21453 JKH 2009 - John Keells Holdings PLC › resource › annual-report › john... · As we all know, there are currently silver linings for Sri Lanka among the global dark clouds

WHATITTAKESJOHN KEELLS HOLDINGS PLC - ANNUAL REPORT 2008/09

The John Keells group sees opportunity inadversity. Our resilience and our proven ready

acceptance of ‘change’ give us the foundation tobenefit from opportunities and step into the

future with confidence.

At the brink of a new beginning for Sri Lanka, we believe we have “what it takes”,

to lead growth.

PageProfile and Discussion

About us 2Our industry groups 3

Chairman’s message 4Operating highlights and significant events 9

Financial achievements and goals 9

Financial highlightsYear at a glance 10

Industry group financial highlights 11

Industry group snapshots 12Board of Directors 18

Group Executive Committee 20Group Operating Committee 21

Corporate governance 24Board Committee reports 33

Management Discussion and AnalysisConsolidated group and segmental performance 36

Group financial position, liquidity and capital resources 45Portfolio movements and evaluation 48

Acquisitions, new business and divestments 50Risk management 51Share information 53

Summary of the Sustainability Report 58

PageFinancial Reports

Annual Report of the Board of Directors 64Statement of Directors’ Responsibility 72

Report of the Auditors 73Balance sheet 74

Income statement 75Cash flow statement 76

Statement of changes in equity 78Notes to the financial statements 80

Economic value statement 128

Supplementary InformationHistory of the John Keells group 129

Decade at a glanceSelected group financial data 130

Indicative US dollar financial statement 131Group real estate portfolio 133

Group directory 135Macro snapshot 138

Glossary of financial terms 139Corporate information 140

Notice of meeting 141Form of proxy 143

2

John Keells Holdings PLC (JKH) is Sri Lanka’s largest listedconglomerate, with business interests in Transportation,Leisure, Property, Consumer Foods & Retail, Financial Servicesand Information Technology, among others. Since its modestbeginnings as a produce and exchange broker in the early1870s, JKH has been known to constantly re-align, repositionand re-invent itself in pursuing growth sectors of the time. Our investment philosophy is based on a positive outlook, boldapproach, commitment to delivery and flexibility to change. JKH is also committed to maintaining integrity, ethicaldealings, sustainable development and greater socialresponsibility in a multi stakeholder context. Having producedsuperior returns for our shareholders and experiencedsignificant growth in the past five years, the group’s immediatephases of growth are fuelled by our vision- ‘Buildingbusinesses that are leaders in the region’.

Our valuesWe are passionate about-• Changing constantly, re-inventing and evolving• Striving to get things right the first time• Doing the right things always• Constantly raising the bar• Fostering a great place to work• Building strong relationships based on openness and trust

JKH is-• The largest capitalised conglomerate listed on the Colombo Stock Exchange• The first Sri Lankan company to be listed overseas

- Global depository receipts listed on the Luxembourg Stock Exchange• AAA(lka) credit rated by Fitch Ratings Lanka Ltd• A full member of the World Economic Forum• A member of the UN Global Compact • LMD’s most respected entity in Sri Lanka for the fourth consecutive year

WHAT WE AREPROFILE & DISCUSSION

3

TransportationThe largest cargo and logistics service providers in thecountry are clustered within this industry group. Wedeveloped and operate what was previously the QueenElizabeth quay of the Colombo port, operate a marinebunkering business as well as businesses in logistics, traveland airline services in Sri Lanka, India and Maldives.

LeisureJKH is the largest hotelier in the country, owning 40 per centof the 5-star capacity in Colombo. Additionally, it owns 7resort hotels in Sri Lanka and 4 in the Maldives, under itstwo brands, ‘Cinnamon Hotels and Resorts’ and ‘ChaayaHotels and Resorts’. This is complemented by destinationmanagement businesses in Sri Lanka, Maldives and India.

PropertyWe are one of the leading developers of luxury residentialcondominiums in Sri Lanka and manage a large commercialreal estate portfolio in Colombo.

Consumer Foods & Retail (CF&R)The group owns two of the country’s best-known consumerbrands, ‘Elephant’ and ‘Keells’, which are leaders in theproduction and marketing of carbonated soft drinks, icecreams and processed meats in Sri Lanka, as well as the‘Keells Super’ chain of supermarkets.

Information TechnologyThe industry group comprises of companies engaged insoftware development, providing IT solutions for off-shoreclientele, and office automation solutions. We have alsoentered in to the BPO industry and established contactcentres in Gurgaon, India and Sri Lanka with clients in theUS, Canada, Middle East and the Indian sub continent.

Financial ServicesOur cluster of financial services companies offer a completerange of financial solutions including commercial banking,insurance, stock broking, debt trading, fund managementand leasing.

Note : Other businesses in our portfolio include the Plantation Services sectorwhich is involved in tea and rubber broking and tea smallholder services

OUR INDUSTRY GROUPS

Centrefunctions

Sectors

Industrygroups

John KeellsHoldings

Transportation LeisureInformationTechnology

ConsumerFoods & Retail

FinancialServices

Property Other

Ports &Shipping

Transportation

Hotel Management

City Hotels

Resort Hotels

DestinationManagement

PropertyDevelopment

RealEstate

ConsumerFoods

Retail

Insurance

Banking &Leasing

Stockbroking

IT Services

Office Automation

PlantationServices

StrategicInvestments

John Keells Social ResponsibilityFoundation

CorporateCommunications

CorporateFinance &Strategy

GroupFinance

HumanResources

GroupTax

GroupTreasury

Group Risk & ControlReview

Legal &Secretarial Sustainability

New BusinessDevelopment &Group Initiatives

Strategic GroupInformationTechnology

IT EnabledServices

John Keells Holdings PLC Annual Report 2008/09

4

CHAIRMAN’S MESSAGEDear Stakeholder,I write this message with a renewed sense of optimism given thecomprehensive victory of the Sri Lankan armed forces in liberatingthe North and East of the country. For three decades the countryhas been ravaged by the scourge of terrorism and this is the timethat we must unite to create a lasting solution which will enable allSri Lankans to live with dignity in a peaceful Sri Lanka. I amconfident that this will usher in an era of unprecedentedopportunity for Sri Lanka, its people and your company. We, forour part, stand ready to play a meaningful role in this regard.

Economic meltdown; global recession; sub-prime crisis; terms notheard of in the recent past, and in some cases, never before,made the headlines impacting the business environment globally.The breadth and severity of the global downturn and its impact ongrowth rates in key economies and in key sectors are difficult tooveremphasise and were felt across the corporate sector in SriLanka in 2008/09. When you add to this the challenges faced bythe company as a result of the Supreme Court judgementpertaining to the Lanka Marine Services (LMS) privatisation,2008/09 was probably the most trying year that the John Keellsgroup has faced in its history.

There was a marked contrast between the first and second halvesof the financial year 2008/09. The first half of the year saw astrong performance by the group despite a challenging economicenvironment with a revenue growth of 20 per cent and a 27 percent growth in profit before tax. In the second half, however, JKHhad to cope with the fallout of the judgement on the LMSprivatisation as well as the knock-on effects of the globaleconomic and financial crisis and this is reflected in the year-endresults of the group.

The key financial highlights for the year 2008/09, which arediscussed in greater detail in the Management Discussion andAnalysis section of the report, are as follows.

• Group profit after tax (PAT) attributable to equity holdersdecreased by 7 per cent to Rs. 4.74 billion

• Group revenue decreased by 2 per cent to Rs. 41.02 billion

• Group profit before tax (PBT) decreased by 4 per cent to Rs.6.30 billion

• Earnings per share (diluted) decreased by 5 per cent to Rs.7.58

• Dividend payout decreased by 41 per cent to Rs. 1.88 billion

• Net cash flow from operating activities decreased by 39 percent to Rs. 4.19 billion

• Cash EPS decreased by 17 per cent to Rs. 7.95

• Return on capital employed decreased to 12.0 per cent from13.9 per cent.

The one off gains from the sale of the Associated Motorways PLC(AMW) stake and the negative goodwill write back on the UnionAssurance (UA) acquisition was more than offset by the one offcharges consequent to the LMS judgement and the reducedprofitability, relative to previous years, arising from the change inthe operating model of the business. The intangible assetscreated by the UA acquisition, being the asset which gave rise tothe negative goodwill write-back, will be amortised in the futureyears over the life of the subject policies.

During these testing times due to the global economic crisis, weremained positive and were able to see opportunity amidstadversity. The fact that we have emerged relatively unscathed witha strong balance sheet and renewed focus is a testimony to thecapability of the women and men of John Keells who have “whatit takes” to ensure JKH remains a superior creator of value for allits stakeholders. We are committed to achieving our long termstrategic objectives. Such achievement, we believe, will beorchestrated as per a business order fundamentally different towhat we have been accustomed to in the past and will thereforerequire a paradigm shift in our mindsets. As we begin a newfinancial year, the global economic outlook remains weak withlimited visibility and there is continuing volatility, albeit at a lowerlevel of intensity when compared to that which prevailed in thesecond half of the previous year, in the currency, interest rates andstock markets. It is against this backdrop that we took decisivesteps such as conversion of fixed costs to variable costs, tightworking capital management and organisation right sizing, just toname a few, in positioning the group to weather the downturnwithout sacrificing its capability to react quickly, and appropriately,to changing market conditions and to an upward momentum inthe economic cycle. These steps, which meshed well withmeasures, taken in previous years, such as pay for performance,balance sheet restructuring and long-term capital planning werenecessary to ensure that our group was well geared through thecycle, both operationally and financially, to continue to deliver longterm value to our stakeholders. Our operating model allows us tobe nimble and non bureaucratic whilst maintaining the right levelsof delegation and answerability together with control, riskmanagement and governance. As has been evident in the past,we have no fear of change and this has helped us to adaptquickly to the prevailing business environment. Such agility is allthe more relevant in the context of today's changing businessneeds.

As we all know, there are currently silver linings for Sri Lankaamong the global dark clouds of recession and the financial crisiswhich I referred to earlier. Sri Lanka is poised to usher in a newbeginning through a political solution that we believe will followthe military successes in the North. The promise of peace offersuntold opportunity for the corporate sector, the John Keells groupand some specific sectors such as tourism, consumer productsand services, trade, logistics and property development, thesebeing businesses which have been particularly affected to varyingdegrees by the years of conflict. We believe that our currentportfolio of goods and services and our operating model whichhas been built and refined over the past years through ourincremental learnings will serve effectively in meeting the needs ofthe evolving situation and times. In the right environment, we areconfident of delivering exponential value to our existingstakeholders and to the many new stakeholders who will emergein a new Sri Lanka.

External factorsAt a macro level, the Sri Lanka GDP grew by 6.0 per cent in 2008when compared to the 6.8 per cent reported in 2007. Inflation,fuelled primarily by high oil prices, was high, particularly in theearly part of the year, and borrowing costs which were around 20per cent in the early part of the year have, in the main, remainedat similar levels despite the lower anticipated inflation. Themonetary policy tightening actions taken by the Central Bank,notably the restriction of liquidity available to the banks, pushedup market interest rates even as policy rates remained stable.Although the closing exchange rate to the US dollar as at 31

5

Chairman : Susantha Ratnayake

“During these testing times... we remained positive and

were able to see opportunityamidst adversity”


6

March 2009 was Rs. 115.53 compared to the Rs. 107.78 as at 31March 2008, the rupee appreciated against the US dollar duringmost part of the year. In the second half of the financial year themarket interest rate on US dollar borrowings was significantlyhigher than expected given the shortage of US dollars in the localmarket as the impacts of the global financial crisis began to befelt in Sri Lanka, despite a depressed USD LIBOR. In these toughcircumstances, I am happy to state that the group's riskprogramme worked well in proactively managing the challengesand opportunities that unfolded in the areas described before.

Additionally, both Sri Lanka and the Maldives, the two maingeographies of our leisure operations were particularly impactedby the global recessionary conditions in the second half of the year.

As mentioned earlier, JKH had to contend with the judgementrelating to the privatisation of LMS, a privatisation that hadattracted many local and foreign bidders under a publiclyadvertised tender. In this regard, I wish to advise you that thecompany and LMS complied fully with the orders of the SupremeCourt at a significant cost. The operations of LMS still continue asa combined floating cum tank based operation as opposed to themainly land based operation of the past.

Internal factorsAs a group, we were hopeful, and determined, to better ourperformance, year on year, in 2008/09 but upping the bar reachedin 2007/08 proved to be a virtual impossibility given theenvironment that prevailed during most part of the year. We,however, continued augmenting our internal capabilities throughthe identification and application of best practices and byleveraging synergies across the industries and sectors in ourgroup to produce the best results possible during a period whererevenue generation and margin maintenance were a greatchallenge. We also pursued a path of ‘smart costs’ with emphasison the usage of electricity and the consumption of fuel and water.Against a background of business uncertainty, new investmentswere mainly in businesses which were familiar to us. Althoughinorganic opportunities were pursued, they did not meet ourinvestment criteria.

Segmental performance - highlightsTransportation remained the main contributor of the group's aftertax profits, despite the LMS setback. The sector contributed 34per cent to the group's profitability with a PAT of Rs. 1.67 billion, adecline of 43 percent [2007/08: Rs. 2.90 billion]. The group'sprofits were mainly driven by the operations of South AsiaGateway Terminals (SAGT) at the Colombo port. During the year,we acquired an additional stake of 8.4 per cent in SAGT, for atotal of USD 23.8 million, from the Asian Development Bank andthe International Finance Corporation, consequent to both partiesexercising their put options. This resulted in our overallshareholding in SAGT increasing to 42.2 per cent.

Leisure recorded a PAT of Rs. 128 million, a 63 per cent decline in2008/09 [2007/08: Rs. 347 million]. Leisure, being the industrywith the largest asset base in the group was affected by the fall intourist arrivals because of the negative travel advisories on SriLanka issued by key European countries. In addition, higher utilitycosts and increasing cost of inputs because of high inflation,contributed to the lower profits generated in Sri Lanka. In ourMaldivian operations, Chaaya Lagoon Hakura Huraa and ChaayaIsland Dhonveli posted profit growth over the previous year.However, the closure of Cinnamon Island Alidhoo for constructionof a breakwater combined with the high fuel costs and the slowdown in long haul travel negatively affected the Maldiviansegment.

Property PAT of Rs. 486 million for the year was a 38 percentdecline [2007/08: Rs. 785 million]. The sector contributed 10 percent to the group's after tax profitability. The construction of ‘TheMonarch’ was completed and a substantial number of units areoccupied. The construction of ‘The Emperor’ is continuing albeit alittle behind schedule due to the negative logistical impactssuffered by heavy security arrangements in the area. While 79 percent of units have been sold off plan, I am optimistic that we willsucceed in selling the remainder, quite quickly, with the expectedimprovement in the country's investment and economicenviorenment.

The Consumer Foods & Retail industry group as a whole reportedRs. 121 million in PAT for the year, a decline of 51 per centcompared to the previous year [2007/08: Rs. 248 million]. Thestrong performance by the Beverages and Frozen Confectionarybusinesses, which recorded a PAT increase of 99 percent over theprevious year, with significant increases in manufacturing anddistribution efficiencies, was offset by losses in the retail sectorwhich resulted from a depressed level of sales as consumerslowered their basket values as their disposable incomes declined,increased costs which could not be passed on to consumersimmediately because of market conditions and lower margins asthe majority of consumers reacted to their ever increasing costburdens by limiting their purchases to the essential basics.

Financial Services reported a PAT of Rs. 339 million, an impressiveincrease of 16 per cent compared to last year [2007/08: Rs. 292million]. Although our stock broking arm was negatively impactedby the bearish stock market conditions, the performances of ourbanking associate, Nations Trust Bank (NTB), and our insurancearm, Union Assurance (UA) were encouraging. NTB reported aPAT growth of 17 per cent. PAT from UA grew by 77 per cent as aresult of the treatment of UA as a subsidiary and the longeraccounting period. Unlike in the past, the UA profits for thequarter ended 31 March 2009 were included as it became a JKHsubsidiary during such quarter while the increased share of UA'sprofits to JKH compared to the previous year also contributed tothis growth.

“...we have emerged relativelyunscathed with a strong balance

sheet and renewed focus is a testimony to the capability of the

women and men of John Keellswho have “what it takes” to ensure

JKH remains a superior creator ofvalue for all its stakeholders”

“We continued augmenting ourinternal capabilities through theidentification and application ofbest practices and by leveragingsynergies across the industries andsectors in our group to produce thebest results possible during a period where revenue generationand margin maintenance were a great challenge”

CHAIRMAN’S MESSAGE

7

Information Technology recorded a loss of Rs. 167 million in thecurrent financial year compared to the profit of Rs. 43 millionachieved last year mainly as a result of losses in the BPO sectorbeing higher than planned. Start-up and reengineering costs inFPO, the Chicago based BPO company, where we have a 44 percent effective holding, were higher than originally envisaged.Additionally, revenues too were depressed as the US recessiontook its toll on the auto and restaurant businesses whichcomprised the bulk of its customers. However, it is heartening tonote that the BPO arm is continuing to increase its client basewith the Indian business showing strong positive cash flows.Further, two of our major clients in USA have committed more work.

Plantation Services, which is included under Others in oursegment report, recorded a PAT of Rs. 177 million. The decline of36 percent [2007/08:Rs. 277 million] was mainly a result of thefalling tea prices in the international markets coupled with a dropin production volumes.

