ITN ANNUAL REPORT 2011

Annual Report 2011

2011

1

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வைரபட ான ொைலகாசிேசைவ

Independent Television Network Ltd.,

PRODUCTION DATE Annual Report 2011

02nd May 2012

Contents ORPORATE REPORTING C 3 Vision, Mission & Values 6 Highlights 2011

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8 Corporate Information 9 Accolades 2011 10 Board of Directors 12 Chairman’s Communiqué 14 Senior Management 16 General Manager’s Review 18 Corporate Governance 20 Corporate Footprints

DIVISIONAL REPORTING 22 Administration 26 Engineering 28 Marketing 30 Programming 32 Lakhanda Radio 34 Vasantham TV 35 Vasantham FM 36 News & Current Affairs)

FINANCIAL REPORTING 38 Annual Report of the Board of Directors on the affairs of the Company

40 Independent Auditors Report

41 Statement of Income

42 Balance Sheet 43 Statement of Changes in Equity

44 Cash Flow Statement 45 Notes to the Financial Statements

From the time children connected two tin cans with a string, distance voice communication came into being...and stayed.

From Alexander Graham Bell to Steve Jobs innovation thrived and the world became a small community.

The days that one had to go to a specific place to telephone someone, listen to radio or watch TV is a thing of the past.

Today anyone can do all these with their mobile phone or a tablet computer...from anywhere in the world.

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We came in to being during post digital era and adapted to the times, technology and lifestyles... yet our fundamental values are not compromised, bringing quality programmes that enrich, enlighten and enthrall our audiences of all communities.

Our Vision The most creative media organisation in South East Asia

Our Mission Uplifting people’s lives with news and programmes that inform, inspire, educate and entertain in keeping with Sri Lankan cultural values.

Our Values

We are patriotic and independent We are honest and trustworthy We treat our audiences with due respect We respect all human beings We respect professionalism We believe in teamwork We embrace a variety of skills, talents and ideas

From Vajira to Sapumali, from Pandit Amaradeva to B&S, from flower power to solar power, from 8 track to iPod, the world keeps evolving.

Over the years, we kept pace with the changing times, spreading our wings without loosing our roots. The core principals that formed the foundation of ITN more than thirty years ago have stood the test of time and remains relevant today as it did in 1979.

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Live Aid was bringing the world together, E.T. was bringing the universe together and The Cosby Show was bringing families together… and ITN brought the entire nation together.

With the beginning of the new millennium, everything has become real - time and on demand. With hand held devices like iPhones, iPads, and Blackberrys to Androids, people have the entire universe on their palm. Webcasts, Podcasts, Webinars to E-mails, voice mail, chat rooms, text messaging – these are today’s most prevalent forms of communication.

Of course, ITN is ‘up – to – speed’ with the modern world, though yet we hold on to our very own values, still believing that some things are built to last, forever... the outlook may change with the world, but the ethos shall not.

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We were, and still are, the forerunner of many imitations to come‌

Financial Performance ITN reported its highest Net Revenue of Rs. 2.1 billion during the year 2011 in a highly competitive environment. This is an 18% growth compared to year 2010 by further establishing market leadership. This growth is a gross result of improvements made to TV channels as well as Radio channels. However, growth of Vasantham TV and Vasantham FM have been restricted by the limited transmission coverage.

Profitability The Company achieved a growth of 23% in Gross Profit. This was accomplished by the growth in group sales and reduction of the operational costs of Prime TV and Prime Radio. There was a better control of operational cost during the last year. As a result, the Company reported its highest net profit of Rs. 481 Million for the year 2011. It is a 56% increase compared to the previous year. The Company increased Earnings Per Share to Rs. 50.6 from Rs. 32 in year 2010.

Contribution to the Government The Company contributed Rs 198 million to the government by paying as Income Tax in addition to the payment of Value Added Tax and Nations Building Tax of Rs.300 million during the year 2011. The Company paid Rs 49.4 million as dividends to the treasury in settling all declared dividends for the previous years.

Capital Expenditure The Company’s Capital Expenditure was Rupees 130 million for purchasing and upgrading plant and machinery and latest technologies to provide better service to our viewers. A new studio complex is under construction and it will further improve the competitiveness with enhanced production quality.

Assets and Liabilities Total Asset of the company increased by 25 % and Total Liabilities decreased by 9 %. Capital and Reserves has increased to Rs.1, 451 million during the year due to the increase in net profit of the year. Liquidity position of the company is improved and Debt to Equity has also improved to 0.11: 1 ratio.

Revenue Growth 6

Profit Analysis

Rs. Mn. 2,500 2,094 2,000

Rs. Mn.

1,800

2,500

1,600 1,400

1,777 1,499

2,000

1,200

1,500

1,500

1,000

1,185

800

1,000

Asset & Equity

Rs. Mn.

685

1,500

600

600

400

500

500

200 0

2006 2007 2008 2009 2010 2011

0

2006 2007 2008 2009 2010 2011 Gross Profit

Operating Profit

Net Profit after Taxation

Rs. Mn.

Revenue Growth

0

2006 2007 2008 2009 2010 2011 Total Assets

Capital & Reserves

Income Contribution

2,000

- Channelwise

1,800 1,600

ITN

1,400

Vasantham TV

1,200

Prime TV

1,000

Lakhanda FM Vasantham FM

800

Prime FM

600 400 200 0

2009 TV Channel

2010

2011

Radio Channel

Highlights 2011 H Highlights Highlights 2011 20

Highlights Highlights 2011 2011 011

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Corporate Information Name of Company

Independent Television Network Limited

Legal Form Commenced operations on 13th April 1979 as a private sector company. Vested in the government by Gazette Extraordinary No. 39/4 of 5th June 1979 under the Business Undertaking Acquisition Act No. 35 of 1971.

Declared a Government Owned Public Company on 27th April 1992 under the Act No. 23 of 1987 appointing general treasury as the only shareholder.

Registered as a company under the Companies Act No 07 of 2007 as a Limited Liability Company.

Company Registration Number

PB 1070

Type of Business Operates two TV channels (ITN, Vasantham TV) and two radio channels (Lakhanda and Vasantham FM) serving Sinhala and Tamil speaking audiences in Sri Lanka.

Board of Directors as at 31st December 2011 Mr. Rosmand Senaratne Mr. Hassim Omar Mr. Mapalagama Wimalaratne Mr. J Devapiran Mr. P G Dassanayake Ms. Malanie Gamage

Chairman / CEO Director Director Director Director/ Working Director Director/Treasury Representative

Senior Management

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Mr. Rosmand Senaratne Mr. P G Dassanayake Mr. Aruna Wijesinghe Mr. Vipula Ratnasiri Mr. Upali Ranjith Mr. Asoka Karunanayake Mr. Sudarman Radaliyagoda Mr. M M Hassim Ms. Chamila Priyangani Ms. Sanjivani Epa

Chairman / CEO Director / Working Director General Manager Deputy General Manager (Programmes) Deputy General Manager (Marketing) Deputy General Manager (Lakhanda) Deputy General Manager (News & Current Affairs) Deputy General Manager (Engineering) Deputy General Manager (Finance) Deputy General Manager ( Administration)

Auditors

Ameresekera & Company – Chartered Accountants, Colombo

Accounting Year

1st January to 31st December

Company Secretary

Corporate Advisory Services (Pvt) Ltd, Colombo

Bankers

Bank of Ceylon

Contact Details

Head Office and Registered Office Wickramasinghepura, Battaramulla, Sri Lanka

Telephone

+94 11 2774424, 27773289

Fax +94 11 2774594

E-mail chairman@itn.lk itnadm@itn.lk Web www.itn.lk Marketing Office

No. 325, Baudhaloka Mawatha, Colombo 7.

Telephone

+94 11 2699072, 2682304, 2691868

Fax :

+94 11 2688724

E-mail

marketing@itn.lk

2011

Accolades

The National Business Excellence Awards Presented by The National Chamber of Commerce of Sri Lanka • Gold Award Winner for Media Sector – 2006, 2007, 2008, 2009, 2010 and 2011 SLIM NEILSON Peoples Awards – 2011 • Peoples TV Channel of The Year • Peoples Youth Channel of The Year • Peoples Programme of The Year ( Atapattama) • Peoples Teledrama of The Year ( Amanda) CNCI Achiever Awards - 2011 Presented by Ceylon National Chamber of Industries • CNCI Achiever of Industrial Excellence- Bronze Award

(Service Sector, National Level Extra Large Category) Sumathi Awards – 2011 • The TV Channel to Telecast Most Popular Teledrama ( Bonda Meedum) • Most Popular Teledrama of the year (Bonda Meedum) • Best News Channel – 2nd Place • Best News Reader – 2nd Place Raigam Tele Awards - 2011 • Most Popular Teledrama of the year (Amanda), • Best TV News Reader

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Board of Directors

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M Wimalaratne

Malanie Gamage

Rosmand Senaratne

Director

Director/ Treasury Representative

Chairman/ CEO

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Hassim Omar Director

P.G.Dassanayake Director/ Working Director

J. Devapiran Director

Chairman’s Communiqué

ITN will never be content as long as there is imagination left in us...

Revenue 2,500 2,094

2,000

1,777 1,499

1,500 685 600

500 2006 2007 2008 2009 2010 2011

Profit

12 Rs. Mn.

1,800 1,600

We have completed another successful year still maintaining the coveted Number One slot for the third consecutive year.

As we all know reaching the apex is hard enough, but staying at the top demands meticulous planning, diligent execution, creativity and mechanisms that gel all these factors into a cohesive forward drive. Let me assure you that we have resources and the commitment that is required to expand the horizons for us, for our client’s and the viewers as well.

As you know that ITN is a broadcasting company per se, and only the quality of our programs will sustain us into the future.

Having said that, we also have another principal mandate that is inherent of us. ITN is a national channel.

Therefore, the quality of the content, and also the responsible manner in which it is delivered is of paramount importance.

What we broadcast, be it news, talk shows, live discussions, cultural programmes or for that matter teledramas are carefully scrutinized to be in line with our corporate ethos before they go on air. Our resolve is to be impartial in what we do and offer everybody the deserving share of voice and audience with no inhibition. Our aim is to bring the entire Sri Lankan community together into a common platform and help meet minds to eradicate discrimination. Since the ushering of much relished peace, this has become fundamentally important for all Sri Lankans. If this goal can be achieved, there is no doubt that we can meet any external challenge as a single nation under one unified banner and if so, ITN will make every effort to help that endeavour a reality.

But we still have to be commercially viable too.

1,400

For sustenance we have to be on a sound financial footing and only then that we can explore ways and means to add more value to our services. With these objectives, obligations and responsibilities in mind we made critical and decisive changes to some of the areas that were identified as weak, and forged ahead with rejuvenated enthusiasm during last year.

1,200 1,000 800 600 400 200 0

ITN is on a roll.

1,185

1,000

0

It is with immense pleasure that I present our last year’s results to you. It is my second year as Chairman and today we are witnessing the fruits of our hard work, which I am about to share with you.

2006 2007 2008 2009 2010 2011 Gross Profit

Operating Profit

Net Profit after Taxation

The net result was reassuring. We increased our Total Revenue to over Rupees 2 billion and earned Rupees 481 million Profit after Tax. Revenue Growth of ITN was 17%. and Lakhanda Radio posted a growth of 34%.

Prime TV and Prime Radio was initiated to serve a strategic purpose during the conflict period. This was a national necessacity and transmission was on a channel and equipment those were rented. Since we did not have additional proprietary frequency and equipment and the costs of rent were prohibitive, we had to put it in the back burner until we are given necessary frequencies. These brand names are ITN’s property and when frequencies become available we will look into reviving transmissions of Prime TV and Prime Radio. In that context our stakeholders: clients and advertising agencies have been immensely supportive. Their vote of confidence and opt for our content is the yardstick that we can use to measure our success.

To reach these landmarks our Programme Division produced and presented several top quality programmes, which were amply supported by the Marketing Division earning the highest advertising revenue so far and the Engineering Division assured high quality transmission island wide.

Accolades 2011.

ITN was awarded many national level awards by organizations such as National Chamber of Commerce, Ceylon National Chamber of Industries and SLIM Nielsen Peoples Awards as the winner of National Business Excellence Award (Media Sector - six years consecutively), CNCI Achiever of Industrial Excellence – Bronze Award. We were also honoured as the People’s TV Channel of the Year, People’s Youth TV Channel of the Year and our programme ‘Atapattama’ as the People’s Programme of the Year and ‘Amanda’ as the People’s Teledrama of the Year.

Look to the future…

Now that the year 2011 year is behind us we have future challenges to face. Firstly, is to retain our Number One spot in the Sri Lankan entertainment sector. In 2012 Sri Lankan audiences will enjoy the first ever High Definition Television Productions.

This will be yet another first by ITN; the first television channel of Sri Lanka.

We are in the process of procuring and installing Digital HDTV infrastructure. At present we are taking action to conduct test broadcasting from Kokavil Station in the northern area with plans to expand the service to cover the entire island.

Also, as I said earlier the human resource is our prime asset and every effort is taken to encourage them to unleash their creativity. When and wherever is necessary we are assisting them with training, guidance and appraisals to bring the best in them out.

In appreciation…

Showbiz is teamwork, always. None of these achievements could have been possible if not for the team players who shouldered the responsibilities admirably. Their relentless pursuit of excellence inspired all of us to challenge the impossible.

I take this moment to note the astute counsel of my colleagues of the Board, unhesitating undertaking of our Senior Management and all staff who helped us to get the ‘show on the road’.

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Rosmand Senaratne

Chairman/ Chief Executive Officer

Senior Management Our knowledge is anchored in a long standing tradition of family entertainment. Thanks this heritage and our ability to constantly renew our offerings and surprise our viewers... each and every day of the year

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Sanjivani Epa

Upali Ranjith

Vipula Ratnasiri P.G.Dassanayake

DGM - Administration

DGM - Marketing

DGM - Programmes

Rosmand Senaratne

Director/ Working Director Chairman/ CEO

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M M Hassim

Aruna Wijesinghe

DGM - Engineering General Manager

Asoka Karunanayake

Sudarman Radaliyagoda Chamila Priyangani

DGM - Lakhanda Radio

DGM - News & Current Affairs

DGM - Finance

General Manager’s Review From the moment we achieved #1 status, it is a perpetual challenge to stay there... at which we have been outstandingly successful We have completed another successful year as the nation’s most preferred channel, surpassing Rupees two billion in Revenue with Rupees half a billion in Profit.

