standard 10 Accounting
policies Changes in Accounting Estimates and Errors (Revised 2005)
19 Retirement benefit obligations
Provision for retiring gratuity
USD USD
19.1 Present value of unfunded gratuity 1,425,164 1,170,153
Total gratuity provision 1,425,164 1,170,153
19.2 At beginning of the year 1,074,307 817,511

Amortisation of transitional liability 31,949 31,949
Effects of movement in exchange rate 45,044 12,156
Benefits paid by the plan (20,278) (19,486)
Current service cost 121,522 97,867
Interest cost 163,914 138,524
Actuarial (gains) losses (53,446) (4,214)
Gratuity c/f 1,363,011 1,074,307
19.3 Expenses recognised in profit or loss

Current service cost 121,522 97,867
Under provision/(over provision) in respect of previous year 31,949 31,949
Actuarial (gains) losses (53,446) (4,214)
Interest cost 163,914 138,524
263,939 264,126
19.4 Under provision/(over provision) in respect of previous year
Balance at the beginning 95,846 127,795
Effects of movement in exchange rate (1,745) -
Charge for the period (31,949) (31,949)
Balance to be charged in the future 62,152 95,846
19.5 Legal Liability as at 31st March 1,035,059 925,781
19.6 The Gratuity liability as at 31st March 2011 is based on actuarial valuation carried out by Actuarial Management
Consultant Pvt. Limited, a firm of professional actuaries.
The valuation method used by the actuary is the 'Project Unit Credit Method', the method recommended by Sri
Lanka Accounting Standard 16 - 'Employee Benefits' (SLAS 16)
The following key assumptions were made in arriving the above figure.
Rate of discount - 11%
Salary increase - 10%
Assumptions regarding mortality on a 1967/70 Mortality Table, issued by The Institute of Actuaries, London
20 Other payables and accruals
USD USD
Accrued expenditure 462,247 401,721
Other payables 748,814 877,073
1,211,061 1,278,794
21 Short term interest bearing borrowings

Short term loans 1,898,230 2,314,024
Import loans 12,656,215 7,653,838
Bank overdraft 5,428,924 4,245,517
19,983,369 14,213,379

22 Asset pledged as security
Assets pledged as security for the short term borrowings are as follows;
Facility Security Value
USD
Overdraft, Letter of credit import loans Inventories & Debtors 11,235,000
and export bills discounting Land & building 1,860,000
23 Capital commitments
The approximate amounts of capital expenditure approved by the Directors as at March 31,2011 were:
Capital expenditure contracted for which no provision is made in the Financial Statements - USD 596,000 (2010 - USD 542,000).
Capital expenditure approved by the Directors but not contracted for -USD 750,000 (2010 - USD 190,000)
24 Contingent liabilities
There is no contingent liability as at 31st March, 2011. (2010-USD 85,074)
25 Transactions with key management personnel

According to the Sri Lankan Accounting Standard 30 (Revised 2005) "Related Party Disclosures", key management
personnel are those having authority and responsibility for planning, directing and controlling the activities of the entity.
Accordingly, the Directors of the Company (including executive and non executive Directors) and their immediate family
members have been classified as KMP of the Company.
Immediate family member is defined as spouse or dependent. Dependent is defined as anyone who depends on the
respective Director for more than 50% of his/ her financial needs.
2011 2010
USD USD
Key management personnel includes, members of the Board of Directors of the company.
Short term employment benefits 201,016 254,400
Directors fees 4,784 4,664
Loans given to Directors

Balance as at 31st March 1,930 4,491
26 Related party transactions

Name of the Company Name of Director Nature of transaction Amount (paid) / received
2011 2010
USD USD
Hayleys PLC. A.M.Pandithage Office space together with other
S.C.Ganegoda related facilities.
K.D.D.Perera Accounting & secretarial services.
Personnel administration & data
processing facilities. (267,479) (216,887)
Hayleys Agro Fertilizer (Pvt) Ltd. A.M.Pandithage Purchase of chemicals (2,978) -