A more detailed review of financial performance of the industrygroups is available in the Management Discussion and Analysissection of the Annual Report.

Expansions, mergers and acquisitionsAs was stated earlier, 2008/09 was a year of consolidation of thegroup's existing portfolio. In the very early part of the year, weaggressively sought investment opportunities in identifiedgeographies such as India, Bangladesh and the Mekong region.As events unfolded, we anticipated a rerating of assests due tothe economic meltdown. We quickly concluded that all investmentbenchmarks and assessments of ‘fair value’ would be thrown in todisarray if we were to proceed on the basis of the asked pricesand temporarily halted the pursuit of regional investment, anaspect that will be closely and regularly monitored going forward.Instead, given our strong balance sheet and seeing an opportunityto increase our stake in established industries where we alreadyhad interests, we acquired the following stakes, in our associateand subsidiary companies;

• A 43.7 per cent stake in Union Assurance PLC increasing theJKH stake to 80.6 per cent

• 23.4 per cent of Ceylon Cold Stores PLC increasing the JKHstake to 80.5 per cent

• 10.9 per cent of John Keells PLC increasing the JKH stake to86.9 per cent

JKH also repurchased its own shares at Rs. 90 per share on a prorata basis of 1 for 25 for a total of Rs. 2.30 billion during the thirdquarter.

As stated earlier, JKH also increased its stake in SAGT to 42.2 per cent by purchasing shares offered to it by Asian DevelopmentBank and International Finance Corporation under put optionarrangements.

In the second quarter of 2008, JKH divested its stake in AMW andrealised a net gain of Rs. 1.03 billion for the group.

DividendsIn addition to the share repurchase, your company has alreadypaid Rs. 2.00 per share as per two interim dividend declarationsand I am pleased to announce that your board has also approvedthe payment of a further Rs. 1.00 per share as a final dividend outof profits for the financial year ended 31 March 2009. The totaldividend paid during 2008/09 was Rs. 1.88 billion.

Looking aheadThe global economy is facing an unprecedented level ofuncertainty and the outlook remains poor in the near term. Whileglobal GDP, at purchasing power parity, is forecast to contract by1.8 per cent in 2009 in the wake of the worst recession since1929, Sri Lanka is one of the few economies in Asia that isexpected to record positive growth in 2009/10 despite poorexternal demand hitting the export sector. This positive GDPgrowth is expected from a boost to domestic demand from animproving security situation in the North and East that willfacilitate agricultural output and swell rural income. Additionally,the improvement in the security situation in the North will enablethe much needed infrastructure development in that area.Needless to state, all of these open out great possibilities to thepublic and private sectors and to the businesses in our group.Whilst there is a sense of optimism, we recognise that the yearahead will pose significant challenges to the group's performance.

Peace undoubtedly will offer unprecedented opportunities for ourSri Lankan leisure business. We have in the last three yearsmaintained the quality of our Sri Lanka offering despite thedepressed market conditions that has prevailed in that period.Over and above this, we took many steps in improving ouroperating processes and employee service levels. The Leisureindustry group has also extended its use of e-technology inexpanding its customer reach. Further, recognising the need of thecustomer for a value for money offering in these recessionarytimes, the leisure group is building new short haul markets for itshotels in Sri Lanka and the Maldives and is working closely withthe existing tour operator networks in crafting a flexible, proactivepricing strategy. As has been already made public, in the nextthree months, Trans Asia hotel will be refurbished and re-launchedunder the ‘Cinnamon’ brand with a wider, more attractive productproposition. Our plans in the region will include an aggressivepush in India to further develop our outbound and inbound travel business.

The Transportation industry group has reorganised the logisticsbusinesses and launched a consolidated new brand ‘John KeellsLogistics’. We are also well positioned to capture non groupcustomers in the supply chain management field on the back ofour learnings in servicing our group supermarkets through acentral warehouse system. We have taken a view that logisticsand supply chain management are growth sectors and we willseek inorganic and organic expansion in these areas in the regionand in Sri Lanka. Lanka Marine Services will focus onconsolidating its operating strategies on the strong domainknowledge that we have acquired in the past years. We believethat post war reconstruction and the resultant economic growth inSri Lanka would have a positive impact on volumes at our terminalin the Colombo port. I am sure that you will also be interested tolearn that a JKH/Larsen and Toubro Ltd consortium is a shortlisted bidder for the Ennore port development project in India.

“Additionally, the improvement inthe security situation in the Northwill enable the much neededinfrastructure development in thatarea. Needless to state, all ofthese open out great possibilities to the public and private sectorsand to the businesses in our group”


8

As I had mentioned in the last Annual Report, we entered in to amemorandum of understanding with AMW, and Finlays ColomboPLC to develop a 'City within a City'. I am pleased to report thatthis project is currently being evaluated and could be launched inthe coming year if the right environment was to emerge.Furthermore, our substantial land bank in prime areas of Colombohas great potential and concepts for the development of the keyproperties have been discussed in principle.

The Consumer Foods sector will follow a strategy of increasingvolumes to grow absolute profits. With peace, the sector seesopportunity for growth in volumes and, indeed, market share inthe previously war torn areas of the country. The thrust points inthe Retail sector will be differentiation powered by value addingback office processes and customer service enhanced by focusedtraining and development. John Keells Foods India Private Limited(JKFI) commenced marketing, sales and distribution operations inmajor metropolitan cities. JKFI plans to start manufacturing inIndia and expand its sales network to increase penetration forprocessed meats under our brand in the current year.

Financial Services is another business that can benefit from apeace dividend. Our banking and insurance businesses are beingpositioned to exploit the opportunities that are likely to emerge inthe North and the East. Insurance penetration, as we know, is stillvery low in Sri Lanka relative to the penetration levels in the regionand even in highly populated India.

In the Information Technology industry group our joint venture withAir Arabia will continue to grow as will our BPO operations basedin India, the USA and Sri Lanka. A stable environment in Sri Lankawill provide the opportunities; opportunities that we envisionedwhen we entered the BPO space in 2005/06, for our country andfor our group.

Corporate responsibilityWith the increased need for corporate responsibility andaccountability in today's evolving business environment, we have,this year, developed a formal framework within our organisation toidentify, establish and monitor key indicators covering suchresponsibility and accountability. It is in pursuance of such a goal,that we formed a Sustainability Committee to lead our group wideefforts in identifying emerging issues, developing coherent andeffective strategies and policies and overseeing theirimplementation. We introduced these initiatives in a group-wideroll out through a project named 'Change for the BEST - Buildingan Equitable and Sustainable Tomorrow'. Details of this are foundin our Sustainability Report, which is the first for JKH in line withGRI/G3 guidelines at a C+ level. It is our aim to scale up to an A+level within the next 3 years. I hasten to state that, in the future,any assessment of the effectiveness of our corporate strategieswill include an evaluation of our actual performance against thegoals we have set for ourselves in measuring our contribution tothe development of both society and the economy. We recognisethat companies, customers, suppliers, employees, their families,wider communities, government, political organisations etceteraare connected and that these interconnections exist within thenatural world. What happens in one has an impact, positive ornegative, on the other. We acknowledge this and we will actaccordingly.

Our detailed Sustainability Report provided with the Annual Reportcontains our 'progress report' on this front.

We are also very proud of the work done by the John KeellsSocial Responsibility Foundation. The foundation looks to improvethe lives of communities touched by our businesses by musteringthe involvement of the very people involved in these businesses,with particular emphasis on education, health, environment,community and livelihood development, arts and culture anddisaster relief.

AppreciationsAs you are aware, Mohamed Muhsin resigned from the board InMarch 2009 and Sumithra Gunesekera will retire from the boardwith effect from 30 June 2009. I thank both colleagues for theirvaluable contribution during their tenure.

I also thank the Board of Directors of JKH for their valuableinsights, advice and guidance during a year which has been onefilled with turbulence, setbacks, challenges and opportunities.

Finally, all of you stakeholders are the inspirers of our goals andachievements. To all of you, I, on behalf of the board andeveryone at the John Keells group, say; - “Thank you” for yoursupport and the confidence and trust you have placed in us.

Susantha RatnayakeChairman

21 May 2009

“In the future, any assessment ofthe effectiveness of our corporatestrategies will include an evaluationof our actual performance againstthe goals we have set for ourselvesin measuring our contribution to thedevelopment of both society andthe economy”

9

April 2008• JKH concluded the acquisition of a 44 per cent equity stake in

Quatrro Finance & Accounting Solutions (Pvt) Ltd (details were

provided in the JKH 2007/08 Annual Report)

• Keells Food Products PLC invested in John Keells Foods India

(Pvt) Ltd, to manufacture and market processed meats in India

July 2008• Supreme Court delivered judgement in a fundamental rights

application regarding the privatisation of Lanka Marine

Services (Pvt) Ltd (LMS) and held that the land grant to LMS,

the Common User Facilities Agreement and all agreements

entered into between the Board of Investment of Sri Lanka

and LMS are null and void

• JKH divested its stake in Associated Motorways PLC realising

a significant capital gain for the group

• Sri Lanka's first ever Nature Field Centre at Rumassala, Galle,

which is an initiative of the Central Environmental Authority

(CEA) and JKH, was formally declared open

August 2008• The Lanka Monthly Digest (LMD) ranked JKH as the ‘most

respected entity’ for the fourth consecutive year

September 2008• JKH acquired 4.22 per cent of South Asia Gateway Terminals

Limited (SAGT) from the Asian Development Bank

• JKH announced an offer to repurchase its shares at Rs. 90 per

share, on a pro rata basis of 1 share for every 25 shares

January 2009• The group invested in Keells Food Products PLC by

subscribing to a 7:10 rights issue

• JKH was ranked first in the top 10 list of Sri Lankan

companies compiled by the Business Today magazine

February 2009• JKH increased its stakes in Union Assurance PLC (UA),

Ceylon Cold Stores PLC and John Keells PLC

• Subsequent to the purchase of the stake in UA, JKH

announced that it will be making a mandatory offer for the

remaining shares of UA not held by JKH under Section 31 of

the Company Take-overs and Mergers Code

March 2009• JKH acquired a further 4.22 per cent of South Asia Gateway

Terminals Limited (SAGT) from the International Finance

Corporation

• Fitch Ratings affirmed the national long term rating of John

Keells Holdings PLC at 'AAA(lka)', the national long term

rating on JKH's senior unsecured notes at 'AAA(lka)' and the

outlook as stable

OPERATING HIGHLIGHTS ANDSIGNIFICANT EVENTS

FINANCIAL ACHIEVEMENTS & GOALS

Indicator (%) AchievementGoal 2009 2008 2007

EBIT growth >20 (2.5) 34.0 26.1EPS growth (fully diluted) >20 (5.3) 32.2 13.6Cash EPS growth (fully diluted) >20 (16.7) 27.1 12.8Return on capital employed (ROCE) 18 12.0 13.9 13.8Return on equity 20 10.7 12.5 11.7Net debt to equity * 50 8.3 0.0 (4.7)

* Replaced debt to equity with net debt to equity as a more meaningful indicator for JKH


10

FINANCIAL HIGHLIGHTSYEAR AT A GLANCE

Year ended 31 March 2008/09 2007/08 Chg. % 2006/07

Earnings highlights and ratiosGroup revenue Rs. million 41,023 41,805 (2) 32,855 Group profit before interest and tax Rs. million 7,996 8,197 (2) 6,115 Group profit before tax Rs. million 6,301 6,579 (4) 4,801 Group profit after tax Rs. million 4,974 5,525 (10) 3,949 Group profit attributable to shareholders Rs. million 4,742 5,119 (7) 3,541 Dividends * Rs. million 1,883 3,176 (41) 1,412 Diluted earnings per share Rs. 7.58 8.00 (5) 6.05 Cash earnings per share Rs. 7.95 9.54 (17) 7.51 Interest cover No. of times 4.7 5.1 (7) 4.7 Return on equity (ROE) % 10.7 12.5 (15) 11.7 Return on capital employed (ROCE) % 12.0 13.9 (13) 13.8

Balance sheet highlights and ratios

Total assets Rs. million 92,216 70,950 30 65,178 Total debt Rs. million 21,597 12,667 71 15,363 Net debt / (cash) ** Rs. million 4,197 20 20,570 (1,983)Total shareholders' funds Rs. million 45,582 43,397 5 38,470 No. of shares in issue million 611 636 (4) 553 Net assets per share Rs. 74.6 68.2 9 69.6 Debt / equity % 42.7 26.3 62 36.4 Net debt / equity ** % 8.3 0.0 19,598 (4.7)Debt / total assets % 23.4 17.9 31 23.6

Market/shareholder informationMarket price of share as at 31 March (actual) Rs. 62.75 119.75 (48) 155.00 Market price of share as at 31 March (diluted) Rs. 62.75 118.77 (47) 153.73 Market capitalisation Rs. million 38,362 76,160 (50) 97,945 Enterprise value ** Rs. million 42,560 76,181 (44) 95,962 Total shareholder return % (44.7) (19.0) (135) 38.5 Price earnings ratio (PER) (diluted) No. of times 8.3 14.8 (44) 25.4 Dividend payout % 42.0 81.0 (48) 62.8 Dividend per share Rs 3.0 5.0 (40) 3.0 Dividend yield % 4.7 4.8 (2) 2.3

OtherEconomic value generated Rs. million 46,836 46,349 1 35,494Economic value distributed Rs. million 41,936 42,794 (2) 31,853

Employees Rs. million 5,544 5,005 11 4,090Government Rs. million 2,781 2,453 13 2,328Others Rs. million 33,611 35,336 (5) 25,435

Economic value retained Rs. million 4,900 3,555 38 3,580Total employees (excluding associates) Number 10,501 9,992 5 9,703

* Cash dividends paid during the year** ‘The Monarch’ and ‘The Emperor’ customer advances have been excluded

11

TURNOVER * Rs. billion

2009 15.4 9.7 1.6 14.1 6.0 2.7 2.8

2008 16.7 9.8 2.6 11.4 3.9 2.2 4.8

2007 12.4 7.6 1.5 9.8 3.5 2.4 1.8

30% 19% 3% 27% 11% 5% 5%

33% 19% 5% 22% 8% 4% 9%

32% 19% 4% 25% 9% 6% 5%

TRP LEISURE PROP CF&R FIN SER IT OTHER

EBIT Rs. billion

(1%) 29% 8% 7% 6% 6% 45%

38% 14% 11% 7% 5% 1% 24%

48% 18% 14% 10% 5% 2% 3%


Capital employed Rs. billion

19% 36% 6% 6% 8% 2% 23%

17% 42% 8% 7% 3% 3% 20%

17% 36% 8% 5% 3% 3% 28%


Total assets Rs. billion

16% 31% 5% 8% 19% 2% 19%

18% 39% 8% 9% 4% 3% 19%

17% 34% 8% 8% 3% 4% 26%


Employees Number

OTHER

TRP Transportation industry group

LEISURE Leisure industry group

PROP Property industry group

CF&R Consumer Foods & Retail industry group

FIN SER Financial Services industry group

IT Information Technology industry group

Others, including Plantation Services


6% 38% 1% 29% 9% 6% 11%

7% 42% 1% 29% <1% 7% 14%

6% 44% 2% 26% <1% 8% 14%

TRP

LEIS

URE

PRO

P

CF&

R

FIN

SER

IT OTH

ER

2009 2.3 0.6 0.5 0.5 0.5 (0.1) 3.6

2008 3.1 1.1 0.9 0.6 0.4 0.1 2.0

2007 2.9 1.1 0.9 0.6 0.3 0.1 0.2

TRP

LEIS

URE

PRO

P

CF&

R

FIN

SER

IT OTH

ER

2009 14.0 25.8 4.5 4.5 5.6 1.5 16.4

2008 10.6 25.3 4.8 4.3 2.0 1.8 12.0

2007 9.7 20.5 4.6 3.1 1.6 1.9 16.3

TRP

LEIS

URE

PRO

P

CF&

R

FIN

SER

IT OTH

ER

2009 14.9 28.4 4.8 7.1 17.9 1.8 17.4

2008 13.0 28.1 5.4 6.6 2.6 2.1 13.2

2007 11.0 22.4 5.5 5.0 1.7 2.5 17.1

TRP

LEIS

URE

PRO

P

CF&

R

FIN

SER

IT OTH

ER

2009 643 3,986 120 3,016 924 638 1,174

2008 720 4,154 118 2,896 24 700 1,380

2007 632 4,231 149 2,567 27 735 1,362

TRP

LEIS

URE

PRO

P

CF&

R

FIN

SER

IT OTH

ER

INDUSTRY GROUP FINANCIAL HIGHLIGHTS

* Turnover is inclusive of the group’s share of associate company turnover


12

TRANSPORTATION

Ports & ShippingTransportation

- Logistics- Airlines

Highlights• JKH acquired an additional 8.4 per cent stake of South Asia

Gateway Terminals (SAGT)

• Lanka Marine Services (LMS) changed its operating formatfrom a primarily land based operation to a combined floatingand tank based operation

• Restructured the logistics businesses and launched aconsolidated new brand ‘John Keells Logistics’

• Mack Air appointed as the General Sales Agent (GSA) forJetLite, a subsidiary of Jet Airways, operating 7 daily flights toColombo

