Exceeding Expectations · 2010. 10. 19. · We will look towards exceeding Shareholder and Customer...

John Keells PLC Annual Report 2009/2010 John Keells PLCP.O. Box 76, 130 Glennie Street, Colombo 2

John Keells PLC | Annual Report 2009/2010

Exceeding Expectations

Corporate Information

Name of CompanyJohn Keells PLC

Company Registration NumberPQ 11

Name of SubsidiariesJohn Keells Stock Brokers (Pvt) LimitedJohn Keells Warehousing (Pvt) Limited

Name of Associate Company Keells Realtors Limited

Legal FormPublic Limited Liability Company listed on the Colombo Stock Exchange(Incorporated in Sri Lanka in 1960)

Registered Office P.O. Box 76, 130, Glennie Street, Colombo 2, Sri LankaTel: 2306000Telex: 21389 KEELLS CETelefax: 2446223E-mail: [email protected]

Directors S.C. RatnayakeA.D. GunewardeneJ.R.F. PeirisL.D. Ramanayake T. de Zoysa K.D.W. RatnayakaMs. Y.A. HansenMs. S.T. Ratwatte

Secretaries & RegistrarsKeells Consultants Limited130, Glennie Street, Colombo 2

Auditors Messrs Ernst & YoungChartered AccountantsP.O. Box 101, Colombo

Principal Bankers (in alphabetical order) Bank of CeylonCommercial Bank of Ceylon Ltd.Deutsche BankDFCC Vardhana BankHatton National BankHongkong & Shanghai Banking Corporation Ltd.Nation's Trust BankNational Development Bank PLCPeople's BankSampath Bank Ltd.Seylan Bank Ltd.Standard Chartered Bank

Contents

Financial Highlights 3Financial Calendar 3Group Structure 4Chairman’s Statement 5Chief Executive Officer’s Report 7Board of Directors 10Senior Management Team 12Human Resources 13Corporate Social Responsibility 14Corporate Governance 17Risk Management 23Audit Committee Report 25Historical Milestone 27

Financial ReviewAnnual Report of the Board of Directors 30The Statement of Director’s Responsibility 34Auditors’ Report 35Balance Sheet 36Income Statement 37Statement of Changes in Equity 38Cash Flow Statement 39Notes to the Financial Statements 40Statement of Value Added 58Information to Shareholders and Investors 60Five Year Summary 62Key Ratios and Information 64Glossary of Financial Terminology 66Notice of Meeting 67Notes 68Form of Proxy 71Corporate Information Inner Back Cover

Produced by Copyline (Pvt) Ltd Printed by Printel (Pvt) Ltd

John Keells PLC Annual Report 2009/10

At John Keells PLC, we place emphasis on surpassing the standards set before us. We have done this through the position we have carved for ourselves in being a leader in the country’s Tea and Rubber Broking Community, preserving the ethics of the trade and guaranteeing customer satisfaction. In other words, we strive to be exemplary.

By achieving excellence in every area of our work, we look to exceed expectations.



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VisionTo be internationally recognised as the best Produce Broker in the world.

MissionTo retain the pre-eminent position as Sri Lanka’s leading Tea and Rubber Broker; to uphold the traditions and ethics of the Tea and Rubber trades; to ensure superior customer service through a dedicated and motivated workforce.

ValuesWe are committed to the highest level of integrity and ethical conduct in all our business activities.

We will look towards exceeding Shareholder and Customer expectations by achieving excellence in all areas of operations.

We recognise the right of every individual to be treated with fairness, dignity and respect and assist our employees to improve their skills and reward their accomplishments.

We will focus on corporate social responsibility and look to protect and safeguard the environment.


3

Financial Calendar

Financial Highlights

INTERIM REPORTS1st Quarter 31st July 2009 2nd Quarter 04th November 20093rd Quarter 03rd February 20104th Quarter 26th May 2010

ANNUAL REPORTS2009/10 26th May 20102008/09 29th May 2009

MEETINGS63rd Annual General Meeting 30th June 201062nd Annual General Meeting 29th June 2009

DIVIDENDSFinal Dividend of Rs. 10.00 per share to be paid on 17th June 2010

Financial Highlights

GROUP Company 2009/2010 2008/2009 Change % 2009/2010 2008/2009 Change %

Revenue (Rs.000’s) 848,144 607,949 39.51 490,621 457,023 7.35

Profit before Tax (Rs.000’s) 403,931 201,746 100.22 216,968 224,806 (3.49)

Profit after Tax (Rs.000’s) 256,524 126,885 79.40 145,286 158,570 (8.38)

Revenue to Government (Rs.000’s) 164,764 91,030 81.00 89,049 82,405 8.06

Profit before Tax on Turnover (%) 47.63 33.18 43.52 44.22 49.19 (10.10)

Return on Capital Employed (%) 27.86 18.69 71.35 19.93 23.49 (15.16)

Earnings per share ( Rs.) 15.12 8.43 79.38 9.56 10.43 (8.38)

Dividend per share ( Rs.) 10.00 10.00 - 10.00 10.00 -

Dividend Cover (Times) 1.69 0.84 100.24 0.96 1.04 (8.38)

Net Assets per Share (Rs.) 81.46 76.34 6.71 68.64 69.08 (0.63)

No. of Employees 183 140 30.71 118 109 8.26

Turnover per Employee (Rs.000’s) 4,635 4,342 6.73 4,158 4,193 (0.84)

Profit per Employee (Rs.000’s) 2,207 1,441 53.17 1,839 2,062 (10.85)


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Group Structure

SUBSIDIARY: JOHN KEELLS WAREHOUSING (PVT) LTD.Directors of the Company: Mr. S. C. Ratnayake (Chairman), Mr. J. R. F. Peiris, Mr. L. D. RamanayakeYear of Incorporation: 2001Principal Activities: Warehousing of Tea and RubberCapital Structure: No. of Shareholders Issued Share Capital Holding Percentage (Rs. 000’s) (%) 2010 2009 2010 2009 2010 2009 2 2 120,000 120,000 100 100

Operating Performance: Gross Turnover Profit before Tax No. of Employees (Rs. 000’s) (Rs. 000’s) 2010 2009 2010 2009 2010 2009 91,481 84,124 33,851 24,420 3 4

SUBSIDIARY: JOHN KEELLS STOCK BROKERS (PVT) LTD.Directors of the Company: Mr. A.D. Gunewardene (Chairman), Mr. S.C. Ratnayake, Mr. J.R.F. Peiris, Mr. K.N.J. BalendraYear of Incorporation: 1979Principal Activities: Share BrokingCapital Structure: No. of Shareholders Issued Share Capital Holding Percentage (Rs. 000’s) (%) 2010 2009 2010 2009 2010 2009 5 5 7,500 7,500 76 76

Operating Performance: Gross Turnover Profit before Tax No. of Employees (Rs. 000’s) (Rs. 000’s) 2010 2009 2010 2009 2010 2009 287,383 82,101 172,597 (6,898) 25 27

ASSOCIATE: KEELLS REALTORS LTD.Directors of the Company: Mr. S.C. Ratnayake (Chairman), Mr. A.D. Gunewardene, Mr. J.R.F. Peiris, Mr. S. RajendraYear of Incorporation: 1966Principal Activities: Property Development and Real Estate Operations

Capital Structure: No. of Shareholders Issued Share Capital Holding Percentage (Rs. 000’s) (%) 2010 2009 2010 2009 2010 2009 9 9 75,000 75,000 32 32

Operating Performance: Gross Turnover Profit before Tax No. of Employees (Rs. 000’s) (Rs. 000’s) 2010 2009 2010 2009 2010 2009 2,030 6,102 (1,827) 32,365 1 1

Company: JOHN KEELLS PLCPRINCIPAL ACTIVITIES: PRODUCE BROKING AND REAL ESTATE OWNERSHIP

Group Structure


5

Chairman’s Statement

“Tea export earnings were only marginally below the record earnings of US$ 1.23 Billion achieved in the previous year, although tea export volumes declined by 9% due to crop deficit.”


On behalf of your Board of Directors I have great pleasure in presenting the Annual Report and the Financial Statements of your Company for the year ended 31st March 2010.

Economic EnvironmentAgainst the backdrop of the global recession, Sri Lanka’s growth declined from 6.8% in 2008 to 3.5% in 2009. The Agriculture Sector growth was at 3.2% whilst the growth of the Service Sector was 3.3%.

In recent years the civil war did not, in the main, disrupt the functioning of the tea and rubber industries. Nevertheless, the removal of the war risk surcharge on the port and the non requirement of insurance on terrorism should benefit producers and exporters alike. The global economic environment had a significant impact on commodity prices whilst the drop in tea supplies from producer countries positively impacted the tea prices during the year.

Business EnvironmentTea BrokingTea production in Sri Lanka was impacted initially by a fairly severe drought which was followed by irregular rainfall. Consequently, production reached only 289 Million kgs which is a 9% drop from the previous year and the lowest since 1999. All elevations reflected negative results with High grown, Medium grown and Low grown elevations declining 14%, 6% and 7% respectively.

Due to this crop deficit, tea exports also declined, reflecting a volume drop of 9%. However given the improvement in prices, export earnings were only marginally below the record earnings of US$ 1.23 Billion achieved in the previous year.

In the first quarter of the calendar year tea prices were depressed due to the global economic downturn. Thereafter, as crop deficits in major producing countries such as Sri Lanka and Kenya became evident, the tea market responded with significant price increases. In the last quarter of the financial year, all elevation averages were at record levels.

Rubber BrokingThe national rubber production increased by 5.4%. All major producing countries reported a decline in harvests. The Rubber market movements were somewhat similar to Tea. Initially, in April, prices were at unattractive levels of Rs.162 per kg for the 1X grade and Rs. 170 for RSS 1. Thereafter, world demand improved, with China buying aggressively. The Price per kg had risen to Rs. 341 and Rs. 360 respectively, by the end of the financial year.

WarehousingDuring the year under review we continued to offer a high service from our state-of-the-art warehouse. Space utilization was below expectations on account of the drop in Tea production. As costs have progressively increased in recent years, it was pleasing to note that warehouse rates increased during the year, for both tea and rubber.

Sri Lanka’ Tea Crop / Exports (Mn Kgs) ( 2005 -2009)

CropExports

25005 06 07 08 09

317.

230

8.8

310.

832

7.4

304.

6 311.

7 318.

731

9.3

289.

828

9.3

350

325

300

275

(Mn Kgs)


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Chairman’s Statement contd.

Stock BrokingThe Colombo stock market had seen limited activity in recent years but with the end of the war, there has been a surge in volumes, with the main indices breaking all time highs. The significantly improved performance of John Keells Stock Brokers reflected this change in sentiment and activity.

Financial PerformanceThe year, which commenced with a negative outlook, ended on a very favourable note with an appreciable improvement in the business performance of most segments.

ConclusionI would like to thank Sumithra Gunesekera, who retired from the Board with effect from 30th June 2009, for his valuable contribution during his tenure. I also take this opportunity to thank our staff, all other stakeholders and my colleagues on the Board for their support and encouragement during the year.

S. C. RatnayakeChairman

26th May 2010

Export Earnings (US $ Billion)

0.605 06 07 08 09

1.5

1.18

0.9

1.2

0.81

0.88

1.02

1.27



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Chief Executive Officer’s Report

IntroductionSustainability of the Tea Industry has always been an issue whenever it came to a revision of wages for workers. The Tea Industry’s ability to sustain itself and re-invest in future development and growth has been called into question following the recent increase in wages for Plantation workers by an unprecedented 40% that raised the daily wage to Rs. 405/= from a previous Rs. 290/=. However, the impact of this increase was tempered by perhaps one of the most significant breakthroughs in wage negotiations with the Labour Unions in the history of the Tea Industry agreeing to link the wage increase to attendance and productivity.

Tea prices continued to reach record levels in the world’s leading Auction Centres due to the huge Global Production deficit, mainly due to unfavourable weather in Sri Lanka, Kenya and India along with many of the worlds smaller tea producing nations. The past 12 months has been a truly defining period for the Tea Industry. First the Global Economic down turn precipitated dramatic developments, which impacted the whole industry. Before the industry could fully recover from the financial implications from this catastrophe, unreasonable weather took its toll on production. With most factories operating well below capacity the cost of production propelled to unprecedented levels.

Consumption continued to rise in India and China. The Tea production in the year 2009 has clearly not been sufficient to meet the global demand. The rise in consumption in these 2 countries has fundamentally changed the balance between global supply and demand for tea. In India alone with consumption growing at 3.5% to 4%, the country will need an additional 30,000 to 35,000 tons each year.

Global TrendsTEASri Lanka’s tea production of 289.8 Mkg was 9% below the previous year and was the lowest recorded since 1999 when a crop of 282.8 Mkg was harvested. Most significant shortfall was in the High Grown Sector which fell by 11.9 Mkgs as compared to 2008. Medium Growns dropped by 4.6 Mkgs and the Low Growns by 12.0 Mkg.

Annual Production By Elevation (Million Kg)

Tea Production 2008 - 2009High

GrownMediumGrown

LowGrown

Total

2008 84.4 49.0 185.3 318.72009 72.3 44.3 173.2 289.8

The output of Black Tea from major countries in the world in 2009 declined by approximately 70 Mkgs. Amongst the major producers, Sri Lanka, Kenya and Indonesia reported lower production, whilst Malawi and Uganda have registered higher production in 2009 when compared to the previous year. The short fall in the Global Tea production helped tea prices reach record levels in most Auction Centres. Both improved Global Economic conditions and restricted supply were the main attributes.

Quantity Sold at World Auction Centres (Million Kg)

Country 2005 2006 2007 2008 2009Colombo 273.4 265.9 242.0 264.9 271.8Calcutta 139.3 134.2 133.4 139.3 151.6Guwahati 142.8 118.2 152.7 152.3 138.5Siliguri 89.6 87.1 83.5 89.7 85.0Coonoor 41.6 37.4 37.7 50.6 44.7Coimbatore 19.8 23.3 23.7 28.1 25.6Cochin 60.3 53.7 57.9 61.6 55.1Chittagong 52.1 49.9 54.6 55.0 54.2Mombasa 306.8 281.7 344.3 303.2 279.4

RubberThere was an increased demand from Local Industries and from Overseas buyers for rubber. The Production in Sri Lanka for the year under review has shown an increase compared to the previous year as reported by the Rubber Development Board as 136,000 MT or a 5.4% increase. Most Plantation Companies however have reported a decline of around 8% compared to the previous year. All major producing Countries reported a decline in production due to the severe drought. China was very aggressive in their purchasing.

“Tea prices continued to reach record levels in the world’s leading Auction Centres due to the huge Global Production deficit.”



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All Rubber Plantation Companies and the Small Holders continue to enjoy the high prices that prevailed throughout the year for all grades of rubber. Some of the Local Industries cut back on their purchases during the latter part of the year due to these high prices.

In April 1X’s were Rs.162.00 per kg and RSS.1 Rs.170.00 per kg. By October 1X’s moved up to Rs.306.00 per kg, whilst RSS.1 was at Rs. 363.00 per kg. By end of the Financial Year 1X’s were selling at Rs. 341.00 per kg, whilst RSS.1 at Rs. 360.00 per kg.

Most Producers have ploughed back part of their profits into the rubber fields, as they envisage prices to continue.

Local TrendsTea exports for the year 2009 was the lowest since 2000 where total exports recorded 287.9 Mkgs.

Total export volumes declined by 9.4% or 30.1 Mkgs however, the average unit FOB price has gained by approximately Rs. 40/=. The feature of the unit value of various categories exported during the year indicate that tea bags have recorded the highest positive variance of Rs. 62.03 per Kg followed by Green Tea at Rs. 52.18 per kg and Black Tea in packet at Rs. 45.52 per kg. Black Tea in bulk which is the largest category exported representing 59.62% of total exports in 2009 has recorded an increase of Rs. 39.70 per kg compared to the previous year. Russia maintained the leading destination for Sri Lanka tea having imported 45.7 Mkgs followed by UAE 31.3 Mkg and 29.4 Mkgs by Syria, whilst Russia and UAE registered drops in exports of 5.1 Mkg and 14.3 Mkgs respectively, exports to Syria increased by 3.1 Mkgs.

Colombo Auction Averages – 2008/2009

Colombo Auction Averages (In Rs.)2008 2009

Uva High Grown 250.74 301.93Western High Grown 280.09 329.76High Grown 270.40 321.28Uva Medium 270.14 327.85Western Medium 261.76 309.97Medium Grown 265.24 316.79Low Grown 331.38 388.44Total 306.55 362.70

Operational ReviewTea BrokingYour Company continued to be one of the largest broking companies in Sri Lanka and once again established the highest number of Top Prices and Record Prices amongst brokers. The weekly price average of the Company reflected an attractive premium over the National Average. The Company continued to offer high end services to the producers and export clients.

National Tea Averages – (Rs. / US $)

Yearly Elevation Averages (Per Kg)

High Grown Medium Grown

Low Grown Total

Rs. US $ Rs. US $ Rs. US $ Rs. US $

2005 170.85 1.69 161.37 1.60 198.59 1.97 185.84 1.84

2006 204.32 1.97 175.12 1.69 204.19 1.97 199.58 1.92

2007 252.46 2.27 242.35 2.18 298.66 2.69 279.44 2.52

2008 273.83 2.52 270.13 2.49 336.38 3.10 310.81 2.86

2009 319.73 2.78 316.06 2.74 387.70 3.37 360.45 3.13

Rubber BrokingRubber Producers continued to enjoy healthy prices throughout the year. Your Company too was rewarded by these high prices, however the quantity handled was lower as there was a decline in production in the Regional Plantation Companies.

WarehousingUtilization of the Warehouse was lower than expected levels as the Tea crop was down on the previous year.

The much awaited Store Rent increase for Tea and Rubber was granted from the 1st of October 2009. The increase was cts 0.24 per kg for Tea and cts 0.25 per kg for Rubber.

Real EstateThe revenue and PBT of the real estate arm decreased during the year when compared with the previous year. The PBT decreased by 30% during the current year and was mainly due to the increase in fair value of investment property in the previous year.

Best Corporate ReportsWe are pleased to inform you that your Company won the Bronze Award at the Annual Report Awards 2009, for Sector - Diversified Holdings (Up to 05 Subsidiaries). This competition is conducted by the Institute of Chartered Accountants of Sri Lanka and is held annually.

Chief Executive Officer’s Report contd.


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Staff Welfare and Employee DevelopmentOver the years we have invested in developing our staff, providing training opportunities both in Sri Lanka and overseas. The Company maintains an open culture, one of dialogue where information on policies, challenges and issues are cascaded down to all levels, so that staff are engaged and have a sense of collective responsibility towards achieving common corporate goals.

During the year, changes were done on the Performance Management System to better measure the performance and competency gaps of employees in relation to corporate objectives.

In conclusion, I wish to thank the Chairman and Board of Directors, for the direction and guidance given. My gratitude also goes, to all categories of staff, and our valued clients, for their loyalty and support.

Sudath MunasingheCEO

26th May 2010

Performance of SubsidiaryJohn Keells Stock Brokers (Pvt) Limited (76% Holding)The end of the war mid way into the 1Q of FY10 sparked a bull run on the Colombo Stock Exchange with price and turnover levels growing rapidly following a poor period during much of FY09 which saw sharp declines on the indices and sharply lower turnover levels as the war intensified.

The All Share Price index recorded a 127% increase over the last financial year while average daily turnover levels increased to Rs. 892 million for FY10 up from Rs. 147 million in the first month of the financial year just prior to the end of the war.