In a country where 17 TV channels and 35 Radio stations vying for a sizable slice of the market share, staying at the No 1 spot for three years consecutively is a prospect easier said than done. It takes imagination, creativity and wholehearted commitment of the entire team to achieve such preeminence. The quality of our hand picked programmes; crystal clear transmission and constant study of spectator perceptions and aligning our programmes to address their desires have propelled us to lead the pack. In an industry where there is no proven formula or a cohesive road map to get there, it demands gut instinct to identify viewers’ choices. We have been at it from inception and will continue to do so.

Today...ITN can be viewed on a hand held device... with crystal clarity from anywhere in the world.

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The Organisation The Revenue rose to Rupees 2,094 million and the Profit after Tax to Rupees 481 million. Despite stiff competition we have been maintaining our commanding presence at the topmost position for three years consecutively and all research organizations have acknowledged this fact without any provision.

Independent Television Network ITN is the No 1 channel in Sri Lanka today and posted Rupees 1,937 million in Revenue an increase of 17% from last year and the Profit rose to Rupees 535 million. Our teledramas and many other programmes have been our core strength that attracted wider viewership to us.

Lakhanda Radio.

Lakhanda Radio is ranked within the first five Radio stations, increased its Revenue last year, contributing Rupees 93 million to the Revenue. No doubt they will increase their income and profits in the coming years.

Vasantham TV and Radio.

Vasantham TV is very strong in Jaffna peninsula and also in Colombo, while Vasantham Radio is doing well in Jaffna, Colombo and Eastern province. They too have shown improvement during last year and much success is expected in the years to come. Their contribution to the Revenue was Rupees 52 million.

Prime TV and Radio.

Prime TV and Prime Radio were originally initiated to serve a national requirement and these channels was operated at a prohibitive cost, as we had to hire out a bandwidth and equipment from a third party. Prime TV and Prime Radio were temporarily discontinued due to same reasons. However, we own the name and the brand and can be reinstated if and when necessary.

Human Resource and Administration.

Administration Division harnesses all resources in to a single team force and manage the human capital with efficient, fair and transparent manner. As we all know that any organization is as good as it’s people. We are no different, except that we have the finest that Sri Lanka has produced in entertainment business. Every member is a champion and is treated as one.

Talent is always recognized and allowed to grow. Administration Division helps to maintain constant monitoring of their performance and reciprocates with performance appraisal incentives to induce inspiration.

Programming.

Programming is a vital cog in our operations and their subscription is beyond words. They consistently have introduced new entertainment with novelty and flair catering to varied interests. This also is the fundamental reason for us to become the No 1 media channel.

News & Current Affairs News is the feature that adds credibility to any channel and ITN News has earned respected status among Sri Lankan viewership in full measure.

I am proud to state that all profit centres are galloping at full speed and the brighter results are yet to come, and allow me to assure you that we will add and keep adding more value to our brand of entertainment without reservation.

I take this moment to thank the Chairman and the Board of Directors for their immense wisdom in helping us to move the Company forward, my Senior Management colleagues for their tenacious support and the members of the ‘Team ITN’ who made it all possible.

Our website was further enhanced to allow viewing of news in English, Sinhala and Tamil throughout the day whilst there are plans to procure Hi - tech cameras and peripheral devices that are needed to cover ‘real – time’ news. In order to be more competitive, plans are underway to increase the number of external recording units, New frontiers will be explored for ITN to become the Number One News Channel of Sri Lanka.

Engineering.

Engineering Division has been performing a phenomenal task by perpetually dominating the air with high quality transmissions giving our creative teams to unleash their imagination to the fullest. Although silent yet their mandate is the catalyst that enriched our formula of entertainment. With the introduction of Digital Television we will offer a whole new television experience for the Sri Lankan viewership.

Marketing.

Marketing Division is our source that put bread on the table.

Over the years they have achieved the impossible and marketed ITN Brand to the entire Sri Lankan business community and increased sales to epic proportions.

Whilst all these are happening in the limelight... there a few silent members doing a intrinsic service to keep the Company functional and financially sound.

Finance Finance Division has singularly managed all fiscal matters by maintaining books healthy and solvent, whilst providing funds whenever they are needed.

Aruna Wijesinghe

General Manager

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Corporate Governance

ITN is committed to achieve high standards of good governance to protect shareholder value and the guidance from the Board of Directors has greatly helped formulate cohesive policy framework.

In addition to complying with the statutory requirements, effective governing systems and practices towards improving transparency, internal controls and ethics at work place good governance is a continuing exercise of the organization.

Board of Directors The core responsibility of the Directors is to act in the best interest of the organization and to create long - term value and return for share holders. The Board is also responsible for the overall performance of the organization, major investments, annual budgets, financial performance reviews, risk management and governance practices. The Board has established a number of sub-committees including the Audit and Management Committee and the Procurement Committee to ensure efficient discharge of its responsibilities and ensure transparency to provide independent oversight of management.

In year 2011 the board comprised of following Directors.

Director

Position held

Period

Mr. Rosmand Senanratne

Chairman/CEO

31st May 2010 to date

Mr. Hassim Omar

Board Director

25th April 2005 to date

Mr. Mapalagama Wimalarathna

Board Director

04th January 2006 to date

Mr. Devapiran

Board Director

15th October 2009 to date

Mr. P G Dassanayake

Board Director/Working Director

31st May 2010 to date

Ms. Malanie Gamage

Board Director/Treasury Representative

09 February 2011 to date

18 The board members are free to discuss and voice their concerns on proposals that are forwarded for Board’s consideration and approval. Contributions of each Director are in many forms such as establishing strategic relationships to the organization and providing guidance to the management and exchanging of views.

Type of meetings

Frequency

Board Meetings

Once a Month

Audit and Management Committee

3 Meetings

Procurement Committee

Once a Week

Legal Affairs Committee

Once a Month

The management provides comprehensive managerial and operational reports and financial statements to the board on regular basis. The necessary information is submitted one week before the meetings so that directors acquaint with the state of affairs prior to the meeting thus, ensuing discussions are more focused and decisive.

Financial performance of the organization is presented at Board meetings and the General Manager and Senior Managers if necessary are also present at the meeting to answer queries the Board may have.

The Company Secretary assists the Chairman with the preparation of meeting agenda and administers, attends and prepares minutes of the Board proceedings, ensuring good flow of information within the Board. The Secretary assists the Board on the compliance with the Articles of Association, laws and regulations.

The management of the organization is committed to assist the Board to implement and strengthen good corporate governance practices.

Audit and Management Committee The Audit & Management Committee includes two non Executive Directors and Working Director. It is chaired by the Director representing the Treasury.

The Committee also comprises of a representative from the Ministry of Media Information, General Manager, Deputy General Managers : Finance, Administration and Marketing, Accountants of ITN / Lakhanda, and the Internal Auditor.

The Audit & Management Committee assists the Board to improve the prevailing systems to be transparent. It focuses on system of internal control, financial reporting process and comply with the laws and regulations and other best practices for corporate governance.

The committee gives guidelines to Internal Auditor as to the areas to be looked in to. Based on their reports the committee holds discussions with relevant mangers to ascertain how best existing systems and procedures may be improved.

During the period under review the committee met on three occasions and reports on meetings were presented to the board.

Internal Audit The Internal Audit functions of the institution, is being done by Internal Audit Section. Routine audit activity proceeds in accordance with the Annual Audit Programmes are approved by the Audit and Management Committee and the Board of Directors.

All audit matters arisen are directly reported to the Chairman for his information and decision.

The Internal Audits performed are aimed at assisting the board and management to discharge their corporate governance responsibilities as well as improving and promoting effective and efficient business process within the institution.

Procurement Committee ITN is following Government Procurement Procedure developed by the National Procurement Agency for its procurement needs of goods, services and works. Thereby ITN has benefited best value for money through the competition and ensuring transparency and consistency in procurement process. Organisational Procurement Committee of ITN is authorized to handle the procurement up to Rs. 50 million and it falls into two categories.

Upper Procurement Committee is chaired by the Chairman of ITN. A member from the Director Board, General Manager, a representative from the Ministry of Mass Media and Information, Deputy General Manager (Administration), Deputy General Manager (Finance) and Deputy General Manager (Engineering) will be present for meetings. It handles major contracts of goods, services and work above the value of Rs. 200,000/-.

Lower Procurement Committee is chaired by the General Manager and handles minor procurement contracts below the value of Rs. 200,000/-.

Both upper and lower Procurement Committees meet weekly for procurement matters.

Legal Affairs Committee The legal affairs committee consists of three board members, the General Manager assisted by the Legal Officer. The committee meets once a month before the Board of Directors meet to discuss the status of pending courts cases and fees payable to lawyers. Details of states of court cases and fees payable to lawyers are submitted to the committee by the Legal Officer to obtain their recommendation before submission to the board.

The Company Secretary The Company Secretary plays a key role in ensuring that the board procedures are followed, all relevant information, details, documents are made available to the Directors for effective decision making at the meetings.

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Corporate Footprints

from Ledger books...

Where it all began...

Our first transmission facility at Mahalwarawa, Pannipitiya...

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Our main transmission facility at Battaramulla, today...

ITN Head Office complex at Battaramulla, Wickremasinghepura today.

1979

Independent Television Network (ITN) commenced operations using a 1KW transmitter on a 65 feet tall antenna mast in Mahalwarawa, Pannipitiya by a team of private entrepreneurs.

Vested in the Government on 5th June.

1982

Transmission facilities, Studios and Head Offices were shifted to Wickremesinghepura, Battramulla.

Commenced operations using U - matic/ Low Band recording and later switched over to commonly used Betacam SP format.

1990

Yatiyantota Tx Station was officially launched on 1st November.

1992

Converted to a Government owned public company under Act No:23 of 1987 and registered under Companies Act No;17 of 1982 on 27th April.

Deniyaya Tx Station was officially launched on 23rd November.

1993

Nayabedda Tx Station was officially launched on 23rd August.

1997

Lakhanda Radio was brought under the management of ITN on 1st April.

1999

Hunnasgiriya Tx Station was officially launched on 12th April.

2000

Karagahatenna Tx Station was officially launched on 4th October.

2001

Lakhanda Studios and Head Office was shifted to ITN premises at Wickremasinghepura, Battaramulla on 7th April.

2006

Sooriyakanda Tx Station was officially launched on 2nd June.

2008

Vasantham FM Radio Channel was launched on 21st April.

ITN became the No 1 Channel in Prime Time in September 2008 for the first time in the history of ITN.

2009

ITN became the No 1 Channel on overall programmes.

Vasantham TV Channel was launched on 25th June.

Prime TV Channel was officially launched on 12 November.

Prime Radio Channel was officially launched on 12th November.

2010

Commenced construction of a large HDTV studio and office complex

2011

Introduced and implemented a Performance Appraisal System for the payment of performance incentive.

to Notebooks

21

Divisional Reporting Total team commitment and combined effort can be achieved only if the organisation is seamlessly harnessed with policies that recognise and encourage true individual potential without discrimination.

The Administration Division has been able to exhibit its resilience to challenges by way of providing a solid foundation and a robust organisational infrastructure to help culminate the exemplary performance in the year 2011.

The Division has always gelled the synergistic operation of all departments, from the orientation and induction of new staff members, to remuneration, benefit administration and career development through training and development for existing staff members.

The Administration Division has also leap - frogged the extra mile in providing workplace diversity and philanthropy, not only in the sphere of Human Resource Management, but through alternate projects during the year that’s behind us.

The Division conducted following local and foreign training programmes with greater participation from all segments.

Annual Training Summery (2011) Training Area

No. of Training Programmes

No. of employees participated

Local

22

Human Resource Development

13

Engineering

11 38

Television / Radio Production Finance Safety & Health

Workshops conducted throughout 2011 on diverse subjects and fields

603

6

70

10 18 4

12

Journalism

12 40

General Management

18

IT

11 44

207

General Management Journalism Safety & health Finance

Total 85 1,032

Foreign Engineering

6 8

Television / Radio Production

3

Journalism

3 3

TV & Radio Production Engineering Human Resource

Human Resource Development

Total

4

12 15

Total expenditure on training and development was Rs.4.2 million.

Performance appraisal and motivation A Performance Appraisal System was formulated and implemented successfully in 2011 to maintain constant monitoring of the staff’s performance. This will reciprocate commitment with performance appraisal incentives to induce inspiration.

Senior Management appraising a promising employee for carrier advancement...

The forthcoming Automated HR system is envisaged to manage all information pertaining to ITN staff such as daily attendance, leave, personal file data, position in the organization to help facilitate incentives on remuneration, promotions and career succession planning.

Administration

Employee strength as at 31 Dec. 2011

Management

ITN

Vasantham TV

Lakhanda Radio

Vasantham FM

83 2 22 2

Technical

150 14 1

TV/ Radio Production

125

12

23

Clerical & Allied

183

2

15

2

Total 541 16 74 5

Appointments/Recruitments during 2011

Assistant Manager (Administration) Contract 1 Marketing Manager ( Vasantham TV/Vasantham FM)

Contract

1

Marketing Executives

Contract

6

Librarian

Contract

1

Civil Representative

Contract

1

Trainee Technical Officer

Contract

14

Engineer Contract

1

Supplies Officer

1

Contract

Secretary Contract

1

Technician Contract

1

Expansion of vehicle fleet 4 new vans were added to the existing fleet during the year 2011 1

28

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Employee Communication We believe in cohesive two-way communication between employees and management and trust that it’s success depends on all employees understanding challenges, business strategies and financial status of the Company.

Thus, we have introduced a number of methods to keep employees informed by way of: • • • • •

Written communication Meetings Intercom system e-mail Easy access to management

Employee health and safety Well-being of employees is a primary fact behind our success, We firmly believe in employees who are physically and mentally fit, and always help them to enjoy a better quality of life outside the work place. We have invested on health benefits and conducted health camps to help employees to evaluate, maintain and improve their health.

Benefits to employees and improvements to welfare activities

24

•

Payment of annual bonus of Rs. 7,500/- per employee.

•

Payment of performance incentive of Rs. 42,500/- in December 2011.

•

Increase of attendance allowance to Rs. 4,000/- per month effective from May 2011.

•

Providing gift vouchers worth Rs. 5,000/- for permanent and contract employees and Rs. 2,500/- for relief panel for the New Year 2011.

•

Providing gift vouchers worth Rs. 3,000/- for permanent and contract employees and Rs. 2,000/- for relief panel for the Sinhala & Tamil New Year 2011

•

Providing festival advance of Rs. 5,000/- and textile loan of Rs. 10,000/- (interest free basis) for the Sinhala and Tamil New Year 2011.