* Turnover is inclusive of the group's share of associate company turnover

** For associate companies the capital employed is representative of thegroup’s equity investment in these companies

*** EBIT per employee is calculated excluding the employees of associatecompanies

2008

/09

2007

/08

2006

/07

EBITTurnover

2008

/09

2007

/08

2006

/07

Transportation

Ports & Shipping

26%

74%

22%

78%

23%

77%

83%

17%

60%

40%

47%

53%

TURNOVER

EBIT

CAPITAL EMPLOYED

EMPLOYEES

30%

29%

19%

6%

The state of the art distribution centre operated by John Keells Logistics, hasbeen a vital cog in the group’s strategy for its logistics businesses towardsproviding end-to-end solutions throughout the supply chain

(Rs. million) 2008/09 2007/08 Chg % 2006/07

Turnover* 15,435 16,706 (7.6) 12,429

EBIT 2,350 3,102 (24.2) 2,912

PBT 2,297 3,055 (24.8) 2,893

PAT 1,667 2,904 (42.6) 2,763

Total assets 14,882 13,018 14.3 10,999

Total equity 13,680 10,377 31.8 9,504

Total debt 317 272 16.8 179

Capital employed** 13,998 10,649 31.4 9,683

Capital expenditure 108 244 (55.8) 151

No. of employees 643 720 (10.7) 632

EBIT per employee*** 3.7 4.3 (15.2) 4.6

CONTRIBUTION TO GROUP SECTOR-WISE HIGHLIGHTS

13

LEISURE

Hotel ManagementCity Hotels Resort Hotels

- Sri Lankan Resorts- Maldivian Resorts

Destination Management

Highlights • Cinnamon Island Alidhoo became fully operational in

December 2008 following the construction of a breakwater

• At the Presidential Awards 2009, Cinnamon Grand Colombowon the award for the best 5-star hotel in the City for thesecond consecutive year while the inbound sector won 5awards including best overseas tour operator and bestadventure operator. Chaaya Island Dhonveli was awarded theGold Choice 2008 for best winter 3 star accommodation byFirst Choice

• Walkers Tours launched a strong domestic tourism initiative inFebruary 2009 focused on nature and historical tours withinSri Lanka

• Serene Holidays was appointed sole agent to cover all Indiafor Costa Cruises (member of Carnival PLC)

Walkers Tours has proved its enduring passion for exploration by commencingwhale-watching expeditions from the southern coast of Sri Lanka; an initiative

which has already been a tremendous success

(Rs. million) 2008/09 2007/08 Chg % 2006/07

Turnover 9,662 9,792 (1.3) 7,589

EBIT 624 1,124 (44.5) 1,089

PBT 133 364 (63.3) 519

PAT 128 347 (63.1) 500

Total assets 28,400 28,067 1.2 22,426

Total equity 18,592 18,277 1.7 13,739

Total debt 7,189 7,047 2.0 6,746

Capital employed 25,780 25,323 1.8 20,485

Capital expenditure 1,626 1,580 2.9 1,395

No. of employees 3,986 4,154 (4.0) 4,231

EBIT per employee 0.2 0.3 (42.2) 0.3

EBITTurnover

32%

51%

17%

30%

50%

34%

46%

20%

20%

26%

(0.1%)

65%

9%

13%

48%

30%

9% 3%

1%

42%

54%

City Hotels

Hotel Management

Destination Management

Resort Hotels

2008

/09

2007

/08

2006

/07

2008

/09

2007

/08

2006

/07

TURNOVER

EBIT

CAPITAL EMPLOYED

EMPLOYEES

19%

8%

36%

38%



14

PROPERTY

Property Development- Development and sale of residential apartments- Operations of the Crescat Boulevard

Real Estate- Management and operation of office sites within the city

Highlights• Construction of ‘The Monarch’ was completed and a

substantial number of the units are now occupied

• The progress of work at ‘The Emperor’ project is affected bythe stringent security regulations. However, work continuesdespite these setbacks with 79 per cent of the units sold off plan

Amidst the challenges, the construction of the third landmark residentialcondominium project at Crescat City - ‘The Emperor’ continues on the back ofthe confidence our customers have placed in us

(Rs. million) 2008/09 2007/08 Chg % 2006/07

Turnover 1,578 2,618 (39.7) 1,463

EBIT 532 902 (41.0) 870

PBT 535 841 (36.3) 844

PAT 486 785 (38.1) 813

Total assets 4,791 5,400 (11.3) 5,460

Total equity 4,460 4,765 (6.4) 4,333

Total debt 37 82 (54.9) 227

Capital employed 4,497 4,847 (7.2) 4,561


No. of employees 120 118 1.7 149

EBIT per employee 4.4 7.6 (42.0) 5.8

TURNOVER

EBIT

CAPITAL EMPLOYED

EMPLOYEES

3%

7%

6%

1%

EBITTurnover

96%

4%

98%

2%

96%

4%

80%

20%

91%

9%

65%

35%

Real Estate

Property Development

2008

/09

2007

/08

2006

/07

2008

/09

2007

/08

2006

/07


15

CONSUMERFOODS & RETAIL

Consumer Foods- Beverages- Frozen Confectionary - Convenience Foods

Retail- Supermarkets

Highlights • Keells Food Products PLC (KFP) successfully completed a

7:10 rights issue and raised Rs. 175 million for its Indianoperation

• A 100 per cent owned subsidiary company in India wasincorporated by KFP. It commenced operations in December 2008

• Ceylon Cold Stores (CCS) was awarded a silver medal forexports by the National Chamber of Exports

• The Retail sector expanded its reach by opening 6 new outletsincluding 2 in the Kandy District

Our products have continued to successfully compete head-on with theestablished multinational soft drinks brands in the country

(Rs. million) 2008/09 2007/08 Chg % 2006/07

Turnover 14,130 11,384 24.1 9,791

EBIT 494 580 (14.9) 645

PBT 278 387 (28.1) 540

PAT 121 248 (51.3) 313

Total assets 7,057 6,563 7.5 4,973

Total equity 3,051 2,694 13.3 1,780

Total debt 1,408 1,572 (10.4) 1,326

Capital employed 4,460 4,266 4.5 3,106


No. of employees 3,016 2,896 4.1 2,567

EBIT per employee** 0.2 0.2 (18.2) 0.3

TURNOVER

EBIT

CAPITAL EMPLOYED

EMPLOYEES

27%

6%

6%

29%

EBITTurnover

45%

55%

49%

51%

49%

51%

(15%)

115% 88%

12%

94%

6%

Retail

Consumer Foods

2008

/09

2007

/08

2006

/07

2008

/09

2007

/08

2006

/07



16

FINANCIALSERVICESInsuranceBanking & LeasingStockbroking

Highlights • JKH increased its stake in the insurance arm of the group,

Union Assurance (UA), from 37.0 per cent to 80.6 per cent

• UA introduced a number of pioneering technology initiatives inmotor insurance, including ‘Union Click & Go’ and an SMSbased facility for claims settlements

• UA expanded the ‘Union Pay Easy’ scheme by partnering withkey stakeholders which enables life insurance policy holdersto pay their premiums at over 1,000 outlets

• In line with its strategic plan, the banking arm of the group,Nations Trust Bank (NTB) expanded aggressively during theyear by opening 5 fully fledged branches, 6 personal bankingcentres and increasing the number of its own ATMs from 38 to 47

Union Assurance has been able to consolidate its position as a leading provider oflife and general insurance solutions in the Sri Lankan market and is gearing itselfto achieve greater heights


** For associate companies the capital employed is representative of thegroup’s equity investment in these companies


(Rs. million) 2008/09 2007/08 Chg % 2006/07

Turnover* 5,979 3,917 52.7 3,462

EBIT 486 422 15.2 338

PBT 486 422 15.2 337

PAT 339 292 16.1 225

Total assets 17,878 2,555 599.8 1,735

Total equity 5,570 1,990 179.9 1,517

Total debt 1 12 (92.8) 47

Capital employed** 5,571 2,003 178.2 1,564

Capital expenditure 4 0.3 1,259.3 5

No. of employees 924 24 3,750 27

EBIT per employee*** 0.5 17.6 (97) 12.5

TURNOVER

EBIT

CAPITAL EMPLOYED

EMPLOYEES

11%

6%

8%

9%

EBITTurnover

38%

61%

1%

35%

61%

4%

43%

51%

6%

38%

(1%)

63%

22%

60%

18%

20%

48%

33%

Banking & Leasing

Insurance

Stockbroking

2008

/09

2007

/08

2006

/07

2008

/09

2007

/08

2006

/07


17

INFORMATIONTECHNOLOGY

IT Services- Software Services

Office Automation IT Enabled Services

Highlights • John Keells Computer Services (Pvt) Limited (JKCS) won the

contract to provide new internet based passenger solutions toKingfisher airlines in spite of regional competition

• The BPO business in India added new clientele in travel,technical support & internal help desk areas whilst the medicaltranscription business began commercial operations inColombo

• InfoMate, the shared services arm, was awarded the ISO 27001:2005 certification by TUV SUD South Asia - one ofthe world's leading providers of services related to technicalsafety

John Keells Computer Services has established itself as a key software servicesprovider for the global aviation industry serving several top airlines


** For associate companies, the capital employed is representative of thegroup’s equity investment in these companies


(Rs. million) 2008/09 2007/08 Chg % 2006/07

Turnover* 2,731 2,243 21.7 2,446

EBIT (118) 98 (220.8) 102

PBT (121) 90 (235.3) 100

PAT (167) 43 (485.3) 56

Total assets 1,804 2,099 (14.1) 2,494

Total equity 1,417 1,775 (20.2) 1,840

Total debt 50 2 2,811.6 16

Capital employed** 1,467 1,777 (17.4) 1,857


No. of employees 638 700 (8.9) 735

EBIT per employee*** (0.2) 0.1 (232.6) 0.1

TURNOVER

EBIT

CAPITAL EMPLOYED

EMPLOYEES

5%

(1%)

2%

6%

EBITTurnover

19%

38%

43%

26%

17%

48%

9%

22%

35%

42%

1%

21%

(207%)

86%

(180%)

78%

82%

120%

60%

(67%)

21%

86%

Systems Integration(Discontinued)

Software Services

IT Enabled Services

Office Automation

2008

/09

2007

/08

2006

/07

2008

/09

2007

/08

2006

/07



18

BOARD OF DIRECTORS

Susantha RatnayakeChairman-CEO

Susantha Ratnayake was appointed as the Chairman and CEO ofJohn Keells Holdings PLC in January 2006 and has served on theJKH board since 1992/93. He has overall responsibility for GroupStrategy and New Business Development. Susantha is a councilmember of the Employers' Federation of Ceylon. He also serveson various clusters of the National Council of EconomicDevelopment (NCED). He has over 30 years of managementexperience, all of which is within the John Keells group.

Ajit Gunewardene Deputy Chairman

Ajit Gunewardene is the Deputy Chairman of John Keells HoldingsPLC and has been a member of the board for over 16 years. He isa director of many companies in the John Keells group and is theChairman of Nations Trust Bank PLC and Union Assurance PLC.He is a member of the board of Nanco (Pvt) Ltd, a companyestablished for the development of Nanotechnology in Sri Lankaunder the auspices of the Ministry of Science and Technology. Hewas also appointed as a member of the National Advisory Councilfor Export Development (NACFED) by the Minister of ExportDevelopment and International Trade. He has also served as theChairman of the Colombo Stock Exchange. In addition to being amember of the board of the Sri Lanka Tourism Promotion Bureau,he serves on several committees appointed by the Minister ofTourism for the development of this industry in Sri Lanka. Ajit hasa degree in Economics and brings over 27 years of experience tothe board.

Sumithra Gunesekera (retiring w.e.f. 30 June 2009)Director and President

Sumithra Gunesekera was appointed to the board in 1997/98. Hehas overall responsibility for the Plantation Services sector and theCorporate Communications function at the Centre and is also theHead of the Management Committee of the John Keells SocialResponsibility Foundation. He is the chairman of the employers'network on disability of the Employers' Federation of Ceylon.Furthermore, he serves on the board of the Sri Lanka Institute ofTourism and Hotel Management. Sumithra is a director in manygroup companies and has over 26 years of managementexperience.

Ronnie Peiris Group Finance Director

Appointed to the board during 2002/03, Ronnie Peiris has overallresponsibility for Group Finance including Treasury, Taxation,Corporate Finance, Group Initiatives, Shared Services and theInformation Technology functions at the centre. Previously,managing director of Anglo American Corporation (Central Africa)Limited and EXCO member of Konkola Copper Mines PLC, bothin Zambia, Ronnie has served on many boards overseas. He hasover 37 years finance and general management experience in SriLanka and abroad. He is a Fellow of the Chartered Institute ofManagement Accountants, UK, Association of Chartered CertifiedAccountants, UK, and the Society of Certified ManagementAccountants, Sri Lanka, and holds an MBA from the University ofCape Town, South Africa. He is a member of the committee of theCeylon Chamber of Commerce, chairman of its taxation subcommittee and also serves on its economic, fiscal and policyplanning sub committee.

Left to right: Franklyn Amerasinghe, Deva Rodrigo, Sumithra Gunesekera, Ajit Gunewardene, Susantha Ratnayake, Ronnie Peiris, Steven Enderby, Sithie Tiruchelvam and Tarun Das

19

Sithie Tiruchelvam* Director

Appointed to the board in January 2007, Sithie Tiruchelvam, alawyer of the Supreme Court of Ceylon, specialises in corporatelaw, intellectual property law and labour law and is a notablehuman rights campaigner. She obtained her LLB from theUniversity of Ceylon in 1966, and was admitted to the SupremeCourt as Advocate in 1968. She is a Founding Partner ofTiruchelvam Associates. She currently serves on several boards,among them being Central Corporate & Consultancy Services(Pvt.) Limited, Nadesan Centre for Human Rights, LIRNEasia andSouth Asians for Human Rights, a regional organisation with itssecretariat in Colombo. Sithie is a member of the Foundations forPeace Network, a worldwide network of community foundationsworking on peace and reconciliation in fractured societies. Shehas also completed a programme on corporate philanthropy at theRockefeller Foundation, programme for philanthropy in New York,USA in 2000/01.

Franklyn Amerasinghe ** Director

Appointed to the board during 1999/00, Franklyn Amerasinghe isthe former CEO and Director General of the Employers'Federation of Ceylon. He was thereafter attached to the ILO as asenior specialist in the social dialogue sector in charge ofEmployers Organisations in East Asia up to October 2002. Abachelor of law and a lawyer by profession, he is currently aconsultant and trainer in social dialogue, human resourcemanagement and industrial relations, both in Sri Lanka andabroad. He is a founder trustee of the Employment Mediation

Services Centre and is a judge for sustainability reporting for theACCA since the initiative commenced in Sri Lanka. He was alsoone of the founder directors of the Skills Development Fund.Franklyn has authored books on a wide range of subjects and hispapers on industrial relations in Sri Lanka have been published insome international and local journals.

Tarun Das * Director

Tarun Das was the head of the Confederation of Indian Industry(CII). He is currently the chief mentor of CII and president AspenInstitute, India and a member of the board of trustees of theAspen Institute, USA and East West Centre, USA. He is the non-executive chairman of Haldia Petrochemicals Ltd, India and anon-executive director on the board of GIVE Foundation India. Heis also a member of the international advisory board of The CocaCola Company Ltd, USA. He is a member of the internationalcouncil of The Asia Society, USA. Tarun is the co-chair of theIndo-US Strategic Dialogue and of Indo-US-Japan StrategicDialogue. He is the managing trustee of Indian Business Trust forHIV/AIDS. He was recently appointed to the board of Satyam bythe prime minister of India consequent to the recent debacle.

Steven Enderby* Director

Appointed to the board in 2005/06, Steven Enderby is currentlybased in Delhi where he is a partner in the leading emergingmarkets private equity investor, Actis Capital LLP, UK. His otherdirectorships include Swaraj Mazda, Avtec, Tema India, Halonix,Ceylon Oxygen, MFE and Actis Advisers. Steven holds a BSc(Hons) in economics and accounting from the Queens Universityof Belfast and is a member of the Chartered Institute ofManagement Accountants, UK.

Deshamanya Deva Rodrigo * Director

Appointed to the board in July 2006, Deva Rodrigo, a charteredaccountant, had a career with the international accounting andconsulting firm PricewaterhouseCoopers, joining the firm in eastAfrica in 1974 and serving in its London offices in 1980. He was aFounder Partner when PricewaterhouseCoopers established its SriLankan firm in 1981, and held the position of senior partner from1992 to 30 June 2006, when he retired from the firm. He was thechairman of the Ceylon Chamber of Commerce from 2004 to2006. He has previously held public office as a director ofPeople's Bank from 2000 to early 2003 and as a member of theTelecommunication Regulatory Commission from May 1997 toJanuary 2002. Deva was also a member of the Monetary Board ofthe Central Bank of Sri Lanka from 2003 to 2006 and a member ofthe National Council for Administration from 2004 to 2006. He is adirector of Ceylon Tobacco Company PLC.

* Independent non-executive** Senior independent non-executive


20

Dilani Alagaratnam President

Dilani Alagaratnam has overall responsibility for the group HumanResources, Legal and Secretarial functions. A lawyer byprofession, she has been with the group for 17 years and is a lawgraduate and a holder of a masters degree in Law. She is amember of the steering committee on human resources andeducation, member of the chamber-university academia roundtable, and is the alternate chairperson of the legislation steeringcommittee of the Ceylon Chamber of Commerce. Dilani is also apermanent member of the legal forum convened by the CentralBank of Sri Lanka.