Active participation by retailers, HNI’s, and private and public sector institutions resulted in the indices posting repeated record highs. This growth reflected much improved investor sentiment and a more positive macro outlook free of much of the volatility and uncertainty that for long loomed over the market during the years of conflict. Declining inflation and interest rates along with lower market volatility and stronger earnings growth prospects for businesses in a no-war environment is expected to help sustain the current upward market momentum well into the new financial year.

John Keells Warehousing (Pvt) Ltd. (100% Holding)Warehousing encountered a challenging year. The arrivals in the first half of the year dropped drastically due to dry weather and the utilization was very low during this period.

Performance of Associate CompanyKeells Realtors (Pvt) Ltd. (32% Holding)Keells Realtors Limited, the John Keells PLC Associate Company that owns Real Estate, recorded a Loss before tax of Rs. 1.8 Million as against a profit of Rs. 32.4 Million in the previous year. The last year’s profit included Rs 27.9 Million increase in Fair Valuation of Investment Property.

Sustainability ReportingRisk managementThe Risk Management process has been designed to ensure identification of any situation or circumstance that would adversely affect the achievement of Group activities and to accept and manage unavoidable risks and to ensure surprise events or situations are minimized. This process is aligned directly to the Group strategy, annual plans and monitored by the audit committee. The main risks have been identified under Business, Production, Competition, Legal, Human Resource, Financial and Technology.



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Board of Directors

Susantha Ratnayake Non Independent Non Executive ChairmanSusantha Ratnayake who is currently the Chairman and CEO of John Keells Holdings PLC was appointed the Chairman of John Keells PLC in January 2006. He is a council member of the Employers' Federation of Ceylon, serves on various clusters of the National Council of Economic Development (NCED) and is the Vice Chairman of the Ceylon Chamber of Commerce. He has over 32 years of Management experience, all of which is within the John Keells Group.

Ajit GunewardeneNon Independent Non Executive DirectorAjit Gunewardene who is currently the Deputy Chairman of John Keells Holdings PLC was appointed Director of John Keells PLC in January 2001. He is a Director of many companies in the John Keells Group and is the Chairman of Nations Trust Bank PLC and Union Assurance PLC. He is a Member of the Board of Nanco (Pvt) Ltd., a Company established for the development of Nanotechnology in Sri Lanka under the auspices of the Ministry of Science and Technology. He was also appointed a Member of the National Advisory Council for Export Development (NACFED) by the Minister of Export Development and International Trade. He has also served as the Chairman of the Colombo Stock Exchange. He is a Member of the Board of the Sri Lanka Tourism Promotion Bureau, he serves on several committees appointed by the Minister of Tourism for the development of this industry in Sri Lanka. Mr. Gunewardene has a Degree in Economics and brings over 26 years of Management experience.

Ronnie PeirisNon Independent Non Executive DirectorRonnie Peiris who is currently the Group Finance Director of John Keells Holdings PLC was appointed Director of John Keells PLC in July 2005. He was previously the Managing Director of Anglo American Corporation (Central Africa) Limited and an EXCO Member of Konkola Copper Mines PLC, both in Zambia. He has over 38 years of Finance and General Management experience in Sri Lanka and abroad. He is a Fellow of the Chartered Institute of Management Accountants, UK, Association of Chartered Certified Accountants, UK, and the Society of Certified Management Accountants, Sri Lanka, and holds an MBA from the University of Cape Town, South Africa. He is a member of the committee of the Ceylon Chamber of Commerce, Chairman of its Taxation Sub Committee and also serves on its Economic, Fiscal and Policy Planning Sub Committee. He is currently the Vice President of Institute of Directors.

Lallith Ramanayake Non Independent Executive DirectorLallith Ramanayake is the Head of the Plantation Services Sector and Head of the CSR Initiative of JKH and has been with the Group for over 38 years. He has also served as the Head of the Transportation Sector during the period 2007 to 2009. He is a Member of the Chartered Institute of Marketing, UK with the Chartered Marketer status and holds an MBA from the Postgraduate Institute of Management, University of Sri Jayewardenapura. Lallith has been the Chairman of the Colombo Brokers' Association, a Director of the Sri Lanka Tea Board, Deputy Chairman of the Tea Association of Sri Lanka and a Member of the Plantation/Tea cluster of the National Council for Economic Development, where he Chaired the Sub Committee which developed the National 10 year Plan for the Tea industry. He has served on the Executive Committee of the Ceylon Chamber of Commerce.

Deshabandu Tilak de ZoysaIndependent Non Executive DirectorTilak de Zoysa was appointed as an Independent Non Executive Director to the Board of John Keells PLC in July 2005.

He was conferred with the title “Deshabandu” in recognition of his services to Sri Lanka and was the recipient of a prestigious National Honour from the Emperor of Japan.

He is President of the Associated Motorways Group of Companies, Chairman of Carson Cumberbatch PLC, Amaya Hotels and Resorts, New York, USA and Helpage Sri Lanka . He also serves as a Board Member of HelpAge International - U.K. and other listed companies, such as, Taj Lanka Hotels Ltd., Lanka Walltiles PLC., and Nawaloka Hospitals PLC. Tilak is the Honorary Consul for Croatia in Sri Lanka since 1999 and a Past Chairman of the Ceylon Chamber of Commerce, National Chamber of Commerce of Sri Lanka and the Plastics and Rubber Institute.


11Board of Directors

Kavan RatnayakaIndependent Non Executive DirectorKavan Ratnayaka was appointed as an Independent Non Executive Director to the Board of John Keells PLC in July 2005 and he functions as the Chief Executive Officer of Dialog Broadband Networks (Pvt) Ltd (DBN) since 2007. He leads the Dialog teams responsible for Fixed Telephony/Broadband and Enterprise Solutions.

He holds a Bachelor of Science (Physics) from the University of California, and has 21 years experience in the field of Information and Communication Technology. Prior to joining Dialog, he served as IBM’s Country General Manager for Sri Lanka.

He is a past President of the American Chamber of Commerce, Sri Lanka and has served in the past, on the Boards of the Arthur C. Clarke Institute for Modern Technologies, The Young Entrepreneurs of Sri Lanka (YESL) and The Sri Lanka Institute of Information Technology (SLIIT).

Yolande HansenIndependent Non Executive DirectorYolande Hansen was appointed as an Independent Non Executive Director to the Board of John Keells PLC, in July 2005. She joined John Keells Group (Walkers Tours) in June 1972, as one of the pioneers in Tourism, and worked for 16 years for the Group. She then joined a Multinational Tourism Conglomerate as their Representative in South Asia from 1988 until 1991, subsequently forming Columbus Tours and presently serving as CEO. She is a Director of the Tourism Training Institute of Sri Lanka.

Sharmini RatwatteIndependent Non Executive Director Sharmini Ratwatte was appointed as an Independent Non Executive Director to the Board of John Keells PLC in May 2007.

She is a Fellow of the Chartered Institute of Management Accountants, UK and also holds a Masters in Business Administration from the University of Colombo.

She holds Non-Executive Directorships in MAS Investments (Pvt) Ltd, the non-apparel investment arm of the MAS Group. Is a Trustee of Sunera Foundation, a non profit organisation empowering differently-abled persons using the performing arts and Chairman of the Environmental Foundation Ltd, a non profit organisation facilitating environmentally sustainable development in Sri Lanka.


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Senior Management TeamMr. L. D. RamanayakeExecutive Vice President/JKH – Sector Head

Mr. S. C. MunasingheVice President/Chief Executive Officer

Mr. R. H. Walpola Assistant Vice President/ Head of Operations – Tea

Mr. S. A. JayewickremeAssistant Vice President/ Head of Operations – (Rubber/ Warehousing)

Ms. T. A. M. De AlwisAssistant Vice President/ Financial Controller

Mr. H. R. A. WanasingheHead of Manufacturing – Low Grown

Mr. D. DassanayakaHead of Manufacturing – High Grown

Mr. S. KarunaratneManager Tea

Ms. K. DaluwatteManager Tea

Mr. H. De MelManager Tea

Mr. R. S. IngramManager Finance

Mr. R. VannitambyManager Tea

Senior Management Team


13

Human Resources

Category Company Subsidiary TotalDirectors 04 00 04VP 01 02 03AVP 03 02 05Managers 08 01 09Asst Managers 08 05 13Executives 23 16 39Clerical 13 02 15Minor Staff 31 00 31Total 91 28 119Casual/Contract 27 37 64Total 118 65 183

Age Company Subsidiary Total50 – 60 years 26 01 2740 – 50 36 12 4830 – 40 14 06 2020 – 30 15 09 24Total 91 28 119

Years of Service Company Subsidiary TotalOver 20 years 31 04 3515 – 20 25 09 3410 – 15 11 01 1205 – 10 11 04 1500 – 05 13 10 23Total 91 28 119

50-60 yrs 22.69%40-50 yrs 40.34%30-40 yrs 16.81%20-30 yrs 20.17%

Age Analysis

Over 20 yrs 29.41%15-20 28.57%10-15 10.08%05-10 12.61%00-05 19.33%

Service Analysis

Directors 2.19%VP 1.64%AVPS 2.73%Managers 4.92%Asst. Managers 7.10%Executive 21.31%Clerical 8.20%Minor Staff 16.94%Casual/ Contract 34.97%

Employee Strength

Human Resources


14

Corporate Social Responsibility

“John Keells Infuses New Life To Historic Slave Island Railway Station”

The Slave Island Railway Station, better known as Kompannaweediya Railway Station, situated in the hub of commercial activity stands strong as one of the oldest legacies. This station boasted a magnificant structure which was larger and more spacious than any other and the colonial influence in architecture made it truly special and superior to any other station in the country.

It remains an emblem of Victorian art displaying stylish arches, intricate woodwork, neo-modern metal installations and the signature mixing of iron and stone standing as a striking example of refined technology. The track was originally designed across Galle Face but due to requests by the public to avoid the promenade, an alternate route through Slave Island was decided upon.

Since the station is in close proximity to our Glennie Street Head Office, John Keells stepped in to refurbish and maintain this social, economic and commercial treasure whilst preserving its colonial and architectural value. Working on the basis that the station should not be just another amenity to the people who pass by but more so clean and user friendly, it was decided to maintain the building and service areas.

Other aspects of renovation include the reconstruction of the overhead bridge with additional roofs to the two sides which has proved to be immensely useful for commuters during the rainy season. In addition, all benches have been repaired and repainted so that they could be fully utilised during peak hours. The building has been repainted and all necessary lights replaced, whilst the ceiling of the main entrance/ticket counter has been fully redone, ensuring that there is a pleasant appearance on entering the station. It has been stated that the facilities and appearance of the station has improved drastically as a result of this project by John Keells.

John Keells hopes to continue maintaining the station at a high standard on a long term basis as we are committed to addressing the needs of the people who are part of our daily lives. Now famed as one of the oldest and cleanest stations in Sri Lanka, it has become a national and social icon and has added further value since it is one of the oldest legacies in our British Heritage.


15Corporate Social Responsibility

Press Articles on the Historic Slave Island Railway Station

Colonial heritage

station chugs on

with bright new

look

Sunday Times

JKH infuses new life to historic Slave Island Railway Station

Daily Island

fldïm[a[ ùosfha ÿïßh ia:dkh kùlrKhg fcdakalS,aia iud.fuka odhl;ajh

Lakbima

JKH Committed to protect historic Slave Island Railway Station

Daily Mirror

JKH Committed to

rejuvenate Slave Island

railway station

Sunday Observer


16

“English for Life Scholarship Program”John Keells PLC through John Keells Social Responsibility Foundation supports the “English for Life Scholarship Program”. Having recognised the importance of English and IT, which has become an essential tool for youth to enrich their personal potential in order to gain employment, we continued to support this programme. We recognised the need for youth to constantly update their knowledge on both skills as well as soft skills in order to enhance their employability.

The English for Life Program is implemented through Gateway Language Centres, and is designed to help youth aged between 17-25 gain practical skills in English together with a basic knowledge of IT and soft skills.

The program attracted over 4,000 applicants, of whom over 1,500 were awarded scholarships after a placement test set by Gateway. The scholarships cover course fees, examination fees, textbooks and other course material.

The John Keells English for Life Scholarship Program was recently launched in Jaffna. This was in culmination of the program launches held in ten other districts of the country.

At the launch, the Head of the English Language Teaching Centre, University of Jaffna, Mr. Sunthereswaran emphasized the importance of Jaffna youth mastering the English Language which has become essential both for advanced studies and employment. He advised the 150 scholars selected to follow the course in Jaffna to “Make English your friend, not your enemy”.

For John Keells, this was not only an investment in the scholars individual development, but also an investment in the future of Sri Lanka as a nation, especially in these promising times.

Corporate Social Responsibility contd.

Corporate Social Responsibility


17

Corporate GovernanceJohn Keells PLC, its subsidiaries John Keells Warehousing (Private) Limited and John Keells Stock Brokers (Private) Limited and associate Company Keells Realtors Limited referred to as the “Group” through its ultimate parent Company, John Keells Holdings PLC (JKH) has put in place an operating model to direct, manage and control the affairs of the Group in the best interests of the stakeholders ensuring greater transparency and timely financial reporting.

The Board of Directors is committed to ensuring business integrity, professionalism and ethical values in all its activities. As a part of this commitment, the Board of Directors has proactively encouraged good corporate governance practices based on generally accepted policy framework and Corporate Governance rules as set out in the listing rules of the Colombo Stock Exchange, which emphasizes transparency, control and accountability, the disclosures for listed public companies as mandated by the Securities and Exchange Commission of Sri Lanka and the requirements as per the New Companies Act No.7 of 2007.

Board of DirectorsThe Board of Directors is the focal point of the Group’s corporate governance process and is ultimately accountable and responsible for the performance and affairs of the Group.

Board Composition and Directors’ IndependenceThe Board of Directors of John Keells PLC as of the year end consists of the Chairman who is a non-executive non independent director, two non-executive non independent directors, four non-executive independent directors and an executive director.

The Board Members have a wide range of expertise as well as significant experience in commercial and financial activities enabling them to discharge their governance duties in an effective manner.

All non-executive independent Directors are considered independent in terms of the listing rules of the Colombo Stock Exchange.

All non-executive independent Directors have submitted a signed and dated declaration confirming their independence as per the Listing Rules of the Colombo Stock Exchange.

Responsibilities of the BoardThe Board of Directors retains full and effective control of the Company and its primary responsibilities are to provide strategic direction to the Company and its subsidiaries, monitor operational and management performance, determine policy and processes to ensure the integrity of the Group’s risk management and internal control environment. The Board also ensures that the Group complies with all relevant laws, regulations and codes of business practices and communicates with stakeholders openly and promptly with substance.

The Board of Directors has whilst reserving specific powers to itself such as approval of major capital expenditure, acquisitions, approval of strategic and operating plans and employment of key staff members delegated the implementation of the strategic objectives decided by the Board to the Sector Head/ CEO and the Management Committee of the Company and its subsidiaries.

Directors’ responsibilities in relation to the Financial Statements, Compliance and internal control is indicated on page 34 of this Report.

Access to Management InformationThe Board Members meet the Executive Directors and Senior Management staff once every three months to review among other matters, the performance and financial statements for the period. Procedures exist to ensure that the directors’ receive relevant documentation in advance of each meeting. Guidelines with regard to the context and presentation have been established for all documents submitted. Quarterly accounts including key operational and financial ratios are circulated to the Board and discussed at the quarterly meetings. In addition, controls are in place to ensure compliance with the policies of the Board. The Board of Directors has unrestricted access to all Company information, records, documents and property.

Chairman of the BoardThe Chairman is a non executive non independent Director.The Chairman conducts Board meetings ensuring effective participation from all Directors. The Chairman is responsible for providing leadership to the Board and ensuring that proper order and effective discharge of Board functions are carried out at all times by the Board Members. The roles of the Chairman and the Chief Executive Officer (CEO) are separate with a clear distinction of responsibilities between them. The executive responsibility for the functioning of the Company’s business including implementation of strategies approved by the Board and developing and recommending to the Board the business plans and budgets that support the Company’s strategy has been entrusted to the CEO.

Board MeetingsThe Board met 4 times during the year. The attendance at these meetings was as follows:

Name of Director No. of Meetings Attended

S. C. Ratnayake - Chairman 4/4A. D. Gunewardene 4/4J. R. F. Peiris 3/4L. D. Ramanayake (appointed during the year)

2/3

T. de Zoysa 2/4K. D. W. Ratnayaka 2/4Ms. Y. A. Hansen 3/4Ms. S. T. Ratwatte 4/4

Corporate Governance


18

Re-election of DirectorsAt each Annual General Meeting one third of the Directors retire by rotation on the basis prescribed in the Articles of Association of the Company and are eligible for re-election.

Any Director, who has been appointed to the Board during the year, holds office until the next AGM, when he/she is required to retire and be re-elected by the shareholders.

The re-election of Directors ensures that shareholders have an opportunity to reassess the composition of the Board. The names of the Directors’ submitted for re-election are provided to the shareholders in advance to enable them to make an informed decision on their election.

The retiring Directors eligible for re-election this year are mentioned in the notice of the AGM on page 67.

Audit Committee, External Auditors and IndependenceThe Audit Committee of the Company comprises

T. de ZoysaK. D. W. RatnayakaMs. Y. A. HansenMs. S.T. Ratwatte

The Audit Committee comprises solely of Non-Executive, Independent Directors and confirms with the Listing Rules of the Colombo Stock exchange. It is governed by a Charter which inter alia, covers the reviewing of Policies and Procedures of internal control, Business Risk Management, Compliance with Laws and Company Policies and independent Audit Function.

The Committee is also responsible for the consideration and recommendation of External Auditors, the maintenance of a professional relationship with them, reviewing accounting principles, policies and practices adopted in the preparation of public financial information and examining all documents representing the Final Financial Statements.

The introduction of a self certification program that requires the Chief Executive Officer (CEO) and Head of Finance of the Sector to confirm compliance on a quarterly basis, with statutory requirements and key control procedures and to identify any deviations from the set requirements has significantly re-enforced the committee’s efforts in these respects.

The Audit Committee had five meetings during the year and the attendance of the members of the Audit Committee are disclosed on page 25 of the Annual Report.

The Sector Head, CEO, Financial Controller and Finance Manager and other operational heads are invited to the meetings of the Audit Committee. The detailed Audit Committee report including areas reviewed during the financial year 2009/10 is given on page 25 of the Annual Report.

Remuneration Committee and PolicyThe Remuneration Committee of the Parent Company John Keells Holdings PLC functions as the Remuneration Committee of the Company and its subsidiaries. as permitted by the Listing Rules of the Colombo Stock Exchange. The Remuneration Committee of John Keells Holdings PLC comprises three independent directors:

E. F. G. Amerasinghe – ChairmanP. D. RodrigoMs. S. S. Tiruchelvam

The remuneration policy of the Group is formulated to attract and retain high calibre executives and motivate them to develop and implement the business strategy in order to optimise long term shareholder value creation.

The key principles underlying the remuneration policy of the Group are as follows:

• All Executive roles across the JKH Group have been banded by an independent third party on the basis of the relative worth of the jobs.

• Compensation be set at levels that are competitive to enable the recruitment and the retention of high calibre executives in the identified job classes/bands- as guided by the best comparator set of companies from Sri Lanka

• Compensation comprising of fixed (base) payments, short term incentives and long term incentives be tied to performance both individual and organisational.

• Performance is measured annually on well defined objectives and metrics at each level-individual, business and group, thereby aligning shareholder interest through a well established performance management system.

• The more senior the level of management, the higher the proportion of the incentive component, thereby lower the proportion of the fixed (base) component of the total compensation.