•

Providing 24 hour Personal Accident Insurance cover for all permanent and contract employees.

•

Medical insurance cover for the value of Rs. 100,000/- to all permanent and contract employees and their family. members at Company’s cost.

•

Daily operation of an effective office transport service from Dehiwala, Fort, Piliandala and Kaduwela for staff transport

•

Issue of distress loans commensurate with the present salary.

•

Vehicle loans up to a maximum of Rs. 1 million for the Executive Staff.

•

Motor bike loans.

•

Hotel facilities made available under staff welfare scheme to staff members to spend a weekend with their family members once a year,

• Health assessment checks are conducted for employees in association with the Seva Wanitha Unit and Welfare Association, Family Get-together, sports and recreation activities •

A family get together was organized aiming to improve family relationships and employee social management and It was well received by the employees.

•

A cricket tournament and welfare trips were organised through the welfare association to encourage employees to balance their working and personal life.

Our responsibility to society ITN focus highly on its responsibilities towards public as we are a Company who interact with public throughout the day.

As much as offering entertainment, we are concerned of their well being too. Be it to promote new talent or education, community activity, health camps or village festival we will ignore the profit factor and offer our services as we know that someday these efforts will benefit the country.

Last year ITN allocated one and a half hours from its daily transmission hours to telecast educational programmes conducted by a panel of qualified teachers in the island for Ordinary Level, Advanced Level and year five scholarship students, and also conducted Workshops/Guidance programmes in rural areas to educate women on cooking, beauty culture etc. At the same time scholarships were granted to one hundred students who obtained high marks at the year five scholarship examination to continue their education up to university entrance. ITN organised Mass Media workshops for school children as well.

Lakhanda Radio conducted 20 medical camps in rural areas to offer free medical check ups and medicine were provided for identified illnesses. To mark the 14th Anniversary of Lakhanda Radio a health campaign was conducted at Ethanamadala Vidyalaya, Kalutara and presented welfare equipment.

ITN together with Lakhanda Radio in coordination with the Health Ministry, Police Department and the Urban / Provincial Councils of the highly affected areas in Colombo and outstations continued with active support as media agent to the ‘Curb Dengue’ programme,. During the campaign public were inspired by the feeling of social obligation.

ITN / Lakhanda Radio joined hands with the public to help those affected by the floods early 2011. General public were made aware of the requirement through the media and the collected water, food, clothes were distributed to the affected.

With donations received from well-wishes of Lakhanda Radio along with the business community, a two storied house was built and handed over to the family of an employee who died under tragic circumstances.

Media sponsorships were provided for projects such as – “Api Wenuwen Api” to improve the welfare facilities of disabled soldiers of armed forces.

ITN / Lakhanda Radio offered the media sponsorship to two significant exhibitions namely “Deyata Kirula”and “Inco 2011”.

The objective of these exhibitions was to impart knowledge of development and information to masses.

In the “Anawaranaya” section during the main news bulletins we exposed lapses, neglect, sabotage or otherwise that were undesirable to the public, and as a result the responsible persons or authorities were made to correct many such lapses or excesses.

ITN had given tremendous encouragement by free publicity to various social service events and activities organised by schools and places of religious worship. Further religious programmes sent on air by ITN and Lakhanda Rado are meant and aimed at propagating, understanding, tolerance and co-existence among the people of ethnic and religious diversities.

Programmes introducing and explaining the fundamental concepts, principals and beliefs of religions were continued as daily programmes whilst special monthly programmes such as “Buddha Rashmi”( Lakhanda) and “Savanak Ras” (ITN) are aired on Poya Days. These programmes are intended to help building a peaceful and righteous society.

Cost free advertising was made available for patients in critical stages in hospitals for their needs for blood and other requirements invoking Buddhist blessings of “Karuna” and “Dana”.

ITN and Lakhanda Radio also carried a programme to mark the World’s Children’s Day and a programme to mark the World’s Women’s day as well.

25

Divisional Reporting The Engineering Division continued its efforts to improve to facilitate the needs and demands of other divisions whilst meeting it’s own goals and objectives as determined in the Corporate Plan 2009-2013 as outlined below: 1.

2.

3.

4.

5.

To commence digital transmission.

To expand TV and Radio coverage.

To improve facilities for TV and Radio.

To implement an appropriate Management Information System.

To implement an appropriate Media Asset Management System.

Improvements to Infrastructure at ITN Additional office space became an urgent requirement due to the increase of staff with the introduction of the new Tamil and English TV and Radio channels in 2009. Accordingly, the News and Marketing building was built throughout 2009 & 2010. The year 2011 was earmarked to provide building space for the staff at ITN Battaramulla and technical facilities to cope with the increase in production work.

Therefore, in April 2011, construction commenced on a four storey building to accommodate the Program & Technical staff and a video library together with a TV production studio and a smaller Talk studio with the Set & Graphic staff and set storage area. The walls and finishing, centralized AC system and Power are planned for the year 2012.

New Studio and Office complex nearing completion at Battaramulla Head Office premises.

26

The new TV Production studio will be equipped with technical equipment of High Definition format. Procurement was initiated for most of the equipment since February 2011. These equipment includes a sophisticated lighting system, HD cameras, video production switcher, character generator, video monitors & receivers, digital video recorders, 36 channel audio mixer and test equipment among others.

Construction of the four storey building for the Power House was nearing completion towards the end of 2011. The ground floor was completed and the new 810 kVA super silent diesel generator was installed. An underground diesel tank of 20,000 litre capacity was constructed and connected to this generator. The 1st and 2nd floor of this building was completed and prepared as office space. The 3rd and 4th floors are prepared as dormitory space for technical and transport sections respectively.

Improved Facilities at Marketing Division Procurement commenced in May 2011 for a 100 kVA silent type diesel generator and 40 kVA UPS system for the Marketing division. This was a prime necessity due to the prolonged CEB power interruptions at critical moments during the operational work using computer equipment at the Marketing Division. With ITN becoming the number one TV station in Sri Lanka consecutively for the last several years, the quality of service that the Engineering division could provide was considered of paramount importance.

Procurement also commenced in November 2011 for a NAS Server and IP Cameras for the Marketing & Credit Control Section, shifting the technology towards a file based system for quick delivery of commercial and program materials originating from Torrington Square; the IP Cameras would keep the Server area in close surveillance as a safety requirement.

A UPS System and AC were also installed for the Server room. Marketing Division is linked to ITN Head Office at Battaramulla via fibre optic connectivity; a service acquired from Sri Lanka Telecom (SLT) on a monthly rental basis.

Improved TV & Radio Broadcast Facilities The 7th TV & Radio Transmitter Station of ITN commenced transmissions from Kokavil Multi - functional Transmission Tower which was formerly declared open on 6th June 2011 by His Excellency the President Mahinda Rajapakse. Vasantham TV (VTV) and Vasantham FM (VFM) transmission is broadcast to the North from Kokavil. However, ITN commenced TV and Radio transmission from Palaly in Jaffna as well during the year to counter the competitive stations who also have started high powered transmission from Jaffna. The MCR at ITN Wickremasinghepura was linked to Kokavil and Jaffna using fibre optic and broadband technology respectively, outsourced from SLT.

Engineering

Procurement commenced in December 2011 for a 3 kW FM Transmitter and Antenna for transmission of VFM from Jaffna, 22” LCD TV receivers for Kokavil and Nayabedde transmission stations, Audio / Video distribution amplifiers for Colombo, Deniyaye, Nayabedde and Yatiyantota transmission stations and a standby 5 kW FM Transmitter for Lakhanda and VFM. VTV & VFM Transmission to the East is planned for early next year for which procurement of Transmission and Antenna equipment was initiated in December 2011.

Improved IT & Web Facilities Desktop and laptop computers were procured this year for Lakhanda, ITN & VTV News for new installations and replacements. NAS servers were procured to supplement the work at Web Section providing storage facilities for the broadcast IT network at ITN. Computer graphics workstation was installed for the Program Division upgrading the unit currently in use.

Impact dot matrix printers were procured for Daily Scheduling software work.

Improved Radio Production Facilities The three numbers DJ Studios constructed last year for Lakhanda and VFM at ITN Battaramulla was equipped with digital and analog audio distribution amplifiers, distribution amplifiers, audio patch panels, audio matrix switches, powered active monitors, digital audio monitoring panel, 06 channel analog audio mixers and CD players. Further, condenser microphones, headphones, boom stands and audio cables were procured to replace equipment in use and maintain Radio Post – Production facilities.

Procurement is in progress for an Appliance Based Firewall System and a Human Resource Information System (HR). The Appliance Based Firewall system is expected to offer a comprehensive network, web & content, application and email security whilst providing safe remote access and prevention of sensitive information or data leakage.

Improved TV Production Facilities Facilities for TV Post Production and Studio recordings were improved with the procurement of audio monitoring system, digital audio mixing console and analog video / audio distribution amplifiers. Multi definition video production switcher, frame synchronizers, 24” colour video monitors, PC based HD/ SD-SDI scan converters are some of the equipment which are awaiting delivery to replace aged equipment in use.

ITN intends to start production of game shows for which procurement of a 55” Touch Screen colour display monitor is in progress. 42” LCD TV receiver was procured for the channel promotion section and installed in the main platform of the Fort Railway Station. Procurement is in progress for another large screen LCD TV receiver to be installed in the Kandy Railway Station.

Procurement of an HD-SDI Test signal generator and waveform monitor was initiated in December 2011. These equipment are for trouble shooting and maintenance of HD equipment of the new studio being constructed. Procurement is in progress for a video production switcher to replace the aging equipment in the OB bus. A new OB Bus is also planned for next year for which tenders have already been called. Furthermore, Headphones, Handheld and Clip-on microphones were procured for the ENG section.

Towards the end of the year a basic computer training and office package course for ITN office staff was conducted Inhouse by the IT team of ITN. A total of 40 office staff were given training in phases. This training program was found to be highly successful and productive.

The Engineering team has already started to convert much of its old U-matic recordings of significance to a digital file based system. Most of the work in the News Division is digital file based. The provincial news reporters too send their news through FTP to the News Division. This has simplified the workflow in the News Division and paved the way to present news items at short notice. Most of the work flow for VTV, VFM and Lakhanda Radio is now file based. This has heightened the demand for storage space, due to the gradual migration to a file based workflow, during the last three years.

This has been a challenge to the Broadcast IT team and they strive for a solution to manage the media storage assets at ITN.

27

Divisional Reporting Marketing Division’s income for the year 2011 is Rs. 2.1Bn and the highest contributions yeilded agencywise stood at; Phoenix O & M (Pvt)Ltd and J.Walter Thompson (Mindshare Sri Lanka) leading with equel investments and closely followed by Grant Advertising (Pvt)Ltd and Media Factory(Pvt) Ltd along with Madison Media.

CUSTOMER CONCENTRATION Rs. Mn 400

This financial achievement is an increase of Rs.317 million, an increase of 18% over the previous year (2010) in which the income derived stood at Rs.1.77 billion.

350 300

The Fonterra Brands Lanka was the highest contributor as a single client followed by Unilever Sri Lanka and Glaxo Smith Kline.

250 200

Throughout 2011, the Market Share of ITN stood at the highest amongst all TV Channels in Sri Lanka. According to LMRB data the Market Share of ITN was 18.94% while the SRL data recorded 32.59%.

150 100

In year 2011, ITN was able to hold the ‘Soorya Mangallaya’ the Sinhala/Hindu New year programme at two locations namely Dambulla and Jaffna, simultaneously.

50 0 2007

2008

2009

2010

2011

* Media sponsorship for Architect 2011 Trade Exhibition which was

organised by Sri Lanka Institute of Architects in February,2011.

MARKET CONCENTRATION Rs. Mn 2,500

* Media sponsorship for Special Live Programmes on

International ‘Women’s Day’ on 08th March,2011.

2,000

28

The Marketing Division successfully negotiated the following media partnerships which were implemented in the year 2011.

* Media sponsorship for ‘Insurance Awards Ceremony’ which was

organized by Coorporative Insurance Company Ltd and held on

Jet Liner Ship on 03rd April 2011.

1,500

* Entered into agreements with clients to implement sponsorships

for live telecast of ‘Lama Avurudu Ulela’ 2011 on 09th April 2011

at Janakala Kendraya.

1,000

* Entered into agreements with clients to implement sponsorships

for live telecast of ‘Soorya Mangallaya’ 2011 (13th and 14th April

2011) Sinhala and Hindu New Year celebrations at Dambulla and Jaffna.

500

0 2007

2008

2009

2010

2011

* Media sponsorship for Munchee National Volley Ball Champion

ship, organized by Ceylon Biscuits Ltd on 07th May 2011 at

Sugathadasa Indoor Stadium, Colombo. * Vesak celebrations were telecast from Colombo. * Sponsorship for Poson Poya celebrations at Sithulpawwa. * Sponsorship for ‘INCO 2011’ Industrial Exhibition and Trade Fair

held on 24th -26th June 2011 organized by The Institution of Incor

porated Engineers, Sri Lanka. * Live telecast of ‘Ruhunu Maha Katharagama Perahera’ in July,2011. * Media sponsorship for ‘Expo Bazaar 2011’ at Green Path,

Colombo organized by Sri Lanka Export Development Board. * Media sponsorship for Industrial Excellence Awards 2011

(Small and Medium Industries) which was organized by Sri Lanka

Chamber of Small and Medium Industries in July,2011. * Media sponsorship to telecast ‘Esala Dalada Perahera’

at Kandy in August 2011. * Media sponsorship for ‘DSI Super Sport Volley Ball’ Tournament

on 20th August 2011.

Marketing

*

Media sponsorship was provided to ‘ Tharu Dilena Reyak – 2 with Asha Bhosle and B & S ‘, musical extravaganza which was organized by Seva Vanitha Army Branch in August 2011.

* ‘CNCI Achievers Awards 2011’ organized by The Ceylon

National Chamber of Industries on 30th August, 2011. * Media sponsorship for special live - programmes to

mark ‘World Children’s Day’ in October,2011. * Media sponsorship for ‘Shilpa 2011’ National Exhibition

and Trade Fair organized by the Ministry of Traditional

Industries and Small Enterprises Development in October,2011. * Media sponsorship for ‘Annual Report Awards 2011’

organized by the Institute of Chartered Ac countants of

Sri Lanka in December,2011.

Following strategies were implemented to achieve the set target.

I.

Commitment Contracts • Entered into commitment contracts with following leading advertising agencies.