Krishan Balendra President

Krishan Balendra has responsibility for the Retail sector, JohnKeells Stock Brokers and the Corporate Finance & Strategyfunction of the group. He started his professional career at UBSWarburg, Hong Kong, in investment banking, focusing primarily onequity capital markets. After a four year stint in Hong Kong, hecontinued his career in corporate finance at Aitken Spence & Co.Ltd., Sri Lanka prior to joining JKH. Krishan holds a law degree(LLB) from the University of London and an MBA from INSEAD.He is a member of the board of the Colombo Stock Exchange.

Romesh David President

Romesh David has been with the group for 29 years during whichhe has served in the Leisure, Domestic & International Trade, ITand Transportation sectors of the group. He now has overallresponsibility for the Transportation industry group. He is amember of the National Council for Economic Development(transport cluster), a member of the economic infrastructure sub-committee of the Ceylon Chamber of Commerce and member ofthe Chartered Institute of Logistics and Transport. Romesh is apast chairman of the Sri Lanka Freight Forwarders' Associationand the Council for Business with Britain.

Jitendra Gunaratne President

Jitendra Gunaratne is responsible for the Consumer Foods sector.Prior to his appointment as President, he overlooked thePlantations and CF&R Manufacturing sectors. His 28 years ofmanagement experience in the group also covers Leisure andProperty. Jitendra holds a diploma in marketing and serves as amember of the advisory committee on consumer affairs of theCeylon Chamber of Commerce.

Note: The Group Executive Committee is currently an 8-member team includingthe 4 executive directors and the above members

GROUP EXECUTIVE COMMITTEE

Left to right: Krishan Balendra, Dilani Alagaratnam, Romesh David, Jitendra Gunaratne

21

Left to right (standing): Sanjeewa Jayaweera, Mano Rajakariar, Ramesh ShanmuganathanLeft to right (seated): Chandrika Perera, Jayantissa Kehelpannala, Sujiva Dewaraja

Left to right (standing): Waruna Rajapakse, Vasantha Leelananda, Sanjeeva FernandoLeft to right (seated): Roshanie Jayasundera-Moraes, Suresh Rajendra, Devika Weerasinghe, Lallith Ramanayake

GROUP OPERATING COMMITTEE


22

Sujiva DewarajaExecutive Vice President

Sujiva Dewaraja heads the IT sector. Since passing out as achartered management accountant in London in 1980, he workedin corporate strategy at a diversified conglomerate and in MIS fora middle eastern government. Moving to the USA, he read for anMBA from the University of Pittsburgh, Pennsylvania, earning aplace on the dean's list. Since then he has been in generalmanagement, holding CEO level positions in the past 17 years. Heis a Fellow of CIMA, UK and an Associate member of theChartered Institute of Bankers, London. Sujiva has served on thecommittee of the Ceylon Chamber of Commerce and currentlyserves on the advisory panel on ICT export to the Minister ofEnterprise Development. He is a founding board member ofSLASSCOM, the apex body representing the IT/BPO industry ofSri Lanka.

Sanjeeva Fernando Executive Vice President

Sanjeeva Fernando heads the IT industry group. Prior to this hewas Head of the Transportation industry group. He has over 22years of management experience, 15 of which have been with thegroup in diverse businesses and capacities. A printer byprofession, Sanjeeva qualified from the London School of Printingand is a member of the London Institute of Printing. He joinedJKH in 1993 to head the group's printing and packaging businessand was the CEO of Lanka Marine Services from the time of itsacquisition in 2002 until 2005.

Roshanie Jayasundera-Moraes Executive Vice President

Roshanie Jayasundera-Moraes, Head of the Retail sector, hasbeen with the group since 1991. She was with the Airlines sectorof the Transportation industry group, before being appointed asHead of the group's supermarket business in November 2003. Aholder of a diploma in marketing from the Chartered Institute ofMarketing (CIM), UK, Roshanie also holds an MBA from the Post-Graduate Institute of Management of the University of Sri Jayawardenepura, Sri Lanka.

Sanjeewa Jayaweera Executive Vice President

Sanjeewa Jayaweera, Chief Financial Officer for the ConsumerFoods & Retail industry group, has been with the group for 16years, during which he served in the Resort Hotels sector of theLeisure industry group and was the Sector Financial Controller forResort Hotels from 1998 to 2005. Prior to joining the group,Sanjeewa was based in the United Kingdom and worked forseveral years as an audit manager.

Jayantissa Kehelpannala Executive Vice President

Jayantissa Kehelpannala, Sector Head Resort Hotels, has over 27years of experience in the leisure industry both in hoteliering andinbound tourism. He is currently the president of the Sri LankaMaldives bilateral business council which is under the aegis of theCeylon Chamber of Commerce and vice chairman, hotels andtourism employers group of the Employers Federation of Ceylon.In addition Jayantissa is also a director of the Rainforest Ecolodgewhich is an industry driven hotel development project to cater andpopularise eco tourism in Sri Lanka.

Vasantha Leelananda Executive Vice President

Vasantha Leelananda is Head of the Destination Managementsector and counts over 30 years in the leisure industry with theJohn Keells group. He served as the managing director of WalkersTours from 1997 to 2005 and overlooks the travel operations inMaldives, India and Sri Lanka. Vasantha holds an MBA from theUniversity of Leicester. He is a past President of the Sri LankaAssociation of Inbound Tour Operators (SLAITO), a board memberof the Sri Lanka Institute of Tourism & Hotel Management and avice chairman of the Responsible Tourism Partnership which isaffiliated to the Travel Foundation UK.

Chandrika Perera Executive Vice President

Chandrika Perera was appointed as the Chief Financial Officer ofthe Leisure industry group in March 2005. She has been with thegroup for 26 years. She held the position of Group FinancialController from 1999 to 2005. A Fellow of the Institute ofChartered Accountants of Sri Lanka and the Society of CertifiedManagement Accountants, Sri Lanka, she holds an MBA (finance)from the University of Southern Queensland. Chandrika serves asa management committee member of the financial reportingfaculty of ICASL, and is a member of the steering committee onincome taxes.

Mano Rajakariar Executive Vice President

Mano Rajakariar, has been the Group Financial Controller sinceApril 2005. He has been with the group for over 13 years in manycapacities including serving as the Sector Financial Controller ofthe Plantations sector and heading the Shared Servicesimplementation within the Group. He has over 21 years ofexperience in audit, finance and general management acquiredboth in Sri Lanka and overseas. Mano is a Fellow member of theInstitute of Chartered Accountants of Sri Lanka (ICASL) and theChartered Institute of Management Accountants, UK. He currentlyserves as a committee member of the Urgent Issues Task Force(UITF) of the ICASL.

Waruna Rajapakse Executive Vice President

Waruna Rajapakse, Head of New Business Development andGroup Initiatives, has over 22 years of experience in Sri Lanka andin the UK, primarily in management consultancy and projectfinance. Prior to joining the group in 2002, he worked for thegovernment at the Bureau of Infrastructure Investment,Informatics International Ltd (UK) and at Ernst & Young. Waruna isa Fellow member of the Chartered Institute of ManagementAccountants, UK, and an Associate member of the Institute ofChartered Accountants of Sri Lanka. He also holds an MBA fromCity University-Cass Business School, London, UK. He is amember of the advisory committee on economic infrastructuredevelopment of the Ceylon Chamber of Commerce.

Suresh Rajendra Executive Vice President

Suresh Rajendra, Head of the Property Group, has over 17 yearsof experience in the fields of finance, travel and tourism, andbusiness development acquired both in Sri Lanka and overseas.Prior to joining the group, he was the head of commercial andbusiness development for NRMA Motoring & Services in Sydney,Australia. Suresh is a Fellow of the Chartered Institute ofManagement Accountants, UK.

GROUP OPERATING COMMITTEE

23

Lallith Ramanayake Executive Vice President

Lallith Ramanayake, Head of the Transportation industry group,was Head of the Plantation Services sector till July 2007 andcounts over 37 years with the group. He is a member of theChartered Institute of Marketing, UK with the chartered marketerstatus and holds an MBA from the Postgraduate Institute ofManagement, University of Sri Jayewardenepura. Lallith has beenthe chairman of the Colombo Brokers' Association, a director ofthe Sri Lanka Tea Board, deputy chairman of the Tea Associationof Sri Lanka, and a member of the plantation/tea cluster of theNational Council for Economic Development, where he chaired thesub committee which developed the national 10 year plan for thetea industry. He has served on the executive committee of theCeylon Chamber of Commerce.

Ramesh ShanmuganathanExecutive Vice President

Ramesh Shanmuganathan is the group's Chief Information Officerand has over 16 years of experience in the ICT industry both in SriLanka and the USA, with the last 9 years in C-level management.Prior to this he has served in the group's IT sector as the CEO ofKeells Business Systems Limited since 2001 and Head ofStrategy/New Business Initiatives of John Keells ComputerServices Ltd since 2004 until he assumed duties as the group'sCIO. Ramesh is a Hayes-Fulbright Scholar and holds to his credita MSc (information technology & computer science) with phikappa phi honours from Rochester Institute of Technology, MBA(general) from Postgraduate Institute of Management, University ofSri Jayewardenepura, BSc.Eng. (electronics &telecommunications) with first class honours from University ofMoratuwa. He is a chartered engineer, chartered IT professionaland a Fellow of the British Computer Society. He also has activememberships in several other professional institutions and is avisiting faculty member for several post-graduate programs.

Devika Weerasinghe Executive Vice President

Devika Weerasinghe, Chief Financial Officer of the Transportationindustry group previously held the position of Sector FinancialController of the Transportation sector. She also served as theSector Financial Controller of the Airlines SBU of theTransportation sector during the period 1998-2004. An Associatemember of the Chartered Institute of Management Accountants-UK, Devika also holds a bachelors degree inbusiness Administration, from the University of Sri Jayawardenepura.

Note: The Group Operating Committee is currently a 21-member teamconsisting of the GEC and the above members


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CORPORATE GOVERNANCEOur Corporate Governance philosophy founded on a culture ofperformance within a framework of conformance and compliancerepresents “what it takes” to succeed in today's competitivebusiness environs in a manner that is sustainable and equitable toall our stakeholders. This philosophy has been institutionalised atall levels in the group through a strong set of corporate values andwritten code of conduct.

A key reference point in most of our corporate governancedisclosures in 2008/09 is the new listing rules of the ColomboStock Exchange (CSE), which became effective in April 2009 andwhich JKH is in full compliance with as at 31 March 2009. TheJKH Annual Report itself is produced and circulated toshareholders on CD-ROM in line with rule 7.2 of the CSE listingrules and available as a comprehensive printed document onrequest. Additionally, the CD-ROM is accompanied by a printedsummary for shareholder convenience.

The underlying framework of our disclosures supports theCompanies Act of 2007, on which we are fully compliant. Some ofthe issues for which we sought greater definition last year wereresolved during the year with dialogue and discussion. We follow,and comply with, the recommendations of the Combined Code of2006 to the extent that they are practicable in the context of thenature of our diverse businesses and their risk profiles. Our policyin this regard, is to comply, or explain. The following report, alsoaddresses all provisions of the Code of Governance of theInstitute of Chartered Accountants of Sri Lanka.

JKH corporate governance frameworkJohn Keells Holdings PLC (JKH) is committed to the higheststandards of business integrity, ethical values and professionalismin all its activities towards rewarding all its stakeholders withgreater creation of value, year-on-year. Our governance frameworkis based on the following -

• The board of JKH is responsible to shareholders to fulfil itsstewardship obligations, in the best interest of the companyand its stakeholders

• Maximising shareholder wealth-creation on a sustainablebasis while safeguarding the rights of multiple stakeholders isa fundamental value shared by all levels of our managementand staff

• The methods we employ to achieve our goals are as importantto us as the goals themselves, and this has been wellcommunicated to the individual businesses and functionalunits within the group

• Our governance and operating model facilitate the making ofbusiness decisions, and resource allocations, in an efficientand timely manner, within a framework that ensurestransparent and ethical dealings which are compliant with thelaws of the country and the standards of governance ourstakeholders expect of us. The model ensures that no oneperson has unfettered powers of decision making

• We believe that building and improving stakeholderrelationships is an integral aspect of board effectiveness and aresponsible approach to business

• We take an active role in discussing with the relevantregulatory bodies the implementation of governanceregulations, accounting standards, and economic reforms inSri Lanka and other jurisdictions where the group has majorbusiness interests

• We opt, when practical, for early adoption of best practicegovernance regulations and accounting standards

• We understand that our resolve to maintain strong governancepractices presents strong commercial advantages especiallythrough a lowering of our cost of capital because of thestrengthening of stakeholder confidence, particularly theconfidence of our investors, both institutional and individual

THE BOARD OF DIRECTORS

Board responsibilities and decision rightsThe Board of Directors is accountable to the shareholders for thegovernance of the company. All directors are accountable for theproper stewardship of the company's affairs and share aresponsibility in ensuring the highest standards of disclosure andreporting, ethics and integrity across the group. Powersspecifically reserved for the board as highlighted in the JKH‘decision matrix’ include -

• Providing direction and guidance to the company in theformulation of its strategies and in the pursuance of itsoperational and financial goals

• Monitoring systems of governance and compliance

• Overseeing systems of internal control and risk management

• Determining any changes to the discretions/authoritiesdelegated from the board to the executive levels

• Approving major acquisitions and disposals and capitalexpenditure

• Reviewing HR processes with emphasis on top managementsuccession planning

• Approving annual budgets and strategic plans

• Approving any changes to constitutional documents and theissue of JKH equity/debt securities

• Appointing and reviewing the performance of the Chairman-CEO

Delegation of authorityThe board has, subject to pre-defined limits, delegated itsexecutive authority to the Chairman-CEO who exercises thisauthority through the Group Executive Committee (GEC), which heheads and to which he provides leadership and direction.

While the board sets the high level strategic direction and theoverall policy framework of the group, it has delegated theimplementation of board set strategies/policies and strategyformulation at specific industry-group level to the Chairman-CEO.Details of the group's management, operating and overlaystructures are detailed later in the report.

Board decision rights, as opposed to executive director decisionrights, covering people, strategy and planning and finance are welldefined and meticulously followed and ensure the balancebetween the speed of decision and appropriate debate. Thesedecision rights are subjected to regular review and were recentlyrevised to reflect the current needs of the group.

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The board has also delegated some of its functions to boardcommittees while retaining final decision rights pertaining tomatters under the purview of these committees. The AuditCommittee and Remuneration Committee consist solely ofindependent directors whilst 3 out of the 4 members of theNominations Committee, the exception being the Chairman-CEOof the company, are independent directors. All three committeesare chaired by independent directors appointed by the board.

Role of the Chairman-CEOThe Chairman, who is also the Chief Executive Officer (CEO), isresponsible for leading the board and for its effectiveness, as wellas executing the strategies and policies of the board. During arecent board evaluation, the appropriateness of combining theroles of Chairman and CEO was revisited and on the basis of the‘pros’ and ‘cons’ that emerged from it, the board deemed thatcombining the two roles is more appropriate for the group atpresent, in meeting stakeholder objectives in a conglomeratesetting.

The Chairman, while leading the board in effectively dischargingits duties towards all stakeholders, ensures with the assistance ofthe Board Secretary, that board procedures are followed anddirectors receive timely, accurate and clear information beforeboard meetings and updates on matters arising betweenmeetings. As the CEO, he guides and supervises executivedirectors in striking a balance between their board and executiveresponsibilities. The Chairman also ensures that constructiveworking relations are maintained between the executive and non-executive members of the board so that every member isable to contribute effectively within their respective competencies.Finally, he sets the tone for the governance and ethical frameworkof the group.

The board composition, group organisation, and in particular, thecommittee overlay structures discussed, under the headingOrganisational & operational control later in this report, ensure thatno one individual has unfettered powers of decision making. Asthe head of the Group Executive Committee (GEC), the Chairman-CEO provides the overall direction and policy/executionframework for the board's decisions via this structure. Experiencehas proved that this structure has enabled him to effectivelybalance his role as the Chairman of the board and the CEO of thecompany/group.

Board meetings, agenda and attendanceAs a general rule, the board of JKH meets once every quarter, inthe least. During the year under review, the board met on 5occasions; 4 being regular meetings and 1 being a special-purpose meeting.

The formal schedule of matters reserved for board consideration,and decision, include the items summarised under ‘Board

responsibilities and decision rights’ as aforementioned, and othermatters having a material effect on the company and the group.

Your board states that every one of its members dedicatedadequate time and effort in discharging their duties and thatmember attendance during board meetings and board committeemeetings was healthy.

Allowing for non-executive director involvement in various boardcommittees and time spent by them in considering variousmatters that require discussion, and decision, in between theformal board meetings, the company estimates that non-executivedirectors devoted around 30 full time equivalent days each to thegroup during the year.

Board composition and independenceAs at the immediately preceding Annual General Meeting (AGM) ofJKH, the board consisted of 10 directors of whom 4, including theChairman, were executive and 6 were non-executive. As at thedate of this report, the board consists of 9 members, comprisingof 4 executive and 5 non-executive directors. The board considersthat all 5 non-executive directors, who constitute a majority on theboard, are independent in accordance with the criteria suggestedby the Combined Code and the criteria of the CSE Listing Rulesof April 2009 and have been identified as such in the boardprofiles given earlier in this report. The 5 independent non-executive members have submitted signed confirmations oftheir independence.