• As the seniority, and therefore the decision influencing capability of the position on organisational results, increases the individual performance to hold lesser weightage than the organisational performance when determining total compensation and incentives.

Details of Remuneration paid to Executive and Non Executive Directors are disclosed in note 21 of the Notes to the Accounts.

Risk Review and Internal ControlThe Company and its subsidiaries also adopt the ultimate Parent Company’s Risk Management Programme which is given on page 23 to manage the significant risks. The significant Business risks to the Company and its subsidiaries which could undermine the achievement of the Group’s business objectives are identified and the owners are appointed to mitigate these risks.

Corporate Governance contd.


19Corporate Governance

The Company has outsourced the internal audit function to Nexia Management Services (Pvt) Ltd., (an affiliate of Messrs. B. R De Sliva & Company, Chartered Accountants). The Audit Plan includes continuous review of the group’s internal systems and controls that have been designed to safeguard the groups assets, maintain proper accounting records and provide management information are in place and are functioning according to expectations. The reports arising out of such audits are, in the first instance considered and discussed at the business/functional unit levels and after review by the Sector Head / CEO are forwarded to the Audit Committee on a regular basis.

Compliance with Legal RequirementsThe Board is conscious of its responsibility to the Shareholders, The Government and the Society in which it operates and is unequivocally committed to upholding ethical behaviour in conducting its business. The Board strives to ensure that the Company complies with the laws and regulations of the Country.

The Board has also taken all reasonable steps to ensure all Financial Statements are prepared in accordance with the Sri Lanka Accounting Standards, the requirements of the Companies Act No. 7 of 2007 and other applicable authorities. The Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Accordingly, the going concern principle has been adopted in preparing the Financial statements.

The Sri Lanka Accounting Standards as set by the Institute of Chartered Accountants are those which govern the preparation of the Financial Statements. The Board is aware of the growing importance of the disclosure of critical accounting policies as a part of Corporate Governance and opine that there are no instances where the use of such a concept would have a material impact on the Company’s and the Group financial performance.

Relations with ShareholdersShareholders will have the opportunity at the forthcoming AGM notice of which has been communicated to you, to put questions to the Board and to the Chairman. The contents of the Annual Report will enable existing and prospective shareholders to make better informed decisions in their dealings with the Company and its subsidiaries.

Code of ConductThe John Keells Holdings PLC, the parent Company of John Keells PLC has established a Code of Conduct for all employees of the John Keells Group.

The Code of Conduct has been formally communicated to all employees, and is now a component of the employee self service portal for executives and above staff and is based on four basic principles, namely:

• The allegiance to the Company and the group.

• The compliance with rules and regulations applying in the territories that the group operates in.

• The conduct of business in an ethical manner at all times and in keeping with acceptable business practices, and

• The exercise of professionalism and integrity in all business and “public” personal transactions.

The above principles encapsulates areas such as fair dealing, conflict of interest, confidentiality and insider information, gifts and entertainment, compliance with the Law and behaviour in public.

The employees are expected to adhere to the Code in the performance of their official duties and in other situations that could affect the group’s image and are expected to entrench the expected behaviour at all levels in the organisation through communication and role modelling.

Secretary to the BoardKeells Consultants Limited act as Secretary to the Company and is qualified to act as such as per the provisions of the Companies Act No. 7 of 2007.

The Company Secretary advises the Board and ensures that matters concerning the Companies Act, Board procedures and other applicable rules and regulations are followed. All Directors have access to the Company secretary. The Articles of the Company specify that the removal of the Company secretary should be by resolution involving the whole Board.


20

Statement of compliance with the Colombo Stock Exchange New listing rule-Section 7.10, rule on Corporate Governance

Rule No. Subject Applicable requirement Compliance Status

Details

7.10.1(a) Non Executive Directors

Two or at least one third of the total number of Directors should be Non-Executive Directors.

Compliant As at the conclusion of the immediately preceding AGM Seven out of Eight Directors were Non-Executive Directors. As at 31st March, 2010 Seven out of Eight Directors are Non- Executive Directors.

7.10.2(a) Independent Directors

Two or one third of Non-Executive Directors, whichever is higher, should be independent.

Compliant As at the conclusion of the immediately preceding AGM, Four of the Seven Non-Executive Directors were independent. As at 31st March, 2010 Four of Seven Non- Executive Directors are Independent.

7.10.2(b) Independent Directors

Each Non-Executive Director should submit a declaration of independence / non-independence in the prescribed format.

Compliant

7.10.3(a) Disclosure relating to Directors

The Board shall annually make a determination as to the independence or otherwise of the Non-Executive Directors and names of Independent Directors should be disclosed in the Annual Report.

Compliant Please refer page 10 to page 11 of this report.

7.10.3(b) Disclosure relating to Directors

The basis for the Board to determine a Director is Independent, if criteria specified for Independence is not met.

Compliant The Board has determined that only Four of the Non Executive Directors out of the Seven satisfy the criteria for “independence” as set out in the Listing Rules.

7.10.3(d) Disclosure relating to Directors

Forthwith provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3(a), (b) and (c) to the Exchange.

Compliant One new Director Mr. L. D. Ramanayake was appointed on 1st July 2009 .

7.10.5 Remuneration Committee

A listed Company shall have a Remuneration Committee.

Compliant The Remuneration Committee of the parent Company John Keells Holdings PLC acts as the remuneration committee of the Company and the subsidiary Company as permitted by the Listing Rules.

7.10.5(a) Composition of Remuneration Committee

Shall comprise of Non – Executive Directors a majority of whom will be Independent.

Compliant The Committee consists of 3 Non-Executive Directors all of whom are Independent.

7.10.5.(b) Functions of Remuneration Committee

The Remuneration Committee shall recommend the remuneration of the Chief Executive Officer and Executive Directors.

Compliant Please refer the Remuneration Policy as set out in page 18 of this Report.


21


Details

7.10.5.(c) Disclosure in the Annual Report relating to remuneration Committee

The Annual Report should set out, a) Names of Directors comprising

the Remuneration Committee

b) Statement of Remuneration Policy

c) Aggregated remuneration paid to Executive and Non – Executive Directors

Compliant

Compliant

Compliant

Please refer page 18.

Please refer page 18


7.10.6 Audit Committee The Company shall have an Audit Committee.

Compliant

7.10.6(a) Composition of Audit Committee

Shall comprise of Non – Executive Directors a majority of whom will be Independent.

A Non – Executive Director shall be appointed as the Chairman of the Committee.

Chief Executive Officer and Chief Financial Officer should attend Audit Committee Meetings.

The Chairman of the Audit Committee or one member should be a member of a professional accounting body.

Compliant

Compliant

Compliant

Compliant

The Audit Committee consists only of Independent Non Executive Directors

Chairman of the Audit Committee is an Independent Non – Executive Director.

The Chief Executive Officer and the Chief Financial Officer attends meetings by invitation.

One member of the Audit Committee is a Management Accountant.

7.10.6(b) Audit Committee Functions

Functions shall include;a) Overseeing of the preparation,

presentation and adequacy of disclosures in the financial statements in accordance with Sri Lanka Accounting Standards.

b) Overseeing of the compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements.

c) Overseeing the processes to ensure that the internal controls and risk management are adequate to meet the requirements of the Sri Lanka Auditing Standards.

Compliant The terms of reference of the Audit Committee have been agreed by the Board.



22


Details

7.10.6(b) Audit Committee Functions contd.

d) Assessment of the independence and performance of the external auditors.

e) Make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors, and approve the remuneration and terms of engagement of the external auditors.

Compliant The terms of reference of the Audit Committee have been agreed by the Board.

7.10.6(c) Disclosure in Annual Report relating to Audit Committee

a) Names of Directors comprising the Audit Committee.

b) The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determination.

c) The Annual Report shall contain a Report of the Audit Committee setting out of the manner of compliance with their functions.

Compliant

Compliant

Compliant


Please refer Audit Committee Report on page 25

Please refer Audit Committee Report on page 25



23

Risk ManagementRisk IdentificationThis part of the process will identify the events or scenarios that could prevent the Group from achieving its set objectives.

Risk Assessment and EvaluationThis is where it is determined whether the risk will have an ultra, high, moderate, low or insignificant impact on the operations of the Group. Also the likelihood of risk occurance based on past experience as well as future projections are evaluated. The Group Risk Management team along with the Company’s functional and operational Managers carry out the risk assessment and evaluation process.

Risk Mitigation Action PlansIdentified and evaluated risks are assigned to risk owners. Risk mitigation action plans will be developed with timelines for implementation by the risk owners along with the management of the Group. When the action plans are formulated, accepting and managing risk, transferring the risk to a third party, elimination of the risk by adopting an exit strategy, building controls into a process to reduce risk, sharing the risk with another party, and insuring against risks are considered.

MonitoringOn a monthly basis the risk mitigation action plans will be monitored and reported at the Management Committee and Sector Committee meetings while on a quarterly basis these will be monitored and reported at the Audit Committee.

Risk Management team of the Company is headed by the CEO and comprise of functional and operational managers. The Audit Committee of the Board receives regular reports

Risk Management ProcessThe Risk Management process has been designed to ensure identification of any situation or circumstance that would adversely effect the achievement of Group activities and to accept and manage unavoidable risks and to ensure surprise events or situations are minimized. This process is aligned directly to the Group strategy, annual plans and monitored by the audit committee. The Risk Management process is outlined as follows:

IntroductionJohn Keells PLC faces many challenges from the business environment from time to time that require continuous evaluation and management of significant risks. The identification of such risks and the implementation of appropriate control measures and processes to manage them within a tolerable level have become extremely important to meet or exceed the expectations of our stakeholders. The comprehensive risk management framework practiced by us to identify, assess, manage and monitor the risks had allowed us to sustain our business and enhance our competitive advantage.

The Company and the subsidiaries have adopted the John Keells Group Risk Management Strategy which is an ongoing process of identifying risk (Risk Mapping), measuring the potential impact and likelihood thereof against a broad set of assumptions (Risk Action/Decisions), establishing unacceptable exposures and initiating mitigating activities to reduce exposures to within tolerance levels (Risk Control Strategies).

Risk management takes place as a bottom-up approach, as depicted below;

John KeellsRisk Universe

Headline Risks

ExternalEnvironment

BusinessStrategies& Policies

BusinessProcess

Organisation& People

Analysis& Reporting

Technology& Data

Layer 4

Layer 3

JKH PLC Audit Committee

Group Executive Committee (GEC)

JK Group Review

Risk Report& Action

BU Review & Sector RiskReport and

Action

Layer 2

Layer 1

Group Operating Committee (GOC)

Sector Committee

Listed Company Audit Committee BU RiskReport &

Action

Report ContentOperational Units

• Risk Managem

ent Team• Risk &

Control Review Team

• Sustainability Integration

Business Unit

Risk Management


24

regarding the Company risk profile, and mitigation activities. The Group risk and control review function also evaluates the risk mitigation procedures as a part of its audit programs.

Some of the key risks that may hinder the achievement of our strategic business objectives are set below:

BusinessDue to the controlled environment in which Tea and Rubber Brokers operate; business risk may not be as large as in other industries. The risks can stem mainly from poor service performance and poor business ethics. The Company looks to perform beyond customer expectations by ensuring that the team of auctioneers and tasters are the best among brokers, by conducting weekly previews and reviews of the service levels including the exchange of market related information. Additionally, enterprise management, marketing advice and manufacturing advice are given to producer clients in order that estates are aligned to market requirements. The Company is identified by the Tea and Rubber trade for its high business ethics.

ProductionThe Company is concerned with risk related to production and quality on account of changes to policies such as fertilizer subsidies and risk related to the perception of Ceylon tea that could have an impact and loss of critical export markets. Therefore the Company is actively involved in lobbying with Government and other trade bodies to ensure that minimum standards are maintained as required.

CompetitionThis relates to the loss of business due to competition from Brokers who are not members of the Colombo Brokers Association resorting to unethical business practices. This is being addressed by lobbying with important authorities and conveying the importance for new entrants to be members of the Colombo Brokers Association.

Legal and RegulatoryThe Legal division of John Keells Group provides guidance, review and direction to safeguard the Group against exposure to material unexpected losses arising from the legal consequences of transactions it enters into.

The tax division of the Company regularly monitors, reviews and scrutinizes statutory returns submitted in respect of fiscal levies and taxes.

Human ResourceThe success of our Company depends on the commitment, motivation and skills of our employees. The main human resource risks are the shortage of experienced and qualified personnel. The Company attempts to mitigate this risk by encouraging continuous education, providing relevant training and development opportunities, and fostering a culture where all employees, regardless of rank, can actively contribute to the business. During the year a formal succession plan for senior level staff was also developed.

FinancialThe Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of mainly overdrafts and bank loans.

The Company deals with mostly recognised, credit worthy clients who are private Tea Factory Owners and Plantation Companies. Credit Risks are minimized as we advance funds based on inventories available in our warehouse valued at historical prices obtained for the relevant marks. Over advances granted are made available only for those clients who have a good track record and are monitored closely.

In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to Bad Debts is insignificant.

On short term advances, exposure to market risk for changes in interest rates is minimized, as the Companies Lending is above the borrowing rates.

TechnologyThe Company operates in a fully computerized, networked environment. Thus the organisational and technical measures needed to protect the confidentiality, availability and integrity of these systems and data becomes increasingly important. The Company has invested in security infrastructure appropriate for our size and scale of operations and security procedures are constantly updated to take account of the latest knowledge and technical enhancements. Security regulations cover technical aspects as well as organisational measures including staff training, end user computer policies etc. The Company has a fully fledged disaster recovery center in place and recovery plan is tested periodically and found to be satisfactory.

Risk Management

Risk Management contd.


25

Audit Committee ReportThe Audit Committee is tasked with the responsibility of assisting the Board in fulfilling its overall responsibility to the shareholders and other stakeholders in relation to the integrity of the Group financial reporting process in accordance with the Company’s Act and other legislative reporting requirements including the adequacy of disclosures of the financial statements in accordance with the Sri Lanka Accounting Standards. The Audit Committee also has the responsibility to ensure the adequacy of internal controls over the financial reporting process, and that the Company and its subsidiaries are in compliance with legal and other regulatory requirements. The Committee evaluates the performance and the independence of the Group Internal as well as its External Audit function.

Composition of the Audit CommitteeThe Audit Committee is a sub-committee of the Board of Directors and consists of four independent non-executive directors.

The members of the Audit Committee are persons with expertise and ability in their respective fields and bring their collective business expertise to bear in the deliberations of the Committee. One member of the Committee is a Management Accountant. The Financial Controller serves as Secretary to the Audit Committee.

Meetings of Audit CommitteeThe Audit Committee meets as often as deemed necessary or appropriate in its judgement, and at least quarterly each year. During the year under review there were five meetings and attendance of the Committee Members is as follows:

Name of the Director Attendance Percentage

Tilak de Zoysa 3 60

K. D. W. Ratnayaka 4 80

Ms. Y. A. Hansen 4 80

Ms. S. T. Ratwatte 5 100

The Executive Director, the Chief Executive Officer, Financial Controller, Finance Manager and Head of Group Risk & Control Review of John Keells Holdings PLC attend by invitation and brief the committee on specific issues. The External Auditors and the Internal Auditors are also required to attend meetings when matters pertaining to their functions come up for consideration.

Terms of ReferenceThe Committee is governed by the specific terms of reference set out in the Audit Committee Charter. The terms of reference comply with and go beyond the requirements of the listing rules of the Colombo Stock Exchange. The Audit Committee Charter is being reviewed at present to update and expand to meet current and best practices guidelines.

The committee focuses on the following objectives in discharging its responsibilities;

a) Risk Managementb) Efficacy of the system of internal controls over financial

reporting.c) Independence and objectivity of the External (statutory)

Auditorsd) Appropriateness of the principal accounting policies usede) Financial statement integrity

Summary of Activities• The Committee reviewed the consistency and

appropriateness of the accounting policies adopted by the Company and was assured that the policies used were appropriate and were in compliance with the Sri Lanka Accounting Standards. The committee reviewed and deliberated on policy updates on internal procedures to ascertain that improvements are aligned to best business practices. The committee also discussed the Group’s readiness for the pending convergence of Sri Lanka Accounting Standards ( SLAS) with International Financial Reporting Standards ( IFRS) and noted that the group is in the process of carrying out a gap analysis with the purpose of identifying areas of significant impact.

• During the course of the year, the Committee reviewed the effectiveness of the internal financial controls to ensure that they provide reasonable assurance to the directors that the financial reporting system adopted by the group can be relied on in the preparation and presentation of the quarterly and annual financial statements.

• The Committee obtained quarterly declarations from the Company and its subsidiaries confirming financial and operational compliance with established group policies and procedures and highlighting departures, if any, together with reasons.

• The Committee reviewed the External Auditors’ Audit Plan and met with the auditors to discuss in particular matters relating to the co-operation, quality of information and representations received from the management. Such discussions also covered the internal rules and guidelines followed by the external auditors in ensuring independence.

• During the course of the year, the Committee established processes, via a review of accounting ratios, movements and variances to obtain comfort on quarterly and annual financial statements of John Keells PLC prior to recommending their adoption by the Board.

Audit Committee Report


26

Internal AuditThe Internal Audit function has been outsourced to Nexia Management Services (Pvt) Ltd.; (an affiliate of Messrs. B. R De Sliva & Company, Chartered Accountants). The Internal Audit Function, in addition to reviewing the efficiency of internal controls, reviews the actions taken to control and mitigate operational and business risks and monitors and reports on the compliance with statutory requirements and group accounting and operational policies. The Audit Committee has agreed with the internal auditor as to the frequency of audits to be carried out, the scope of the audit and the areas to be covered and the fee to be paid for their services.

During the year under review, the emphasis of the Internal Audit Function covered:• Review of internal controls

• Operational risks

• Business risks

• Compliance with statutory requirements

• Non-compliance with Company policies

• Identification of inefficiencies and proposals for remedial action

The Internal Auditor was also required to provide an overview of the risk profile of the business being audited together with a risk grading on a specified scale.

External AuditThe External Auditors of the Company submitted a detailed Audit Plan for the financial year 2009/10. The Audit Plan specified “areas of audit emphasis” which had been identified from the last audit or from a review of current operations. The areas of audit emphasis had been selected due to the probability of error and the material impact it can have on the financial statements. At the conclusion of the audit, the auditors met with the Audit Committee to discuss and agree the treatment of any matters of concern identified in the course of the audit.

The Audit Committee has recommended to the Board of Directors that Messrs. Ernst & Young be re-appointed as Auditors for the financial year ending 31st March 2011, subject to the approval of the shareholders at the next Annual General Meeting.

ConclusionThe Audit Committee is satisfied that the group’s accounting policies, operational controls and risk management processes provide reasonable assurance that the affairs of the group are managed in accordance with group policies and that group assets are properly accounted for and adequately safeguarded.

Deshabandu Tilak de ZoysaChairman, Audit Committee

26th May 2010

Other MembersK. D. W. RatnayakaMs. Y. A. Hansen Ms. S. T. Ratwatte

Audit Committee Report contd.

Audit Committee Report


27

1876 A partnership styled “John Brothers and Company” was formed with offices situated in Colombo and Kandy.

1878 This partnership was dissolved and Edwin John started an establishment of his own titled “E. John” and carried on the business of produce and exchange broking. The first decade of business of E. John was one of low activity. Villers records this period thus, “Business in those days was very limited. Coffee had all but gone out, Tea had not expanded sufficiently and the little business in Chinchona was not enough to go around.” During this period, Reginald, son of Edwin John, joined his father in Ceylon.