Agency

Mindshare-Sri Lanka Phoenix Grant Maccan Erickson Media Factory/ Madison Media Triad

First Media Solutions

II. Publicity & Promotion • Entered into contra agreements with Newspaper

Organisations to communicate programme line ups to

attract more urban viewership.

• Press conferences to obtain wider publicity.

• Erect Billboards displaying the strengths of ITN in

Colombo and other selected towns.

• On line competitions during teledramas and offer gift

items to the winners.

III. Use of Information Technology • Application of information technology to accelerate productivity.

• Usage of E-mail to dispatch proposals to Ad-Agencies

and Clients.

• Usage of IT for transfer of telecast materials such as

Logo branding etc., • Promotions of ITN Web banner.

IV. Training • Training the marketing staff on public relations,

marketing communication, 5S system, inter divisional

coordination aimed at increasing ratings.

V.

Market Research and Analysis Entered into agreements with SRL and LMRB, to obtain data in market research.

Based on the market research data the following measures were taken to promote sales.

•

•

Competitions were introduced into teledramas and action taken to award prizes to winners.

Launching of new teledramas and new time belts as special events with participation of Agencies/Clients/ Related Artistes.

VI. Consultancy Services

Consultancy services were obtained from an expert

Media Planner to attend on analyzing market behavior,

provide media reports, analyze ITN performance, analyze

programme ratings and provide projections for future.

VII. Commercial Packages.

•

•

•

•

Custom commercial packages were offered responding to special requirements of advertisers.

Special packages were offered to suit special events and special seasons.

Action taken to grant special discounts for clients under taking agreed financial commitments on yearly basis.

Offering of value added Packages/Benefits to Clients/ Agencies considering their requirements, product promo tion and the events organized by them.

VIII. Biz News • With the view to strengthen existing business relations

Biz News Coverage was provided free of charge to

Agencies/Clients for their business events such as Semi

nars, Product Launches etc., in ITN and Prime TV.

29

Divisional Reporting Programming Division ITN, the foremost TV Channel of Sri Lanka, celebrated its 33rd anniversary in 2011. According to SLR and LMRB data records, ITN was placed at No. 1 rank in Sri Lanka continuously from September 2008 which we still retain. According to overall viewers’ data records ( and also to SLR and LMRB data), we were able to retain No. 1 position with honour by further improving our position. In 2011 a transmission period of 596 hours per month was maintained and the annual transmission period maintained was nearly 7,152 hours.

It was possible to continue the Tamil Channel, Vasantham TV which was added to our media network two years ago, in a manner more attractive to the viewers. Particularly, with the commencement of the Kokavil Transmission Centre during last year, Vasantham TV made inroads to the people of the north as a local Tamil channel with increasing popularity. It was yet another achievement of us in 2011.

While telecasting the most popular four teledramas in Sri Lanka, ITN provided an opportunity to the creative directors in the field of tele-dramas to telecast their creations too.

Special Programmes in 2011 DFCC Mind Star Second stage of the Quiz Reality Program introduced for the first time in the history of Sri Lankan television programs was telecast this year on every Saturday from 9.00 p.m. Thus, this Programme was given a special appreciation at the Sumathi Tele-drama Awards Festival 2011.

Asha Bhonsle ‘Live in Concert’ Media sponsorship was obtained for the musical concert held in the country by the popular Indian singing star Asha Bhonsle and the ability on the part of ITN to secure the right to TV production and broadcast of this concert was a unique achievement by us in the year 2011.

30

‘Deyata Kirula’ National Exhibition – 2011 ITN played a special role at the Deyata Kirula National Exhibition held at Moneragala by the government highlighting the pride and development of the country. The exhibition stall and the mobile studio built at the exhibition ground were a special attraction to the public.

Some of our blockbuster attractions during 2011...

Special Promotional Programmes In order to attract more response from the viewers two Promotional Programmes including a cricket match and a musical concert with the participation of the artistes who were involved in the four tele-dramas telecast on week days in 2011 were held in Kandy and Negombo. The very high participation of the public at both these programmes was a very clear indication of the tremendous popularity enjoyed by the channel.

In 2011 too it was possible to broadcast the following programmes with increasing popular attraction: 1 Doramandalawa 2 Atapattama 3 “Venasa” Magazine Programme 4 “Sanhinda” Musical Programme Programmes to mark special Annual Festivals 1 Sinhala and Hindu New Year Festival The Programme “Surya Mangalyaya” produced to mark the Sinhala and Tamil New Year was the New Year Programme with the highest viewer response this year. This “Surya Mangalyaya” Programme was broadcast from the banks of Ibbankatuwa Reservoir in the south and from Velvetithurai in Jaffna in the north. This Programme was highly appreciated by the viewers as a programme of cultural exchange between the Sinhala and Tamil communities.

2 Universal Women’s day Celebrations A special Programme was organized at the National Youth Centre, Maharagama, with the participation of a large number of women, to mark the Universal Women’s Day. Religious Programmes

Programming

A number of special religious programmes were organized to coincide with the 2600 Sambuddhatva Jayanthiya which falls in 2011. The series of Programmes “Savanak Res” telecast from a historic temple in the island on the Full Moon Day was successfully concluded. ITN provided exclusive media sponsorship for the “Buddha Rashmi” Vesak Zone organized jointly by the Presidential Secretariat and the Hunupitiya Gangarama Temple and it received a large viewer response.

In addition, ITN conducted a variety of other special Programmes too to mark the Christmas Festival 2011. As a part of these special programmes, two Christmas Masses were telecast and a series of popular English films were telecast over ITN for the Catholic viewers.

In 2011 too ITN provided media sponsorship for a number of national sports events including the following in addition to media sponsorship for all the national level volleyball tournaments: • • •

Munchee Volleyball tournament Presidential Gold Cup Volleyball tournament DSI Super Sports School Volleyball tournament

By providing special media sponsorship for the South Asian Beach Volleyball Sports Festival held in Hambantota in Sri Lanka, ITN played a prominent role in bringing the said International Sports Festival to our sports fans.

Children’s Programmes 1 Children’s New Year Programme ITN organized a New Year Programme for children and telecast it from an attractive set constructed at the Pelawatta Jana Kala Kendraya, Battaramulla with a record participation of children.

National duty of the Independent Television Network

2 Universal Children’s Day Celebrations –

“ITN Lama Lokaya” This Programme was held at “Leisure World Water Park” in Kaluaggala with the participation of a large number of children.

‘ITN Lama Lokaya’ was a prominent programme among the Universal Children’s Day Programmes.

As a family channel, our programme line-up can be enjoyed by the entire family and our programmes are highly commended by viewers at different levels of society. It is our sole intention to further strengthen and consolidate the No. 1 position we have achieved by engaging in a media mission getting still closer to the people and discharging our duties as the principal guardian of our cultural heritage and values.

3 World famous children’s cartoon Programmes In 2011 arrangements were made by ITN to telecast a series of world famous children’s cartoon progrmmes on all five days of the week from 4.30 p.m. to 5.30 p.m. According to viewer data, this one - hour air time secured No. 1 place among all channels. This series of cartoon programmes was assorted from the famous cartoon programmes series, Woody Wood Pecker.

Educational Programmes In 2011, the entire air time from 4.30 a.m. to 5.30 a.m. on week days was dedicated exclusively for educational programmes.

Accordingly, the educational programme “Thakshilawa” conducted by a group of veteran teachers of the island aimed at GCE (O/L) and GCE (A/L.) Examinations was very popular among school children. In 2011 ITN was also able to telecast a series of half hour weekly programmes aimed at children studying for the Year Five Examination.

Sports Programmes

It is the duty of any national channel to enlighten the people on the development of the country and to place facts before them, and in 2011 ITN did perform this duty conforming to the highest standards of national duty.

31

Divisional Reporting The progress made by Lakhanda through the programme restructuring measures in 2010 was further consolidated in 2011 according to the SLR survey report. Financial reports indicate that sales income too have recorded a corresponding increase.

In 2011, short term restructuring was done in Programmes and News Sectors with the direct objective of increasing listener response.

Accordingly, SLR survey report has indicated that Lakhanda Radio has become the foremost channel among all radio channels and has registered an increase in the number of listeners within three years, in terms of all air time periods.

Busy technical staff during News casting...

The Buddhabhi Vandana religious programme broadcast between 03.30 – 6.00 a.m. every morning with tremendous listener response was extended from 22.00 hrs – 06.00 a.m.The night air time from 22.00 – 23.00 hrs was dedicated for a series of enlightening dhamma sermons. The objective of Lakhanda Buddhabhi Vandana is to broadcast a series of accurate and quality programmes.

During the year Lakhanda secured an increased response to the series of Dhamma sermons titled “Sitha Nivana Budu Bana” every week-end from 8.00 a.m. to 9.00 a.m.

In 2011 sponsorship was secured for the “Buddha Rashmi” Poya programme and is expected to extend this to “Buddhabhi vandana” in 2012.

The religious programme series programmes conducted in a number of places including Anuradhapura, Kandy, Kataragama, Didghavapi and Gangaramaya helped enhance the image of Lakhanda.

32

The programme, “Ira Sevaya” between 6.00 a.m. – 8.00 a.m. was restructured with the objective of securing sponsor attention and it was possible to secure it sufficiently during 2011.

With donations received from well-wishers and the business community of Lakhanda Radio, a two storied house was built and handed over to the family of an employee who died under tragic circumstances.

The period between 8.00 a.m. – 9.00 a.m. has been allocated for the review of current affairs and people’s opinions as a national obligation.

“Lakhanda Helidarawwa” prodgramme is broadcast during this period.

Air time between 9.00 a.m. – 10.00 a.m. is dedicated for the programme “Sonduru gee mandakiniya” where a single theme or songs of a selected singer are featured.

The programme “Lassana Davasak” between 10.00 a.m. – 12.00 noon was created to provide light entertainment and knowledge with the objective of securing sponsorship. Other channels are seen utilizing this air time with attractive prizes for their own promotional purposes. Attention will be paid on this aspect during the ensuing year.

The “Gee Rashmi concert platform between 12.30 p.m. – 14.00 p.m. is broadcast with increasing listener response and sponsor attention from one quarter to another. As a promotional programme too “Gee Rashmi” renders a great service to Lakhanda.

A single episode radio programme titled “Sandyawe Sihinaya” was broadcast during 14.00 – 16.00 hrs with the participation of amateur artistes and through that it was possible to attract a considerable number of listeners. Arrangements have been made to continue this programme during 2012 along with broader promotional programs with creative contributions of popular script writers.

The time between 16.00 – 17.30 hrs was dedicated for the entertainment programme “Nala matakaya” which provided light entertainment with a touch of sarcasm. It is further expected that this programme would be able to attract listener attention as an effective alternative to the meaningless imitations engaged in by many other channels.

A new programme titled “Lakhanda Prema Thatakaya” was started during 2011 between 19.30 – 21.00 hrs as an external recording featuring solo concerts of popular artistes. At present Lakhanda has been able to act as the media sponsor of all such concerts held in Colombo and the suburbs. This is a programme performing an important role in the task of Lakhanda promotional mission.

According to LMRB Survey report, the Programme “Jothi Rathriya” broadcast between 21.00 – 22.00 hrs enjoys the second place among all radio

Lakhanda Radio

channels. This is conducted as a promotional programme as well. Lakhanda has by now been able to secure a large number of rare hits by the late singer, H.R.Jothipala, with the help of Lakhanda fans.

Computerization of songs in the library of Lakhanda was further continued in 2011. All functions including the preparation of daily continuity schedule, trailers and commercial announcements, broadcast of songs and programmes were computerized in 2011 by using new computer software.

All staff members were given training in the new software, M Collector.

In addition to the above, selected members of the staff have been directed for training in computer skills, leadership and attitude change. Employees of the Engineering and Programme Divisions have been identified for foreign training.

During 2011, Lakhanda was able to offer listeners a new experience of ’Gee Rashmi’, every month by organizing the massive live musical show.

In addition to the above, promotional activities were also carried out through the Deyata Kirula Exhibition, Budddha Rashmi Vesak Zone, outreach promotional visits focusing Poson Udanaya in Anuradhapura, outstation radio broadcasts and the creation of stickers, posters and banners etc.

Promotional activities were also carried out through “Sampath Hamuwa” and “Hospitality for humanity”. Donation of materials for educational requirements of school children, medical equipment, wheel chairs, crutches, musical instruments, sewing machines etc were part pf the exercise, and for the needy and it was also possible to build and donate a two-storey building for a poor family at a cost of Rs 2.3 million.

Apart from the above activities, Lakhanda Radio took the initiative to organize 40 medical clinics throughout the island in collaboration with Sadaham Osu Organization and also to organize a “Buddha Rashmi” promotional visit on every poya day. We were also able to provide exclusive official sponsorship for a large number of musical programmes, drama festivals and other activities in the spheres of arts, with the participation of popular vocalists of the country.

In the mean time, the society of aesthetics of this country was treated to an unprecedented experience in the culture of musical concerts to mark the 15th anniversary of Lakhanda. This concert titled ‘Sanda Re Suvisara - Lakhanda, the pride of 15 years’ – held in Colombo attracted a record crowd.

Under the Programe, “Lassana Davasak” a prize worth Rs. 10,000/= was presented to winners each day during the year and the fact that Lakhanda was able to launch a massive promotional drive with the assistance of ITN and the national papers can be regarded as yet another achievement by us during the period under review.

In 2011 special attention was paid to bringing news reporting closer to the public and the success recorded by the News Section in finding solutions to people’s problems was much appreciated by listeners. Through the programme, “Sodisi Meheyuma”, nearly 200 unsettled problems were brought to the notice of authorities and the involvement of the News Section was instrumental in finding solutions to about thirty of them.

The News staff was directed to training programmes more frequently in collaboration with the Media School and the Ministry of Skills Development and a number of other institutes.

Officials of the News Section were deployed for effective coverage of international conferences and other special functions.

Creative and strategic methods were introduced to news presentations in order to increase public attraction to the development news of the government. For example, during 2011 close contacts were established with relevant Ministries/ Provincial Councils /institutes/local government authorities etc for effective coverage of special projects such as the Southern Highway Project, Nelum Pokuna etc. The steps taken in 2011 to build a sound co-ordination with the Marketing Division enabled Lakhanda News Division to earn an income of Rs. 15.77 million.

New DJ studios were established for Vasantham and Lakhanda services utilizing new technology thereby enhancing listener response.