Senior Independent DirectorThe non-executive directors had structured direct discussions withthe Chairman-CEO, on 1 occasion during the year, without thepresence of the other executive directors. During the year,Franklyn Amerasinghe was appointed as the Senior IndependentDirector. The terms of reference of the role include leading theevaluation and appraisals of the performance of the Chairman-CEO, chairing the Nominations Committee when consideringsuccession for the role of Chairman-CEO, acting as the point ofcontact for stakeholders with concerns which have failed to beresolved through the normal channels, acting as an alternativepoint of contact to the Chairman-CEO for executive directors,meeting with the other non-executive directors on at least anannual basis and addressing any concerns with the Chairman-CEO or the board as appropriate.

All the other non-executive directors are encouraged to proposediscussion items and are provided with the agenda andsupporting material well in advance to facilitate awareness andpreparation.

The board is of the view that its present composition ensures aright balance between executive expediency and independentjudgement. Collectively, the non-executive directors bring a range

Attendance of board and committee meetingsBoard Nominations Remuneration Audit

meetings Committee Committee Committeemeetings meetings meetings

HEA A HEA A HEA A HEA A

S Ratnayake - Chairman * 5 5 1 1 - - - -A Gunewardene 5 5 - - - - - -S Gunesekera ** 5 5 - - - - - -R Peiris * 5 5 - - - - - -F Amerasinghe - Chairman, Remunerations Committee 5 5 - - 1 1 6 5T Das - Chairman, Nominations Committee 5 3 1 1 - - - -S Enderby 5 4 1 1 - - 6 5M Muhsin *** 5 4 1 1 1 1 - -D Rodrigo - Chairman, Audit Committee 5 5 - - 1 1 6 6S Tiruchelvam 5 5 1 1 - - 6 2HEA - Meetings held and eligible to attend A - Attended * Permanent attendees to the Audit Committee ** Retiring w.e.f. 30 June 2009 *** Resigned w.e.f. 1 March 2009


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of value adding domestic and international experience, andexpertise, in specialised functions. The company is conscious ofthe need to maintain an appropriate mix of skills and experienceon the board and to refresh progressively its composition overtime. The company also notes the value that has been brought tobear by the non-executive directors on the governance of thegroup. Biographical details of directors are set out in the Board ofDirectors section of the Annual Report. The non-executivedirectors of the board collectively possess strong financialacumen and are in good positions to assess the integrity of thegroup's financial reporting systems and controls, continuallyreview and critique these systems and make changes to them as necessary.

Conflicts of interest and independenceOver and above the issue of independence, each director has acontinuing responsibility to determine whether he or she has apotential or actual conflict of interest arising from externalassociations, interests or personal relationships, in materialmatters which are considered by the board from time to time.Directors who have had an interest in a matter under discussionhave excused themselves from deliberations on the subject matterand have abstained from voting on them. Abstentions, whereapplicable, from board decisions, are duly minuted.

Prior to appointment to the board, eligible persons are requestedto make known their various interests that could potentiallyconflict with the interest of the company. Once appointed to theboard, all directors are expected to inform the board and obtainboard clearance prior to accepting any position, or engaging inany transaction that could create a potential conflict of interest. Allnon-executive directors are required to notify the Chairman-CEOof changes to their current board representations. Details ofcompanies in which board members hold board or boardcommittee membership is available with the company, forinspection by shareholders on request.

Name of director Type Involvement/interestShare Material

Holding Management businessrelationship

S Ratnayake ED Yes Yes NoA Gunewardene ED Yes Yes NoS Gunesekera* ED Yes Yes NoR Peiris ED Yes Yes NoF Amerasinghe NED/SID Yes No NoT Das NED/ID No No NoS Enderby NED/ID No No NoM Muhsin** NED/ID Yes No NoD Rodrigo NED/ID No No NoS Tiruchelvam NED/ID No No No

ED - executive director, NED - non-executive director, SID - senior independent director ID - independent director

* retiring w.e.f. 30 June 2009** resigned w.e.f. 1 March 2009

Although Franklyn Amerasinghe and Tarun Das have completed 3 terms of 3 years each, the board considers them ‘independent’given their objective and unbiased approach to matters of theboard.

Supply of information and board inductionAll directors are fully briefed on important developments in thevarious business activities of the group and they regularly receiveinformation concerning the group's operations, finances, risks, itsemployees and potential conflicts of interest situations to enablethem to fulfil their duties and obligations effectively.

Steps are also taken in ensuring that newly appointed non-executive directors are apprised of the operations of thegroup, its strategies, its values and culture, its operating model, itspolicies, governance framework and processes. Their attention is

also drawn to their responsibilities as directors in terms ofprevailing legislation and to the code of conduct demanded by thecompany.

The directors have access to external and internal auditors,experts, senior managers under a structured arrangement and toinformation, as is necessary, to carry out their duties andresponsibilities effectively and efficiently. Apart from periodicperformance reports, directors also receive information updatesfrom management on topical matters, new regulations and bestpractices as relevant to the group's businesses. Additionally, alldirectors have access to the services of the company secretarieswhose appointment and/or removal is the responsibility of the board.

External professional adviceThe board seeks independent professional advice when andwhere necessary. During the year under review, professionaladvice was sought on various matters including-

• The legal, tax and accounting aspects covering the SupremeCourt judgement on the privatisation of Lanka Marine Services

• Various tax related issues, including deferred taxation, givenrapidly changing tax regulations

• Impacts of the global financial crisis and recession on SriLankan and regional business and the JKH businesses inparticular

• Studies, including regulatory and taxation, on countries wherenew investment is contemplated

• Sustainability reporting

Board and CEO's performance appraisalThe board continued with its annual board performance appraisalin 2008/09. It is a formalised process of self appraisal, wherebyeach member assesses, on an anonymous basis, the performanceof the board under the headings of ‘role clarity and effectivedischarge of responsibilities’ (in relation to the responsibilitieshighlighted earlier in this report), ‘people mix and structures’,‘systems and procedures’, ‘quality of participation’ and ‘boardimage’. The scoring, and open comments, were collated by theSenior Independent Director and the results were analysed to givethe board an indication of its effectiveness as well as areas thatrequired addressing and/or strengthening. The open and frankdiscussions that followed the evaluation reflected the keenness ofthe board on doing “what it takes” to make the board moreeffective. While the analysis concluded that the board wasfunctioning effectively, it did highlight some areas which could beimproved on and action plans to address such highlighted issueswere agreed upon.

The Remuneration Committee, chaired by the Senior IndependentDirector, appraises the performance of the Chairman-CEO on thebasis of pre-agreed objectives for the group set in consultationwith the board. Such performance is not merely judged in terms ofthe group's performance against plan but also considers thegroup's performance against its peers in areas such as revenuegrowth, market share, profit growth and earnings per share. Nonquantifiable issues such as company image, customer orientation,human resource management and societal trust are alsoconsidered in the overall assessment.

Board appointments and Nominations CommitteeThe responsibility for identifying and proposing suitablecandidates for appointment as non-executive directors to theboard of JKH, in keeping with the target board composition andskill requirements, lies with the Nominations Committee. It alsomanages the process of appointing the Chairman-CEO of JKH.

CORPORATE GOVERNANCE

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Board appointments follow a formal and transparent procedure.There were no new appointees to the board in the financial year2008/09.

During the major part of the year, the Nominations Committeecomprised of 4 independent directors (including the chairman ofthe committee) and the Chairman-CEO of JKH.

The detailed Nominations Committee report is given in the BoardCommittee reports section of the Annual Report.

Tenure, retirement and re-electionThe executive directors are appointed and recommended for re-election only until their prescribed company retirement age. Thenon-executive directors on the other hand, are appointed for aterm of three years, ideally up to a maximum of three terms eachsubject to the age limit as per statutory provision at the time of re-appointment following the end of a term.

One-third of the directors, except the Chairman-CEO, retire byrotation on the basis prescribed in the articles of the company. Adirector retiring by rotation is eligible for re-election by ashareholder resolution at the annual general meeting.

All directors are subject to election by shareholders at the firstAGM after their appointment. The board recommends thatshareholders vote in favour of the resolutions to elect the relevantdirectors who come up for re-election at the AGM. Theirbiographical profiles have been provided in the Annual Report.The resolutions cover the re-election of Tarun Das who retires inline with section 210 of the Companies Act 2007, upon reachingthe age of 70, as well as P D Rodrigo and S S Tiruchelvam whoretire by rotation this year and become eligible for election at theAGM to be held on the 26 June 2009.

Mohamed Muhsin resigned from the board on 1 March 2009,while Sumithra Gunesekera will retire with effect from 30 June 2009.

REMUNERATIONA customised ‘pay for performance’ scheme based on the pillarsof individual performance rating and organisational performancerating was implemented during the previous financial year for allgroup employees at manager level and above, and on the pillar ofindividual performance rating only for all group employees atassistant manager and executive levels. The rationale for theexclusion of organisational rating in linking pay to performance atthe lower levels was that the individuals at those levels had littledirect influence on the bottom line of their organisations. It hasbeen widely accepted that the scheme has achieved theobjectives of employee motivation towards better performance,greater employee recognition and reward and the alignment ofemployee, management and stakeholder interests. Organisationalratings are determined using the annual plan as the yardstick. Thedifficulties in being able to formulate these ‘yardstick’ plans in avery volatile and uncertain environment is posing great challengesto management and some refinement to the current methodologyis necessary and is being currently discussed.

The pay for performance system has, as its bedrock, theperformance management system that the group has beenperfecting over the last few years and the detailed remunerationsurveys that the group conducts on a regular basis. Additionally,the group also engages in ongoing reviews of remunerationobtained via the participation in other corporate surveys whenthey are relevant to the group.

Remuneration CommitteeThe Remuneration Committee, comprising 3 independentdirectors, is responsible for assisting the Board of Directors inestablishing remuneration policies and practices in the group and

in reviewing and recommending to the board appropriateremuneration packages for the Chairman-CEO and the otherexecutive directors. The Committee has been fully apprised of thecurrent remuneration policy of the group, the measures taken bythe group regarding staffing and remuneration during the next 12to 18 months, where the global economy is expected to be inrecession, and the local economy in a slow down, and on the‘pros’ and ‘cons’ of the currently prevailing share based long termincentive plans.

The Remuneration Committee in consultation with the Chairman-CEO ensures that-

• Levels of remuneration are sufficient to attract, retain andmotivate directors of the desired quality at the right price

• Share options are not awarded below market price, and

• Statutory and legal requirements are complied with

None of the executive directors or members of the GEC areinvolved in influencing, or determining, their own compensationpackages.

For the purpose of this report, the terms ‘compensation’ and‘remuneration’ have been used in reference to cash and non-cash benefits received in consideration of employment(excluding statutory entitlements such as employees providentfund and employees trust fund contributions), unless otherwisequalified.

The detailed Remuneration Committee report is given in the BoardCommittee reports section of the Annual Report.

Key principlesThe key principles underlying the group's remuneration policy are-

• All Assistant Vice President (AVP) and above roles across thegroup have been banded by an independent third party on thebasis of the relative worth of jobs, thereby enabling internalequity

• Compensation is set at levels that are competitive to enablethe recruitment and the retention of high calibre executives inthe identified career levels/job bands - as guided by themedian, 65th percentile and 75th percentile of the bestcomparator set of companies (from Sri Lanka and the region,where relevant)

• Compensation, comprising of fixed (base) payments, shortterm incentives and long term incentives are tied to individualperformance at all levels and organisational performance atmanager levels and above

• Performance is measured annually on well defined individualand organisation objectives and metrics which reflect, and arepositively correlated to, the company's objectives, therebyaligning employee, management and stakeholder interests.Organisational ratings are additionally modified to reflectmarket conditions via a set of pre-agreed peer comparators.As was explained earlier, the prevailing volatility anduncertainty in the current operating environment are posingchallenges to management in establishing annual plans.

• The more senior the level of management, the higher theproportion of the incentive component, and thereby lowerproportion of the fixed (base) component of totalcompensation

• As the decision influencing capability of the position onorganisational results, increases, the individual performanceholds lesser weightage than the organisational performancewhen determining total compensation and incentives


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• Long term incentives have, for sometime, taken the form ofEmployee Share Options (ESOP) and were offered toemployees, in defined career levels, based on pre-determinedcriteria which are uniformly applied across the same. Suchoptions were offered at market prices prevailing on the date ofthe offer. The group's ESOP scheme is presently beingreviewed considering global evolvements and its validity in thecontext of the financial crisis and global recession and theirimpacts on the economic and financial markets. The lastESOP award was made on 25 March 2008.

• All remuneration policies are based on considerations ofaffordability and sustainability

• Communication and transparency in current and proposedpolicies

Board remunerationThe remuneration of the Chairman-CEO, the executive directorsand other members of the Group Executive Committee aredetermined as per the above principles. At these higher levels, thebenchmark weightage between individual and organisationperformances in establishing compensation is a 20:80.

The remuneration of executive directors have a significant elementwhich is variable, such variability being linked to the peer adjustedconsolidated group bottom-line and minimum returns onshareholder funds.

The ratio between fixed and variable in 2008/09, with variablebeing based on the actual performance in 2007/08 was;

Compensation of non-executive directors (NEDs) is determined inreference to fees paid to other NEDs of comparable companies.The fees received by NEDs is determined by the board andreviewed annually.

NEDs receive a fee for devoting time and expertise for the benefitof the group in their director capacities and additional fees foreither chairing or being a member of a committee. NEDs do notreceive any performance/incentive payments and are not eligibleto participate in any of the group's pension plans or share optionplans. Non-executive fees are not time bound or defined by amaximum/minimum number of hours committed to the group perannum, and hence is not subject to additional/lower fees foradditional/lesser time devoted.

Make-up of remuneration for executive directorsThe levels and make-up of remuneration, organisation-wide, arelinked to the key principles highlighted before.

In order to further align the interests of executive directors andshareholders, the executive directors, like other eligibleemployees, have received employee share options based on roleresponsibility and actual performance against the same. Thenumber so awarded was recommended to the board by theremuneration committee. Such options were awarded at theclosing market price on the date of award. The last ESOP Awardwas made on the 25 March 2008 but no award was made in 2008/09.

The share options made available to each of the executivedirectors for the year has been disclosed in the Annual Report ofthe Board of Directors 2008/09.

Value of total remuneration (cash) Rs. million

Executive directors (company) 122Non-executive directors (company) 11

‘Cash’ compensation highlighted above comprises salary, pensioncontributions, short term incentive plans and other non-sharebased benefits. In accordance with the guidelines of the Securities& Exchange Commission of Sri Lanka, we have disclosed theaggregate remuneration paid to executive and non-executivedirectors during the financial year 2008/09.

ACCOUNTABILITY AND AUDIT Organisational and operational controlThe operating model currently in place clearly defines authoritylimits, responsibilities and accountability facilitating operatingexpediency, healthy debate and decision freedom. The committeestructure, as depicted below, whilst ensuring that no oneoperating body or individual has unfettered powers of decisionmaking, allows consensus to as great an extent as practical, but itis the Chairman-CEO, the presidents, sector/functional heads andprofit centre/function managers, who are accountable for the totalgroup, industry/ functions groups, the sectors/functions and thebusiness units/sub-functions respectively.

The independence of the finance function is preserved through astructure that has executive vice presidents - finance and sectorfinancial controllers having a direct functional reporting line to theGroup Finance Director in a setting that allows them to contributeand add value to operations via their direct administrativereporting links with presidents and sector heads.

Group Executive Committee (GEC) and succession planningAs at 31 March 2009, the 8 member GEC consisted of theChairman-CEO, the Deputy Chairman, the executive directorpresidents and the presidents. Two executive vice presidents withspecific responsibility for 2 industry groups have been permanentinvitees to the GEC since 1 January 2009 in a move to spread the‘accountability load’ over a greater number of persons. This movewas necessary in order to sharpen the execution and delivery ofthe agreed plans.

The GEC is the overlay structure that implements, under theleadership and direction of the Chairman-CEO, the policies andstrategies determined by the board, manages, through delegationand empowerment, the business and affairs of the group andmakes portfolio decisions and prioritises the allocation of capital,technical and human resources.

Group level Group Executive Committee

GEC

Industry/function Group Management Committee group level

Industry/function Sector Committee SBU/sector level

Business/function Management Committee BU/departmental level

GMC

Board

Group Operating Committee GOC *

* Is not a decision making body but acts as a conduit between the GEC and the GMCs

Fixed VariableEmoluments ofexecutive board members

46% 54%


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The GEC also assists the Chairman-CEO in succession planningand the appointment of presidents, sector heads, functional headsand other senior managers and the career management ofassistant vice presidents and above. This process is well testedand, on a proactive basis, a pool of potential successors for anumber of key positions is identified and earmarked for specifictraining and development as is necessary. A key feature of theoperating model is that the GEC members, particularly thepresidents, not only play a mentoring role, but are totallyaccountable for the businesses and functions under them.

Group Operating Committee (GOC)As at 31 March 2009, the 21 member GOC consisted of theChairman-CEO, the Deputy Chairman, the executive directorpresidents, the presidents and the executive vice presidents.

The GOC provides a platform to share learning on issues thatcross industry groups, sectors, business units and functions. It isalso the forum to discuss group strategy, group initiatives andgroup best practices. Its main purpose is to act as a ‘conduit’between the various businesses within the group towardsidentifying and extracting group synergies and the implementationof such.