1890 Prospects began to improve rapidly with the approaching tea business.

1895 Reginald John was taken into the partnership of E. John & Co. By this time, business was growing quite rapidly in tea, shares, oil and exchange.

1948 E. John & Co., amalgamated with two London Tea Broking firms, William Jas and Hy Thompson & Co. and Geo White and Co. The firm was then incorporated as a private limited liability Company and the name was changed to E. John, Thompson, White and Co. Ltd.

1960 E. John, Thompson, White & Co. Ltd., amalgamated with Keells & Waldock Ltd. The name was changed to John Keells Thompson White Ltd. This Company had its office in the National Mutual Insurance Company building in Chatham Street. The first Chairman of the Company was Douglas Armitage and on his retirement he was succeeded by A. G. R. Willis. The Company acquired its Glennie Street premises from Dodwell & Company which was initially used as a warehouse.

1962 The firm moved to the sixth floor of the then newly constructed Ceylinco House.

1966 The initial step towards diversification of the activities of the Company was taken with the acquisition of Ceylon Mineral Waters Ltd.

1970 M.C. Bostock was elected Chairman of the Company.

1971 John Keells Ltd, moved its offices to Glennie Street, Slave Island.

1976 John Keells Ltd, became a People’s Company.

1986 John Keells Holdings Ltd, acquired the controlling interest of John Keells Ltd, M. C. Bostock retired and D. J. M. Blackler took over as the Chairman of the Company.

Historical Milestones



28

1990 K. Balendra took over as Chairman, the first Sri Lankan to hold this position. John Keells Ltd, acquired controlling interests in John Keells Stock Brokers (Pvt) Ltd.

1993 Financial Statements of the associates Keells Realtors Ltd., and International Tourists & Hoteliers Ltd. were incorporated to the Consolidated Accounts.

2000 K. Balendra retired as Chairman on 31st December, 2000.

2001 V. Lintotawela took over as Chairman on 1st January, 2001. John Keells Ltd., incorporated John Keells Warehousing (Pvt) Ltd., a fully owned subsidiary with B.O.I. status.

2003 The state-of-the art warehouse of John Keells Warehousing (Pvt) Ltd., which is the largest hi-tech tea warehouse in this part of the region was commissioned for storing pre-auctioned produce.

2004 The Company disposed its Investment in International Tourists & Hoteliers Ltd.

2005 Vivendra Lintotawela retired as Chairman on 31st December 2005 and Susantha Ratnayake took over as Chairman on 01st January 2006.

2007 The name of the Company was changed to John Keells PLC which is a new requirement of the Companies Act No. 7 of 2007.

Historical Milestones contd.


Financial Review

30 Annual Report of the Board of Directors34 The Statement of Director’s Responsibility35 Auditors’ Report36 Balance Sheet37 Income Statement38 Statement of Changes in Equity39 Cash Flow Statement40 Notes to the Financial Statements


30

The Directors have pleasure in presenting the 63rd Annual Report of your Company together with the audited financial statements of John Keells PLC., and the audited consolidated financial statements of the group for the year ended 31st March, 2010.

GeneralThe Company was incorporated on 01st April 1960 as a Public Limited Liability Company and the issued shares of the Company are listed on the Colombo Stock Exchange. Pursuant to the requirements of the new Companies Act No. 7 of 2007, the Company obtained a new Company No. PQ 11 on 15th June 2008.

Principal ActivitiesCompanyThe principal activities of the Company remain unchanged as produce broking.

SubsidiariesJohn Keells Stock Brokers (Private) Limited continues to provide stock broking services.

John Keells Warehousing (Private) Limited continues to provide warehousing facilities.

Business ReviewA review of the Group’s performance during the financial year is given in the Chairman’s Review and the Chief Executive Officer’s Report. These reports form an integral part of the Directors Report and provide a fair review of the performance of the Group during the financial year ended 31st March 2010.

Financial StatementsThe Financial Statements of the Company and the Group are set out on pages 36 to 57 of the Annual Report

Auditors’ ReportThe Auditors’ Report on the financial Statements is given on page 35 of the Annual Report

Significant Accounting PoliciesThe accounting policies adopted in the preparation of the financial statements are given on pages 40 to 44 of the Annual Report. There were no changes in the Accounting Policies adopted in the previous year for the Company or the Group.

Going ConcernThe Board of Directors is satisfied that the Company, its subsidiaries and associate, have adequate resources to continue its operations in the foreseeable future. Accordingly, the Financial Statements are prepared based on the “going concern concept”.

Stated CapitalThe total stated capital of the Company as at 31 March 2010 was Rs.152 mn (2009 - Rs. 152 mn). The stated capital the Company comprises 15,200,000 Ordinary Shares fully paid up.

RevenueRevenue generated by the Company amounted to Rs. 491mn (2009 - Rs. 457 mn), whilst group revenue amounted to Rs.848 mn (2009 - Rs. 608 mn). Contribution to group revenue, from the different business segments is provided in note 18.2 to the financial statements on page 52.

Results and AppropriationsThe profit after tax of the Company was Rs.145 mn (2009 - Rs. 159 mn) whilst the group profit attributable to equity holders of the parent Company for the year was Rs.230 mn (2009 - Rs. 128 mn).

Results of the Company and of the group are given in the income statement on page 37.

DividendThe total dividend pay-out was Rs.10.00 (2009 - Rs. 10.00) per share during the year amounting to Rs. 152 mn (2009 - Rs. 152 mn).

Dividend per share has been computed based on the amount of dividends recognised as distribution to the equity holders during the period.

The Directors have recommended a Final Dividend of Rs.10.00 per share for the year ended 31st March 2010 from the profits available for appropriation. In accordance with the Sri Lanka Accounting Standards, events after the Balance Sheet Date, the proposed dividend has not been recognised as a liability as at 31st March 2010.

As required by Section 56 (2) of the Companies Act No 7 of 2007, the Board of Directors have, certified that the Company satisfies the solvency test in accordance with Section 57 of the Companies Act no 7 of 2007, and have obtained a certificate from the Auditors, prior to approving a Final Dividend of Rs.10.00 per share for this year. The Final Dividend will be paid on 17th June 2010 to those shareholders on the register as at 08th June 2010.

Detailed description of the results and appropriations are given below.

Annual Report of the Board of Directors


31

DonationsTotal donations made by the Company and group during the year amounted to Rs. 2.1mn (2009 - Rs. 1.4 mn) and Rs. 2.6 mn (2009 - Rs. 1.4 mn), respectively, of these, the donations to approved charities were Rs.0.6mn (2009 - Rs. 1.4 mn) at Company and Rs.1.1 mn (2009 Rs. 3.80 mn) at group. The amounts do not include contributions on account of Corporate Social Responsibility (CSR) initiatives.

The John Keells Social Responsibility Foundation, which operates with funds contributed by each of the companies in the group, handles most of the group’s CSR initiatives and activities. The Foundation manages a range of programmes that underpin its key principle of acting responsibly in all areas of business to bring about sustainable development. The Company’s contribution to John Keells Social Responsibility Foundation was Rs. 1.2 mn (2009 Rs. 2.4 mn) and the groups contribution was Rs.1.7 mn (2009 3.9 mn) respectively.

Property, Plant and EquipmentThe book value of property, plant and equipment as at the balance sheet date amounted to Rs.28mn (2009 - Rs. 37 mn) and Rs.157 mn (2009 - Rs. 180 mn) for the Company and group respectively.

Capital expenditure for the Company and group amounted to Rs. 2.4 mn (2009 - Rs. 1 mn) and Rs.2.6 mn (2009 - Rs. 5.7 mn), respectively. Details of property, plant and equipment and their movements are given in note 2 to the financial statements on page 45.

Market Value of PropertiesAll properties classified as investment property were valued in accordance with the requirements of SLAS 40 (2005) Investment Property. The carrying value of investment

property of the Company and group amounted to Rs. 696 mn (2009 - Rs. 696 mn) and Rs.696 mn (2009 - Rs. 696 mn) respectively. The investment property was revalued by Mr. P. B. Kalugalagedera as at 31 March 2009.

Details of the valuation of investment property is provided in note 3 to the financial statements on pages 46 .

The real estate portfolio of the group as at 31 March 2010 is disclosed on pages 46.

InvestmentsInvestments of the Company and the group in subsidiaries, associate, and other external investments amounted to Rs.172 mn (2009 - Rs. 172 mn) and Rs 68.mn (2009 - Rs. 71 mn), respectively.

Detailed description of the long term investments held as at the balance sheet date, are given in note 5 to the financial statements on page 47.

ReservesTotal reserves as at 31 March 2010 of the Company and group amounted to Rs.891mn (2009 - Rs. 898 mn) and Rs.1,086 mn (2009 - Rs. 1,008 mn), respectively.

The movement and composition of the capital and revenue reserves is disclosed in the statement of changes in equity on page 38.

Events Occurring after the Balance Sheet DateThere have been no events subsequent to the balance sheet date, which would have any material effect on the Company or on the group other than those disclosed in note 28 to the financial statements on page 57.

Group Company Profits 2009/10 2008/09 2009/10 2008/09 Rs. 000’s Rs. 000’s Rs. 000’s Rs. 000’s

After making provision for bad and doubtful debts and for all known liabilities and after providing for depreciation on fixed assets, the profit earned was 403,931 201,746 216,968 224,806From which has to be deducted the provision for taxation of (147,407) (74,861) (71,682) (66,236)Leaving a net profit on ordinary activities after taxation of 256,524 126,885 145,286 158,570From which the amount attributable to Minority Interest was (deducted)/added (26,686) 1,230 - -And after the balance brought forward from the previous year was added 891,099 914,984 794,077 787,507The amount available for appropriation was 1,120,937 1,043,099 939,363 946,077

AppropriationsAnd an Interim Dividend of Rs. 5/- per share paid for (2008/09) on 24th April 2009 (76,000) - (76,000) -Final Dividend of Rs. 5/- per share paid for (2008/09) on 18th June 2009 (76,000) (152,000) (76,000) (152,000)Leaving a balance to be carried forward to the next year of 968,937 891,099 787,363 794,077


32

Contingent Liabilities and CommitmentsThere have been no commitments or contingent liabilities other than those stated in note 25 on page 55 of the Annual report.

Human ResourcesThe number of persons employed by the Company and group as at 31 March 2010 was 118 (2009 - 109) and 183 (2009 - 140), respectively.

The group is committed to pursuing various HR initiatives that ensure the individual development of all our teams as well as facilitating the creation of value for themselves, the Company and all other stakeholders.

There were no material issues pertaining to employees and industrial relations in the year under review.

Corporate GovernanceCorporate Governance practices and principles with respect to the management and operations of the Company is set out on page 17 of this report. The Directors confirm that the Company is in compliance with the relevant rules on Corporate Governance contained in the listing rules of the Colombo Stock Exchange

The Directors declare that:a) The Company has not engaged in any activities, which

contravene laws and regulationsb) The Directors have declared all material interest in contracts

involving the Compnay and refrained from voting on matters in which they were materially interested

c) The Company has made all endeavours to ensure the equitable treatment of shareholders

d) The business is a going concern with supporting assumptions or qualifications as necessary and

e) The Directors have conducted a review of internal controls covering financial operational and compliance controls and risk management and have obtained a reasonable assurance of their effectiveness and successful adherence herewith.

Risk Management and Internal ControlThe Board confirms that there is an ongoing process for identifying, evaluating and managing any significant risks faced by the group. Risk assessment and evaluation for each business unit takes place as an integral part of the annual strategic planning cycle and the principle risks and mitigating actions in place are reviewed regularly by the Board and the Audit Committee. The Board, through the involvement of the risk review and control department takes steps to gain assurance on the effectiveness of control systems in place. The Audit Committee receives reports on the results of internal control reviews and the Head of the Group Risk Review and Control Department has direct access to the Chairman of the Audit Committee.

Audit CommitteeThe following members of the Board serve on the Audit Committee.T. De Zoysa - ChairmanK. D. W. RatnayakaMs. Y. A. HansenMs. S. T. Ratwatte

The report of the Audit Committee is given on page 25 of the Annual report.

Remuneration CommitteeAs permitted by the Listing Rules of the Colombo Stock Exchange, the Remuneration Committee of John Keells Holdings PLC, the parent Company of John Keells PLC functions as the Remuneration Committee of the Company and subsidiaries. The remuneration committee of John Keells Holdings PLC comprises of three independent Directors.

E. F. G. Amerasinghe – ChairmanP .D. RodrigoMs. S. S. Tiruchelvam

The remuneration policy of the Company and its subsidiaries is detailed in the Corporate Governance Report on page 18 of the Annual Report.

Stock Market InformationAn ordinary share of the Company was quoted on the Colombo Stock Exchange at Rs. 194.50 as at 31st March 2010 ( 31st March 2009 - Rs 62/-). Information relating to public holding, earnings, dividend, net assets, market value per share and share trading is given in “Key Ratios and Information” on pages 64 to 65 and in the Shareholders Information Section on pages 60 to 61.

The Company endeavours at all times to ensure equitable treatment to all shareholders.

Substantial ShareholdingsThe names of the twenty largest shareholders, the number of shares held and the percentages held are given on page 61 of the Annual Report. The distribution schedule of the shareholders and public holdings are disclosed on page 60 of the Annual Report.

DirectorateDuring the year the Board of Directors of John Keells PLC consisted of eight Directors with wide commercial, academic knowledge and experience. Mr. G. S. A. Gunesekera resigned from the Board with effect from 30th June 2009, while Mr. L. D. Ramanayake was appointed with effect from 1st July 2009. The Directors profiles is given on pages 10 & 11 of the Annual Report.

The Board of Directors of the Company and its subsidiaries as at 31 March 2010 is listed below.

Name of the Director John Keells PLC

John Keells Stock Brokers (Private) Limited

JohnKeellsWarehousing (Private)Limited

S. C. Ratnayake – Chairman √ √ √A. D. Gunewardene √ √ -J. R. F. Peiris √ √ √G. S. A. Gunesekera (resigned with effect from 30.6.2009)

√ - √

L. D. Ramanayake (appointed with effect from 01.7.2009)

√ - √

K. N. J. Balendra - √ -T. de Zoysa √ - -K. D. W. Ratnayaka √ - -Ms. Y. A. Hansen √ - -Ms. S. T. Ratwatte √ - -

Annual Report of the Board of Directors contd.


33

Supplier PolicyThe Group applies an overall policy of agreeing and clearly communicating terms of payment as part of the commercial agreements negotiated with suppliers, and endeavors to pay for all items properly charged in accordance with these agreed terms. As at 31 March 2010 the trade and other payables of the Company and group amounted Rs. 58 mn (2009 - Rs. 300 mn) and Rs. 281mn (2009 - Rs. 342 mn), respectively

Environmental ProtectionThe group complies with the relevant environmental laws, regulations and endeavors to comply with best practices applicable in the country of operation.

Statutory PaymentsThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of, and in respect of the employees of the Company and its subsidiaries, and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the balance sheet date have been paid or, where relevant provided for, except as specified in Note 25.3 to the financial statements on page 55, covering contingent liabilities.

AuditorsMessrs Ernst & Young, Chartered Accountants, are willing to continue as Auditors of the Company, and a resolution proposing their reappointment will be tabled at the Annual General Meeting.

The Audit Committee reviews the appointment of the Auditor, its effectiveness and its relationship with the group, including the level of audit and non-audit fees paid to the Auditor.

A total amount of Rs.1.2 mn (2009 – Rs. 1 mn) by the Company and Rs. 1.8 mn (2009 – Rs. 1.6 mn) by the group has been paid out as audit fees. The Auditors, do not have any relationship (other than that of an Auditor) with the Company or any of its subsidiaries.

Further details on the work of the Auditor and the Audit Committee are set out in the Audit Committee Report on page 25.

Annual ReportThe Board of Directors approved the Company and consolidated financial statements on 26th May 2010. The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board.

Annual General MeetingThe Annual General Meeting will be held at the HR Auditorium, (Ground Floor) of John Keells PLC, No. 130, Glennie Street, Colombo 2, on 30th June, 2010 (Wednesday) at 10.00 a.m. The notice of the Annual General Meeting appears on page 67.

This Annual Report is signed for and behalf of the Board of Directors

Chairman Director Keells Consultants Ltd. Secretaries26th May 2010

Retirement of Directors by Rotation or Otherwise and Their Re-ElectionMr. K. D. W. Ratnayaka and Ms. Y. A. Hansen retire by rotation in terms of Article 83 of the Articles of association of the Company, and being eligible offer themselves for re-election.

Mr. L. D. Ramanayake retires, by rotation in terms of Article 90 of the Articles of association of the Company, and being eligible offers himself for re-election.

Directors’ RemunerationDetails of the remuneration and other benefits received by the directors are set out in page 53 of the financial statements.

DIRECTORS’ and CEO’s Shareholdings

Name of Director Number of sharesAs at 31st March 2010

As at 31st March 2009

S. C. Ratnayake Nil NilA. D. Gunewardene Nil NilJ. R. F. Peiris Nil NilL. D. Ramanayake Nil N/AT. de Zoysa Nil NilK. D. W. Ratnayaka Nil NilMs. Y. A. Hansen Nil NilMs. S. T. Ratwatte Nil NilS. C. Munasinghe (CEO) Nil Nil

Interest RegisterThe Company maintains an Interest Register as required by the Companies Act No. 7 of 2007 and entries have been made therein.

As both subsidiaries of the Company are private companies which have dispensed with the requirement to maintain an Interest Register, this Annual Report does not contain particulars of entries made in the Interest Registers of subsidiaries.

Particulars of Entries in the Interests Registera) Interests In Contracts The Directors have all made a General Disclosure to the

Board of Directors as permitted by S 192 (2) of the Companies Act No 7 of 2007 and no additional interests have been disclosed by any Director.

b) There have been no disclosures of share dealings as at 31st March 2010.

c) Indemnities & Remuneration The board approved the payment to the executive director of

the Company, L. D Ramanayake of;• Short term variable incentives based on individual

performance, organisation performance and role responsibility based on the results of the financial year 2008/2009, paid in July 2009;

• A one off ex-gratia payment made in December 2009 (there was no annual increment awarded in 2009); and

• Long Term Incentive in the nature of ESOP in John Keells Holdings PLC dependant on the aforesaid performance rating, organisational rating and role responsibility.

as recommended by the Remuneration Committee of JKH the holding Company of John Keells PLC in keeping with the group remuneration policy.


34

The Statement of Director’s Responsibility

The responsibility of the Directors, in relation to the financial statements, is set out in the following statement. The responsibility of the auditors, in relation to the financial statements, is set out in the report of the auditors on page 35 of the report.

As per the provisions of the Companies Act No 7 of 2007, the Directors are required to prepare for each financial year and place before a general meeting financial statements, which comprise:

• A balance sheet, which presents a true and fair view of the state of affairs of the Company and its subsidiaries as at the end of the financial year and

• An income statement, which presents a true and fair view of the profit or loss of the Company and its subsidiaries for the financial year; which comply with the requirements of the act.

The directors are required to ensure that, in preparing these financial statements:

• the appropriate accounting policies have been selected and applied in a consistent manner and material departures, if any, have been disclosed and explained;

• all applicable Accounting Standards as relevant, have been followed;

• judgements and estimates have been made which are reasonable and prudent.

The directors are also required to ensure that the Company has adequate resources to continue in operation to justify applying the going concern basis in preparing these financial statements.

Further, the directors have a responsibility to ensure that the Company maintains sufficient accounting records to disclose, with reasonable accuracy the financial position of the Company and its subsidiaries, and to ensure that the financial statements presented comply with the requirements of the Companies Act No 7 of 2007.