S.C.Ganegoda
Logiwiz NW (Pvt) Ltd. A.M.Pandithage Logistic services (173,242) -
Hayleys Business Solutions Int.(Pvt) Ltd. A.M.Pandithage Payroll charges (1,027) -

S.C.Ganegoda
Unichela (Pvt) Ltd M.C.D.Amalean Sale of knitted fabric. 7,902,049 6,406,871
Bodyline (Pvt) Ltd M.C.D.Amalean Sale of knitted fabric. 22,444 12,287
Mas Active (Pvt) Ltd M.C.D.Amalean Sale of knitted fabric. 1,727,508 2,739,367
Mas Intimates (Pvt) Ltd. M.C.D.Amalean Sale of knitted fabric. 184,147 92,555
Silueta (Pvt) Ltd. M.C.D.Amalean Sale of knitted fabric. 119,250 698,950
Board of Investment K.D.D.Perera License fees & Service charges. - 6,189
Sampath Bank K.D.D.Perera Banking facilities. 116,146 191,958
27 There are no events occurring after the Balance Sheet date which require adjustments to or disclosure in the Financial Statements.

Annual Report 2011
Income Statements translated into SLR
SLR '000 SLR '000
Restated
Revenue 6,587,505 5,803,551
Cost of sales (5,743,850) (4,609,775)
Gross profit 843,655 1,193,776
Other income 4,043 103
Distribution expenses (273,441) (97,321)
Administrative expenses (1,258,038) (546,448)
Financing costs (139,573) (170,925)
Profit/(Loss) before tax (823,354) 379,185
Income tax (expense) /reversal 23,828 (12,394)
Profit/(Loss) for the year (799,526) 366,791
Earnings/(Loss) per share (15.74) 7.22
Dividend per share - 1.96

Balance Sheets translated into SLR
SLR '000 SLR '000
Restated
ASSETS
Non-Current Assets
Property, plant & equipment 3,031,549 3,071,908
Current Assets
Inventories 1,470,016 1,406,906
Trade receivables 415,945 1,083,835
Other receivables & prepayments 217,399 114,768
Cash and cash equivalents 10,487 86,150
Total Current Assets 2,113,847 2,691,659
Total Assets 5,145,396 5,763,567
EQUITY & LIABILITIES

EQUITY
Stated capital 527,856 527,856
Reserves on amalgamation 690,679 712,765
Capital reserves 125,589 129,605
Revenue reserves 238,473 1,113,266
Exchange fluctuation reserve 177,638 222,846
Total Equity 1,760,235 2,706,338
Non-Current Liabilities
Interest bearing loans and borrowings 202,223 161,002
Deferred tax liabilities 153,930 189,969
Retirement benefit obligations 151,744 123,427
Total Non-Current Liabilities 507,897 474,398
Current Liabilities
Trade payables 296,646 692,828
Current portion of the interest bearing loans & borrowings 212,231 85,878
Due to Hayleys Ltd 8,812 24,229
Other payables and accruals 134,827 146,921
Short term interest bearing borrowings 2,224,748 1,632,975
Total Current Liabilities 2,877,264 2,582,831
Total Liabilities 3,385,162 3,057,229
Total Equity and Liabilities 5,145,396 5,763,567
The financial statements prepared and presented in US Dollars reflect the economic substance of underlying events and circumstances
of the enterprise. The supplementary information in SL Rupees is presented for convenience purposes only. The statements presented in
SL Rupees are not a full set of financial statements and are not purported to comply with Sri Lanka Accounting Standards. They
represent selected information taken from the US Dollar financial statements, translated into SL Rupees generally using the principles
set out in the International Accounting Standards Board Interpretation SIC 30 for the translation of financial statements to a presentation
currency from a measurement currency. Revenue and costs are converted using the average exchange rate for the period. Assets and
liabilities are converted using the exchange rate at the end of the year. The revenue reserve incorporates the profit for the period reflected
in the income statements.
In accordance with advice received from the Urgent Issues Task Force of the Institute of Chartered Accountants of Sri Lanka, stated
capital is represented at it's original SL Rupee value.