33

Vasantham Television

Divisional Reporting

Since installing normalcy through out the island of Sri Lanka, Vasantham TV, the Tamil television channel of the ITN was launched in year 2009 June 25th, giving importance to the heritage of Tamils, especially for their art and cultural programmes. It was first launched in Colombo and later in Jaffna and ultimately expanded through the biggest telecommunication tower in Kokavil to the entire Northern Province.

Until then majority of the Tamil television channels in Sri Lanka telecast a large number of programmes from various Indian television channels.

But from the beginning Vansantham TV telecast majority of the programmes under its own production. There were different programmes telecast separately on weekly days and weekends from morning 6 am to 12am on regular basis. All of these programmes were designed in order to attract all members in a family.

Vasantham TV also won two awards at the state awards ceremony for best Tamil television shows within the six months of its launching.

The programmes telecasted on Vasantham TV are as follows, Tamil feature films Cultural Programmes Mega Tele Serials News and Current affairs Talk Shows Musical Programmes Children’s Programmes Magazine Programmes Entertainment Programmes Future projects

34

in order to bring Vasantham TV more closer to viewers in Sri Lanka several steps are being taken

Some of our popular programmes that are taken to the hearts of the Tamil viewership...

•

Transmission expansion of the channel.

•

Producing local teledramas, to encourage Sri Lankan artists to enhance their participation.

• Producing reality shows to bring out the hidden talents of the

local people, by paving ways to reach the majority of the Tamil

public which would also publicize the talents of the Tamil artists.

Divisional Reporting

Vasantham FM Vasantham FM has been able to enhance the quality of its broadcast service in several regions in the island including North, East, and Colombo along with the introduction of the new channel 91.8 MHz aired from its transmission tower in Kokawil. This has enabled Vasantham FM to further broaden its patron base.

As a result of the improvements made during 2008, Vasanatham FM succeeded in surging forward surpassing all the competitors and grabbing the third position of the LMRB, in its stride.

Northern Penninsula took a festive atmosphere with the commissioning of Sri Lanka’s tallest transmission tower at Kokavil.

Vasantham FM proceeded to offer short time radio programs and news bulletins and soon became very popular among radio fans. Vasantham FM also made considerable contribution for the government’s task of educating the public about humanitarian based initiatives of the security personal as well as relief provided to people by the state.

This helped to bring the Tamil people, the government and the security forces much closer. Vasantham FM won accolade not only as a news broadcaster but also as an arbitrator for current issues.

During the year of address, Vasantham FM added several novel items which allured more listeners for the service and became among the first three most popular Tamil radio stations of the nation. Changes were made in the administration as well and new comers were heaved aboard as news readers which further enhanced the popularity of Vasantham FM among Tamil speaking radio fans.

Our religious programs ‘Iray Osai’ aptly broadcast during early morning hours from 5 am to 6 pm with devotional songs, too are well received by devotees of respective faiths. Additionally, Vasantham FM aired special programs during festivals of various communities along with exclusive live broadcast of feasts held in prominent sacred places in various areas in the island including Jaffna, Kilinochchi, Trincomalee, Kattankudi and Colombo during 2011.

Meanwhile, sponsored programs aired daily from 6 am to 10 am have considerably increased the patronage for Vasantham FM, while programs broadcast from 10 am to 1 pm were offered as interesting playful programs that offered prices and rewards.

And the ‘Ragham Sugamanathu’ aired during week days from 1 pm to 4 pm offered vintage songs, especially for the ‘old song’ fans, while 4 pm to 7 pm program offered mixed period songs which too became popular among all age groups.

From 7.15 pm to 9 pm Vasantham FM airs a cocktail program called ‘Pottu Thakku’ that is a blend of humor, astrology, song competition etc.

From 9.15 pm to midnight, through the program ‘Vasantha Nila’, we offer selected songs, poems and swapping experience of listeners.

To carter the late night dwellers Vasantham FM airs the cocktail program ‘Natchaththira Vaanam’, with a mix of music and comedy to keep them vibrant. Day’s programs are concluded with ‘Idham Tharum Ragam’, aired from 3 am to 5 am with songs with soft music.

Vasantham FM adopted the Computer software M Collector during 2011 which has enabled us to air our programs with more clarity and quality. Our news readers too were imparted with special training to be compatible with improved technology.

Moreover, Vasantham FM organized and held 25 musical programs with great success for its fans during 2011 in various parts of the country. This first ever initiative has been recorded as a historic event in our journey which helped add more listners for Vasantham FM. In the meantime, Vasantham FM has further broadened its perimeters in order to reach global audience by commencing its online broadcast service. The service could be accessed through the web domain www. vasanthamfm.lk

35

News & Current Affairs

Divisional Reporting

At beginning of 2011, all research sources confirmed that ITN News has taken the foremost rank and accordingly Raigam Awards acknowledged the fact with an award.

Thus, in order to add more qualitative value to ITN News, several new measures were initiated during the year 2011.

To attract more viewers, many features with novelty was added to the four mainstream news bulletins and hourly news bulletins,

The new digitally re - mastered ITN’s unique theme music helped to attract more audiences,

Several officials who were employed on daily basis were enrolled as contract employees and some were adapted to perma nent staff,

Website was further enhanced to allow viewing of news in English, Sinhala and Tamil throughout the day.

Projects 2012…

The modern News Room with two newscasters needs further

improvements and the necessary infrastructure will be acquired soon,

36

News division busy editing reports for telecast...

Hi - tech cameras and peripheral devices that are needed to cover ‘real – time’ news will be procured.

In order to be more competitive, plans are underway to increase the number of external recording units,

New frontiers will be explored for ITN to become the Number One News Channel of South East Asia.

Financial Statements

ORPORATE R 38 Annual Report of the Board of Directors on the affairs of the Company C

40 Independent Auditors Report

41 Statement of Income

42 Balance Sheet 43 Statement of Changes in Equity

44 Cash Flow Statement 45 Notes to the Financial Statements

37

Annual Report of the Board of Directors on the Affairs of the Company The Directors are pleased to present this corporate report together with the audited Financial Statements of Independent Television Network Ltd for the year ended 31st December 2011.

Principal Activities The principle activities of the organization during the year were to operate two TV channels and two Radio channels catering to Sinhala and Tamil speaking communities of Sri Lanka with the widest range of entertaining programmes of music, drama, movie etc. and educational programmes, news bulletins and current affairs.

There have been no significant changes in the nature of principal activities during the financial year under review.

Review of Business The review of the operation of the Company during the financial year and results of those operations and future developments are stated in the Chairman’s Communiqué and on the reports given by each division. These reports form an integral part of the Annual Report of the Board of Directors on the affairs of the company.

Future Developments Future prospects of the organization are covered in the Chairman’s Communiqué and the reports given by each division.

Going Concern The Directors are satisfied that the Company has adequate resources to continue its operations in the foreseeable future.

Accordingly the financial reports are prepared based on the Going Concern.

Revenue The revenue of the organization during the year was Rs. 2,094 million. An analysis of revenue is given in Note 2 to the financial statements.

Profit and Appropriation Net profit after taxation of the organization was Rs. 481 million and Rs. 24 million is proposed to be declared as dividends.

Share Capital The stated capital as at the end of the year was Rs. 95,000,000/-, consisting of 9,500,000 number of ordinary shares.

38

Employment The number of employees as at 31st December 2011 was as follows.

ITN Vasantham Lakhanda Vasantham

TV Radio FM Management 83 2 22 2 Engineering 150 14 1 TV/Radio Production 125 12 23 2 Clerical & Allied 183 2 15 Total 541 16 74 5 Dividends Directors have recommended a first and final payment of Rs. 2.53 per ordinary share, which will amount to a payment of Rs. 24 million. Total dividend payment as a percentage of Organization’s own profit after tax for the year ended 31 December 2011 is 5%.

Reserves The Reserves as at 31st December 2011 amounted to Rs. 1,357 million. The movements of the reserves during the year are shown in Statement of changes in Equity for the year 2011.

Property Plant & Equipment The total net capital expenditure on acquisition on property, plant and equipment and capitalization of work in progress cost of the organization during the year amounted to Rs. 130 million. The details of Property, plant and equipment are given in Note 10 to the financial statements.

Statutory payments The directors to the best of their knowledge and belief confirmed that all payments in respect of statutory liabilities to employees and the government have been made within the stipulated period during the period under review.

Corporate Donations The donations made by the company during the year are disclosed in Note No 6 of the financial statement.

Directorate The Board of Directors of ITN and the date of appointment with the changes in the directorate are given on page 18 of the Annual Report.

Annual Report of the Board of Directors on the Affairs of the Company...cont’d/

Director’s share holdings The Directors hold no shares.

Corporate Governance The Board of Directors of the organization has accepted and acknowledged adaptation of good governance practices as an essential tool in today’s corporate culture. The organization confirms compliance with corporate governance rules as at the date of the annual report 2011.

Share Holding The Treasury of the Government of Sri Lanka holds 100% shares.

Contingent Liabilities and Commitments There are no contingencies or commitments other than those disclosed in the Note 22 to the Financial Statements Events after balance sheet date No circumstances have arisen and no material events have occurred during the period between the Balance Sheet date and Directors signing of accounts, which require disclosure or adjustment to the Financial Statements Annual General Meeting The Annual General Meeting of Independent Television Network Ltd will be held on the day of 27th June 2012 at 4 p.m. 2011.

Auditors The Accounts have been audited by Messrs. Amarasekara & Co. Chartered Accountants of Sri Lanka. As far as the Directors are aware, the auditors do not have any other relationship with the Company.

For and on behalf of the Board, INDEPENDENT TELEVISION NETWORK LTD

39 Rosmand Senaratne Chairman/CEO

Independent Auditor’s Report

C H A R T E R E D

A C C O U N T A N T S

No. 12 Rotunda Gardens, Tel: 2327595, 2445751, 2321758 Colombo, Sri Lanka.

Fax: 2337385, 2437346, 5355,633

E-mail: taxaco@sltnet.lk (Tax Branch) acom@sltnet.lk (Audit Branch)

To The Members of Independent Television Network Limited Report on the Financial Statements 1.

We have audited the accompanying financial statements of Independent Television Network Limited, which comprise the balance sheet as at December 31, 2011, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes set out on Pages 02 – 24.

Management’s Responsibility for the Financial Statements

2.

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

40 3.

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.

4.

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 principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

5.

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

6.

In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 December 2011 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 December 2011 and its results and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements

7.

These financial statements also comply with the requirements of Section 151 (2) of the Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTS COLOMBO,

Income Statement

(Expressed in Sri Lankan Rupees) For the year ended December 31, 2011

Note 2011 2010

Revenue 2 2,094,147,455 1,777,993,224

Cost of Sales 3 (451,026,313) (444,289,083)

Gross Profit 1,643,121,142 1,333,704,141

Other Income 4 91,649,956 71,436,931

Marketing Expenses 5 (264,571,620) (137,804,861)

Administrative Expenses 6 (780,219,899) (766,817,665)

Finance Cost 7 (7,977,225) (5,287,698)

Profit Before Taxation 682,002,354 495,230,848

Income Tax Expenses 8 (200,888,137) (187,104,825)

Profit for the Year 481,114,217 308,126,022

Basic Earnings Per Share (Rs.) 9 50.64 32.43

41

Figures in brackets indicate deductions.

Notes to the Financial Statements on Pages 4 6 to 60 form an integral part of these Financial Statements.

42

Balance Sheet

(Expressed in Sri Lankan Rupees) As at December 31, 2011

Note 2011 2010

ASSETS Re-stated

Non - Current Assets

Property, Plant and Equipment 10 536,943,665 496,285,658 Intangible Asset 11 4,391,013 Long Term Investments 12 4,000 4,000 Deferred Taxation 18 - 1,450,404 Total Non - Current Assets 541,338,678 497,740,062

Current Assets

Inventories 13 17,121,941 11,973,749 Trade and Other Receivables 14 861,692,737 839,989,293 Prepayments 5,959,708 1,535,356 Cash and Cash Equivalents 15 764,776,354 400,925,402 Total Current Assets 1,649,550,739 1,254,423,800 Total Assets 2,190,889,417 1,752,163,862

EQUITY AND LIABILITIES

Equity

Stated Capital 16 95,000,000 95,000,000 Capital Reserves 673,384 673,384 Retained Earnings 1,356,148,085 864,557,801 Total Equity 1,451,821,469 960,231,185

Non - Current Liabilities

Retirement Benefits Obligations 17 38,924,840 69,571,058 Deferred Taxation 18 15,413,724 Deferred Income (Government Grant) 19 105,753,486 134,766,199 Lease Obligations - Settlements Fall Due More Than One Year 20 11,291,229 28,590,151 Bank Loan (SDB) - Settlements Fall Due More Than One Year - 2,713,106 Total Non - Current Liabilities 171,383,278 235,640,514

Current Liabilities Trade and Other Payables 21 411,033,939 396,617,969 Lease Obligations - Settlements Fall Due Within One Year 20 18,128,662 14,381,621 Bank Loan (SDB) - Settlements Fall Due Within One Year 2,713,106 4,607,741 Income Tax Payable 135,808,963 140,684,832 Total Current Liabilities 567,684,670 556,292,163 Total Equity and Liabilities 2,190,889,417 1,752,163,862

I certify that these Financial Statements of the Company comply with the requirements of the Companies Act No. 07 of 2007.

Finance Officer

The Board of Directors are Responsible for Preparation and Presentation of these Financial Statements.

Approved and Signed for and on behalf of the Board,

Director Director

25 April 2012. Colombo,

Figures in brackets indicate deductions.

Notes to the Financial Statements on Pages 4 6 to 60 form an integral part of these Financial Statements.

( Expressed in Sri Lankan Rupees)

For the year ended December 31, 2011

Statement of Changes in Equity

Stated Capital Retained Total

Capital Reserves Earnings

Balance as at January 01, 2009 95,000,000 673,384 541,345,573 637,018,957

Profit for the Year - - 308,126,022 308,126,022

Dividends Paid - - (9,250,000) (9,250,000)

Adjustments - - 1,127,874 1,127,874

Balance as at December 31, 2010 - (As Previous Year Reported) 95,000,000 673,384 841,349,470 937,022,854

Restatement of Over Provision for Differed Tax in Previous Years - - 23,208,331 23,208,331

Balance as at December 31, 2010 - (Re-stated) 95,000,000 673,384 864,557,801 960,231,185

Profit for the Year - - 481,114,217 481,114,217

Dividends Paid - - (15,406,301) (15,406,301)

(Gain) / Loss arising from changes in the assumptions or due to (over) / under Provision in the Previous Years - - 35,947,733 35,947,733

Adjustment for Deferred Taxation - - (10,065,365) (10,065,365)

Balance as at December 31, 2011 95,000,000 673,384 1,356,148,085 1,451,821,469 43

Figures in brackets indicate deductions.