The directors are also responsible for taking reasonable steps to safeguard the assets of the Company and its subsidiaries and in this regard to give proper consideration to the establishment of appropriate internal control systems with a view to preventing and detecting fraud and other irregularities

The directors are required to prepare the financial statements and to provide the auditors with every opportunity to take whatever steps and undertake whatever inspections they may consider to be appropriate to enable them to give their audit opinion.

Further, as required by Section 56(2) of the Companies Act. No. 7 of 2007, the Board of directors have confirmed that the Company, based on the information available, satisfies the solvency test immediately after the distribution, in accordance with Section 57 of the Companies Act. No. 7 of 2007, and has obtained a certificate from the auditors, prior to declaring a final dividend of Rs.10.00 per share for the year, to be paid on 17th June 2010.

The directors are of the view that they have discharged their responsibilities as set out in this statement.

Compliance ReportThe directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries, and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the balance sheet date have been paid, or where relevant provided for.

By Order of the Board

Keells Consultants LimitedSecretaries

26th May 2010


35

Auditors’ Report

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF JOHN KEELLS PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of John Keells PLC (“Company”), the consolidated financial statements of the Company and its subsidiaries which comprise the balance sheets as at 31 March 2010, the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial StatementsThe 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 controls 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 OpinionOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

OpinionIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2010 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March 2010 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31 March 2010 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company.

Report on Other Legal and Regulatory RequirementsIn our opinion, these financial statements also comply with the requirements of Sections 151(2) and 153(2) to 153(7) of the Companies Act No. 07 of 2007.

Colombo.26th May 2010


36

Balance Sheet

Group CompanyAs at 31st March 2010 2009 2010 2009 Note Rs.000’s Rs.000’s Rs.000’s Rs.000’s

ASSETSNon-Current AssetsProperty, Plant & Equipment 2 157,037 180,040 28,292 36,892Investment Properties 3 696,250 696,250 696,250 696,250Leasehold Property 4 44,558 45,647 - -Investments in Subsidiaries 5.1 - - 120,380 120,380Investment in Associate 5.2 / 5.3 40,457 43,844 24,000 24,000Other Investment 5.4 27,534 27,534 27,534 27,534Other Non Current Assets 6 19,713 24,378 11,481 12,445Deferred Tax Assets 7 3,192 9,058 - -Deposits with Colombo Stock Exchange 8,000 16,500 - - 996,741 1,043,251 907,937 917,501Current AssetsInventories 8 3,253 2,796 3,199 2,693Trade & Other Receivables 9 605,717 472,580 405,765 438,287Other Recoverables - Short Term Deposits 2,752 2,810 2,752 2,810Amounts due from Related Parties 27.1 23,129 12,760 23,193 12,808Short Term Investments 10.1 305,500 92,000 - -Cash and Bank 10.1 181,359 185,702 118,313 178,894 1,121,710 768,648 553,222 635,492

Total Assets 2,118,451 1,811,899 1,461,159 1,552,993

EQUITY AND LIABILITIESEquity Attributable to Equity Holders of the ParentStated Capital 11 152,000 152,000 152,000 152,000Revenue Reserves 12 1,086,237 1,008,399 891,363 898,077 1,238,237 1,160,399 1,043,363 1,050,077Minority Interest 13 47,964 21,278 - -Total Equity 1,286,201 1,181,677 1,043,363 1,050,077

Non-Current LiabilitiesInterest Bearing Loans & Borrowings 17 41,024 55,083 - -Deferred Tax Liabilities 14 63,772 59,171 51,605 55,512Retirement Benefit Obligations 15 50,764 44,331 37,833 30,878 155,560 158,585 89,438 86,390Current LiabilitiesTrade and Other Payables 16 281,419 342,391 58,397 299,944Income Tax Payable 86,087 15,531 33,862 15,546Amounts due to Related Parties 27.2 4,655 1,673 5,405 1,189Interest Bearing Loans & Borrowings 17 164,059 101,307 150,000 90,000Bank Overdrafts 10.2 140,470 10,735 80,694 9,847 676,690 471,637 328,358 416,526

Total Equity and Liabilities 2,118,451 1,811,899 1,461,159 1,552,993

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

Ms. T. De AlwisFinancial Officer

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.Signed for and on behalf of the Board by,

S. C. Ratnayake L. D. RamanayakeDirector Director

The accounting policies and notes on pages 40 through 57 form an integral part of the financial statements.

26th May 2010


37

Income Statement

Group CompanyYear ended 31st March 2010 2009 2010 2009 Note Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Revenue 18 848,144 607,949 490,621 457,023

Cost of Sales (256,641) (234,669) (152,791) (164,914)

Gross Profit 591,503 373,280 337,830 292,109

Dividend Income 19.1 1,775 1,462 20,675 52,402

Other Operating Income 19.2 23,909 28,715 2,295 3,132

Distribution Expenses (17,359) (8,767) (13,563) (5,124)

Administrative Expenses (145,213) (177,164) (93,297) (106,880)

Finance Expenses 20 (50,099) (60,668) (36,972) (45,364)

Share of Associate Company Profit/ (Loss) 5.3 (585) 10,357 - -

Change in Fair Value of Investment Property 3 - 34,531 - 34,531

Profit Before Tax 21 403,931 201,746 216,968 224,806

Income Tax Expense 22 (147,407) (74,861) (71,682) (66,236)

Profit for the Year 256,524 126,885 145,286 158,570

Attributable to:Equity Holders of the Parent 229,838 128,115Minority Interest 13 26,686 (1,230) 256,524 126,885

Earning Per Share - Basic 23 15.12 8.43

Dividends Per Share - Gross 24.2 10.00 10.00

Figures in brackets indicate deductions.



38

Statement of Changes in Equity

Note Stated General Accumulated Total Minority Total Year ended 31st March Capital Reserves Profit Interest Group Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Balance as at 31st March 2008 152,000 117,300 914,984 1,184,284 30,908 1,215,192

Profit for the Year - - 128,115 128,115 (1,230) 126,885

Final Dividend -2007/2008 24.1 - - (152,000) (152,000) - (152,000)

Subsidiary Dividends to Minority Shareholders - - - - (8,400) (8,400)


Profit for the Year - - 229,838 229,838 26,686 256,524

Interim Dividend - 2008/2009 24.1 - - (76,000) (76,000) - (76,000)

Final Dividend - 2008/2009 24.1 - - (76,000) (76,000) - (76,000)


Stated General Accumulated Total Note Capital Reserves Profit Company Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Balance as at 31st March 2008 152,000 104,000 787,507 1,043,507

Profit for the Year - - 158,570 158,570

Final Dividend Paid - 2007/2008 24.1 - - (152,000) (152,000) Balance as at 31st March 2009 152,000 104,000 794,077 1,050,077

Profit for the Year - - 145,286 145,286

Interim Dividend - 2008/2009 24.1 - - (76,000) (76,000)

Final Dividend Paid - 2008/2009 24.1 - - (76,000) (76,000)

Balance as at 31st March 2010 152,000 104,000 787,363 1,043,363



39

Cash Flow Statement

Group CompanyYear ended 31st March Note 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

CASH FLOW FROM /(USED IN) OPERATING ACTIVITIESOperating Profit Before working Capital Changes A 464,211 227,705 249,722 201,742(Increase)/ Decrease in Inventories (457) (948) (506) (976)(Increase)/Decrease in Trade and Other Receivables (133,137) 538,371 32,523 37,597(Increase)/Decrease in Other Non Current Assets 4,665 (8,529) 964 (2,661)(Increase)/Decrease in Short Term Deposits 55 (11) 55 (11)(Increase) /Decrease in Amounts Due from Related Parties (10,368) (1,472) (10,384) (1,450)Increase/ (Decrease) in Amounts Due to Related Parties 2,983 (1,524) 4,216 (1,953)Increase /(Decrease) in Trade and Other Payables (60,972) (400,730) (241,548) 95,947Cash Generated from Operations 266,980 352,862 35,042 328,235

Finance Expenses Paid 20 (50,099) (60,668) (36,972) (45,364)Income Tax Paid (63,586) (86,905) (57,271) (66,421)Retirement Benefit Cost Paid 15 (7,967) (4,869) (6,628) (4,277)Retirement Benefit Cost (Net) Transferred 15 7,359 989 7,359 748Deposits made with Colombo Stock Exchange 8,500 (11,500) - -Net Cash Flows from/(Used in) Operating Activities 161,187 189,909 (58,470) 212,921

CASH FLOWS FROM /(USED IN) INVESTING ACTIVITIESAcquisition of Property, Plant & Equipment 2 (2,642) (5,737) (2,406) (1,157)Purchase of rights Issue- KFPPLC - (16,239) - (16,239)Proceeds from Sale of Property, Plant & Equipment - 55 - 55Interest Received 19.2 22,409 26,412 773 803Dividend Received 19.1 1,775 1,462 20,675 52,402Net Cash Flows from/(Used in) Investing Activities 21,542 5,953 19,044 35,864

CASH FLOWS FROM /(USED IN) FINANCING ACTIVITIESRepayment of Interest Bearing Borrowings 17 (101,307) (9,093) (90,000) -Proceeds from Short Term Borrowings 150,000 90,000 150,000 90,000Dividends Paid 24 (152,000) (152,000) (152,000) (152,000)Dividends Paid to Minority Shareholders’ - (8,400) - -Net Cash Flows (Used in) Financing Activities (103,307) (79,493) (92,000) (62,000)

NET INCREASE IN CASH AND CASH EQUIVALENTS 79,422 116,369 (131,428) 186,785CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 10.3 266,967 150,598 169,047 (17,738)CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 10.3 346,389 266,967 37,619 169,047

(A) Operating Profit Before Working Capital Changes

Profit Before Tax 403,931 201,746 216,968 224,806

Adjustments forAssociate Company Share of Profit 585 (10,357) - -Depreciation 21 25,635 28,689 11,006 13,752Amotisation of Lease Charges 1,089 1,089 - -Change in Fair Value of Investment Property - (34,531) - (34,531)(Profit)/Loss on Sale of Property, Plant & Equipment 14 543 - 543Provision for Retirement Gratuity 15 7,042 7,732 6,224 5,013Interest Income 19.2 (22,409) (26,412) (773) (803)Investment Income 19.1 (1,775) (1,462) (20,675) (52,402)Finance Expenses 20 50,099 60,668 36,972 45,364 464,211 227,705 249,722 201,742



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Notes to the Financial Statements

ACCOUNTING POLICIES

1. CORPORATE INFORMATION1.1 GeneralJohn Keells PLC.,is a Public Limited Liability Company, incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The Registered Office and the principal place of business of the Company is situated at No. 130, Glennie Street, Colombo 2.

1.1.1 Principal Activities and Nature of OperationsDuring the year, the principal activities of the Company and its Subsidiaries (Group) were broking of tea and rubber, renting office space and warehouse space and the provision of stock broking activities.

1.1.2 Parent EnterpriseThe Company’s parent and controlling party is John Keells Holdings PLC., which is incorporated in Sri Lanka.

1.1.3 Date of Authorisation for IssueThe Financial Statements of John Keells PLC, for the year ended 31st March 2010, were authorised for issue in accordance with a resolution of the Board of Directors on 26th May 2010.

1.1.4 Companies in the Groupa) SubsidiariesAll companies in the Group whose Financial Statements have been included in the Consolidated Financial Statements are listed below.

John Keells Warehousing (Pvt) Ltd.John Keells Stock Brokers (Pvt) Ltd.

b) AssociateThe results of the Associate Company Keells Realtors Ltd., have been included in the Consolidated Financial Statements on the basis of the share of income accruing to the Group.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.2 General Policies1.2.1 Statement of ComplianceThe Balance Sheet, Statement of Income, Changes in Equity and Cash Flow, together with Accounting Policies and Notes, (“Financial Statements”) have been prepared in compliance with Sri Lanka Accounting Standards (SLAS) and the requirements of the Companies Act No 7 of 2007.

1.2.2 Basis of PreparationThese Financial Statements presented in Sri Lankan Rupees have been prepared, on a historical cost basis except for Investment Property which are stated at market value.

1.2.3 Use of Estimates and JudgementsThe preparation of financial statements in conformity with SLAS, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The 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 judgements about the carrying amount of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised 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.

Judgements made by management in the application of SLAS that have a significant effect on the financial statements are mentioned below:

Policy No Note No

Valuation of Investment Property 1.5.2 3

Deferred Tax 1.4 b 7 and 14

Impairment of Assets 1.5.4 -

Employee Benefit Liabilities 1.6.1 15

1.2.4 Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous financial year.

1.2.5 Comparative InformationPrevious years, figures and phrases have been re arranged, wherever necessary to conform to the current year’s presentation.

1.2.6 Events after the Balance Sheet DateAll material post balance sheet events have been considered and appropriate adjustments or disclosures have been made in the respective notes to the financial statements.

1.3 Consolidation Policya) Basis of ConsolidationThe consolidated financial statements include the financial statements of the Company, its subsidiaries and other companies over which it has control.

The group’s financial statements comprise of the consolidated financial statements of the Company and the group which have been prepared in compliance with the group’s accounting policies.


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All intra group balances, transactions, income and expenses and profits and losses resulting from intra group transactions are eliminated in full.

1.3.1 SubsidiariesSubsidiaries are those enterprises controlled by the parent. Control exist when the parent holds more than 50% of the voting rights or otherwise has a controlling interest.

Subsidiaries are controlled from the date the parent obtains control until the date that control ceases.

The total profits and losses for the year, of the Company and of its subsidiaries included in consolidation and all assets and liabilities of the Company and of its subsidiaries included in consolidation are shown in the consolidated income statement and balance sheet respectively.

Minority interest which represents the portion of profits or losses and net assets not held by the group , are shown as a component of profit for the year in the income statement and as a component of equity in the consolidated balance sheet separately from parent shareholders’ equity.

The consolidated cash flow statement includes the cash flows of the Company and its subsidiaries.

All companies included in the Group have a common financial year, which ends on March 31.

1.3.2 AssociateAssociates are those investments over which the group has significant influence and holds 20% to 50% of the equity and which are neither subsidiaries nor joint ventures of the group.

The investments in associate, is carried in the balance sheet at cost plus post acquisition charges in the group’s share of net assets of the associate. After application of the equity method, the group determines whether it is necessary to recognise any additional impairment loss with respect to the group’s net investment in the associate. The income statement reflects the share of the results of operations of associate. Where there has been a charge recognised directly in the equity of the associate, the group recognises its share of any changes in the statement of changes in equity.

When the group’s share of losses in an associate equals or exceeds the interest in the undertaking, the group does not recognise further losses unless it has incurred obligations or made payments on behalf of the entity.

The accounting policies of the associate Company conform to those used for similar transactions of the group.

The group ceases to use the equity method of accounting on the date from which it no longer has significant influence in the associate.

1.4 Taxa) Current TaxesThe provision for Income Tax is based on the elements of income and expenditure as reported in the Financial Statements and computed in accordance with the provisions of the relevant tax statutes.

b) Deferred TaxDeferred Taxation is the tax attributable to the temporary difference that arise when taxation authorities recognise and measure assets and liabilities with rules, that differ from those of the consolidated financial statements.

Deferred Tax is provided on the Liability Method on temporary differences at the balance sheet between the tax bases of assets and liabilities and their carrying amounts for the financial reporting purposes.

Deferred Tax assets and liabilities are recognised for all taxable temporary differences, Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry- forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realised or liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted as at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exist and the deferred taxes relate to the same taxable entity and the same taxation authority.

Deferred tax relating to items recognised directly in equity is recognised in equity.

1.5 Valuation of Assets and Their Bases of Measurement1.5.1 Property, Plant and Equipmenta) CostProperty, Plant and Equipment is stated at cost less accumulated depreciation and any accumulated impairment in value.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

b) DepreciationProvision for depreciation is calculated by using the straight-line method on the cost or valuation of all Property, Plant and Equipment other than Freehold Land in order to write off such amounts, over the estimated useful economic life of such assets. The estimated useful life of assets, are as follows:


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Building on Leasehold Land over 50 yearsPlant and Machinery over 10 yearsFurniture and Fittings over 8 yearsMotor Vehicles over 5 yearsOffice Equipment over 6 yearsComputer Equipment - Hardware over 5 years - Software over 3 yearsOthers over 5 years

The useful life and residual value of assets are reviewed, and adjusted if required, at the end of each financial year.

c) Operating LeasesLeases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as Operating Leases. Rentals paid under operating leases are recognised as an expense in the Income Statement on a straight-line basis over the lease term.

d) Leasehold PropertyPrepaid lease rentals paid to acquire land use rights are armortised over the lease term in accordance with the pattern of benefits provided. Leasehold property is tested for impairment annually and is written down where applicable. The impairment loss if any, is recognised in the income statement.

1.5.2 Investment PropertyProperties held to earn rental income, and properties held for capital appreciation have been classified as investment property.

Investment properties are initially recognised at cost. Subsequent to initial recognition the investment properties are stated at fair values, which reflect market conditions at the balance sheet date.

Gains or losses arising from changes in fair value are included in the income statement in the year in which they arise.

Investment properties are de-recognised when disposed, or permanently withdrawn from use because no future economic benefits are expected. Any gains or losses on retirement or disposal are recognised in the income statement in the year of retirement or disposal.

Transfers are made to investment property, when there is a change in use evidenced by ending of owner -occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property, when there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

Where Group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment in the consolidated financial statements and accounted as per SLAS 18 (Revised) Property, Plant and Equipment.

1.5.3 InvestmentsAll quoted and unquoted securities, which are held as Non-Current investments, are valued at cost. The cost of the investment is the cost of acquisition inclusive of brokerage and cost of transactions. The carrying amount of Long Term Investments are reduced to recognise a decline which is considered other than temporary, in the value of investments, determined on an individual investment basis.

In the Company Financial Statements, investments in Subsidiaries and Associate Company have been accounted for at cost, net of any impairment losses which are charged to the income statement. Income from these investments is recognised only to the extent of dividends received.

1.5.4 Impairment of AssetsThe group 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 group makes an estimate of the assets recoverable amount. An asset’s recoverable amount is the higher of an asset’s cash generating unit’s fair value less cost to sell or 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. Impairment losses are recognised in the income statement except for impairment losses in respect of property, plant and equipment which are recognised against the revaluation reserve to the extent that it reverses a previous revaluation surplus.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. Previously recognised impairment losses other than in respect of goodwill, are reversed only if there has been an increase in the recoverable amount of the asset. Such increase is recognised only to the extent of the carrying amount had no impairment losses been recognised previously.

1.5.5 InventoriesBuilding materials, consumables and spares are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Net realisable value is the price at which inventories can be sold in the ordinary course of business.

The cost incurred in bringing inventories to its present location and condition, are accounted as follows:-

Building Materials – On a weighted average basisConsumables and Spares – On a weighted average basis

Notes to the Financial Statements contd.


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1.5.6 Trade and Other ReceivablesTrade receivables are stated at the amounts they are estimated to realise net of provision for bad and doubtful receivables.

Other receivables and dues from Related Parties are recognised at cost less allowance for bad and doubtful receivables.

A provision for doubtful debts is made when the debt exceeds 180 days, and collection of the full amount is no longer probable. Bad debts are written of when identified.

1.5.7 Short – term InvestmentTreasury bills and other interest bearing securities held for resale in the near future to benefit from short – term market movements are accounted for at cost plus the relevant proportion of the discounts or premiums.

1.5.8 Cash and Cash EquivalentsCash and cash equivalents in the cash flow statement comprise cash at Bank and in hand and short term deposits with a maturity of 3 months or less, net of outstanding Bank overdrafts.