Annual Report 2011
Ten Year Summary
10-year
compound 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
growth % USD USD USD USD USD USD USD USD USD USD
R lt
Results
Net turnover 15 58,322,307 50,056,501 59,074,278 59,736,554 50,803,668 37,589,169 29,640,137 24,584,621 17,098,624 16,175,163
Prot after tax (223) (7,078,596) 3,163,627 3,235,324 5,877,245 4,394,372 3,962,009 2,605,697 2,529,152 1,853,886 1,067,666
Funds Employed
Stated capital 3 6,534,102 6,534,102 6,534,102 6,534,102 6,534,102 6,534,102 5,193,028 5,193,028 5,193,028 5,193,028
Reserves 18 9,276,862 17,021,818 16,632,221 15,226,288 11,609,768 7,623,339 5,881,729 4,383,966 3,121,622 2,153,456
Shareholders' fund 9 15,810,964 23,555,920 23,166,323 21,760,390 18,143,870 14,157,441 11,074,757 9,576,994 8,314,650 7,346,484
Borrowings (both short & long term) 17 23,706,118 16,362,217 16,124,369 15,443,809 16,194,239 14,871,249 17,866,698 13,667,475 8,771,253 5,984,838
39 517 082
39,517,082 39 918 137
39,918,137 39 290 692
39,290,692 37 204 199
37,204,199 34 338 109
34,338,109 29 028 691
29,028,691 28 941 454
28,941,454 23 244 469
23,244,469 17 085 903
17,085,903 13 331 322
13,331,322
Assets Employed
Non current assets 10 27,230,300 26,737,822 26,462,825 25,686,328 23,741,628 19,578,330 17,960,068 14,044,575 11,976,245 11,133,501
Current assets 14 18,987,220 23,428,147 19,624,002 20,286,525 18,235,648 15,713,790 14,818,944 13,743,795 8,006,613 5,857,878
Current liabilities net of borrowings 9 (3,954,781) (7,520,043) (5,978,624) (8,050,296) (7,100,956) (5,815,027) (3,059,750) (3,409,937) (1,404,503) (1,781,437)
Provisions 37 (2,745,657) (2,727,790) (817,511) (718,359) (538,211) (448,402) (348,269) (274,886) (203,835) (160,464)
Deferred income - - - - - (429,539) (859,078) (1,288,617) (1,718,156)
Capital Employed 13 39,517,082 39,918,137 39,290,692 37,204,199 34,338,109 29,028,691 28,941,454 23,244,469 17,085,903 13,331,322
Cash Flow
Net cash inow/(outflow) from operating activities (4,837,120) 3,783,556 3,677,255 6,619,224 4,698,040 6,871,543 1,873,665 (572,614) (385,058) 106,897
Net cash inow/(outflow) from investing activities (2,485,654) (2,046,136) (2,615,639) (3,615,591) (4,337,616) (2,720,844) (5,005,712) (2,971,555) (1,653,157) (1,697,448)
Net cash inow/(outflow) from nancing activities 897,130 (2,568,869) (1,551,086) (5,162,870) (873,133) (1,390,973) 1,097,143 160,074 (389,572) (1,282,894)
Increase / (decrease) in cash & cash equivalents (6,425,643) (831,448) (489,471) (2,159,236) (512,709) 2,759,726 (2,034,904) (3,384,095) (2,427,787) (2,873,445)
Key Indicators
Earnings/(Loss) per share (basic) USD (0.14) 0.06 0.06 0.12 0.09 0.08 0.05 0.05 0.04 0.02
Net assets p
per share USD 0.31 0.46 0.46 0.43 0.36 0.29 0.23 0.19 0.17 0.15
Dividend per share Rs. - 2.50 2.00 6.40 4.60 4.00 4.50 5.00 3.50 2.50
Gearing % 60 41 41 42 47 51 62 59 51 45
Turnover to capital employed (times) 1.48 1.25 1.50 1.61 1.48 1.29 1.02 1.06 1.00 1.21

Shareholder Information
1 Stock Exchange
Interim Financial Statements of the forth quarter for the year ended 31/03/2011 have been submiited to the Colombo Stock Exchange as
required by the listing rules.
2 Ordinary Shareholders as at 31st March,2011
Residents Non-Residents Total
No. of shares held No. of