Notes to the Financial Statements on Pages 4 6 to 60 form an integral part of these Financial Statements.

Cash Flow Statement

(Expressed in Sri Lankan Rupees) F or the year ended December 31, 2011 Note 2011

2010

Cash Flows from Operating Activities Profit Before Taxation 682,002,354 495,230,848

Adjustments for; Amortization of Government Grants (29,012,713) (30,589,380) Depreciation and Amortization of Intangible Assets 97,168,205 97,544,464 Provision for Gratuity 8,785,955 7,548,326 Profit on Sale of Property, Plant and Equipment (789,266) (891,703) Transfer of Assets to Income Statement - 826,591 Interest Income (32,733,862) (12,740,804) Lease Interest 6,869,198 3,230,086 Specific Provision / Written Off of Doubtful Debts 66,445,882 Specific Provision / Written Off of Slow Moving Inventory 2,087,390 Interest Expenses 1,108,027 2,057,613 Operating Profit Before Changes in Working Capital 801,931,170 562,216,041

Changes in Working Capital

(Increase)/Decrease in Inventories (7,235,582) 534,241 (Increase)/Decrease in Trade and Other Receivables (81,943,407) (215,155,587) (Increase)/Decrease in Prepayments (4,424,352) 2,316,127 (Increase)/ Decrease in Work in Progress (11,436,704) 2,442,289 Increase/(Decrease) in Trade and Other Payables 48,415,970 19,543,354 Cash Generated from Operations 745,307,095 371,896,465

44

Gratuity Paid (3,484,440) (2,808,204) Interest Paid (1,108,027) (2,057,613) Taxes Paid (198,965,243) (106,952,619) Net Cash Flow from Operating Activities 541,749,384 260,078,029

Cash Flows from Investing Activities Acquisition of Property, Plant and Equipment / Intangible (130,846,137) (180,204,838) Proceeds from Sale of Property, Plant and Equipment 854,882 891,703 Interest Received 26,528,536 18,224,141 Lease Rentals Paid (20,421,673) (9,624,590) Net Cash used in Investing Activities (123,884,391) (170,713,584)

Cash Flows from Financing Activities

Dividend / Levy Paid to the Treasury (49,406,301) (19,250,000) Proceeds from Government Grants for Kokavil Project for SLRC/SLBC - 20,000,000 Settlement of Bank Loan (4,607,741) (3,741,758) Net Cash used in Financing Activities (54,014,042) (2,991,758)

Net Changes in Cash and Cash Equivalents During the Year 363,850,951 86,372,687

Cash and Cash Equivalents at Beginning of the Year 400,925,402 314,552,715

Cash and Cash Equivalents at End of the Year (Note 15) 764,776,354 400,925,402

Figures in brackets indicate deductions.

Notes to the Financial Statements on Pages 4 6 to 60 form an integral part of these Financial Statements.

Notes to the Financial Statements

For the year ended December 31, 2011

1.

CORPORATE INFORMATION

1.1

Reporting Entity The Company was incorporated on 27 April 1992 as a Public Limited Liability Company to take over the business carried on by the Government Owned Business Undertaking of Independent Television Network Limited, in terms of conversion of state corporations and Government Owned Business Undertakings into Public Companies Act No. 23 of 1987. Accordingly, the balances reflected in the accounts of the Government Owned Business Undertaking have been transferred to the Company with the exception of an adjustment in respect of the share capital of Rs 95 million which has been issued to the Secretary to the Treasury resulting in Goodwill of Rs 33,861,107/- which has been fully amortized by the end of year 2004.

1.2

Date of Authorization for Issue The financial statements of the Independent Television Network Limited for the year ended 31 December 2011 were authorized for issue in accordance with a resolution of the board of directors dated 25 April 2012.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 2.1.1

GENERAL ACCOUNTING POLICIES Statement of Compliance The Financial Statements of the company comprise the Balance Sheet, Income Statement, Changes in Equity and Cash Flow together with Accounting Policies and Notes to the Financial Statements. These Financial Statements are prepared in conformity with Generally Accepted Accounting Principals and the applicable Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka (ICASL) and the requirements of the Companies Act No. 07 of 2007, and Sri Lanka Accounting and Auditing Standards Act No 15 of 1995.

2.1.2

Basis of Measurement These Financial Statements have been prepared mainly based on historical cost and other specific measurements which are explained in the succeeding notes.

No adjustment has been made for inflationary factors affecting the Financial Statements.

2.1.3

Functional and Presentation Currency These Financial Statements are presented in Sri Lankan Rupees which is the Company’s functional and presentation currency.

2.1.4

Going Concern The Directors have made an assessment of the company’s ability to continue as a going concern and they do not intend either to liquidate or to cease trading.

2.1.5

Amalgamation of Accounts The Accounts of Independent Television Network Limited, Vasantham TV, Prime TV, Lakhanda Radio, Vasantham FM,Prime Radio have been maintained. The Management of Independent Television Network Limited had amalgamated the accounts of all TV channels & Radio channels in year 2010. Previous year's figures have been recast where necessary to conform to the current presentation.

2.1.6

Significant Accounting Judgments, Estimates and Assumptions The preparation of Company Financial Statements in conformity with SLASs requires management to make judgments, estimates, and assumptions that affects the application of accounting policies and reported amounts of assets, liabilities, income and expenses and disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcome that require material adjustments to the carrying amounts of assets or liabilities effected in future periods.

The judgments, estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments, estimates and assumptions about the carrying amount of assets, liabilities and contingent liabilities that are not readily identified from other sources.

The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgments, estimates and assumptions made by the management in application of SLASs that could have a significant effect on the Financial Statements are mentioned below.

2.1.7

Judgments, estimates and assumptions Valuation of Property, Plant & Equipment Impairment of Non-Financial Assets Excluding Goodwill Deferred Tax Assets Current Taxation Retirement Benefit Obligation – Gratuity

Note reference 2.2.2.1 2.2.2.9 2.2.1 (b) 2.2.1 (a) 2.2.3.3 (a)

Foreign Currency Transactions Foreign Currency Transactions are translated to Sri Lankan Rupees using the prevalent rate at the time the transaction takes place. Monetary assets and liabilities in foreign currencies are translated at the rate of exchange prevailing at the balance sheet date. The resulting gains and losses arising on settlement of monetary items and on the translation of monetary items are accounted for in the Income Statement.

45

Notes to the Financial Statements...cont’d/

For the year ended December

2.1.8

Post Balance Sheet Events All material events occurring after the Balance Sheet date have been considered and where necessary adjustments have been made to /or disclosed in the Financial Statements.

2.1.9

Comparative Information The Accounting Policies, which have been consistently applied by the company, are unless otherwise stated, consistent with those used in the previous years. Previous year’s figures and phrases have been rearranged to conform to the presentation.

2.1.10

New Accounting Standards issued but not yet Effective The following standards have been issued by the Institute of Chartered Accountants of Sri Lanka and are effective for the period specified below.

The Institute of Chartered Accountants of Sri Lanka has issued a new volume of Sri Lanka Accounting Standards which will become applicable for financial periods beginning on or after 1st January 2012. Accordingly, these Standards have not been applied in preparing these financial statements as they were not effective for the year ended 31st March 2011.

These Sri Lanka Accounting Standards comprise Accounting Standards prefixed both SLFRS (corresponding to IFRS) and LKAS (corresponding to IAS). Application of Sri Lanka Accounting Standards prefixed SLFRS and LKAS for the first time shall be deemed to be an adoption of SLFRSs. The Company is currently in the process of evaluating the potential effects of these Standards on its financial statements and the impact on the adoption of these Standards have not been quantified as at Balance Sheet date.

2.2

OTHER SIGNIFICANT ACCOUNTING POLICIES

2.2.1

Income Tax Expense Income Tax Expense comprises current and Deferred Tax. Income Tax Expense are recognized in the Income Statement.

a)

Current Taxation Current tax liabilities arise to the company in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and amendments thereto. These liabilities are provided for in the Financial Statements applying the said provisions which the management believes reflect actual liability. There can be instances where the stand taken by the company on transaction is contested by the Revenue Authority. Any additional costs on account of these issues are accounted for as a tax expense at the point of liability is confirmed on the company.

46

Current tax assets and liabilities for the current year and prior periods are measured at the amounts expected to be recovered from or paid to Revenue Authority. Tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the Balance Sheet date. The provision for current tax is based on the elements of income and expenditure as reported in the Financial Statements. b)

Deferred Tax Deferred tax is recognized using the Balance Sheet method, providing for temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes.

Deferred tax is not recognized for the temporary differences arising in the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investment subsidiaries to the extent that they probably will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by reporting date. Deferred tax assets and liabilities are offset if there is a legal enforceable right to set off current tax liabilities and assets, and they relate to income taxes levied by the same tax authorities on the same taxable entity.

A deferred tax asset is recognized only to the extent that it is probable that future profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduce to the extent that is no longer probable that the related tax benefit will be realized.

c)

Social Responsibility Levy (SRL) As per the provisions of Finance Act No. 5 of 2005, and amendments thereto, the SRL was introduced with effect from 1 January 2005. SRL is payable at the rate of 1.5% on all taxes and levies chargeable as specified in the First Schedule of the Act. However, this liability was abolished from the year of assessment beginning 1st April 2012.

2.2.2

Assets and Bases of Their Valuation Assets classified as current assets in the Balance Sheet are cash and those which are expected to be realized in cash, during the normal operating cycle of the company’s business, or within one year from the Balance Sheet date, whichever is shorter. Assets other than current assets are those which the company intends to hold beyond a period of one year from the Balance Sheet date.

2.2.2.1

Property, Plant and Equipment The cost of PPE is the cost of purchase with any incidental expenses incurred in bringing the assets to its working conditions, for its intended use. Expenditure incurred for the purpose of acquiring, extending or improving assets of permanent nature has been treated as capital expenditure.

2.2.2.2

Restoration Costs Expenditure incurred on repairs or maintenance of Property, Plant and Equipment in order to restore or maintain the future economic benefits expected from originally assessed standard of performance, is recognized as an expense when incurred.

Notes to the Financial Statements...cont’d/ F 2.2.2.3

For the year ended December 31, 2011

Depreciation Provisions for depreciation are calculated by using a straight-line method on the cost / revalued amounts of all fixed assets in order to write-off such amounts over the following estimated useful lives of such assets.

ITN Lakhanda

Buildings 20 years 25 years

Plant, Machinery and Equipment - Electrical 04 years

Plant, Machinery and Equipment - Non Electrical 08 years -

Audio Frequency Equipment - 04 - 08 years

Furniture and Fittings 08 years 08 years

Transmitters 08 years 08 years

Motor Vehicles 04 years 08 years

Library Books 04 years 04 years

Tools 04 years 02 years

Depreciation is provided on a pro-rata basis on the assets purchased / disposed of during the year. Depreciation of an asset begins when it is available for use whereas depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date the asset is derecognized.

2.2.2.4

Capital Work-in-Progress Capital work-in-progress represents the accumulated cost of materials and other costs directly related to the construction of an asset. Capital work-in-progress is transferred to the respective asset accounts at the time it is substantially completed and ready for its intended use.

2.2.2.5

Intangible Assets An Intangible Asset is recognized if it is probable that future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably in accordance with SLAS 37 “Intangible Assets”. Accordingly, these assets are stated in the Balance Sheet at cost less accumulated amortization and accumulated impairment losses.

Subsequent Expenditure Subsequent expenditure on intangible assets is capitalized only when it increases the future economic benefits embodied in the specific assets to which it relates. All other expenditure is expensed as incurred.

Amortization Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and the amortization period for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the Income Statement in the expense category consistent with the function / nature of the intangible asset. Amortization is commenced when the asset is available for use.

The economic useful life of the Computer Software which was only intangible asset held as at the Balance Sheet date is amortized over its estimated useful life of ten (10) years.

2.2.2.6 Investments

All investments, which are held as Long term, are stated at cost. Investments which are held for yield or capital

appreciation are also classified as long-term investments. These investments are recorded at cost and provision

is made for any permanent diminution in value (impairment).

Investments that are held for trading purposes are classified as short-term investments. These are marketable securi- ties acquired and held with the intention of re-sale over a short period of time. Such securities are initially recorded at cost on an aggregate in total and subsequently measured at market value. Adjustments for fall in / increase in the market value are accounted by charging the difference to the Income Statement. Cash in money market account for the purpose of investing short term marketable securities are also treated as short term investments.

All unquoted investments are carried at lower of cost or Director’s valuation, if any. Provision is made for any permanent diminution in value.

2.2.2.7

Trade and Other Receivables Trade receivables are carried out at anticipated realizable value. A provision for impairment of trade receivables is established when there is reasonable evidence that the company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial re-organization and default payments are considered as indicators that a trade receivable is impaired. When the carrying amount of the asset is reduced, the loss is recognized in the Income statement. When a trade receivable is uncollectible, it is written off against the provision for trade receivable. Subsequent recoveries of amounts previously written–off are credited against other operating expenses in the Income Statement.

2.2.2.8 Cash and Cash Equivalent

Cash and cash Equivalents are defined as cash in hand, demand deposits and short-term highly liquid investments

readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

47

Notes to the Financial Statements...cont’d/

48

For the year ended December 31,2011

2.2.2.9

Impairment of Non – Financial Assets Excluding Goodwill The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.

These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Impairment losses of continuing operations are recognized in the income statement in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognized in equity up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indica- tion exists, the company makes an estimate of recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been deter mined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment losses recognized in relation to goodwill are not reversed for subsequent increases in its recoverable amount.

2.2.3

Liabilities and Provisions

2.2.3.1

Liabilities Liabilities classified as current liabilities in the Balance Sheet are those obligations payable on demand or within one year from the Balance Sheet date. Items classified as non current liabilities are those obligations which expire beyond a period of one year from the Balance Sheet date.

All known liabilities have been accounted for in preparing the financial statements and adequate provisions have been made for liabilities which are known to exist.

2.2.3.2 Provisions

Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past

event. Where it is probable that an outflow of resources embodying economic benefits will be required to settle the

obligation and a reliable estimate can be made of the amount of the obligation.

2.2.3.3 Retirement Benefit Obligations a)

Defined Benefit Plan – Retirement Gratuity Provision A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability recog- nized in the financial statements in respect of defined benefit plan is the present value of the defined obligation at the reporting date. The defined benefit obligation is calculated using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows.