1.6 Liabilities and Provisions1.6.1 Employee Benefits Plans – GratuityThe liability recognised in the balance sheet is the present value of the defined benefit obligation at the balance sheet date using the projected unit credit method.

1.6.2 Defined Contribution Plans – Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund contribution and Employees’ Trust Fund contributions in line with respective Statutes and Regulations. The Group contributes defined percentages of gross emoluments of employees to an approved Employees’ Provident Fund and to the Employees’ Trust Fund respectively, which are externally funded.

1.6.3 Provision for Contingent Assets and Contingent Liabilities

Provisions are made for all obligations (legal or constructive) existing as at the Balance Sheet date when it is probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of the quantum of the outflow.

All contingent liabilities are disclosed as a note to the Financial Statements unless the outflow of resources is remote.

All contingent assets are disclosed where the inflow of economic benefit is probable.

1.7 Income Statement1.7.1 Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group 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 trade discounts and Value Added taxes after eliminating sales within the Group. The following specific criteria are used for the purpose of recognition of revenue.

a) Brokerage IncomeBrokerage Income is recognised on an accrual basis on the contractual date. Brokerage Income in respect of forward sales contracts are recognised at the point of delivery of goods.

b) Rendering of ServicesRevenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

c) Interest IncomeInterest Income is recognised on an accrual basis.

d) Dividend IncomeDividend Income is recognised on a cash basis.

e) Rental IncomeRental Income is recognised on an accrual basis.

f) Gains and LossesNet gains and losses of a revenue nature on the disposal of Property, Plant and Equipment and other non current assets including investments have been accounted for in the Income Statement, having deducted from proceeds on disposal, the carrying amount of the assets and related selling expenses.

Gains and losses arising from incidental activities to main revenue generating activities and those arising from a group of similar transactions which are not material, are aggregated, reported and presented on a net basis.

g) OthersOther Income is recognised on an accrual basis.

1.7.2 Expenditure Recognitiona) Expenses are recognised in the Income Statement

on the basis of a direct association between the cost incurred and the earning of specific item of income. All expenditure incurred in the running of the business and in maintaining the Property, Plant and Equipment in a state of efficiency has been charged to the Income Statement in arriving at the profit for the year.

b) For the purpose of presentation of Income Statement the Directors are of the opinion that function of expenses method present fairly the elements of the group’s performance. Hence such presentation method is adopted.

1.7.3 Borrowing costBorrowing cost are recognised as an expense in the period in which they are incurred, unless they are incurred in respect of qualifying assets in which case it is capitalised.


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1.8 Segment Information1.8.1 Reporting segmentsThe Group’s internal organisation and management is structured based on individual products and services which are similar in nature and process and where the risk and return are similar. The primary segments represent this business structure.

Since the individual segments are located close to each other and operate in the same industry environment, catering to clientele from the same geographical location, the need for geographical segmentation does not arise.

1.8.2 Segment InformationSegment information has been prepared in conformity with the accounting policies adopted for preparing and presenting the Consolidated Financial Statements of the Group.

1.9 Effect of Sri Lanka 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 accounting periods on the dates specified below.

Sri Lanka Accounting Standard 44 – Financial Instruments; Presentation (SLAS 44) and Sri Lanka Accounting Standard 45 - Financial Instruments, Recognition & Measurement (SLAS 45)

SLAS 44 and 45 was issued in 2008, and will be effective for financial periods beginning on or after 1 January 2011. Accordingly, the Financial Statements for the year ending 31 March 2012 will be required to adopt SLAS 44 and 45.

These two standards together provide comprehensive guidance on identification, classification, measurement and presentation of financial instruments (including Derivatives) into financial assets, financial liabilities and equity instruments. Accordingly when a financial asset or liability is recognised initially, the group will measure such financial asset or liability at its fair value plus, transaction costs that are directly attributable to the acquisition or issue of the financial asset, financial liability and subsequently measured either at fair value or amortized cost depending on the categorisation of financial assets and financial liabilities.

In order to comply with the requirements of these standards, the group /Company is in the process of setting up an implementation plan and assessing the effect of adoption of the aforesaid two standards. Due to the complex nature of the effects of these standards the impact of adoption cannot be estimated as at the date of publication of these Financial Statements.



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Balance Additions Disposals/ Balance as at Retirements as at 01.04.2009 31.03.2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

2. PROPERTY, PLANT & EQUIPMENTGroup2.1 At Cost Building on Leasehold Land 121,186 - - 121,186Plant & Machinery 94,290 980 - 95,270Furniture & Fittings 87,548 853 (56) 88,345Motor Vehicles 11,840 - - 11,840Computer Equipment 47,515 14 (361) 47,168Office Equipment 5,291 287 (1,129) 4,449Others 13,094 508 (991) 12,612Total Value of Assets 380,764 2,642 (2,537) 380,870

2.2 DepreciationAt CostBuilding on Leasehold Land 16,233 2,385 - 18,618Plant & Machinery 66,413 6,658 - 73,071Furniture & Fittings 60,171 8,975 (56) 69,090Motor Vehicles 7,593 1,135 - 8,728Computer Equipment 38,838 4,122 (361) 42,599Office Equipment 4,253 500 (1,118) 3,635Others 7,224 1,860 (991) 8,092Total Depreciation 200,725 25,635 (2,526) 223,833

2.3 Net Book Value of Assets 2010 2009 Rs.000’s Rs.000’s

At Cost 157,037 180,040Total Carrying Amount of Property, Plant & Equipment 157,037 180,040

Company2.4 At Cost Balance Additions Disposals/ Balance as at Retirements as at 01.04.2009 31.03.2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Plant & Machinery 63,174 980 - 64,154Furniture & Fittings 34,549 853 (33) 35,369Motor Vehicles 11,840 - - 11,840Computer Equipment 30,024 14 (94) 29,944Office Equipment 1,759 71 - 1,830Others 10,782 488 (991) 10,279Total Value of Assets 152,128 2,406 (1,118) 153,416


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2.5 Depreciation Balance Charge for Disposals/ Balance At Cost as at the year Retirements as at 01.04.2009 31.03.2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Plant & Machinery 48,805 3,546 - 52,351Furniture & Fittings 23,904 2,504 (33) 26,375Motor Vehicles 7,593 1,135 - 8,728Computer Equipment 26,611 2,270 (94) 28,787Office Equipment 1,655 95 - 1,750Others 6,668 1,456 (991) 7,133Total Depreciation 115,236 11,006 (1,118) 125,124

2.6 Net Book Value of Assets 2010 2009 Rs.000’s Rs.000’s

At Cost 28,292 36,892Total Carrying Amount of Property, Plant & Equipment 28,292 36,892

3. INVESTMENT PROPERTIES Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

At the beginning of the year 696,250 661,719 696,250 661,719Change in fair value during the year - 34,531 - 34,531At the end of the year 696,250 696,250 696,250 696,250

3.1 The details of Investment Properties of the Company are disclosed below.

Owner Company/Location Area (Bldgs.) Land in Acres Valuation Date Name of Valuer Sq .Ft. F/hold L/hold (Rs 000’s)

John Keells PLC 122,338 1.78 0.58 636,000 31/03/09 Mr P B Kalugalgedera130,Glennie Street, (Chartered Valuer)Colombo 2

50, Minuwangoda Road 2.64 - 59,000 31/03/09 Mr P B KalugalgederaEkala, Ja- Ela (Chartered Valuer)

58, Kirulapone Avenue 0.08 - 1,250 31/03/09 Mr P B KalugalgederaColombo 6 (Chartered Valuer)

Having studied the current income levels and market conditions of similar properties situated within close proximity, and a desktop valuation obtained from Mr. P. B. Kalugalgedera, the Directors of the Company confirmed that the value of investment property as at 31st March 2010 is Rs. 696,250,001/- for the Company and Group.

Rental income earned from investment properties by the Company and Group amount to Rs 85,596,126/-(2009 - Rs.64,193,190/-)Direct operating expenses incurred amounted to Rs 29,868,289/- (2009 -Rs.17,763,696/-).



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4. LEASEHOLD PROPERTY4.1 Summary Group 2010 2009 Rs.000’s Rs.000’s

Balance as at 1st April 45,647 46,736Amortised during the year (1,089) (1,089)Balance as at 31st March 44,558 45,647

4.2 Amortisation of Leasehold Property Muturajawela Land Rs.000’s

To be amortised in 2011 1,089To be amortised from 2012 - 2016 5,445To be amortised from 2017 - 2052 38,024 44,558

John Keells Warehousing (Pvt) Ltd has entered into a 50 year lease agreement with the Sri Lanka Land Reclamation and Development Corporation to lease a land in Muthurajawela for a total lease rent of Rs 54,450,000/-. The total lease liability was paid off during 31/03/2005. The total pre-paid lease rentals are being amortised over the lease period of 50 years.

4.3 Details of Leasehold Land as at 31st March 2010 Leasehold Property Extend of Land Period of Lease Annual Rental Rs 000’s Rs.

John Keells PLC A - R - P Land facing the Beira Lake at 130, Glennie Street Colombo 2 - 2 12 64 Annual 11,610

John Keells Warehousing (Pvt) LtdLand at Muthurajawela 44,558 6 - - Ending 1,089,000 2052

5. LONG TERM INVESTMENTS Group Company 2010 2009 2010 2009 Summary Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Investments in Subsidiaries (5.1) - - 120,380 120,380Investment in Associate (5.2 & 5.3) 40,457 43,844 24,000 24,000Other Investment (5.4) 27,534 27,534 27,534 27,534Total Investments 67,991 71,378 171,914 171,914

5.1 Investment in Subsidiaries - Company 2010 2009 No. of shares Holding Cost Directors’ Cost Directors’ Non-Quoted 2010 2009 % Valuation Valuation 000’s 000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

John Keells Warehousing (Pvt) Ltd. 12,000 12,000 100% 120,000 120,000 120,000 120,000John Keells Stock Brokers (Pvt) Ltd. 570 570 76% 380 380 380 380 120,380 120,380 120,380 120,380


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5.2 Investment in Associate - Company 2010 2009 No. of shares Holding Cost Directors’ Cost Directors’ Non-Quoted 2010 2009 Valuation Valuation 000’s 000’s % Rs.000’s Rs.000’s Rs.000’s Rs.000’s Keells Realtors Ltd 2,400 2,400 32% 24,000 24,000 24,000 24,000

5.3 Summarised Financial Information of Associate - Group Group 2010 2009 Rs.000’s Rs.000’s

Group Share of Balance Sheet Total Assets 42,889 46,523Group Share of Balance Sheet Total Liabilities (2,432) (2,679) 40,457 43,844

Group Share of Revenue 650 1,953

Group Share of Profits/(Loss) (585) 10,357

5.4 Other Investment - Group and Company 2010 2009Other Investment No. of shares Holding Cost Market Cost Market Quoted 2010 2009 % Value Value 000’s 000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Keells Food Products PLC 788 788 9.28% 27,534 54,426 27,534 39,834

6. OTHER NON CURRENT ASSETS Group Company 2010 2009 2010 2009 Staff Vehicle Loan Rs.000’s Rs.000’s Rs.000’s Rs.000’s

At the beginning of the year 32,012 21,244 16,281 12,746Loans Granted 2,634 17,296 2,544 7,158Loans transferred from /(to) 1,605 3,046 1,605 3,046Loans Recovered (9,342) (9,574) (4,546) (6,669) At the end of the year 26,909 32,012 15,884 16,281

Receivable within one year (Note 9) 7,196 7,634 4,403 3,836Receivable after one year 19,713 24,378 11,481 12,445 26,909 32,012 15,884 16,281

7. DEFERRED TAX ASSETAt the beginning of the year 9,058 2,413 - -Addition / (Release) (5,866) 6,645 - -At the end of the year 3,192 9,058 - -

The closing Deferred Tax Asset Balance relates to the following:Accelerated depreciation for tax purposes (964) (1,079) - -Retirement benefit obligations 4,156 4,259 - -Losses available for offset against future taxable income - 5,878 - - 3,192 9,058 - -



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8. INVENTORIES Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Building Materials 982 1,010 982 1,010Consumable and Spares 2,271 1,786 2,217 1,683 3,253 2,796 3,199 2,693

9. TRADE AND OTHER RECEIVABLESTrade Debtors 604,531 472,988 412,932 447,020Less: Provision for Doubtful Debts (21,586) (13,917) (20,888) (13,385)Other Debtors 6,835 1,247 6,313 676Advances and Prepayments 8,741 4,628 3,005 140Loans to Executives (Note 6) 7,196 7,634 4,403 3,836 605,717 472,580 405,765 438,287

10. CASH AND CASH EQUIVALENTS IN CASH FLOW STATEMENT 10.1 Favourable Cash & Cash EquivalentsCash & Bank Balances 181,359 185,702 118,313 178,894Short Term Investment 305,500 92,000 - - 486,859 277,702 118,313 178,89410.2 Unfavourable Cash & Cash EquivalentsBank Overdrafts (140,470) (10,735) (80,694) (9,847)

10.3 Net Cash & Cash Equivalents 346,389 266,967 37,619 169,047

11. STATED CAPITAL11.1 Issued and Fully Paid Group Company No of Shares 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Opening Balance - Ordinary Shares 15,200,000 152,000 152,000 152,000 152,000Closing Balance - Ordinary Shares 15,200,000 152,000 152,000 152,000 152,000

12. REVENUE RESERVES Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

General Reserve 117,300 117,300 104,000 104,000Accumulated Profit 968,937 891,099 787,363 794,077 1,086,237 1,008,399 891,363 898,077

13. MINORITY INTEREST Rs.000’s Rs.000’s

Balance at the beginning of the year 21,278 30,908Share of Profits/(Loss) for the year 26,686 (1,230)Dividend Paid - (8,400)Balance at the end of the year 47,964 21,278


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14. DEFERRED TAX LIABILITIES Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Balance as at the beginning of the year 59,171 49,345 55,512 46,590Charge for the Year 4,601 9,826 (3,907) 8,922Balance as at the end of the Year 63,772 59,171 51,605 55,512

The closing Deferred Tax Liability balance relates to the following:Accelerated Depreciation for Tax Purposes 23,829 15,261 4,872 6,581Revaluation of Investment Property to Fair Value 59,982 59,738 59,982 59,738Retirement Benefit Obligations (13,619) (11,000) (13,248) (10,807)Others - Tax Losses (6,420) (4,828) - - 63,772 59,171 51,605 55,512

15. RETIREMENT BENEFIT OBLIGATIONS - GRATUITYBalance as at the beginning of the Year 44,331 40,479 30,878 29,394Provision made during the Year 2,995 3,134 2,031 2,058Interest Cost for the Year 4,433 4,048 3,088 2,939Payments made during the Year (7,967) (4,869) (6,628) (4,277)Transfers during the Year 7,359 989 7,359 748(Gain)/Loss arising from changes in the assumptions or due to (over)/under provision in the previous years (387) 550 1,105 16Balance as at the end of the Year 50,764 44,331 37,833 30,878

The employee benefit liability of John Keells PLC is based on the actuarial valuation carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries. The employees benefit liability of all other companies in the Group are based on gratuity formula in Appendix E of SLAS 16 - Employee Benefits

The expenses are recognised in the following line items in the income statement. Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Cost of Sale 5,850 4,970 5,480 4,208Administrative Expenses 1,192 2,762 744 805 7,042 7,732 6,224 5,013

The principal assumptions used in determining the cost of employee benefits were:

Discount rate 10% 10%Future salary increases 10% 10%

16. TRADE AND OTHER PAYABLES Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Trade Creditors 219,138 296,327 31,324 269,903Sundry Creditors and Accrued Expenses 62,281 46,064 27,073 30,041 281,419 342,391 58,397 299,944



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17. INTEREST BEARING LIABILITIES Balance Loans Obtained Loans Repaid Balance as at during the during the as at 01/04/2009 year year 31/03/2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

GroupAsset Backed notes payableGross Liability 99,258 - 24,362 74,896Finance Charges (32,868) - (13,055) (19,813)Standard Chartered Bank Loan 90,000 - 90,000 -NDB Bank Loan - 150,000 - 150,000 156,390 150,000 101,307 205,083

2010 2010 2009 2009 Amount Amount Amount Amount Repayable Repayable 2010 Repayable Repayable 2009 Within 1 year After 1 year Total Within 1 year After 1 year Total Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Asset Backed Notes 14,059 41,024 55,083 11,307 55,083 66,390Standard Chartered Bank Loan - - - 90,000 - 90,000NDB Bank Loan 150,000 - 150,000 - - - 164,059 41,024 205,083 101,307 55,083 156,390

Gross Liability 24,362 50,534 74,896 24,362 74,896 99,258Finance Charges Allocated to future periods (10,303) (9,510) (19,813) (13,055) (19,813) (32,868)Standard Chartered Bank Loan - - - 90,000 - 90,000NDB Bank Loan 150,000 - 150,000 - - - 164,059 41,024 205,083 101,307 55,083 156,390

Balance Loans Obtained Loans Repaid Balance as at during the during the as at 01/04/2009 year year 31/03/2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

CompanyStandard Chartered Bank Loan 90,000 - 90,000 -NDB Bank Loan - 150,000 150,000 90,000 150,000 90,000 150,000

18. REVENUE18.1 Summary Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Gross Revenue 848,144 607,949 490,621 457,023 848,144 607,949 490,621 457,023


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18.2 Segment Information - Group Produce Broking & Warehousing Share Broking Real Estate Total 2010 2009 2010 2009 2010 2009 2010 2,009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Segment RevenueGross Revenue - Third Parties 492,654 439,227 287,383 82,101 22 14 780,059 521,342 - Related Parties - - - - 89,426 101,907 89,426 101,907Inter Segment Sales - - - - (21,341) (15,300) (21,341) (15,300) 492,654 439,227 287,383 82,101 68,107 86,621 848,144 607,949Segment ResultsProfit Before Tax 176,168 117,371 172,597 (6,898) 55,143 91,273 403,931 201,746Taxation (12,420) (3,787) (61,403) 1,772 (1,902) (950) (75,725) (2,965)Unallocated Tax (71,682) (71,896)Total Tax (147,407) (74,861)Profit After Tax 256,524 126,885

Segment Assets 935,754 919,320 542,211 141,129 640,486 751,450 2,118,451 1,811,899

Segment Liabilities 435,600 506,418 341,447 51,559 55,200 72,245 832,250 630,222OthersPurchase of Property Plant & Equipment 522 3,484 216 2,140 1,904 113 2,642 5,737

Depreciation 15,909 16,643 2,125 2,193 7,601 10,033 25,635 28,869

19. OTHER INCOME19.1 Dividend Income Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Income from Investments with Related Parties - Quoted 1,775 1,462 1,775 1,462 - Non-quoted - - 18,900 50,940 1,775 1,462 20,675 52,402

19.2 Other Operating IncomeInterest Income - Outside 22,409 26,412 773 803Guarantee Fees 218 893 218 893Sundry Income 1,282 1,410 1,304 1,436 23,909 28,715 2,295 3,132

20. FINANCE EXPENSES Interest Expense on Overdrafts 18,491 40,559 18,419 40,523Interest Expense on Loans & Borrowings Payable to - Others 31,608 20,109 18,553 4,841 50,099 60,668 36,972 45,364



53

Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

21. PROFIT BEFORE TAXStated after charging/ (crediting)Directors’ Emoluments 14,897 8,656 11,431 4,800Personal costs includes - Defined Benefit Plan Costs - Gratuity 7,042 7,732 6,224 5,013 - Defined Contribution Costs - EPF & ETF 17,557 16,681 9,987 10,565 - Other Staff Costs 167,089 163,664 76,284 95,861Donations 4,247 5,341 3,297 3,841Auditors’ Fees 1,824 1,600 1,157 990Depreciation 25,635 28,689 11,006 13,752Legal Fees & Professional Charges 4,320 4,859 4,320 4,859(Profit)/Loss on Disposal of Assets 14 543 - 543Amortisation of Lease Charges 1,089 1,089 - -BOI Fees 248 242 - -

22. INCOME TAX EXPENSECurrent Tax on Ordinary Activities for the year (22.1) 134,840 66,020 75,589 57,314Deferred Taxation Charge (22.2) 10,467 3,181 (3,907) 8,922Tax on Dividend Income 2,100 5,660 - -Total Income tax Expenses 147,407 74,861 71,682 66,236

Social Responsibility Levy has been charged at the rate of 1.5% (2009 - 1.5%) on the Income Tax Liability, which is included in the Income Tax Expense.