No. of share- No. of share-
No. of shares % No. of shares % share- No. of shares %
holders holders
holders
1 - 1,000 686 286,324 0.582 4 3,700 0.008 690 290,024 0.590
1,001 - 10,000 407 1,597,276 3.248 9 23,500 0.048 416 1,620,776 3.296
10,001 - 100,000 77 2,329,700 4.737 3 80,000 0.163 80 2,409,700 4.900
100,001 - 1,000,000 12 4,059,674 8.255 3 544,860 1.108 15 4,604,534 9.363
Over 1,000,000 5 39,081,610 79.471 1 1,170,848 2.381 6 40,252,458 81.851
1,187 47,354,584 96.293 20 1,822,908 3.707 1,207 49,177,492 100.000
31.03.2011 31.03.2010
No. of No. of No. of No. of
% %
Categories of shareholders shares shareholder shares shareholders
Individuals 3,939,560 1,107 8.011 4,634,860 1102 9.425
Institutions 45,237,932 100 91.989 44,542,632 68 90.575

49,177,492 1,207 100.000 49,177,492 1170 100.000
3 Convertible Non-Voting Class 'B' Shares as at 31st March,2011 (Unquoted)
No. of
No. of shares %
Category shareholders
Employees 1,370,913 381 85.489
Trustees 232,701 1 14.511
1,603,614 382 100.000
4 Market Value
The market value of an ordinary share of Hayleys MGT Knitting Mills PLC. was :
2011 (Rs.) 2010 ( Rs.)
Highest 57.00 (on 23rd Sep.2010) 46.75 (on 3rd Sep.2009)

Lowest 28.60 (on 17th Dec.2010) 29.00 (on 08th Apr.2009)
Year end 35.60 32.00
5 Share Trading
2011 2010
No. of transactions 8,016 4,236
No. of shares traded 11,673,900 18,741,000
Value of shares traded (Rs.) 471,959,060 628,531,500

Annual Report 2011
HAYLEYS-MGT KNITTING MILLS PLC
Company No. PQ 37
NOTICE OF MEETING
Notice is hereby given that the Nineteenth Annual General Meeting of Hayleys-MGT Knitting Mills PLC, will be
held at the Registered Office of the Company, at No.400, Deans Road, Colombo 10, on Thursday, 23rd June, 2011 at
10.30 a.m. and the business to be brought before the meeting will be:
1. To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31st
March, 2011 with the Report of the Auditors thereon.
2. To re-elect Mr.A.M.Pandithage, who retires by rotation at the Annual General Meeting, a Director
3. To re-elect Mr.M.C.D.Amalean, who retires by rotation at the Annual General Meeting, a Director
4. To re-appoint Mr. S.Spezza, who retires having attained the age of seventy three years and the company has
received special notice of the undernoted ordinary resolution in compliance with section 211 of the companies Act
No.7 of 2007 in relation to his re-appointment.
Ordinary Resolution
That Sabatino Spezza, a retiring Director, who has attained the age of seventy three years be and is hereby re-
appointed a Director of the company and it is hereby declared that the age limit of seventy years referred to in
section 210 of the Companies act No.7 of 2007 shall not apply to the appointment of the said Director.
5. To authorise the Directors to determine contributions to charities.
6. To appoint Messrs Ernst & Young, Chartered Accountants as Auditors of the Company for the year 2011/12
and to authorise the Directors to determine their remuneration.
7. To consider any other business of which due notice has been given.
NOTE :
A shareholder is entitled to appoint a proxy to attend and vote instead of himself and a proxy need not be a
shareholder of the Company. A Form of Proxy is enclosed for this purpose. The instrument appointing a
proxy must be deposited at the Registered Office, No.400, Deans Road, Colombo 10 by 10.30 a.m. on 21st
June , 2011.
By Order of the Board