Group Management Committee (GMC) and othercommittees and succession planningThe other key operating committees are the GMCs, the SectorCommittees and the Management Committees that focus onstrategy, performance monitoring, career management andsuccession planning of employees below assistant vice presidentlevel, risk management and group initiatives at an industry group,sector, strategic business unit and business unit levelsrespectively. Functions have GMCs and functional committees.Business and Function units are encouraged to take responsibilityand accountability to the lowest possible level via suitablystructured committees and teams in a management by objectives setting.

The agendas of these committees are carefully structured to avoidduplication of effort and ensure that discussions and debate arecomplementary both in terms of a bottom-up and top-down flowof accountabilities and information. As stated earlier, theresponsibility and accountability lie with the Chairman-CEO, thepresidents, the sector/functional heads and the profitcentre/function managers as applicable.

The introduction of peer adjusted organisational ratings in 2007/08in determining pay for performance has resulted in the search bybusiness units, sectors and industry group of productivityenhancements, process improvements and cost efficiencies withina framework of better teamwork.

Operations planning, monitoring and decision rightsA planning and monitoring process, which facilitates andencourages the involvement of staff through annual plans thatarticulate strategy at industry group, sector, strategic businessunit, business unit, departmental and functional unit levels,ensures employee involvement and empowerment. Decision rightsare defined for each level and this has resulted in an inculcation ofa sense of ownership, the reduction of bureaucracy and speedierdecision-making. Annual and five year plans are formulated on abottom-up basis using futuristic scenarios developed by the GECand GMCs and macro economic factors developed by thecorporate centre.

Actuals are compared against the original plan and/or thereforecast on a monthly basis at GMC, Sector Committee,Management Committee and Departmental Committee levels andare reviewed at least quarterly by the GEC. The Chairman-CEOand the GEC are able to view key financial information for all

group companies on a real time basis via the group ERP systemwhile the presidents and executive vice presidents, the CEOs ofbusiness units and managers of functions are able to view, on anonline basis, information relevant to their areas of responsibility.

Responsibility for monitoring and achieving plans as well asensuring compliance with group policies and guidelines rests withthe chief executive officers of each group company and heads offunctions at the corporate centre at the business unit and function levels.

Individual performance objectives are established for all staff fromexecutives to the Chairman-CEO and such objectives are linked tothe group objectives. A performance management system that isfounded on the performance objectives and a competency matrixdeveloped as a part of the human resources management processprovides the basis for training and development while individualperformance ratings coupled with organisational rating, at levelsapplicable, form the basis of a pay for performance system.

At the GMC level and above, the focus is more on headlinefinancial and non-financial indicators, strategic priorities, riskmanagement, use of IT as a tool of competitive advantage, newbusiness development, continuous process improvements andhuman resource management.

Process of investment appraisal and investment decisionDuring the past year, several investors and analysts have enquiredabout the group's investment decision process and the board hasthought it fit to summarise it in this report.

Over the years, the group has maintained a process of investmentappraisal and investment decision which ensures the involvementof the relevant persons. In this manner, several views, opinionsand advice are obtained prior to the making of the decision. Ourexperience is that a holistic and well debated view of thecommercial viability and potential of any project includingoperational, financial, funding, risk and tax implications has mostof the time culminated in a good result.

A summary of the process is given as follows-

• A project's origin could be an operating committee such asthe GEC, GOC, GMC etc, a business unit, the group's internalNew Business Development or Corporate Finance functions oralternatively a public advertisement, ‘Request for Proposal’ ora call for an ‘Expressions of Interest’.

• If there is interest in principle, the President of the industrygroup that the project falls under or a GEC appointedcommittee will engage the Corporate Finance or NewBusiness Development divisions to work with other relevantpersons in the group in preparing a detailed report whichwould cover key business considerations such as industryoverview and trends, the potential operating and financialperformance of the project, key assumptions and sensitivities,SWOT and risk analysis, HR issues, IT considerations, tax,funding costs and optimum structuring of the transactionamong others. A comprehensive study of the tax regime thatapplies to the project will be done in order to determine taxincentives available as well as to propose format ofincorporation.

• Such a feasibility report is next discussed by the GroupExecutive Committee (GEC) and if, found to meet the group'sstrategic and financial objectives, will be forwarded to theboard for approval in principle to proceed to detailed duediligence and negotiation if investment is beyond the authoritylimits of the GEC.

• Once approval in principle is obtained from the GEC and/orthe board, as applicable, the project team, which is invariablymulti-disciplined, will proceed to the next phase of


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investigation which would focus on detailed operational,commercial, financial and legal due diligence. Discussions willalso commence with regulatory and licensing authorities andfinancial institutions and possible partners as relevant andnecessary. Social and environmental impacts will also beconsidered in ensuring the sustainability of the business andthe communities touched by it.

• Where the transaction involves the transfer or lease of land,title searches would be conducted for both private and publicland. In the case of public land every step would be taken toensure compliance with the rules and regulations. Asappropriate, written authority and approvals will be obtained.

• Where the project is a part of a privatisation, the entireprocess would be conducted in line with the directives of therelevant administrative authority as communicated throughExpressions of Interest, Request for Proposals, pre-bidmeetings and official approvals and correspondence. TheGEC and/or the Board will appoint a person to lead thediscussions on behalf of the company and in most instancesthis would be the President of the subject industry group.

• Subject to the project satisfying all the criteria as highlightedbefore, the final approval to proceed will be given by the board.

As is apparent from the foregoing, all investment decisions aremade through a committee structure. No one individual hasunfettered decision making powers in investment decisions.

Integrity of systems processes and internal controlYour board has taken necessary steps to ensure the integrity ofthe group's accounting and financial reporting systems andinternal control systems and also their review and monitoring on aperiodic basis. Our systems covering risk management, financialand operational control, ethical conduct, compliance with legaland regulatory requirements and corporate social responsibilityare detailed below.

Audit Committee, external auditors and independenceThe Audit Committee comprises of three independent directors. Itis governed by a charter which, in the main, covers the principlesgoverning financial reporting, internal control and the managementof risks, both financial and operational, and the workings of the committee.

The committee is responsible for the consideration andappointment of external auditors, the maintenance of aprofessional relationship with them, reviewing the accountingprinciples, policies and practices adopted in the preparation ofpublic financial information and examining all documentsrepresenting the final financial statements. A quarterly selfcertification programme that requires the chief financial officers ofindustry-groups, heads of finance of sectors and financemanagers of operating units to confirm compliance with financialstandards and regulations and requires the CEOs of businessunits to confirm operational compliance with statutory and otherregulations and key control procedures, coupled with theidentification of any deviations from the expected norms havesignificantly aided the committee in its efforts in ensuring correctfinancial reporting and effective internal control and riskmanagement.

The Chairman-CEO, the Group Finance Director, the GroupFinancial Controller and the Head of Risk Control and Review andthe external auditors are regular invitees to the meetings of theAudit Committee.

The detailed Audit Committee report including the areas reviewedduring the financial year 2008/09 is found in the Board Committeereport section of the Annual Report.

Although Ernst & Young are the external auditors of the holdingcompany and many other group companies and also audit theconsolidated financial statements, the individual group companiesemploy many other audit firms, these being KPMG Ford, Rhodes,Thornton & Co, Pricewaterhouse Coopers, SJMS Associates,Deloitte and Touché, India and Luthra and Luthra, India. Theaudits have been distributed in a manner that does not give rise toone dominant external auditor in terms of fees. In addition to thenormal audit services, Ernst and Young and the other externalauditors, have also provided certain non-audit services to the group.

All such services have been provided with the full knowledge ofthe respective audit committees and are assessed to ensure thatthere is no compromise of external auditor independence. Theboard has agreed that, ideally, such non-audit services should notexceed the value of the total audit fees charged by the subjectauditor within the relevant geographic territory. The externalauditor alsp provides a certificate of independence on an annual basis.

We have separately classified the audit and non-audit fees paid bythe company and group to our principal auditor, Ernst & Young,and to other auditors of companies in the group in the Notes tothe Financial Statements of the Annual Report.

Care is taken to ensure that the internal audit function in groupcompanies is not outsourced to the external auditor of thatcompany. The group attempts, where practical, to give preferenceto audit firms who are not external auditors of any groupcompany, in carrying out internal audit work in a further attempt toensure external auditor independence.

The Auditors' report on the financial statements of the companyfor the year under review is found in the Financial Reports sectionof the Annual Report.

Combining internal audit, risk management and insuranceDuring the last financial year, a key move was made in bringingthe functions of internal audit, risk management and insuranceunder a common risk umbrella.

The group has, during the year, benefited from the synergisingrelationship among these functions and aims to have in place, inthe future, subject to further study and cost-benefit/risk-rewardanalysis, even better risk management and risk transfermechanisms, including the establishment of a captive insurancescheme that uses the strength of the group balance sheet, inoptimising the residual cost of risks. Whilst a lot has beenachieved in consolidating risk management and establishing risktransfer mechanisms, the statistical analysis required in crafting acaptive insurance vehicle is now available and will be put to usethis year.

The proactive identification of all risks, both operational andfinancial, has helped in ensuring that internal, and external, audit programmes are tailored to the current needs of the subject entities.

System of internal controlYour board has, through the involvement of the Risk Review andControl department, taken steps to gain assurance that systems,designed to safeguard the company's assets, maintain properaccounting records and provide management information are inplace and are functioning according to expectations. The riskreview programme covering the internal audit of the whole groupis outsourced and the reports arising out of such audits are, in thefirst instance, considered and discussed at the business/functional unit levels and after review by the sector head and thepresident of the industry group are forwarded to the relevant auditcommittee on a regular basis. Further, the audit committees also


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assess the effectiveness of the risk review process and systems ofinternal control on a regular basis. Follow-ups on internal auditsare done on a structured basis.

Risk managementThe GEC has adopted a group-wide risk management programmeto identify, evaluate and manage significant group risks andstress-test for various risk scenarios. The programme ensures thata multitude of risks, arising as a result of the group's diverseoperations, are effectively managed in creating and preservingshareholder and other stakeholder wealth. The detailed RiskManagement report of the Annual Report describes the process ofrisk management as adopted by the group and the key risks tothe achievement of the group's strategic business objectives.

Going concern and financial reportingThe directors are satisfied that the company has sufficientresources to continue in operation for the foreseeable future. Inthe unlikely event that the net assets of the company fall below ahalf of shareholders funds, shareholders would be notified and anextraordinary resolution passed on the proposed way forward.

The going concern principle has been adopted in preparing thefinancial statements. All statutory and material declarations arehighlighted in the Annual Report of the Board of Directors in theAnnual Report. Financial statements are prepared in accordancewith the Sri Lanka Accounting Standards (SLAS), including all thenew standards introduced during the subject year, andInternational Accounting Standards (IAS), as applicable.

Information in the financial statements of the Annual Report aresupplemented by a detailed ‘Management Discussion andAnalysis’ which explains to shareholders the strategic, operational,investment and risk related aspects of the company that havetranslated in to the reported financial performance and are likely toinfluence future results.

The Statement of Directors' Responsibilities in relation to financialreporting is given in the Financial Reports section of the AnnualReport. The directors' interests in contracts of the company areaddressed in the Annual Report of the Board of Directors.

The directors have taken all reasonable steps in ensuring theaccuracy and timeliness of published information and inpresenting an honest and balanced assessment of results in thequarterly and annual financial statements. As discussed in theshareholder relations section of this note, all price sensitiveinformation has been made known to the Colombo StockExchange, shareholders and the press in a timely manner and inkeeping with the regulations.

Ethical and responsible decision making The board encourages management to promote value-baseddecision making across the organisation. The culture within JKHdraws upon a set of unifying values to guide the actions anddecisions of the board and all employees. The group's values arefound in the ‘About Us’ section of the Annual Report and are/havebeen constantly referred to by the Chairman-CEO, presidents andBU heads during employee, agent and other key stakeholderengagement. The group believes that the main source of itscompetitive advantage is the trust that the stakeholders place onthe core values underlying its corporate activities.

The JKH values are displayed in the group's intranet and alsodisseminated in many other ways, including new employeeinduction sessions, feedback sessions and performancemanagement feedback sessions. The senior management of thegroup, generally recognised as AVP and above grades includingthe Chairman-CEO, are expected to walk the talk and theirmanagement behaviour is monitored through an annual 360-

degree feedback. All the group's recognition schemes insist, as aminimum, that all nominees have lived the JKH values.

Code of conductA 'Code of Conduct' has been formally communicated to allemployees, executives and above and is now a component of theemployee self service portals and is based on four basicprinciples, namely-

• The allegiance to the company and the group

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

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

• The exercise of professionalism and integrity in all businessand ‘public’ personal transactions

The subject employees are expected to adhere to the code in theperformance of their official duties and in other situations thatcould affect the group's image and are expected to entrench theexpected behaviour at all levels in the organisation throughcommunication and role modelling.

Securities trading policyThe group's securities trading policy prohibits all employees andagents engaged by JKH who are aware of unpublished price-sensitive information from trading in JKH shares or the shares ofother companies in which the group has a present businessinterest. The board, GEC, GOC as well as certain identifiedemployees in senior executive roles who are privy to JKH's resultsprior to its availability to the public are prohibited from tradingduring periods leading up to the release of quarterly and annualresults, new investments, particularly mergers and acquisitions,announcements of scrip issues and dividend payments.

Open communicationsJKH board believes in maintaining open-door policies for itsemployees and key stakeholders and this is promoted at all levelsof the group.

Given the hierarchical structures that are unavoidable in anorganisation as diverse as JKH, the entrenchment of opencommunications is yet to take the form and be in the extentdesired. The importance of communication, top-down, bottom-upand lateral in gaining employee commitment to organisationalgoals through a sense of belonging as a result of being betterinformed has been emphasised through various communiquésissued by the Chairman-CEO and other senior managers.

Skip-level meetings, which were conducted throughout the groupcompanies in 2008/09 for assistant manager and above levels,enabling employees to get an opportunity to interact, and discuss,with superiors who are at a level higher than their own immediatesupervisor. This proved to be more effective as the subjectemployees gained more confidence in its intent. This hasfurnished the management with a conduit, via first-hand feedback,to information, which has been helpful in improving operationsand work relationships.

Whistleblower policyThe group has established a mechanism for employees to reportto the Chairman through a communication link named ‘ChairmanDirect’, concerns about unethical behaviour and any violation ofgroup values. Employees reporting such incidents are guaranteedcomplete confidentiality and such complaints are investigated and addressed via a select committee under the direction of the Chairman.


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While this is a key process within JKH to support and promotehonest and ethical behaviour, this course of action is to be usedwhere the systems and processes that are already in place do not,or are not, capable of addressing the issue at hand.

ComplianceThe board is conscious of its responsibility to the shareholders,the government and the society in which it operates and iscommitted to upholding the highest standards of ethical behaviourin conducting its business. The board, through the Group Legaldivision, the Group Finance division and its other operatingstructures, strives to ensure that the company and all of itssubsidiaries and associates comply with the laws and regulationsof the countries they operate in.

The Board of Directors have also taken all reasonable steps inensuring that all financial statements are prepared in accordancewith the Sri Lanka Accounting Standards and the requirements ofthe Colombo Stock Exchange and other applicable authorities.The Sri Lanka Accounting Standards, as set by the Institute ofChartered Accountants of Sri Lanka, are those, which govern thepreparation of the financial statements. The InternationalAccounting Standard is used in the rare instance where a SriLanka Accounting Standard does not exist. The board is aware ofthe growing importance of the disclosure of critical accountingpolicies as a part of good governance and opine that there are noinstances where the use of such concept would have a materialimpact on the company's and the group's financial performance.

The group has made every effort to comply with the requirementsof the Companies Act of 2007 and the new CSE listing rules of 2009.

Corporate responsibilityThe group recognises that it exists not only to maximise long termshareholder value but also to look after the rights and appropriateclaims of many non-shareholder groups such as employees,consumers, clients, suppliers, lenders, environmentalists, hostcommunities and governments. We recognise that they have astake in the outcome of the group's actions and, accordingly, wewill accord to them an increasing status when making corporatedecisions. More importantly, we are becoming more aware of theimpact of our business decisions on these stakeholder groups,the environment and broader communities. The John Keells SocialResponsibility Foundation, the vehicle used by the group indeveloping and implementing the group's involvement in 'thecommunity' has geared itself to ensure that the socialprogrammes of the group are consistent with the principles ofsustainable development.

This year, a group wide initiative was launched to document ourmanagement approach towards sustainability and policiesregarding the same in a number of areas including groupsustainability itself, health and safety, freedom of association,corruption, human rights, environment, and products andservices, among others. JKH has also released its firstSustainability Report in line with GRI-G3 guidelines this year. Witha starting level of C+ for the financial year under review, our targetis to scale up to an A+ disclosure level report within three years.

SHAREHOLDER RELATIONS Constructive use of AGMShareholders will have the opportunity at the forthcoming AGM,notice of which has been communicated to you to put questionsto the board and to the Chairman-CEO of JKH and the chairmenof the various committees. The contents of this Annual Report willenable existing and prospective stakeholders to make betterinformed decisions in their dealings with the company.

In general, all steps are taken to facilitate the exercise ofshareholder rights at AGMs, including the receipt of notice of theAGM and related documents within the specified period, votingfor the election of new directors, new long term incentive schemesor any other issue of materiality that requires a shareholderresolution.

Dialogue with shareholdersThe company has a well-developed investor relations programmeto address the information needs of investment institutions andanalysts regarding the company, its strategy, performance andcompetitive position. Given the wide geographic distribution of thecompany's current and potential shareholders, this programmeincludes regular roadshows to Asia Pacific, Europe and the USAconducted by the Deputy Chairman and the Head of InvestorRelations. Matters discussed, and issues raised, at thesemeetings are brought to the attention of the GEC and/or theboard, as appropriate, and addressed.