22.1 Reconciliation between tax expenses/ (income) and the product of accounting profit. Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Profit Before Tax 403,931 201,746 216,968 224,806Dividend Income (1,775) (1,462) (20,675) (52,402)Share of Profits 585 (10,357) - -Profits not charged to income tax (revaluation of Land) - - - (1,966)Aggregate Accounting Profit 402,741 189,927 196,293 170,438

Accounting Profit 402,741 189,927 196,293 170,438

Income Tax on Accounting Profit at Applicable Rates 134,036 60,912 68,539 59,663Under/(Over) Provision for Previous Year (911) (179) (634) -Aggregate Disallowed Expenses 10,119 6,458 2,426 5,726Social Responsibility Levy at the Rate of 1.5% (2009 -1.5%) 2,261 1,060 1,351 847Tax on Dividend Income 2,100 5,660 - -Share of Associate Company Income Tax Expense (198) 950 - -Total Income Tax Expenses 147,407 74,861 71,682 66,236

Income Tax charged atStandard Rate - CSE Listed Companies 74,872 56,467 74,872 56,467Standard Rate - Others 35% (2009 - 35%) 54,712 4,747 - -Concessionary Rate of 15% (2009 - 15%) 3,828 2,796 - -Social Responsibility Levy at the Rate of 1.5% (2009 - 1.5%) 2,233 1,015 1,351 847Deferred Tax Charge 10,467 3,181 (3,907) 8,922Under/(Over) Provision for Previous Year (634) - (634) -Share of Associate Company Income Tax Expenses (198) 950 - -Tax on Dividend Income 2,100 5,660 - -1.5% SRL on Inter Company Dividends 27 45 - -Total Income Tax Expenses 147,407 74,861 71,682 66,236


54

The Group tax expenses is based on the taxable profit of each Group Company, since at present the tax laws do not provide for Group taxation.

In terms of agreement dated 14th March , 2003 entered into with the Board of Investment of Sri Lanka under section 15 of the BOI Law No 4 of 1978 John Keells Warehousing (Pvt) Ltd, is entitled to a concessionary tax rate of 15% on business profits for a period of 7 years. Commencing from the year of assessment 2003/2004.

22.2 Deferred Tax Expense Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Deferred Tax arisingAccelerated Depreciation for tax purposes (2,136) (1,991) (1,466) (1,438)Revaluation of Investment Property to Fair Value - 10,879 - 10,879Retirement benefits - Gratuity (2,304) (1,335) (2,441) (519)Deferred Tax Recognised due to change in income tax rate 6,953 - - -Benefit Arising from Tax Losses 7,954 (4,372) - -Total Deferred Tax Charged 10,467 3,181 (3,907) 8,922

Deferred Tax Liabilities have been computed at 35% for all standard rate companies (including listed companies)

Deferred Tax Liability of John Keells Warehousing (Pvt) Ltd has been computed at 35% as the Company’s tax rate will be 35% from the year of assessment 2010/11.

23. EARNINGS PER SHARE23.1 Amounts Used as the Numerator: Group 2010 2009 Rs.000’s Rs.000’s

Net Profit Attributable to Ordinary Shareholders 229,838 128,115

23.2 Number of Ordinary Shares Used as the Denominator:Weighted Average number of Ordinary Shares in Issue 15,200 15,200Basic Earnings Per Share (Rs.) 15.12 8.43

The 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 outstanding during the year.

24. DIVIDENDS 24.1 Dividend Paid Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

InterimDividend Paid - Rs. 5/- per shareOut of Dividends received - Free of tax 1,462 - 1,462 -Out of Profits - Liable for tax 74,538 - 74,538 - 76,000 - 76,000 -FinalDividend Paid Rs. 5/- per shareOut of Dividends received - Free of tax - 129,852 - 129,852Out of Profits - Liable for tax 76,000 22,148 76,000 22,148Total 152,000 152,000 152,000 152,000

24.2 Dividend Per ShareDividends Paid During the Year - Net (Rs) 10.00 10.00 10.00 10.00



55

25. COMMITMENTS AND CONTINGENCIES25.1 Capital CommitmentsThe Company does not have any capital commitments as at the Balance Sheet date.

25.2 Financial CommitmentsThe Company has guaranteed banking facilities of it’s related companies amounting Rs. 89.4 Mn (2009 - Rs. 447.6 Mn)

Amount Amount Guaranteed Guaranteed 2010 2009 Rs.000’s Rs.000’s

Name of the Company RelationshipKeells Food Products PLC Affiliate 1,000 1,000John Keells Stock Brokers (Pvt) Ltd Subsidiary 2,000 290,825Walker Tours Ltd Affiliate 11,500 11,500John Keells Holdings PLC Parent - 45,000John Keells Warehousing (Pvt) Ltd Subsidiary 74,897 99,258 89,397 447,583

25.3 ContingenciesThere are no contingent liabilities as at the balance sheet date other than the following.

Sesame Senhora Tea (Pvt)Ltd has claimed a sum of Rs 1.1 million, which has been contested in courts, Other than this, no other claim or litigation has been or expected to be received.

26. ASSETS PLEDGEDAs at the Balance Sheet date the Following assets of the Company have been pledged as security against the Company’s borrowings. Carrying Amount Carrying Amount Pledged 2010 Pledged 2009 Nature of Assets Nature of Liability Rs 000’s Rs 000’s

Property Bank Borrowing 45,500 45,500Investments Bank Borrowing 3,965 3,965 49,465 49,465

27. RELATED PARTY DISCLOSURES27.1 Amounts due from Related Parties Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Parent 5,233 6,345 5,233 6,345Subsidiary - - 65 48Associate - - - -Companies Under Common Control 17,896 6,415 17,895 6,415Key Management Personnel - - - -Close Family Members of KMP - - - -Companies controlled / jointly controlled / significantly influenced by KMP and their close family members - - - - 23,129 12,760 23,193 12,808


56

27.2 Amounts due to Related Parties Group Company 2010 2009 2010 2009 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Parent 2,560 1,092 2,291 726Subsidiary 1,742 3Associate - - - -Companies Under Common Control 2,095 581 1,372 460Key Management Personnel - - - -Close Family Members of KMP - - - -Companies controlled / jointly controlled / significantly influenced by KMP and their close family members - - - - 4,655 1,673 5,405 1,189

27.3 Transactions With Related PartiesParentReceiving of Services for which fees are paid 18,336 23,856 18,336 23,856Renting of office space for which rent is received (40,242) (31,614) (40,242) (31,614)Providing of Services for which fees are received (133) (675) (133) (675)

SubsidiariesTaken store space on Rent - - 2,910 7,714Renting of office space for which rent is received - - (7,516) (4,801)

AssociateTaken store space on Rent 611 4,484 611 4,484

Companies under Common ControlPurchase of goods for a fee 2,977 5,916 2,977 5,916Receiving of Services for which fees are paid 4,454 4,857 4,454 4,857Renting of office space for which rent is received (38,644) (27,779) (38,644) (27,779)Providing of Services for which fees are received (458) (20,365) (488) (20,395) (53,099) (41,320) (57,735) (38,437)Guaranteed Bank Facilities Keells Food Products PLC - - 1,000 1,000John Keells Stock Brokers (Pvt) Ltd S - - 2,000 290,825Walker Tours Ltd - - 11,500 11,500John Keells Holdings PLC - - - 45,000John Keells Warehousing (Pvt) Ltd - - 74,897 99,258 - - 89,397 447,583

27.4 Post Employment benefit planContribution to the staff provident fund 2,104 2,127 2,104 2,127

27.5 Compensation of Key Management PersonnelShort Term Employee Benefits 14,897 8,656 11,431 4,800Post Employment Benefits - - - -Other Long Term Benefits - - - -Termination Benefits - - - - 14,897 8,656 11,431 4,800

Key Management Personnel include members of the Board of Directors of the Company, & Ultimate Parent Company John Keells Holdings PLC.



57

27.6 Terms and Conditions of Transactions with Related PartiesTransactions with Related Parties are at normal market prices. Outstanding balances at year end are unsecured, interest free and settlement occurs in cash.

28. EVENTS OCCURRING AFTER THE BALANCE SHEET DATEThe Board of Directors at a meeting held on 26th May 2010 proposed a Final Dividend of Rs 10/- per Share for the Financial Year ended 31st March 2010. As required by section 56 (2) of the Companies Act No 7 of 2007, the Board of Directors has confirmed that the Company satisfies the Solvency test in accordance with section 57 of the Companies Act No 7 of 2007. and has obtained a certificate from the auditors, prior to declaring a Final Dividend which is to be paid on the 17th of June 2010.

In accordance with the Sri Lanka Accounting Standard 12 (revised 2005) , Events after the Balance Sheet date, the final dividend has not been recognised as a liability in the financial statement as at 31st March 2010.


58

Statement of Value Added

Company CONSOLIDATED 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Value AddedGross Revenue 364,247 374,912 409,215 457,023 490,621 624,224 634,647 641,348 607,949 848,144Other Income 25,495 112,075 171,686 55,534 22,970 18,388 25,391 32,256 30,177 25,684 389,742 486,987 580,901 512,557 513,591 642,612 660,038 673,604 638,126 873,828Cost of Materials and Services purchased (74,400) (150,629) (134,065) (96,046) (140,462) (152,035) (77,147) (162,024) (136,847) (186,526) 315,342 336,358 446,836 416,511 373,129 490,577 582,891 511,580 501,279 687,302

% SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHAREDistribution of Value AddedTo employees as Remuneration 27 90,769 29 95,005 20 89,311 27 111,424 21 77,874 22 108,420 25 147,709 34 174,785 38 187,792 29 198,668To Government (see below) 15 46,200 15 52,122 15 68,072 20 82,405 24 89,049 19 92,004 20 109,568 24 122,279 18 91,030 24 164,764To Lenders of Capital-Interest on borrowings 5 15,564 2 7,242 4 17,718 11 45,364 10 36,972 7 34,119 4 25,489 7 34,597 12 60,668 7 50,099-Minority Interest - - - - - - - 3 16,648 3 17,038 2 11,280 - (1,230) 4 26,687To Shareholders as Dividends 11 34,200 54 181,989 24 106,400 36 152,000 40 152,000 7 34,200 31 181,989 21 106,400 30 152,000 22 152,000Retained in the Business 42 128,609 - - 37 165,335 6 25,318 5 17,234 42 205,186 17 101,098 12 62,239 2 11,019 14 95,083 100 315,342 100 336,358 100 446,836 100 416,511 100 373,129 100 490,577 100 582,891 100 511,580 100 501,279 100 687,302

The statement of Value Added shows the wealth, the Company and the Group have been able to create on its own and its employeeseffort. It also explains how Value Added has been distributed.

Revenue to GovernmentSRL /NBT/FINACIAL VAT 7,959 6,697 6,609 12,838 14,044 7,959 6,697 6,609 12,838 14,044Rates and Taxes 2,599 3,365 3,326 3,331 3,323 3,104 3,365 3,326 3,331 3,323Income Tax 35,642 42,060 58,137 66,236 71,682 80,941 99,506 112,344 74,861 147,397Total 46,200 52,122 68,072 82,405 89,049 92,004 109,568 122,279 91,030 164,764

To employees as Remuneration 29%To Government (see below) 24% To lenders of Capital Interest on borrowings 7% To lenders of Capital Minority Interest 4% To shareholders as Dividends 22% Retained in the Business 14%

Distribution of Value Added


59

Company CONSOLIDATED 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Value AddedGross Revenue 364,247 374,912 409,215 457,023 490,621 624,224 634,647 641,348 607,949 848,144Other Income 25,495 112,075 171,686 55,534 22,970 18,388 25,391 32,256 30,177 25,684 389,742 486,987 580,901 512,557 513,591 642,612 660,038 673,604 638,126 873,828Cost of Materials and Services purchased (74,400) (150,629) (134,065) (96,046) (140,462) (152,035) (77,147) (162,024) (136,847) (186,526) 315,342 336,358 446,836 416,511 373,129 490,577 582,891 511,580 501,279 687,302

% SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHAREDistribution of Value AddedTo employees as Remuneration 27 90,769 29 95,005 20 89,311 27 111,424 21 77,874 22 108,420 25 147,709 34 174,785 38 187,792 29 198,668To Government (see below) 15 46,200 15 52,122 15 68,072 20 82,405 24 89,049 19 92,004 20 109,568 24 122,279 18 91,030 24 164,764To Lenders of Capital-Interest on borrowings 5 15,564 2 7,242 4 17,718 11 45,364 10 36,972 7 34,119 4 25,489 7 34,597 12 60,668 7 50,099-Minority Interest - - - - - - - 3 16,648 3 17,038 2 11,280 - (1,230) 4 26,687To Shareholders as Dividends 11 34,200 54 181,989 24 106,400 36 152,000 40 152,000 7 34,200 31 181,989 21 106,400 30 152,000 22 152,000Retained in the Business 42 128,609 - - 37 165,335 6 25,318 5 17,234 42 205,186 17 101,098 12 62,239 2 11,019 14 95,083 100 315,342 100 336,358 100 446,836 100 416,511 100 373,129 100 490,577 100 582,891 100 511,580 100 501,279 100 687,302

The statement of Value Added shows the wealth, the Company and the Group have been able to create on its own and its employeeseffort. It also explains how Value Added has been distributed.

Revenue to GovernmentSRL /NBT/FINACIAL VAT 7,959 6,697 6,609 12,838 14,044 7,959 6,697 6,609 12,838 14,044Rates and Taxes 2,599 3,365 3,326 3,331 3,323 3,104 3,365 3,326 3,331 3,323Income Tax 35,642 42,060 58,137 66,236 71,682 80,941 99,506 112,344 74,861 147,397Total 46,200 52,122 68,072 82,405 89,049 92,004 109,568 122,279 91,030 164,764

SRL /NBT/FINACIAL VAT 9 %Rates and Taxes 2%Income Tax 89%

Revenue to Government


60

Information to Shareholders and Investors

1. Stock Exchange ListingThe issued ordinary shares of John Keells PLC are listed with the Colombo Stock Exchange of Sri LankaThe Audited Accounts of the Company and the Consolidated Accounts for the year ended 31st March, 2010have been submitted to the Colombo Stock Exchange.

2. Distribution of Shareholdings

31st March 2010 31st March 2009No. of Shares held Shareholders Holdings Shareholders Holdings

Number % Number % Number % Number %

Less than 1,000 590 72.39 179,064 1.18 680 72.80 220,594 1.451,001 - 10,000 183 22.45 571,568 3.76 213 22.81 656,872 4.3210,001 - 100,000 38 4.66 972,832 6.40 38 4.07 961,398 6.32100,001 - 1000,000 2 0.25 267,840 1.76 1 0.11 152,440 1.00over 1,000,000 2 0.25 13,208,696 86.90 2 0.21 13,208,696 86.90Total 815 100.00 15,200,000 100.00 934 100.00 15,200,000 100.00

2. Analysis of Shareholders

31st March 2010 31st March 2009Categories of Shareholders Holdings Shareholders HoldingsShareholders Number % Number % Number % Number %

Individuals 746 91.53 1,442,376 9.49 873 93.47 14,764,572 97.14Institutions 69 8.47 13,757,624 90.51 61 6.53 435,428 2.86Total 815 100.00 15,200,000 100.00 934 100.00 15,200,000 100.00Residents 805 98.77 15,140,004 99.61 924 98.93 15,138,504 99.60Non Residents 10 1.23 59,996 0.39 10 1.07 61,496 0.40Total 815 100.00 15,200,000 100.00 934 100.00 15,200,000 100.00John Keells Holdings and Subsidiaries 1 0.12 13,208,696 86.90 1 0.11 13,208,696 86.90Public 814 99.88 1,991,304 13.10 933 99.89 1,991,304 13.10Total 815 100.00 15,200,000 100.00 934 100.00 15,200,000 100.00

4. Share Performance at Colombo Stock Exchange

2009/2010 2008/2009

Highest Market Price 200.00 84.00Lowest Market Price 63.00 58.00Closing Price as at 31st of March 194.50 62.00

5. Dividend Payments A Final Dividend of Rs. 10/- per share will be paid on 17th June 2010.


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6. Top Twenty Shareholders

As at 31st March 2010 As at 31st March 2009Name of Shareholders No. of Shares Holding % No. of Shares Holding %

John Keells Holdings PLC 13,208,696 86.90 13,208,696 86.90Mr. H. S. D. Soysa 153,440 1.01 152,440 1.00Bank of Ceylon - No 2 A/C 114,400 0.75 - -The Roman Catholic Archbishop of Colombo 85,708 0.56 85,708 0.56Bhadra Investments Ltd. 69,112 0.45 69,112 0.45Mrs. H. G. S. Ansell 60,000 0.39 60,000 0.39HSBC/ R. Senathirajah - - 60,000 0.39Mr. M. Radhakrishnan 58,200 0.38 58,200 0.38Eric Rajapakse and Company Ltd. 56,284 0.37 56,284 0.37Mrs. M. L. De Silva 51,968 0.34 51,968 0.34Mr. C. D. Kohombanwickremage 44,100 0.29 - -Mr. W. R. H. Perera 43,268 0.28 43,268 0.28Mrs. N. Tirimanne 35,600 0.23 40,100 0.26Waldock Mackenzie Ltd./ Delmege Forsyth and Company 35,200 0.23 - -Ms. N. S. De Mel 34,284 0.23 18,500 0.12Sisira Investors Limited 28,568 0.19 28,568 0.19Colombo Fort Investments Ltd. 28,200 0.19 28,200 0.19Colombo Investment Trust PLC 25,712 0.17 25,712 0.17Mr. D. K. A. K. Weeratunga - - 23,800 0.16Mrs. H. J. C. Fernando 22,852 0.15 22,852 0.15Waldock Mackenzie Ltd./Mrs. G. Soysa - - 21,770 0.14Mr. K. C. Vignarajah - - 20,400 0.13Favourite Garments Ltd. 20,000 0.13 20,000 0.13Mr. B. V. Hettithanthrige 20,000 0.13 - - 14,195,592 93.39 14,095,578 92.73

Earnings & Dividends Per Share

Earnings per shareDividends per share

006 07 08 09 10

11.4

22.