HAYLEYS GROUP SERVICES (PRIVATE) LIMITED
Secretaries
Colombo
30th May 2011

FORM OF PROXY
I/We*
of
being a shareholder/shareholders* of HAYLEYS-MGT KNITTING MILLS PLC hereby appoint,
1. .
of .
or failing him/them,*
2. ABEYAKUMAR MOHAN PANDITHAGE (Chairman of the Company) of Colombo, or failing him,

one of the Directors of the Company as my/our* proxy to attend and vote as indicated hereunder
for me/us* and on my/our* behalf at the Nineteenth Annual General Meeting of the Company to be
held on Thursday, 23rd June, 2011 and at every poll which may be taken in consequence of the
aforesaid meeting and at any adjournment thereof:
For Against
1. To consider and adopt the Annual Report of the Board and the Statements of Accounts for
the year ended 31st March, 2011, with the Report of the Auditors thereon.
2. To re-elect Mr.A.M.Pandithage, who retires by rotation at the Annual General Meeting,

a Director.
3. To re-elect Mr.M.C.D.Amalean, who retires by rotation at the Annual General Meeting,

a Director
4. To re-appoint Mr. S.Spezza, who retires having attained the age of seventy three years,
a Director by passing the Ordinary Resolution set out in the notice.
5. To authorise the Directors to determine contributions to charities.
6. To appoint Messrs Ernst & Young, Chartered Accountants as Auditors of the Company
for the year 2011/12 and to authorise Directors to determine their remuneration .
(** ) The proxy may vote as he thinks fit on any other resolution brought before the Meeting.
As witness my/our* hands this .. day of ....2011.

Signature of Shareholder
Witnesses
.
.
.
NOTE : : * Please delete the inappropriate words.
1. A proxy need not be a shareholder of the Company.

2. Instructions as to completion appear on the reverse.
Form of Proxy
Instructions as to Completion
1. To be valid , this Form of Proxy must be deposited at the Registered Office of the Company,
No.400, Deans Road, Colombo 10, by 10.30 a.m. on Tuesday, 21st June, 2011.
2. In perfecting the Form of Proxy, please ensure that all details are legible
3. If you wish to appoint a person other than the Chairman of the Company (or failing him, one
of the Directors) as your proxy, please insert the relevant details at 1 overleaf and initial
against this entry.
4. Please indicate with an X in the space provided how your proxy is to vote on each resolution.
If no indication is given, the proxy in his discretion will vote as he thinks fit. Please also
delete (**) if you do not wish your proxy to vote as he thinks fit on any other resolution
brought before the Meeting.
5. In the case of a Company / Corporation, the proxy must be under its Common Seal which
should be affixed and attested in the manner prescribed by its Articles of Association.
6. Where the Form of Proxy is signed under a Power of Attorney (POA) which has not been
registered with the Company, the original POA together with a photocopy of same or a copy
certified by a Notary Public must be lodged with the Company along with the Form of Proxy.
Corporate Information
Name of Company Bankers

Hayleys- MGT Knitting Mills PLC Standard Chartered Bank
HSBC
Legal Form Hatton National Bank PLC
A Quoted Public Company with Limited Liability Bank of Ceylon
(Incorporated in Sri Lanka in 1993 ) NDB Bank PLC
Sampath Bank PLC
Company Registration Number Commercial Bank of Ceylon PLC
PQ 37. Deutsche Bank
Citibank, N.A.
Accounting year end
31st March Auditors
KPMG Ford, Rhodes, Thornton & Co.
Principal Activity Chartered Accountants,
Manufacturing of knitted fabric P.O.Box 186
Colombo.
Directors
A.M.Pandithage - Chairman Legal Advisors
S.C.Ganegoda - Appointed Deputy Chairman(w.e.f.5/11/2010) Julius & Creasy ,
S.Spezza - Managing Director Attorney-at-Law,
D.B.Weerasinghe - Tendered Resignation on 8/11/2010 P.O.Box 154
M.C.D.Amalean Colombo.
H.R.Peries - Resigned (w.e.f.29/04/2011)
R.Seevaratnam Senior Management
K.D.D.Perera A.M.Pandithage - Chairman
S.C.Ganegoda - Deputy Chairman
Secretaries S.Spezza - Managing Director
Hayleys Group Services (Pvt) Ltd. W.Sooriyarachchi - Chief Operative Ocer
400, Deans Road,Colombo 10. P.A.Muhandiramge - General Manager - Human Resources
Telephone: (94-11) 2627650- 2627653 (4 Lines) A.A.S.L.Munasinghe - General Manager - Operations
Dinusha Perera - General Manager - Finance
Registered Oce Thusitha Perera-General Manager - Human Resource Development
400, Deans Road , K.G.Chandrapala - Deputy General Manager - Dyeing
Colombo 10. M.D.F.A.Perera - Deputy General Manager- Knitting
Telephone: (94-11) 2627000 K.F.C.De Zilwa - Deputy General Manager - Marketing
N.S.S.Kumarage- Deputy General Manager - Dyeing
Main Oce & Factory Gen. Wasantha Perera- Consultant-Administration & Logistics
Narthupana Estate , Neboda.
Telephone: (94-34) 4297100, 2242055
HAYLEYS MGT KNITTING MILLS PLC ANNUAL REPORT 2011