Using interest rates that are determined in currency in which the benefits will be paid and that have term to maturity approximating to the terms of the related liability.

Provision has been made for retirement gratuities from the first year of service for all employees, in conformity with SLAS 16 (Revised 2006) on retirement benefit costs. However, under the payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.

The liability is not externally funded. The key assumption by the actuary includes the followings,

01.

02.

03.

b)

Defined Contribution Plans – “Employees Provident Fund” & “Employees Trust Fund” All employees who are eligible for “Employees Provident fund” contribution and “Employees Trust Fund” contribution are covered by relevant contribution funds in line with respective statutes and regulations. Employer’s contribution to the defined contribution plans are recognized as an expense in the Income Statement when incurred.

Rate of Interest of 9.50% Rate of Salary increment of 10% Retirement age of all employees 55 Years

2.2.3.4 Interest Bearing Loans and Borrowings

Interest bearing loans are recorded at the amount of proceeds received, net of transaction cost if any. All borrowing

costs are charged to Income Statement as an expense in the period in which they are incurred.

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

2.2.3.5

2.2.3.6

Stated Capital Ordinary shares and Preference Shares are classified as Stated Capital.

Contingent Liabilities and Contingent Assets A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that can not be measured reliably. The company does not recognize a contingent liability but discloses its existence in the Financial Statements.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company.

The company does not recognize contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

2.2.3.7 Trade and Other Payables

Trade and Other Payables are stated at their costs.

2.2.3.8 Deferred Income (Grants)

Grants are recognized at their fair value. When the grant relates to an expense item, it is recognized as income over

the period necessary to match it to the costs, which it is intended to compensate for, on a systematic basis. Grants

related to assets are deferred in the Balance Sheet and credited to the Income Statement over the useful life of the asset.

Grants presented in the Balance Sheet as at 31 December 2010 are amortized over eight years.

2.2.3.9

Finance Lease Obligations Property, plant and equipment on finance leases which effectively transfers to the company substantially all the risks and benefits incidental to Ownership of the leased items are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payment at inception of the, less accumulated depreciation

The total interest payable is accounted as interest in suspense. The corresponding credit is recorded lease as an amount payable to lesser. The installments paid are used to reduce the liability.

The Interest charge of the year is transferred from the interest suspense account to the Income Statement.

2.2.3.10

Operating leases Leases where the lesser effectively retains substantially all the risk and rewords of ownership over the lease term are classified as operating leases. Payments made under operating leases are recognized in profit and loss on straight- line basis over the term of lease.

2.2.4

Income Statement

2.2.4.1

Revenue Recognition Revenue has been principally recognized on accrual basis in terms of Sri Lanka Accounting Standard No. 29. “Revenue�. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company, and the revenue and associated costs incurred or to be incurred can be reliably measured.

Revenue is measured at the fair value of the consideration received or receivable, net of sales taxes.

a)

Interest Income on Investments Interest income is recognized as the interest accrued on the time basis (taking into account the effective yield on the asset) unless collectability is in doubt.

b) Net Gains and Losses on Disposals of Property, Plant & Equipment

Net gains and losses on disposal of an item on Property, Plant & Equipment are determined by comparing the net

sales proceeds with the carrying amount of Property, Plant & Equipment and are recognized in the Income Statement. c)

Other Income All other incomes are recognized on an accrual basis.

2.2.4.2 Expenditure Recognition a)

Operating Expenses Expenses are recognized in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running in the business and in maintain ing the property, plant and equipment in a state of efficiency has been charged to income in arriving at the profit / (loss) for the year. Provisions have also been made for bad and doubtful debts, all known liabilities and deprecia- tion on Property, Plant & Equipment.

b)

Finance Expenses Interest expenses are recognized on an accrual basis. Borrowing costs are recognized as an expense in the period in which they are incurred.

2.2.5

Cash Flow Statement The cash flow statement has been prepared using the indirect method.

49

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

Note 2011 2010

2 Revenue

Sale of Air Time 2,133,611,732 1,812,995,318

Production Charges 5,980,793 16,541,494 2,139,592,525 1,829,536,812

Nation Building Tax (45,445,070) (51,543,588)

2,094,147,455 1,777,993,224

3 Cost of Sales

Procurement of Programme Materials - Foreign 39,054,126 34,181,694

Procurement of Programme Materials - Local 283,447,801 275,067,048

Other Production Expenses 3.1 128,524,386 135,040,341 451,026,313 444,289,083

3.1 Other Production Expenses

Custom Duty, Freight and Clearing 102,062 857,722

Payments to Artists 34,045,870 33,049,817

Scripts and Previewing Charges 213,165 3,680

Tape and Compact Discs 82,321 105,362

Sundry Production Expenses 77,257,316 78,571,299

Video Cassettes 3,616,184 4,414,662

Tax on Foreign Programmes 9,888,537 18,037,800

News Bulletin Expenses 1,923,384

Hire of Equipment 1,395,547 128,524,386 135,040,341

50

4 Other Income

Interest Income 32,733,862 12,740,804

Profit on Sale of Property, Plant and Equipment 789,266 891,703

Miscellaneous Income 4.1 58,126,828 57,804,424 91,649,956 71,436,931

4.1 Miscellaneous Income

Registration of Suppliers 28,750 185,470

Royalty / Copy Rights Charges - 7,500

Fines 39,416 24,161

Sundry Income 23,544,793 26,525,625

Charges on Returned Cheques 595 860

Amortization of Government Grants 29,012,713 30,589,380

Staff Loan Interest 3,673,305 471,428

Write Back of Retention Payable 1,827,256 58,126,828 57,804,424 5 Marketing Expenses

Agency and Marketing Executive Commission 193,092,457 131,668,522

License Fees for Microwave Link 627,928 3,304,375

Market Research Expenses 3,611,148 943,373

Bad Debts Written Off 794,205 1,888,591

Specific Provision for Doubtful Debts 66,445,882 264,571,620 137,804,861

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

Notes 2011 2010

6 Administrative Expenses

Salaries and Allowances 6.1 238,539,519 221,125,238

Employees’ Provident Fund 32,136,699 30,768,629

Employees’ Trust Fund 6,382,605 6,095,903

Overtime 43,160,273 42,013,869

Incentives, Bonus and Annual Bonus 60,149,709 42,865,462

Awards to Staff 130,300 120,384

Staff Training 1,703,058 799,902

Staff Welfare 21,155,591 15,708,414

Uniforms to Staff 90,300 164,954

Traveling and Subsistence 6.2 17,309,074 14,424,035

Gratuity 8,785,956 7,548,326

Housing Loan Interest 2,972,320 2,547,196

Postage, Telephone and Telex 6.3 11,930,138 11,317,105

Stationery, Minor Articles and Printed Forms 6.4 6,793,118 5,190,290

Advertising and Periodicals 6.5 17,207,218 33,115,202

Electricity and Power 56,732,410 55,107,290

Entertainment 318,384 375,637

Fuel for Generators 2,890,833 2,494,280

Motor Vehicle Running 6.6 39,592,399 39,747,801

Repairs and Maintenance of Equipment 18,150,567 24,159,514

Repairs and Maintenance of Buildings 16,424,992 12,504,514

Repairs and Maintenance of Studio 674,526 510,140

Maintenance of Garden 574,286 722,376

Maintenance of Roads 2,957,900 6,426,063

Insurance 21,429,750 16,216,030

Rent, Rates and Taxes 10,331,433 30,085,757

Depreciation and Amortization of Intangible 97,168,208 97,544,464

Security 11,621,501 12,386,919 51

Subscriptions to Foreign Organizations 4,672,875 4,248,940

Water Supply 1,484,770 1,291,407

Audit Fees 259,490 286,750

Board of Survey 100,000

Legal Expenses 1,516,699 2,961,791

Expenses on Board Meetings 6.7 763,212 450,085

Ceremonial Expenses 326,617 940,322

Consultancy Fees - 1,500

Professional Charges 170,563 220,381

Management Information System 1,494,668 1,542,900

Miscellaneous 62,953 332,715

Stamp Duty 91,672 105,500

Compensation - 5,000

Registration Fees 1,283,388 650,554

Web Hosting Services 5,105,076 6,644,790

Dialog TV Connection 950,007 1,104,228

Donations - 458,744

Exchange Loss 164,764

Stock Written Off 304,308

Specific Provision for Slow Moving Inventory 2,087,390

Frequency Charges 6,276,211 9,963,077

Internet and Link Charges 5,385,935 2,627,958

Bank Charges 406,235 895,331 780,219,899 766,817,665

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

52

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

Notes 2011 2010

6.1 Salaries and Allowances

Salaries and Wages 226,226,883 207,959,367

Other Allowances 12,312,636 13,165,871 238,539,519 221,125,238

6.2 Traveling and Subsistence

Traveling and Subsistence - Local

13,736,781 11,605,773

Traveling and Subsistence - Foreign 3,572,293 2,818,262

17,309,074 14,424,035 6.3 Postage, Telephone and Telex

Postage 223,642 160,424

Telegrams and Telephone

11,706,496 11,156,681

11,930,138 11,317,105

6.4 Stationery, Minor Articles and Printed Forms

Stationery 4,807,027 2,973,389

Minor Articles

1,839,301 1,971,061

Printed Forms 146,790 245,840

6,793,118 5,190,290

6.5 Advertising and Periodicals

Business Promotion

5,367,188 7,293,696

Advertising and Publicity 9,816,188 22,599,673

Publication and Periodicals 2,023,842 3,221,833

17,207,218 33,115,202

6.6 Motor Vehicle Running

Fuel and Lubricant 9,449,564 8,063,825

Repairs and Maintenance 6,750,976 8,044,109

Insurance and License 930,988 1,261,471

Hire Charges 22,460,871 22,378,396

39,592,399 39,747,801

6.7 Expenses on Board Meetings

Allowance for Board Members 573,950 242,500

Secretarial Expenses 95,324 150,317

Board Meeting Expenses 93,939 57,268

763,212 450,085

7 Finance Cost

Interest on Overdraft 100 70,061

Lease Interest 6,869,198 3,230,086

Bank Loan Interest

1,107,927 1,987,552

7,977,225 5,287,698 8 Income Tax Expenses

Provision for Income Tax and SRL 198,000,000 186,075,107

Provision for Deferred Tax 6,798,763 1,029,718

Over Provision in Previous Year (3,910,626)

200,888,137 187,104,825

8.1 Reconciliation Between Current Tax Provision and the Product of Accounting Profit.

Accounting Profit Before Tax 682,002,354 495,230,848

Aggregated Expenses Disallowed for Tax 192,000,000 160,509,468

Aggregated Expenses Allowed for Tax (137,000,000) (101,364,569)

Aggregated Income from Other Sources (68,000,000) (44,221,886)

Taxable Profit for the Year 669,002,354 510,153,861

Other Income Allowed for Tax 38,140,503 13,632,506

Total Statutory Income / Assessable / Taxable Income 707,142,857 523,786,367

Income Tax Charged at Statutory Tax Rate of 28% (2010 @ 35%) 198,000,000 183,325,228

Social Responsibility Levy (2010 @ 1.5%) - 2,749,878 198,000,000 186,075,107

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

Notes 2011 2010

9 Basic Earnings Per Share (Rs.)

Basic Earnings Per Share is calculated by dividing the net profit for the year attributable to ordinary shareholders by

the weighted average number of ordinary shares in issue during the year.

Amount used as the Numerator

Net Profit Attributable to Ordinary Shareholders (Rs.) 481,114,217 308,126,022

Number of Ordinary Shares used as the Denominator

Weighted Average number of Ordinary Shares in issue applicable

to basic Earnings Per Share 9,500,000 9,500,000

Basic Earnings Per Share (Rs.) 50.64 32.43

10 Property , Plant and Equipment

Cost or Valuation

Description Balance as at Additions Transfers (Disposals) Balance as at

Jan. 01, 2011 Dec. 31, 2011

Freehold Assets

Land 6,082,446 - - - 6,082,446

Buildings 115,930,620 20,641,279 - - 136,571,899

Office Equipment 21,332,252 10,261,463 - (95,990) 31,497,725

Plant, Machinery and Equipment 574,348,795 23,100,810 - - 597,449,605

Transmitters 344,114,446 6,244,006 - - 350,358,452

Audio Frequency Equipment-Normal 6,677,126 - - - 6,677,126 53

Audio Frequency Equipment-Electronic 32,384,328 10,456,994 - - 42,841,322

Motor Vehicles 49,155,761 28,664,105 5,394,115 (1,025,000) 82,188,981

Furniture, Fittings and Others 153,347,171 26,593,918 - - 179,941,089

Tools 2,392,902 60,879 - - 2,453,781

Library Books 424,143 30,975 - - 455,118

Leasehold Assets

Motor Vehicle 13,894,115 - (5,394,115) - 8,500,000

Equipment 40,773,304 - - - 40,773,304

1,360,857,410 126,054,429 - (1,120,990) 1,485,790,849

Property , Plant and Equipment

Freehold Assets

Buildings 43,244,919 5,295,226 - - 48,540,145

Office Equipment 11,564,801 2,012,388 - (30,374) 13,546,815

Plant, Machinery and Equipment 426,714,965 32,670,004 - - 459,384,969

Transmitters 224,485,907 24,661,542 - - 249,147,449

Audio Frequency Equipment-Normal 6,215,811 127,816 - - 6,343,627

Audio Frequency Equipment-Electronic 31,833,385 1,324,496 - - 33,157,881

Motor Vehicles 40,772,372 4,214,477 5,394,015 (1,025,000) 49,355,864

Furniture, Fittings and Others 68,057,859 17,435,294 - - 85,493,153

Tools 1,787,659 292,036 - - 2,079,695

Library Books 394,028 22,105 - - 416,133

Leasehold Assets

Motor Vehicle 9,644,015 2,125,000 (5,394,015) - 6,375,000

Equipment 6,587,126 6,587,126 - - 13,174,252

871,302,846 96,767,510 - (1,055,374) 967,014,982

Written Down Value 489,554,564 518,775,867

Capital Work in Progress

Buildings 6,731,094 11,436,704 18,167,798

Total 496,285,658 536,943,665 (Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

54

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

10.1 During the financial year, the company acquired Property, Plant and Equipment (PPE) to the aggregate value of

Rs. 126,054,429/- (2010 - Rs. 180,204,838/-) for cash payments. Expenditure on WIP was Rs 11,436,704/- (2010 Rs.6,731,094/-). The aggregate value of the PPE disposed during the year is Rs. 1,120,990/- (2010 - Rs.1,555,981/-).