The company, through its Investor Relations division (IR),maintains an active dialogue with shareholders, potentialinvestors, investment banks, stockbrokers and other interestedparties. Any concerns raised by a shareholder are addressedpromptly at the department level and are forwarded, whennecessary, to the GEC for consideration and advice. Analystsreports are circulated among the GEC, as and when available, andits contents debated.

Major transactionsAll material and price sensitive information about the company ispromptly communicated to the Colombo Stock Exchange, wherethe shares of the company are listed, and released to the pressand shareholders. The group also publishes quarterly, half-yearlyand nine months ended interim reports. The interim and AnnualReports, contain a Chairman's message which explains, at a highlevel, the performance, background and rationale for all majortransactions.

THE FUTUREJKH is committed to conducting its affairs with integrity, efficiencyand fairness to all stakeholders. Our approach to governance is ofintrospection, critical review, continued benchmarking andimprovement. This, we believe, is not a choice as much as it is anessential, as the global investor witnesses a sea-change in themanner in which investments are structured and evaluated,companies grapple with higher costs of funding and limitedaccess to debt and governments adopt protectionist policies inresponse to recessionary conditions. As a business based in afrontier market, we seek to remain a preferred choice forinvestment. Therefore, as in the past few years, our key areas offocus will continue as follows-

• Creating robust operating structures that are able to evolve toface the challenges of our strategic plans and continuous re-invention of our portfolio

• Maintaining sound internal controls and a robust framework ofrisk management and mitigation

• Developing the depth and reach of our external stakeholderrelationships, improving transparency and efficiency ininformation flows and promoting partnership and mutualunderstanding between management and externalstakeholders

• Staying abreast of international best practices and adoptingthose that add value to the group and its stakeholders, and

• Knowing and doing “what it takes” to create sustainable valuefor our stakeholders

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The Remuneration Committee met when there was formalbusiness to transact and also interacted by circulars and othermeans to deal with sundry issues arising from its mandate. Therewere also occasions when the committee raised issues at boardmeetings to facilitate the speed of decision making. An innovationintroduced by the board is that the formal agenda for all boardmeetings includes time for a report of the committee.

The committee ensured that the board complied with theCompanies Act in relation to director remuneration especially therequirements of section 216.

The committee met to consider a survey which was carried out toascertain whether the remuneration of directors was in line withmarket trends and was satisfied that given the complexity of thework of the board the payments were moderate and fair.

The ‘pay for performance’ scheme, which significantly changedthe culture of the organisation and made all managementpersonnel think in terms of value addition and their contributioncontinued into the second year and seems to be now accepted, inprinciple, as a sustainable scheme for compensating employees.Our actual experience whilst revealing areas that require finetuning has also highlighted the need to make modifications tocater for periods of extraordinary recession. The process whichidentifies John Keells group as a trail blazer locally has resulted inthe key officers of the company being called upon to assist otherorganisations who are keen to follow the same path and this hasbeen a major contribution made by the group to the developmentof pay policy in Sri Lanka. It is of note that the non-executive staffare entitled to an uniform bonus based on a share of the profits asper the previous customary scheme other than where suchpayments are dictated by collective agreements or industry bestpractice whereas the executives and above are no longer entitledto a uniform share of profits. The current ‘pay for performance’scheme is based on individual performance only for executivesand assistant managers, and based on individual performanceand organisational performance for managers and above.

The committee met to examine the pay proposals of theChairman-CEO in relation to the executive directors and membersof the Group Executive Committee (GEC) who were evaluated onfixed and measurable criteria discussed with them individually.The committee evaluated the Chairman-CEO, on criteria whichhad been pre-agreed between him and the committee, and thecommittee duly made recommendations to the board in relation tothe Chairman-CEO which were approved unanimously.

The committee interacted regularly with the Human Resourcedivision and management in ensuring that compensationstructures were in line with an overall group policy, details ofwhich are found in the Remuneration section of the corporategovernance report.

In conclusion, I wish to thank my colleagues, Deshamanya DevaRodrigo, Sithie Tiruchelvam and Mohamed Muhsin, for theirvaluable contribution to the work of the committee and also oursecretary, Linda Starling.

Franklyn AmerasingheChairmanRemuneration Committee

21 May 2009

MembersM V Muhsin (resigned w.e.f. 1 March 2009), P D Rodrigo, S S Tiruchelvam

BOARD COMMITTEE REPORTSREMUNERATION COMMITTEE REPORT


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AUDIT COMMITTEE REPORT

Composition of the Audit CommitteeThe composition of the Audit Committee remained at fourindependent non-executive directors during the year. Thecommittee draws on the expertise of members with backgroundsin finance, audit, legal counseling, human resource managementand regulatory institutions. In keeping with the guidelines for bestpractice on the ‘role of auditors’ issued by the Securities andExchange Commission of Sri Lanka, the Chairman of thecommittee is a chartered accountant and former senior partner ofPricewaterhouseCoopers, Sri Lanka. The Head of Group Risk andControl Review serves as secretary to the Audit Committee.

Meetings Six meetings of the committee were held during the year. TheChief Executive Officer and the Chief Financial Officer, bothexecutive directors, together with the Group Financial Controllerattend most parts of these meetings by invitation. Other officialsare invited to attend on a needs basis. The internal auditors andexternal auditors are present at meetings when matters pertainingto their functions come up for consideration.

Terms of referenceThe committee is governed by the specific terms of reference asset out in the Audit Committee charter which is reviewed on a bi-annual basis. The terms of reference comply with and go beyondthe requirements of the listing rules of the Colombo StockExchange.

The committee focuses on the following objectives in dischargingits responsibilities;

(a) Risk management

(b) Efficacy of the system of internal controls

(c) Independence and objectivity of the external (statutory)auditors

(d) Appropriateness of the principal accounting policies used

(e) Financial statement integrity

Summary of activities• The committee reviewed the consistency and appropriateness

of the accounting policies adopted by the group and wasassured that the policies used were appropriate and were incompliance with the Sri Lanka Accounting Standards. Thecommittee reviewed and deliberated on policy updates oninternal procedures to ascertain that improvements are alignedto best business practices.

• During the course of the year, the committee reviewed theeffectiveness of the internal financial controls to ensure thatthey provide reasonable assurance to the directors that thefinancial reporting system adopted by the group can be reliedon in the preparation and presentation of the quarterly andannual financial statements. These reviews includeddiscussions on the effectiveness and security of informationprocessing and technology platforms.

• The internal and external audit reports of all group companieswhich are listed on the Stock Exchange are reviewed by therespective audit committees. Reports of all other groupcompanies are examined by the JKH PLC Audit Committee.

• The committee obtained quarterly declarations from theindustry groups and sectors confirming financial andoperational compliance with established group policies andprocedures and highlighting departures, if any, together with reasons.

• The committee held a special closed door meeting with theexternal auditors without the presence of any executivedirectors or officials of the group, to discuss in particularmatters relating to the co-operation, quality of information,and representations received from the management. Suchdiscussions also covered the internal rules and guidelinesfollowed by the external auditors in ensuring independence.

• The committee deliberated on the many representations madeby the group to the relevant statutory and regulatoryauthorities directly to obtain clarity and guidance onAccounting Standards, Tax and other related issues. Theruling that was sought from the Urgent Issues Task Force(UITF) of the Institute of Chartered Accountants of Sri Lanka(ICASL) on the accounting treatment and disclosure to bemade in relation to the necessity of providing for deferred taxon Board of Investment (BOI) and Tax Holiday Companies asper Sri Lankan Accounting Standard 14 (revised) on IncomeTaxes has still not been received. The committee has beenguided by the external auditors on the accounting treatmentadopted in conformity with past practice with which they haveconcurred.

• During the course of the year, the committee establishedprocesses, via a review of accounting ratios, movements andvariances to obtain comfort on quarterly and annual financialstatements of John Keells Holdings PLC prior torecommending their adoption by the board.

• The committee deliberated at length the financial implicationsof the judgments delivered by the Supreme Court of theDemocratic Socialist Republic of Sri Lanka regarding theprivatisation of Lanka Marine Services (Private) Limited (LMS),where in, inter alia, the transfer of land was declared null andvoid ab initio and the BOI concessions granted were annulled.The committee was guided by the specialist legal, tax,accounting and other opinions obtained by the company informing its views on the accounting treatment of the effects ofthe court rulings. Confirmation of the treatment has beenrecieved from the UITF of the ICASL.

• During the year, Group Risk & Control Review department(R&CR) assisted in the phased implementation of authorisationmatrix in SAP based on roles as opposed to individuals tostreamline transaction authorisation access, make useradministration easier and enable user access for roles theyperform in full.

Risk and Control ReviewThe Audit Committee is assisted by the group R&CR department,which manages the internal audit and risk managementrequirements of the group. The Head of group R&CR reportsfunctionally to the Chairman of the Audit Committee on activitiesand key control issues. Internal audits are outsourced to leadingaudit firms in line with an agreed annual audit plan. Regular followup reviews are conducted by group R&CR to ascertain that auditrecommendations have been acted upon. Group R&CR alsoconducts special reviews as requested either by the AuditCommittee or by management.

The internal audit function, in addition to reviewing the efficacy ofinternal controls, reviews the actions taken to control and mitigateoperational and business risks and monitors and reports on thecompliance of group companies with statutory requirements andgroup accounting and operational policies. Internal audit reportsprovide an overview of the risk profile of the business beingaudited. The frequency of audit increases with higher risk.

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During the period under review, the board was apprised of theenterprise risk management program implemented across the group.

Subsidiary company Audit CommitteesSubsidiaries quoted on the Stock Exchange have appointed theirown audit committees consisting of independent directors. Suchaudit committees are independent of the Audit Committee of JohnKeells Holdings PLC but maintain the standards agreed with JohnKeells Holdings PLC Audit Committee and report to the JKH AuditCommittee on any issue of significance. The minutes of theirmeetings are made available to the Audit Committee of JohnKeells Holdings PLC. The group R&CR department providessecretarial and logistical support to such audit committees.

External auditThe Audit Committee has discussed with the external auditorsbefore the audit commenced, the nature, approach and scope ofthe audit and has reviewed the ‘Audit Plan’ for the financial year 2008/09.

The external auditors have direct communication channels withthe Audit Committee and have kept the committee advised ofmatters of significance that arose during the course of the audit.

The Audit Committee met with the external auditors on 15 and 21 May 2009 to review and approve the financial statementsbefore presentation to the Board for adoption.

The Audit Committee has reviewed the type and quantum of non-audit services provided by the external auditors to the groupto ensure that their independence as auditors has not beenimpaired.

The Audit Committee has recommended to the board that Ernst &Young, Chartered Accountants, be reappointed as externalauditors of John Keells Holdings PLC for the financial year ending31 March 2010, subject to approval by the shareholders at thenext Annual General Meeting.

ConclusionThe Audit Committee is satisfied that the group's accountingpolicies, operational controls and risk management processesprovide reasonable assurance that the affairs of the group aremanaged in accordance with group policies and that group assetsare properly accounted for and adequately safeguarded.

The contribution made by Franklyn Amerasinghe, Steven Enderbyand Sithie Thiruchelvam as members of the committee isacknowledged with grateful appreciation. Their professionalexpertise was invaluable in making the audit committee functioneffective and useful.

Deva RodrigoChairmanAudit Committee

21 May 2009

MembersF Amerasinghe, S Enderby, S S Tiruchelvam

The Nominations Committee, as of 31st March 2009, consisted ofthree independent directors and the Chairman-CEO of John KeellsHoldings PLC.

The mandate of the committee remains;-

• To recommend to the board the process of selecting theChairman and the Deputy Chairman

• To identify suitable persons who could be considered forappointment to the board as non-executive directors

• Make recommendation on matters referred to it by the board

During the period under review, the committee met, formally, onone occasion with all members in attendance and discussedvarious topical issues, telephonically, as and when a need arose.

During the year, the board approved the committee'srecommendation of the appointment of a Senior IndependentDirector whose role is summarised as;

• Meet with the other members of the board without theChairman present on at least an annual basis in order toevaluate and appraise the performance of the Chairman;

• Chair the Nominations Committee when consideringsuccession to the role of the Chairman of the board;

• Act as a point of contact for shareholders and otherstakeholders with concerns which have failed to be resolvedor would not be appropriate through the normal channels ofthe Chairman, Chief Executive and/or Chief Financial Officer;

• Act as an alternative point of contact for executive directors, if required, in addition to the normal channels of the Chairman-CEO

• Meet with the other non-executive directors of the board on atleast an annual basis and address any concerns, with theChairman or the board, as appropriate

The committee continues to work closely with the board inreviewing, regularly, its skills needs. The committee opines thatthe skills representation in the board is appropriate for the group'scurrent needs.

Tarun DasChairmanNominations Committee

21 May 2009

MembersS Enderby, M V Muhsin (resigned w.e.f. 1 March 2009), S S Tiruchelvam, S C Ratnayake

NOMINATIONS COMMITTEE REPORT

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Summary of key income statement items

Rs. million 2008/09 2007/08 Change % Explanatory highlights for YoY changes

Revenue 41,023 41,805 (782) (2) • Revenue growth in CF&R. Retail sector in particularachieved revenue growth of Rs. 1.89 billion

• Growth in revenue from BPO operations in India• Fall in revenues of LMS due to change in operating

model• Drop in Property stemming from revenue recognition

cycle of projects

Cost of sales (31,212) (30,645) (567) (2) • Increased to 76 per cent of revenue [2007/08: 73 per cent] due to reduced disposable incomes resulting inan inability to pass on all cost increases to customers

Share of associate 2,350 2,243 107 5 • Increase in associate company profits on back of strongcompany profits performance of NTB

• Increased share of SAGT profits due to increased stake

Other operating income 3,735 2,717 1,018 37 • Negative goodwill of Rs. 641 million on acquisition ofinvestments

• Increase in interest income by Rs. 182 million• Cash reserves increased due to drawdown of IFC loan

Distribution expenses (1,383) (1,340) (43) (3) • Primarily consists of expenses relating to ConsumerFoods

• Increase in distribution costs of Consumer Foods relatingto marketing expenses, offset by reductions inInformation Technology and other industry groups

Administrative expenses (6,255) (5,529) (726) (13) • Increased depreciation charge, island taxes andoperating costs on account of Cinnamon Island Alidhoobeing operational for the full year

• Charge on impairment of assets at LMS

EBIT 7,996 8,197 (201) (2) • Reduction in EBIT in Transportation due to drop inrevenue at LMS and an increase in LMS costs arisingfrom the Supreme Court judgement

• Reduction in Leisure due to operating environment in Sri Lanka and Maldivian Resorts not being fullyoperational throughout the year

• Interest income at holding company

Finance expenses (1,695) (1,618) (77) (5) • Increased finance cost due to IFC loan• Reduction in finance expense in Leisure on account of

fall in US dollar borrowing rates

Profit before tax 6,301 6,579 (278) (4) • Growth in Financial Services and Others, includingPlantation Services

• Offset by reductions in other industry groups

Tax expense (1,327) (1,055) (272) (26) • One off tax impact of Rs. 519 million due to SupremeCourt judgement on LMS

Profit for the period 4,974 5,525 (551) (10) • Capital gain from sale of stake in AMW, negative goodwillarising from acquisition of investments

• Lower contributions from Transportation and Property

Note: CF&R - Consumer Foods and Retail; BPO - business process outsourcing; LMS - Lanka Marine Services; NTB - Nations Trust Bank; SAGT - South AsiaGateway Terminals; EBIT - earnings before interest and tax; IFC - International Finance Corporation; UA - Union Assurance

WHAT IT TOOKMANAGEMENT DISCUSSION & ANALYSIS

37

OVERVIEW The financial year 2008/09 was one that was characterised bymany unforeseen events as discussed in the Chairman'sMessage. Driven partly by global phenomena and partly byinternal issues arising from the conflict in the North, the Sri Lankan economy faced many challenges in the forms of arelative slow down in growth, high inflation and pressure on the Sri Lankan rupee. While further discussion and data on theeconomy can be found in the Macro Snapshot section of theAnnual Report, the following brief discussion describes the broadimpacts that certain macro variables have had on the performanceof the group.

InflationDriven by increases in global commodity prices during mid 2008,point to point inflation as measured by the Colombo ConsumerPrice Index (CCPI) increased quite significantly reaching a peak of28.2 per cent in June 2008. The increase in inflation resulted inincreases in costs which could not be entirely passed ontoconsumers, thereby affecting the margins in certain industrygroups. Further, the high inflationary environment resulted inconsumers being more selective in their consumption patternswith more emphasis on essential items. By the year end, inflationceased to be a concern on the back of the tight monetary policyof the Central Bank, aided by falling commodity prices andfavourable base effects.

Interest rates As part of its counter inflationary actions, the Central Bankmaintained its tight monetary policy and measures of curtailingcredit expansion and these resulted in interest rates remaininghigh throughout the year. Although the fall in inflation towardsearly 2009 allowed the Central Bank to loosen its monetary policy,commercial lending rates are yet to fall significantly. The primelending rate (AWPLR) averaged 19.2 per cent throughout the year.While the increase in interest rates had an impact on companieswithin the group with rupee denominated debt, the group alsobenefited by investing its cash reserves in high yieldinggovernment securities.