25

12.6

522

.90

8.88

7.00

8.43 10

.00

15.1

210

.00

25

15

20

10

5

Net Assets & Market Price per Share

Net Assets Per ShareMarket Price per Share

006 07 08 09 10

86.0

7 99.7

5

76.0

4 85.2

5

77.9

1 90.0

0

76.3

462

.00

81.4

619

4.50

200

150

100

50


62

Five Year Summary

Company CONSOLIDATEDFor the year ended 31st March 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Trading ResultsGross Revenue 364,247 374,912 409,215 457,023 490,621 624,224 634,647 641,348 607,949 848,144

Operating Profit 137,895 106,812 159,328 214,636 230,970 273,246 234,764 243,733 221,880 428,931Other Income 25,495 112,075 171,686 55,534 22,970 18,388 25,391 32,256 30,177 25,684Finance Charges (15,564) (7,242) (17,719) (45,364) (36,972) (34,119) (25,489) (34,597) (60,668) (50,099)Share of Association Company Profits/ (Loss) - - - - - 13,526 74,784 17,195 10,357 (585)Amortisation of Negative Goodwill - - - - - 266 - - - -Profit before Taxation 147,826 211,645 313,295 224,806 216,968 271,307 309,450 258,587 201,746 403,931Taxation based thereon (36,254) (42,287) (58,137) (66,236) (71,682) (81,072) (100,104) (112,344) (74,861) (147,407)Profit after Taxation 111,572 169,358 255,158 158,570 145,286 190,235 209,346 146,243 126,885 256,524Minority Interest - - - - - (16,648) (17,038) (11,280) 1,230 (26,686)Profit attributable to John Keells PLC 111,572 169,358 255,158 158,570 145,286 173,587 192,308 134,963 128,115 229,838

Share Capital and ReservesStated Capital 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000Revenue Reserves 921,472 742,750 891,507 898,077 891,363 1,156,307 1,003,722 1,032,284 1,008,399 1,086,237Shareholders’ Funds 1,073,472 894,750 1,043,507 1,050,077 1,043,363 1,308,307 1,155,722 1,184,284 1,160,399 1,238,237Minority Interest - - - - 28,990 21,548 30,908 21,278 47,964 1,073,472 894,750 1,043,507 1,050,077 1,043,363 1,337,297 1,177,270 1,215,192 1,181,677 1,286,201

Assets Less LiabilitiesCurrent Assets 558,572 390,147 597,289 635,492 553,222 830,954 688,323 1,313,105 768,648 1,121,710Current Liabilities (270,786) (290,826) (355,057) (416,526) (328,358) (421,067) (511,884) (922,735) (471,637) (676,690)Net Current Assets/(Liabilities) 287,786 99,321 242,232 218,966 224,864 409,887 176,439 390,370 297,011 445,020Fixed Assets and Investments 863,397 874,770 877,259 917,501 907,937 1,096,045 1,167,009 981,036 1,043,251 996,741Long Term Liabilities - - - - - (80,120) (75,483) (66,390) (55,083) (41,024)Negative Goodwill on Consolidation - - - - - (3,187) - - - -Deferred Liabilities (77,711) (79,341) (75,984) (86,390) (89,438) (85,328) (90,695) (89,824) (103,502) (114,536) 1,073,472 894,750 1,043,507 1,050,077 1,043,363 1,337,297 1,177,270 1,215,192 1,181,677 1,286,201


63

Company CONSOLIDATEDFor the year ended 31st March 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Trading ResultsGross Revenue 364,247 374,912 409,215 457,023 490,621 624,224 634,647 641,348 607,949 848,144

Operating Profit 137,895 106,812 159,328 214,636 230,970 273,246 234,764 243,733 221,880 428,931Other Income 25,495 112,075 171,686 55,534 22,970 18,388 25,391 32,256 30,177 25,684Finance Charges (15,564) (7,242) (17,719) (45,364) (36,972) (34,119) (25,489) (34,597) (60,668) (50,099)Share of Association Company Profits/ (Loss) - - - - - 13,526 74,784 17,195 10,357 (585)Amortisation of Negative Goodwill - - - - - 266 - - - -Profit before Taxation 147,826 211,645 313,295 224,806 216,968 271,307 309,450 258,587 201,746 403,931Taxation based thereon (36,254) (42,287) (58,137) (66,236) (71,682) (81,072) (100,104) (112,344) (74,861) (147,407)Profit after Taxation 111,572 169,358 255,158 158,570 145,286 190,235 209,346 146,243 126,885 256,524Minority Interest - - - - - (16,648) (17,038) (11,280) 1,230 (26,686)Profit attributable to John Keells PLC 111,572 169,358 255,158 158,570 145,286 173,587 192,308 134,963 128,115 229,838

Share Capital and ReservesStated Capital 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000Revenue Reserves 921,472 742,750 891,507 898,077 891,363 1,156,307 1,003,722 1,032,284 1,008,399 1,086,237Shareholders’ Funds 1,073,472 894,750 1,043,507 1,050,077 1,043,363 1,308,307 1,155,722 1,184,284 1,160,399 1,238,237Minority Interest - - - - 28,990 21,548 30,908 21,278 47,964 1,073,472 894,750 1,043,507 1,050,077 1,043,363 1,337,297 1,177,270 1,215,192 1,181,677 1,286,201

Assets Less LiabilitiesCurrent Assets 558,572 390,147 597,289 635,492 553,222 830,954 688,323 1,313,105 768,648 1,121,710Current Liabilities (270,786) (290,826) (355,057) (416,526) (328,358) (421,067) (511,884) (922,735) (471,637) (676,690)Net Current Assets/(Liabilities) 287,786 99,321 242,232 218,966 224,864 409,887 176,439 390,370 297,011 445,020Fixed Assets and Investments 863,397 874,770 877,259 917,501 907,937 1,096,045 1,167,009 981,036 1,043,251 996,741Long Term Liabilities - - - - - (80,120) (75,483) (66,390) (55,083) (41,024)Negative Goodwill on Consolidation - - - - - (3,187) - - - -Deferred Liabilities (77,711) (79,341) (75,984) (86,390) (89,438) (85,328) (90,695) (89,824) (103,502) (114,536) 1,073,472 894,750 1,043,507 1,050,077 1,043,363 1,337,297 1,177,270 1,215,192 1,181,677 1,286,201

Revenue & PBT

RevenuePBT

006 07 08 09 10

624,

224

271,

307

634,

647

309,

450

641,

348

258,

587

607,

949

201,

746

848,

144

403,

931

1,000,000

600,000

800,000

400,000

200,000

(Rs 000’s)

Quoted Investments

Book ValueMarket Value

006 07 08 09 10

11,2

95 15,7

76

11,2

9523

,200

11,2

9525

,983

27,5

3439

,834

27,5

3454

,426

60,000

45,000

30,000

15,000

(Rs 000’s)

Growth In Shareholder’s Funds

ReservesStated Capital

006 07 08 09 10

1,15

6,30

715

2,00

0

1,00

3,72

215

2,00

0

1,03

2,28

415

2,00

0

1,00

8,39

915

2,00

0

1,08

6,24

715

2,00

0

1,500,000

1,200,000

900,000

600,000

300,000

(Rs 000’s)


64

Key Ratios and Information

Company CONSOLIDATED 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

KEY INDICATORS

(A) Profitability & Return to Shareholders

Annual Turnover Growth (%) 16.82 2.92 9.15 11.68 7.35 20.63 1.70 1.06 (5.21) 39.51Net Profit ratio (%) 30.63 45.17 62.35 34.70 29.61 27.81 30.30 21.04 21.07 27.10Earning per share (Rs.) ** 7.34 11.14 16.79 10.43 9.56 11.42 12.65 8.88 8.43 15.12Returns on Shareholders’ Funds (%) 10.39 18.93 24.45 15.10 13.92 12.98 16.34 11.11 10.84 17.87Return on Capital Employed (%) 13.78 22.42 28.37 23.49 19.93 18.63 18.77 19.35 18.69 27.86 Dividend per share (Rs) 2.25 22.90 7.00 10.00 10.00 2.25 22.90 7.00 10.00 10.00Debt Equity Ratio (%) 10.42 9.13 11.81 9.51 22.11 17.04 17.71 17.37 14.14 26.87

(B) Liquidity

Current Ratio (No of Times) 2.06 1.34 1.68 1.53 1.68 1.97 1.34 1.42 1.63 1.66Interest Cover (No of Times) 10.50 30.22 18.68 5.96 6.87 8.95 13.14 8.47 4.33 9.06

(C) Investor Ratios

Net Assets per share at year end (Rs.) 70.62 58.86 68.65 69.08 68.64 86.07 76.04 77.91 76.34 81.46Price-Earnings Ratio (Times) 11.43 7.65 5.36 5.94 20.35 7.35 6.74 10.14 7.36 12.86Effective rate at Dividend (%) 50 234 70 100 100 50 234 70 100 100Dividend (Rs.000’s) 76,000 348,080 106,400 152,000 152,000 76,000 348,080 106,400 152,000 152,000Dividend cover (Times) 1.47 0.48 2.40 1.04 0.96 2.28 0.55 1.27 0.84 1.69

(D) Share Valuation

Market price per share (Rs) 99.75 85.25 90.00 62.00 194.50 99.75 85.25 90.00 62.00 194.50

(E) Other Information

Number of Employees 145 149 133 109 118 179 180 153 140 183Turnover per employee (Rs.000’s) 2,512 2,516 3,077 4,193 4,158 3,487 3,526 4,192 4,342 4,635Value added per employee (Rs.000’s) 2,175 2,257 3,360 3,821 3,162 2,741 3,238 3,227 3,581 3,096

Note:**Earnings per share is based on 15,200,000 number of shares in issue as at 31st March, 2010.


65

Company CONSOLIDATED 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

KEY INDICATORS

(A) Profitability & Return to Shareholders

Annual Turnover Growth (%) 16.82 2.92 9.15 11.68 7.35 20.63 1.70 1.06 (5.21) 39.51Net Profit ratio (%) 30.63 45.17 62.35 34.70 29.61 27.81 30.30 21.04 21.07 27.10Earning per share (Rs.) ** 7.34 11.14 16.79 10.43 9.56 11.42 12.65 8.88 8.43 15.12Returns on Shareholders’ Funds (%) 10.39 18.93 24.45 15.10 13.92 12.98 16.34 11.11 10.84 17.87Return on Capital Employed (%) 13.78 22.42 28.37 23.49 19.93 18.63 18.77 19.35 18.69 27.86 Dividend per share (Rs) 2.25 22.90 7.00 10.00 10.00 2.25 22.90 7.00 10.00 10.00Debt Equity Ratio (%) 10.42 9.13 11.81 9.51 22.11 17.04 17.71 17.37 14.14 26.87

(B) Liquidity

Current Ratio (No of Times) 2.06 1.34 1.68 1.53 1.68 1.97 1.34 1.42 1.63 1.66Interest Cover (No of Times) 10.50 30.22 18.68 5.96 6.87 8.95 13.14 8.47 4.33 9.06

(C) Investor Ratios

Net Assets per share at year end (Rs.) 70.62 58.86 68.65 69.08 68.64 86.07 76.04 77.91 76.34 81.46Price-Earnings Ratio (Times) 11.43 7.65 5.36 5.94 20.35 7.35 6.74 10.14 7.36 12.86Effective rate at Dividend (%) 50 234 70 100 100 50 234 70 100 100Dividend (Rs.000’s) 76,000 348,080 106,400 152,000 152,000 76,000 348,080 106,400 152,000 152,000Dividend cover (Times) 1.47 0.48 2.40 1.04 0.96 2.28 0.55 1.27 0.84 1.69

(D) Share Valuation

Market price per share (Rs) 99.75 85.25 90.00 62.00 194.50 99.75 85.25 90.00 62.00 194.50

(E) Other Information

Number of Employees 145 149 133 109 118 179 180 153 140 183Turnover per employee (Rs.000’s) 2,512 2,516 3,077 4,193 4,158 3,487 3,526 4,192 4,342 4,635Value added per employee (Rs.000’s) 2,175 2,257 3,360 3,821 3,162 2,741 3,238 3,227 3,581 3,096

Note:**Earnings per share is based on 15,200,000 number of shares in issue as at 31st March, 2010.


66

Glossary of Financial Terminology

Accrual BasisRecording Revenues and Expenses in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period.

Capital EmployedShareholders’ Funds plus Debt

Contingent LiabilitiesA condition or situation existing at the Balance Sheet date due to past events, where the financial effect is not recognised because:

1. The obligation is crystalised by the occurrence or non occurrence of one or more future events or,

2. A probable outflow of economic resources is not expected or,

3. It is unable to be measured with sufficient reliability

Current RatioCurrent Assets over Current Liabilities

Debt/Equity RatioDebt as a percentage of Shareholders Funds

Dividend CoverEarnings per Share over Dividends per Share

Dividend Payout RatioTotal Dividend interest and Tax as percentage of Capital Employed

Earnings Per Share (Eps)Profit after tax attributable to ordinary shareholding over weighted average numbers of shares in issue during the period

Earnings YieldEarnings per Share as a percentage of Market price per Share end of the period.

Effective Rate of TaxationIncome Tax, including deferred tax over Profit before Tax

Interest CoverProfit before Interest and Tax over Finance Expenses

Market CapitalisationNumber of Shares in issue at the end of the period multiplied by the Market price at end of period

Net AssetsTotal assets minus Current Liabilities minus Long Term Liabilities minus Minority Interest

Net Asset Per ShareNet Assets, over number of Ordinary Shares in issue

Net DebtNet Debt minus (Cash plus Short Term Deposits)

Net Turnover Per EmployeeNet Turnover over average number of employees

Price Earnings RatioMarket Price per Share over Earnings per Share

Quick Asset RatioCash plus Short Term Investments plus Receivables, Dividend by Current Liabilities

Quick RatioCash plus Short Term Investments plus Receivables over Current Liabilities

Return On AssetsProfit after Tax over Average Total Assets

Return on EquityProfit after Tax as a percentage of Average Shareholder’s Funds

Return on Capital EmployedEarning before interest and tax as percentage of Capital Employed

Shareholders FundsStated Capital, Capital Reserves plus Revenue Reserves

Total DebtLong Term Loans plus Short Term Loans and Overdrafts

Total Value AddedThe difference between revenue (including other income) and expenses, cost of materials and services purchased from external sources

Total AssetsFixed Assets plus Investments plus Non Current Assets plus Current Assets

Working CapitalCapital required finance the day-to-day operations Current Assets minus Current Liabilities


67

Notice of Meeting

NOTICE IS HEREBY GIVEN THAT the Sixty Third Annual General Meeting of John Keells PLC will be held on 30th June 2010 (Wednesday) at 10.00 a.m. at the HR Auditorium (Ground Floor) of John Keells Holdings PLC, No. 130 Glennie Street, Colombo 2. The business to be brought before the Meeting will be:

• To read the Notice convening the Meeting

• To receive and consider the Report of the Directors and the Statement of Accounts for the Financial Year ended 31st March 2010 with the Report of the Auditors thereon

• To re-elect as Director, Mr. K. D. W. Ratnayake who retires in Terms of Article 83 of the Articles of Association

• To re-elect as Director, Ms. Y. A. Jordan Hansen who retires in Terms of Article 83 of the Articles of Association

• To re-elect as Director, Mr. L. D. Ramanayake who retires in Terms of Article 90 of the Articles of Association

• To re-appoint Auditors and to authorise the Directors to determine their remuneration

• To authorise the Directors to determine and make donations

• To consider any other business of which due notice has been given

Note:I. A member unable to attend is entitled to appoint a proxy to attend and vote in his/her place

II. A proxy need not be a member of the Company

III. A member wishing to vote by proxy at the meeting may use the Proxy Form enclosed

IV. To be valid, the completed Proxy Form must be lodged at the registered office of the Company not less than 48 hours before the meeting

By Order of the Board

KEELLS CONSULTANTS LIMITED

SecretariesColombo

04th June 2010


68

Notes

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69

Notes

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71

Form of Proxy

I/We ....................................................................................................................................................................................................................... of

.....................................................................................................................................................................................................................................being a member/members of John Keells PLC hereby appoint

.....................................................................................................................................................................................................................................

of ................................................................................................................................................................................................. or failing him/her

Mr. Susantha Chaminda Ratnayake of Colombo, failing himMr. Ajit Damon Gunewardene of Colombo, failing himMr. James Ronnie Felitus Peiris of Colombo, failing himMr. Lallith Devakumar Ramanayake of Colombo, failing himMr. Tilak de Zoysa of Colombo, failing himMr. Kavantissa Danudra Weerawardene Ratnayaka of Colombo, failing himMs. Yolande Ann Hansen of Colombo, failing herMs. Sharmini Tamara Ratwatte of Colombo

as my/our proxy to vote for me/us on my/our behalf at the Sixty Third Annual General Meeting of the Company to be held on 30th June 2010 and at every poll which may be taken on consequence of the aforesaid meeting and at any adjournment thereof.

Signed this ...................................................................... day of ...................................................................... Two Thousand and Ten.

......................................................................Signature of Shareholder

Note:(1) A proxy need not be a member of the Group.(2) Instructions regarding completion appear on the reverse hereof.


72

INSTRUCTIONS TO COMPLETION

1) To be valid, the Form of Proxy must be deposited at the Registered Office of the Company, 130 Glennie Street, Colombo 2, not less than 48 hours before the time appointed for holding the meeting.

2) In perfecting the Form of Proxy, please ensure that all details are legible, sign in the space provided and fill in the date of signature.

3) If you wish to appoint a person other than the Directors as your proxy, please insert the relevant details in the space provided overleaf and initial against this entry.

4) In the case of a Company or body corporate, the Proxy must be executed under its common seal which should be affixed and attested in the manner prescribed by its Articles and Association of Constitution.

Corporate Information

Name of CompanyJohn Keells PLC

Company Registration NumberPQ 11

Name of SubsidiariesJohn Keells Stock Brokers (Pvt) LimitedJohn Keells Warehousing (Pvt) Limited

Name of Associate Company Keells Realtors Limited

Legal FormPublic Limited Liability Company listed on the Colombo Stock Exchange(Incorporated in Sri Lanka in 1960)

Registered Office P.O. Box 76, 130, Glennie Street, Colombo 2, Sri LankaTel: 2306000Telex: 21389 KEELLS CETelefax: 2446223E-mail: [email protected]

Directors S.C. RatnayakeA.D. GunewardeneJ.R.F. PeirisL.D. Ramanayake T. de Zoysa K.D.W. RatnayakaMs. Y.A. HansenMs. S.T. Ratwatte

Secretaries & RegistrarsKeells Consultants Limited130, Glennie Street, Colombo 2

Auditors Messrs Ernst & YoungChartered AccountantsP.O. Box 101, Colombo

Principal Bankers (in alphabetical order) Bank of CeylonCommercial Bank of Ceylon Ltd.Deutsche BankDFCC Vardhana BankHatton National BankHongkong & Shanghai Banking Corporation Ltd.Nation's Trust BankNational Development Bank PLCPeople's BankSampath Bank Ltd.Seylan Bank Ltd.Standard Chartered Bank

Contents

Financial Highlights 3Financial Calendar 3Group Structure 4Chairman’s Statement 5Chief Executive Officer’s Report 7Board of Directors 10Senior Management Team 12Human Resources 13Corporate Social Responsibility 14Corporate Governance 17Risk Management 23Audit Committee Report 25Historical Milestone 27

Financial ReviewAnnual Report of the Board of Directors 30The Statement of Director’s Responsibility 34Auditors’ Report 35Balance Sheet 36Income Statement 37Statement of Changes in Equity 38Cash Flow Statement 39Notes to the Financial Statements 40Statement of Value Added 58Information to Shareholders and Investors 60Five Year Summary 62Key Ratios and Information 64Glossary of Financial Terminology 66Notice of Meeting 67Notes 68Form of Proxy 71Corporate Information Inner Back Cover

Produced by Copyline (Pvt) Ltd Printed by Printel (Pvt) Ltd

John Keells PLC Annual Report 2009/2010 John Keells PLCP.O. Box 76, 130 Glennie Street, Colombo 2

John Keells PLC | Annual Report 2009/2010


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Exceeding Expectations · 2010. 10. 19. · We will look towards exceeding Shareholder and Customer...

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