Annual Report: Hayleys MGT Knitting Mills PLC

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A N N UAL REPOR T

HAYLEYS MG T KNITTING MILLS PLC

Summary of Financial Performance 2 Cash Flow Statements 34

Annual Report 2011

Year ended 31st March 2011 2010 Change

Revenue 58,322 50,057 17

Prot/(Loss) before tax (7,290) 3,271 (323)

Prot/(Loss) after tax (7,079) 3,164 (324)

Dividend - 1,108 (100)

Shareholders' funds at year end 15,811 23,556 (33)

Investment in property, plant and equipment 2,521 2,047 23

Earnings /(Loss) (0.139) 0.062 (324)

Market value(USD) at year end 0.320 0.279 15

Net assets (USD) at year end 0.311 0.464 (33)

Dividend (USD) - 0.022 (100)

Price earnings (times) based on year end price Negative 4.471 -

Dividend payout (%) - 35

Interest cover (times) Negative 3.22

Gearing (%) 59.99 40.99

Return on capital employed(%) (18.45) 8.19

Current ratio (times) 0.73 1.04

02 Hayleys MGT Knitting Mills PLC

In line with the above mentioned announcements a

Hayleys MGT Knitting Mills PLC

Mr. D. B. Weerasinghe tendered his resignation on

04 Hayleys MGT Knitting Mills PLC

Hayleys MGT Knitting Mills PLC

External environmental factors such as sharp

This section provides an overview of the nancial Operating Prot/(Loss)

Turnover and Profit from Operations

Turnover USD 58.3 Mn during the year under review

Discrepancies between the value of physical

06 Hayleys MGT Knitting Mills PLC

Earnings before Interest, tax , depreciation and

Interest (1,236) (1,474)

The Companys earnings before interest, tax,

Hayleys MGT Knitting Mills PLC

Investments Results at a Glance

08 Hayleys MGT Knitting Mills PLC

Company distributed dry rations and other essentials to

For the fourth time a blood donation campaign was

Hayleys MGT Knitting Mills PLC

Commissioning of the biomass boiler has signicantly

Vehicle mileage has been rearranged to minimise the

We are the rst Sri Lankan company to receive Post

The following Energy saving measures were adopted

10 Hayleys MGT Knitting Mills PLC

We set out below the Corporate Governance

Hayleys MGT Knitting Mills PLC

Corporate Governance principle Compliance

The Attendance by each of the Directors is given below.

Name of Director Attendance

Responsibilities of the Board Enhance shareholder value.

Ensure all stakeholder interest are considered in corporate decisions

Formulate and communicate business policy and strategy to assure

Approve any change in the Companys business portfolio and sanction

Ensure Executive Directors have the skills/ knowledge to implement

Ensure eective remuneration, reward and recognition policies are in

Set and communicate values/ standards, with adequate attention

Ensure eective information, control, risk management and audit

12 Hayleys MGT Knitting Mills PLC

Corporate Governance principle Compliance

Ensure compliance with established laws and ethical standards.