10.2 Property, Plant & Equipment of the company include assets which are fully depreciated, the cost of such assets are

as follows:

Asset Category

Buildings 10,452,504 10,227,333

Office Equipment 7,707,594 7,257,376

Plant, Machinery and Equipment 344,459,515 335,669,070

Transmitters 151,900,520 146,827,060

Audio Frequency Equipment - Normal 5,654,603 5,654,603

Audio Frequency Equipment - Electronic 31,593,938 31,529,438

Motor Vehicles 39,055,644 25,603,079

Furniture, Fittings and Others 22,124,143 20,130,658

Tools 1,282,689 1,197,223

Library Books 351,914 331,496 614,583,064 584,427,336

11 Intangible Asset - Software Cost

Balance at Beginning of the Year -

Addition 4,791,708

Balance at End of the Year 4,791,708

Amortization

Balance at Beginning of the Year -

Charge for the Year 400,695

Balance at End of the Year 400,695

Carrying Amount at End of the Year 4,391,013

12 Long Term Investments

Lanka Puwath Limited - (Unquoted / 4 , Shares) 4,000 4,000

13 Inventories

Fuel 1,756,741 245,646

Spares and Others 17,794,838 13,027,971

Engine Oil - 42,380 19,551,579 13,315,997

Provision for Inventories to write off - Specific - (1,000,000)

Provision for Inventories to write off - General (2,429,638) (342,248) 17,121,941 11,973,749

14 Trade and Other Receivables

Trade Debtors 14.1 888,874,785 808,641,692

Other Debtors 14.3 10,619,339 6,157,183 899,494,124 814,798,875

Provision for Doubtful Debts - Specific - (10,709,929)

Provision for Doubtful Debts - General (110,592,222) (33,436,412)

788,901,902 770,652,534

Staff Loans 14.4 62,188,898 55,979,461

Advances and Deposits 14.5 10,601,937 13,357,298 861,692,737 839,989,293

14.1 Trade Debtors

Commercial Debtors 851,127,789 765,305,866

Sundry Debtors 830,630 1,131,640

Dishonored Cheques 11,936,966 10,567,640

Contra Deal Debtors 14.2 24,979,400 31,636,546 888,874,785 808,641,692

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

14.2 Contra Deal Debtors

Hotel Tree of Life - (491,516)

Ceylon Cold Stores - (434,385)

Berjaya Mount Royal 97,334 97,334

Prince Hotel 10,145 10,145

Singer Sri Lanka 11,177

Associated News Papers 415,691 7,993,244

Ceylon Pencil Co. Ltd. 600,360 600,360

TVS Lanka (Pvt) Ltd. - (5,017)

Hotel P.T. Garden 66,125 66,125

Mascom 2,439,864 2,439,864

Standard Newspapers 202,950 202,950

Hayleys Consumer Products Ltd. 1,158,880 1,158,880

Lanka Multi Publishers Ltd. 273,600 273,600

Oruthota Chalets (ECO Lanka Resort) 61,500 61,500

Godage Bookshop 20,000 20,000

Rivira Media 869,033 869,033

Udaya Children Newspapers 115,000 115,000

Sumathi Group of Companies 1,990,531 1,990,531

Akasa Kusum 3,282,915 3,282,915

Ceylon Chocolates 357,000 357,000

Shanthi Buddabumi - 146,633

Hotel Randiya 50,850 50,850

Brown & Company - (41,360)

Ceylon Continental Hotel - (83,586)

Sayuri News Papers 4,737,774 4,737,774

Voice of Asia Network 7,968,053 7,968,053

Vidun Cinema Entertainment 250,617 250,617 24,979,400 31,636,546

14.3 Other Debtors

Receivable from employee 1,213,120 1,423,120 55

Other Receivables 382,274 813,634

Interest Receivable 8,215,500 2,010,174

Withholding Tax 584,885 628,996

VAT Control A/C 211,759 1,152,501

Withholding VAT 11,801 63,402

Sooriyakanda Project - 65,355 10,619,339 6,157,183

14.4 Staff Loans

Festival Advances 620,453 612,213

Distress Loan 44,141,458 39,608,506

Vehicle Loans 16,413,415 15,240,393

Textile Loan 1,013,573 518,349 62,188,898 55,979,461

14.5 Advances and Deposits

Local Advances 1,025,702 1,275,020

LC Deposits 1,149,651 1,880,628

Deposits & Receivables 4,614,354 4,598,854

Advance for Local Purchase 3,800,745 5,597,891

Franking Machine Advances 11,485 4,905 10,601,937 13,357,298 15 Cash and Cash Equivalents

Bank and Cash Balances 1 5.1 36,744,174 41,155,727

Short Term Deposits 728,032,180 359,769,675 764,776,354 400,925,402

15.1 Bank and Cash Balances

Bank of Ceylon - Torrington Square 16,911,058 17,084,956

Bank of Ceylon - Corporate Branch 3,978,831 5,079,979

Bank of Ceylon - Isurupaya 6,814,494 7,082,661

Bank of Ceylon - Pelawatta (new) 311,314 218,835

Bank of Ceylon - Torrington (new) 5,066,749 382,272

People’s Bank - Borella 2,353,200 11,134,109

Bank of Ceylon - Savings Pelawatte - (A/C 1-008277-3) 222,915 172,915

Bank of Ceylon - Savings Pelawatte - (A/C 72257367) 1,085,612 36,744,174 41,155,727

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

Notes to the Financial Statements...cont’d/

56

For the year ended December 31,2011

16 Stated Capital

Issued and fully paid

Number of Ordinary Shares 9,500,000 9,500,000

Value (Rs.)

95,000,000 95,000,000

17 Retirement Benefit Obligations

Balance as at 01 January 69,571,058 64,830,935

Charge for the year 2,176,705 7,548,326

Interest Charge for the Year 6,609,251

Payment during the year (3,484,440) (2,808,204)

(Gain) / Loss arising from changes in the assumptions or due to (over) /

under Provision in the Previous Year (35,947,733)

Balance as at 31 December 38,924,840 69,571,058

Re-Stated 18 Deferred Taxation

Balance as at 01 January (1,450,404) 20,728,209

Charge for the Year 6,798,763 1,029,718

Deferred Tax Effect on Policy Change in Gratuity Calculation 10,065,365

Restatement of Over Provision in Previous Years - (23,208,331)

Balance as at 31 December 15,413,724 (1,450,404)

18.1 Deferred Tax Provision as at End of the Year is Made up as Follows:

Temporary Differences Arising from Accelerating Depreciation 26,312,679 22,899,466

Temporary Differences Arising from Provision for Gratuity (10,898,955) (24,349,870) 15,413,724 (1,450,404)

19 Deferred Income (Government Grant)

Balance as at 01 January 134,766,199 127,080,963

Grant Received on Kokavil Project - 38,274,616

Amortization for the Year (29,012,713) (30,589,380)

Balance as at 31 December 105,753,486 134,766,199 20

Lease Obligations Settlements Fall Due More Than One Year Motor Vehicle Lease Creditor 3,778,831 5,750,395 Interest in Suspense (596,450) (1,449,637)

3,182,381

4,300,758

Equipment

Lease Creditors 8,491,320 27,916,488

Interest in Suspense (382,472) (3,627,095) 8,108,848 24,289,393

11,291,229

28,590,151

Settlements Fall Due Within One Year

Motor Vehicle

Lease Creditor 1,971,564 3,439,033

Interest in Suspense (692,515) (1,018,053) 1,279,049 1,072,051

Equipment

Lease Creditors 19,425,168 16,982,640

Interest in Suspense (2,575,555) (5,021,999) 16,849,613 11,960,641

18,128,662 14,381,621

Total Lease Obligations 29,419,890 42,971,772

20.1 The aggregate value of accrued lease liability included in the current portion of lease creditors (Equipment) was

Rs. 2,442,528/- as at the balance sheet date .

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

Notes 2011 2010

21 Trade & Other Payables

Trade Creditors 21.1 119,813,280 114,062,625

Other Payables 21.2 83,132,096 73,216,679

Dividends Payable - 34,000,000

Accrued Expenses 207,738,564 175,038,664

Provision for Audit Fees 350,000 300,000 411,033,939 396,617,969 21.1 Trade Creditors

Commercial Creditors 69,500,784 66,137,341

Customer Advance 1,471,659 583,726

Abans Ltd. 16,026,873 16,026,873

Frostair Industries (Pvt) Ltd. 124,277 124,277

Directory, Printing and Publishers 127,500 127,500

Co Whole Sale Establishment 1,460,401 1,460,401

The Peak Residence 54,730 54,730

John Keels Hotels 381,890 381,890

Wijaya Newspapers 1,612,948 2,787,148

Bits & Bytes 1,630,232 819,902

DSI 794,897 794,897

Austasia Sports Club 64,000 64,000

Shanthi Buddhabumi 1,099,917 54,277

Diesel and Motor Engineering Co.Ltd 678,500 678,500

Delma Lanka (Pvt) Ltd., 880,000 880,000

Sarasavi Book Shop 1,678,576 1,682,076

Upali Group 6,943,729 6,943,729 57

Sri Lanka Telecom 243,053 243,053

Sign-Tech Advertising 2,769,750 2,769,750

Vishva Lekha 192,251 192,251

Cargills (Ceylon) Ltd. 1,484,035 2,604,035

Grand Oriental Hotel 119,956 119,956

Sunflower Hotel 57,050 57,050

Sansta Hotel 61,354 61,354

Micro Cars Limited 65,888 1,704,000

Atlats Bookshop 300,000 300,000

Lakbima News Papers 2,026,080 2,026,080

Lanka Business Pages 137,483 137,483

Opulent Caters 345,800 918,800

The Village Hotel 231,540 231,540

Kassapa Lion Rock 852,200 852,200

Sky Park Holiday Inn 688,062 58,062

Hotel Janaki 150,114 500,114

Yoneta Tours Organisation 951,533 951,533

Thilanka Hotel Kandy 566,096 734,096

Hotel Tree of life 251,516

Ceylon Cold Stores 434,385

TVS Lanka (Pvt) Ltd 5,017

Brown & Company 41,360

Ceylon Continental Hotel 83,586

Wijaya Holiday Resort - Kiriella 512,600

Monty Guest Hotel - Ampara 1,996,656

Elephant Reach Hotel - Thissamaharama 715,000 119,813,280 114,062,625

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions

Notes to the Financial Statements...cont’d/

Trade Creditors...cont’d/

58

For the year ended December 31,2011

Notes 2011

2010

21.2 Other Payables

Deposits Payable 833,253 731,589

Sundry Creditors 20,086,652 6,586,509

L.C. Advance (Creditors) 2,544,335 3,827,902

Payables 3,604,303 5,435,351

Unclaimed Payments 2,485,380 2,168,967

Cancelled Cheques 13,567,437 11,121,655

Retention 1,449,600 2,744,214

VAT Control Account 16,764,043 13,957,408

Withholding VAT - 951,748

Nation Building Tax Payable 4,342,470 3,657,398

Withholding Tax deducted at source - 1,292,930

Special Projects (102,702) (102,702)

Doramandalawa Trust Fund 96,850 96,850

Stamp Duty Payable 37,422 33,877

TV Loan Recoveries 423,187 423,187

Loss of Mobile Phone - 39,950

Rent Payable 16,999,867 20,205,200

Withholding Tax - 44,647 83,132,096 73,216,679 22 Commitments and Contingencies

22.1 Capital Expenditure Commitments

There were no material commitments outstanding as at 31st December 2011 for future Capital Expenditure.

22.2 Litigation

The following cases have been filed / claims made against the Independent Television Network Limited, and the

proceedings are in progress.

a) Mrs. Chandrawathie Gamlath Vs. Mr. Newton Gunarathne

b) Mrs. Muditha Peiris Vs. ITN

c) Mr. Gairuka Perusinghe Vs. ITN

d) Mr. A.S.K.Senaratharachchi Vs. ITN

Figures in brackets indicates deductions.

Notes to the Financial Statements continued on page 23

Notes to the Financial Statements...cont’d/

For the year ended December 31,2011

23 Contingencies

There were no material contingent liability as at 31st December 2011 other than disclosed in Note 22.2.

24 Events Occurring After the Balance Sheet Date

There were no major events after the Balance Sheet date which require disclosure in the Statement of Accounts.

25 Related Party Transaction

There were no major related party transactions with Independent Television Network Limited as at 31st December 2011.

26 Directors Interest in Contracts

The Directors of the Company did not have interest in contracts, financially or otherwise with the Independent Television

Network Limited during the year ended 31st December 2011.

27 Security and Repayment Terms of Borrowing

Bank Name Facility Limit of Securities

Name Facility (Rs.)

Bank of Ceylon Overdraft 11,900,000/- Fixed Deposit worth of Rs. 17,279,449/-

Bank of Ceylon Overdraft 5,900,000/- Fixed Deposit worth of Rs. 7,015,637.80

Bank of Ceylon Letter of Credit 85,000,000/- Fixed Deposit worth of Rs. 92,615,479.16

Sanasa Development

Bank Ltd Loan 12,642,464/- Machinery and Equipment worth of Rs. 12,642,464 59 28 Summary of Financial Results of the Channels

ITN 2011

Prime TV

V asantham TV

L akhanda Radio

Prime Radio

Vasantham FM

2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Revenue

1,937,262,796

1,652,123,545

934,174

5,220,085

52,494,526

43,544,220

93,712,375

69,705,434

247,800

2,692,963

9,495,783

4,706,977

Cost of Sales

(382,882,912)

(376,130,466)

(4,780,529)

(19,824,450)

(47,002,797)

(34,258,296)

(12,883,516)

(8,884,708)

(411,966)

(2,864,427)

(3,064,592)

(2,326,736)

Gross Profit / (Loss)

1,554,379,884 1,275,993,079 (3,846,355) (14,604,365)

5,491,729

9,285,924

80,828,859

60,820,726

(164,166)

(171,464)

6,431,191

2,380,241

Total Expenses (Net of Other Income)

(818,996,459)

(689,673,811)

(9,861,811)

(28,465,143)

(25,632,981)

(15,746,541)

(83,304,038) (67,074,694)

(4,812,623)

(32,280,401)

(18,510,876)

(5,232,703)

Profit / (Loss) Before Taxation

735,383,425

586,319,268 (13,708,166) (43,069,508) (20,141,252)

(6,460,617)

(2,475,179) (6,253,968) (4,976,789) (32,451,865) (12,079,685) (2,852,462)

(Expressed in Sri Lankan Rupees) Figures in brackets indicate deductions