The global financial crisis resulted in a tightening of credit and ashortage of US dollars in the markets due to international interbank lending markets drying up significantly. Although USD LIBORspiked temporarily as a result, the easing of the Fed funds rate by

policy makers in the US resulted in LIBOR falling rapidlycompared to the beginning of the year. As a majority of thegroup's borrowings, such as term loans and overdrafts in theMaldives and the International Finance Corporation (IFC) loan tothe holding company, are US dollar denominated and LIBORindexed, the group benefited from the fall in LIBOR.

Exchange ratesThe exchange rate movement during the financial year was a storyof two halves, with the rupee very steady during the first half tillOctober 2008, on the back of capital inflows for investments ingovernment securities. While import related businesses benefited,those with US dollar income streams faced a challenge. Thegroup mitigated the impacts of the exchange rate by entering intoforward rate agreements, taking advantage of the attractivepremiums available in the market.

During the second half of the year, capital flight arising fromforeign investors disposing of government securities due to riskaversion as a result of the financial crisis, placed the rupee undertremendous pressure. As a result, the rupee was allowed todepreciate from October 2008 and depreciated to Rs. 115.53 tothe US dollar by 31 March 2009. The group benefited from thedepreciation of the rupee as many industry groups have foreigncurrency denominated income streams. For import related tradeand other exposures, the group took the necessary proactivemeasures to cover the exposures.

REVIEW 2008/09

Revenue Group revenue, excluding associate company revenue, decreasedmarginally by 2 per cent to Rs. 41.02 billion [2007/08: Rs. 41.81billion]. Group revenue, inclusive of associate company revenue,increased to Rs. 52.27 billion [2007/08: Rs. 51.43 billion] primarilydue to an increased contribution from associate companies inBanking & Leasing, Insurance and IT Enabled Services in India.Group revenue was boosted by growth in Consumer Foods andRetail, Financial Services and Information Technology. Theseincreases were offset by reductions in revenue in Transportationand Property. Plantation Services also recorded falls in revenues,whilst Leisure revenue was essentially flat compared with theprevious year. The revenue composition of the group (includingshare of associate company revenue) changed marginally in the

CONSOLIDATED GROUP ANDSEGMENTAL PERFORMANCE


38

current year, with Consumer Foods and Retail increasing its shareof group revenue to 27 per cent.

Transportation• Revenue, including associate company turnover, fell 8 per

cent to Rs. 15.43 billion [2007/08: Rs. 16.71 billion].

• Revenue in the Ports and Shipping sector was positivelyimpacted by growth in the group share of South Asia GatewayTerminals (SAGT) turnover on account of increased stake inSAGT.

• Revenues in the Transportation sector comprising LankaMarine Services (LMS) fell considerably as a result of thechange in business model of LMS consequent to thejudgement by the Supreme Court of Sri Lanka pertaining tothe ownership of land. Operations are now based on a mix ofland based and floating barge operations.

• Revenue in the Logistics segment comprising of DHL Keellswas relatively flat due to a slowdown in export volumes duringthe latter half of the year. The operations of John KeellsLogistics (JKLL) recorded an increase in turnover, althoughthis is not reflected in the net group revenues as a majority ofthe business relates to inter company revenues arising fromservicing the distribution centre of the supermarket business.

Leisure• Revenue fell marginally by 1 per cent to Rs. 9.66 billion

[2007/08: Rs. 9.79 billion] despite the tough conditionsprevailing in the industry due to negative travel advisories.

• City Hotels recorded a 5 per cent increase in revenues onaccount of an increase in revenue of Cinnamon Grand, whilerevenues of Trans Asia fell marginally. The minimum rateagreement amongst the hotels in Colombo did not holdthroughout the year as the pursuit of occupancy resulted insome price competition.

• Revenues of Sri Lankan Resorts were relatively flat with allresorts recording similar revenues as compared to last yeardue to sustained marketing to local clientele, which partiallycompensated for a drop in tourist arrivals.

• Despite having several resorts closed for refurbishment andupgrading of facilities, Maldivian Resorts maintained itsrevenues in line with the previous year due to strong growthfrom Chaaya Island Dhonveli and Chaaya Lagoon Hakuraa.While revenues of Chaaya Reef Ellaidhoo grew significantlycompared to the previous year, it did not compensate entirelyfor the loss of revenue from Velidhu Island resort, the lease ofwhich expired last year. Cinnamon Island Alidhoo alsorecorded a drop in revenues as a result of curtailing

operations for a few months on account of the construction ofa breakwater.

• Destination Management recorded a drop in revenues of 13per cent, primarily on account of a drop in revenues of SereneHolidays, its Indian operating arm. Revenues of Sri Lankanoperations were also down by 4 per cent due to the prevailingnegative travel advisories and slowdown in long haul travel.

Property• Revenue fell 40 per cent to Rs. 1.58 billion [2007/08: Rs. 2.62

billion] as a result of the nature of revenue recognition cyclesof property development projects.

• Approximately 90 per cent of revenue and profits in relation to'The Monarch' have been recognised to date. The balancerevenue will be recognised upon hand over of the balanceapartments.

• Recognition of revenue was hampered due to a lower velocityof cash collections due to the slowdown in the global andlocal economies. This was further compounded by thedepreciation of the British pound and the euro against the USdollar, which affected buyers in those countries as they hadopted to make payments in US dollars.

• 79 per cent of units of 'The Emperor' have been sold as of theyear end. Apartment sales during the last year wereparticularly stagnant on account of the financial impacts of theglobal economic slowdown and the local economic conditions- particularly the high interest rate environment and lack ofdemand in the rental market.

• Revenue of the Crescat Boulevard mall operations wereimpacted by the inability to raise rental rates due to a drop infootfalls due to periodic road closures and restrictive accessto the mall, thereby affecting sales of retailers.

Consumer Foods & Retail• Revenue grew 24 per cent to Rs. 14.13 billion [2007/08:

Rs. 11.38 billion].

• Growth primarily driven by impressive growth of 32 per cent inthe Retail business, with the addition of 6 new outletsproviding impetus to growth.

• In spite of lower disposable incomes dampeningconsumption, Consumer Foods recorded a growth of 15 percent on the back of strong performances in the Beveragesand Convenience Foods segments. Revenue growth inBeverages was aided by price increases undertaken duringthe year as a result of increasing costs.

REVENUE COMPOSITION EBIT COMPOSITION

2008/09

2007/08

Transportation Leisure Consumer Foods & Retail Financial Services

30% 19% 3% 27% 11% 5% 5%

33% 19% 5% 22% 8% 4% 9%

2008/09

2007/08

29% 8% 7% 6% 6%(1%) 45%

38% 14% 11% 7% 5% 1% 24%

Property Information Technology Other

CONSOLIDATED GROUP AND SEGMENTAL PERFORMANCE

39

• Revenue growth in Beverages and Frozen Confectionary werepositively impacted by the launch of fresh marketingcampaigns undertaken during the year.

Financial Services• Revenue, including associate company turnover, grew 53 per

cent to Rs. 5.98 billion [2007/08: Rs. 3.92 billion].

• Growth led by increase in revenues in Banking & Leasing andInsurance sectors.

• Group share of revenues in the Insurance sector comprising ofUnion Assurance (UA) increased on the back of an impressiveperformance of the company and the increased share ofrevenues accruing to the group as a result of the acquisition ofshares of UA in February 2009 resulting in the company beingtreated as a subsidiary.

• Group share of revenues in the Banking & Leasing sectorcomprising Nations Trust Bank (NTB) increased due to astrong performance of the bank driven by the re-launch of itsbrand, offering simplicity and convenience to customers.

• The Stockbroking sector recorded a fall in revenues as a resultof the drop in market activity arising from tough economicconditions and lack of significant foreign buying interest in thestock market.

Information Technology• Revenue, including associate company turnover, increased 22

per cent to Rs. 2.73 billion [2007/08: Rs. 2.24 billion].

• Growth led by an increase in revenues in the IT EnabledServices sector comprising of business process outsourcing(BPO) operations in India, which recorded significant growthas a result of organic and acquisitive growth.

• Office Automation and Software Services recorded marginaldrops in revenues compared with the previous year.

• Despite last year's revenue including the revenue from thedivested Keells Business Systems, overall revenue grew dueto increased contribution from the BPO business.

Others (including Plantation Services)• Revenue in Plantation Services decreased 23 per cent to

Rs. 2.09 billion [2007/08: Rs. 2.72 billion].

• The tea industry was not spared of the impacts of the globaleconomic crisis resulting in lower volumes and a negativeimpact on prices as seen with most commodities, therebyaffecting revenues of Tea Smallholder Factories.

• Despite the fall in tea prices towards the latter portion of 2008,the revenue of the tea broking unit increased, albeit off asmaller base.

Earnings before interest and tax Group earnings before interest and tax (EBIT) fell by Rs. 202million to Rs. 8.00 billion [2007/08: Rs. 8.20 billion]. Within theindustry groups, Transportation was the primary contributor withRs. 2.35 billion to group EBIT. Leisure, Property, Consumer Foodsand Retail and Financial Services all had similar contributions togroup EBIT at Rs. 486-624 million. With the exception of FinancialServices, all industry groups recorded falls in EBIT due to flatrevenues and rising costs.

The EBIT contribution from Others, including Plantation Services,was impacted by a positive contribution from the holding

company on account of interest income and the gain on thedisposal of the investment in Associated Motorways (AMW),resulting in an EBIT contribution of Rs. 3.63 billion. Otheroperating income increased 37 per cent to Rs. 3.74 billion[2007/08: Rs. 2.72 billion] primarily on account of interest incomeon investments, negative goodwill relating to the acquisition ofinvestments and exchange gains amounting to Rs. 2.27 billion,Rs. 641 million and Rs. 282 million respectively.

Industry group EBIT margins EBIT margins of the group declined to 15.3 per cent compared to15.9 per cent in the previous year as a result of the fall in EBIT.With the exception of Financial Services, all industry groupswitnessed drops in EBIT margins as a result of the challengingoperating environment of rising costs and the inability to increaserevenues in all businesses due to lower disposable incomesaffecting consumption.

EBIT margins (%) 2008/09 2007/08 2006/07Transportation 15.2 18.6 23.4Leisure 6.5 11.5 14.3Property 33.7 34.5 59.5Consumer Foods & Retail 3.5 5.1 6.6Financial Services 8.1 10.8 9.8Information Technology (4.3) 4.3 4.2Overall group 15.3 15.9 15.7

Transportation• Decreased by Rs. 752 million to Rs. 2.35 billion [2007/08:

Rs. 3.10 billion].

• Decrease driven by fall in EBIT in LMS due to the disruption toits business model affecting absolute gross profit generation.One off administrative charges relating to payment ofcompensation to employees as directed by the SupremeCourt of Sri Lanka of Rs. 153 million coupled with impairmentcharges in relation to assets and provision for stock lossesnegatively impacted EBIT.

• Drop in EBIT in Transportation sector partially offset byincreased EBIT contribution from Ports & Shipping as a resultof the group's increased share of SAGT and a relatively highercontribution from Maersk as compared to the previous year.

• Although still having a marginal negative contribution to EBIT,the third party logistics operations of JKLL recorded a markedimprovement in EBIT as compared to the previous year as aresult of enhanced gross profit contribution towards its fixedcosts.

Leisure• Decreased by Rs. 500 million to Rs. 624 million [2007/08:

Rs. 1.12 billion].

• Similar to the previous year, Sri Lankan Resorts recorded anegative EBIT due to adverse conditions prevalent in theindustry. EBIT was negatively impacted as compared to theprevious year as a result of marginally lower average roomrates coupled with increases in operating expenses relating topower and energy costs. However, tight control on other costsensured that the negative impact to EBIT was curtailed. Thefall in EBIT in Sri Lankan Resorts was also compounded bythe one off item relating to the profits recognised on the saleof Unawatuna Walk Inn for Rs. 44 million in the previous year.

• City Hotels recorded a fall in EBIT due to lower contributionsfrom both Cinnamon Grand and Trans Asia. EBIT at Cinnamon


40

Grand was impacted by increases in depreciation, power andenergy costs and maintenance charges.

• The EBIT contribution from Maldivian Resorts reducedsignificantly, primarily as a result of a negative EBIT atCinnamon Island Alidhoo arising from the depreciation chargerelating to the investment and an increase in island taxes onaccount of the hotel operating for a full year as compared tothe previous year.

• Higher fuel prices across all Maldivian Resorts had a negativeimpact on EBIT. In addition, operating expenses of CinnamonIsland Alidhoo and Chaaya Reef Ellaidhoo increasedsignificantly against the previous year, as both resorts wereoperational for a full year. However, the increases in costswere not compensated for by an increase in revenues,resulting in a negative impact on EBIT. Chaaya Island Dhonvelirecorded an impressive improvement in EBIT.

• Destination Management recorded a significant fall in EBIT ascompared to the previous year with a negative EBIT in thecurrent year. Both the Sri Lankan and Indian operations werenegatively impacted due to lower revenues. Although certaincost saving measures were undertaken in terms of staff andother costs, these measures were unable to compensate forthe fall in gross profits, resulting in lower dilution of fixedcosts.

Property• Decreased by Rs. 370 million to Rs. 532 million [2007/08: Rs.

902 million].

• Reduction in EBIT due to revenue recognition cycle of 'TheMonarch' and 'The Emperor'. Recognition of revenues inrelation to some apartment units in 'The Monarch' wasdeferred due to delays in handovers.

• Increased efficiency in managing costs, particularly power andenergy costs resulted in savings in the Real Estate businesswhich recorded an improved EBIT as compared with theprevious year.

• EBIT of the mall operations of Crescat Boulevard was alsoimpacted by increasing costs and stagnant revenues due tolower footfalls affecting retailers due to the securityconstraints in accessing the property.

Consumer Foods & Retail• Decrease of Rs. 86 million to Rs. 494 million [2007/08: Rs. 580

million].

• Consumer Foods recorded an increase in EBIT on account ofimpressive growth in the EBIT of the Beverages and Frozen

Confectionary segments. EBIT increased as a result ofmaintaining margins on higher revenues, resulting in a higherdilution of fixed costs. The increase in EBIT was achieved inspite of a significant increase in marketing spend in promotingits brands.

• Production efficiencies arising from the new bottling operationcoupled with other process efficiencies were also instrumentalin curtailing cost increases in the Beverages and ConvenienceFoods segments.

• The EBIT of Convenience Foods recorded a drop due to startup costs in setting up the Indian operations. The Sri Lankanoperations were also negatively impacted due to rising rawmaterial costs and the inability to pass on all cost increases toconsumers, resulting in lower gross margins.

• The Retail business recorded a negative EBIT as compared tothe previous year in spite of achieving higher revenues. EBITwas impacted as a result of a higher share of basket valuesshifting to lower margin essential items due to lowerdisposable incomes of consumers. EBIT was also affected bythe higher operating costs of the new outlets which are yet toreach its full potential. Higher power and energy costs due totariff increases also had a negative impact on EBIT.

Financial Services• Increase of Rs. 64 million to Rs. 486 million [2007/08: Rs. 422

million].

• Growth in EBIT contribution from Insurance sector as a resultof impressive performance of UA coupled with a higher shareof profits arising from the increased stake in UA.

• EBIT of the Banking & Leasing sector improved on the back ofa strong performance from NTB.

• The Stockbroking sector had a disappointing year due tobearish sentiment prevalent in the market resulting in thesector having a negative contribution.

Information Technology• Decreased by Rs. 215 million to a negative EBIT of Rs. 118

million [2007/08: Rs. 98 million].

• Decrease in EBIT impacted by the loss of Rs. 80 million inEBIT contribution from Keells Business Systems following thedivestment last year.

• Negative EBIT contributions from the BPO operations in SriLanka and India due to inadequate dilution of fixed costs. Theoperations in Sri Lanka relating to medical transcription faceda few challenges, where the group experienced high attrition

0

2,000

4,000

6,000

8,000

10,000

EBITEBIT Margin

2004/05 2005/06 2006/07 2007/08 2008/09

13.5%14.7%

15.7% 15.9%15.3%

Rs. million

FINANCE EXPENSE COMPOSITIONEBIT AND EBIT MARGINS

2008/09

2007/08

3% 29% 13%<1% 55%<1%

<1%

3% 47% 4% 12%<1%

<1% 34%

TransportationLeisurePropertyConsumer Foods & Retail

Financial ServicesInformation TechnologyOther

0

400

800

1,200

1,600

2,000

Finance ExpensesInterest Cover

2004/05 2005/06 2006/07 2007/08 2008/09

Rs. million

8.8x 9.2x

4.7x

5.1x 4.7x

INTEREST COVER


41

rates of staff, which compounded the effect of high front endtraining costs. A review of the operations in Sri Lanka is beingperformed to optimise utilisation of facilities with a view toimproving profitability.

• The acquisition of clients in the BPO operations in India isexpected to improve the contribution towards fixed costs,thereby improving profitability of the Indian operations.

• EBIT fell in both the Office Automation business and SoftwareServices segment as compared with the previous year.Software Services was affected by lower revenue resulting in alower contribution towards fixed costs. The segment alsoincurred increased marketing spend in a bid to access the UKmarket for its software solutions to the airline industry with noincremental benefit to revenue due to the time lag inconverting leads to sales.

Others, including Plantation Services• Increase in EBIT by Rs. 1.66 billion to Rs. 3.63 billion

[2007/08: Rs. 1.97 billion].

• Plantation Services recorded a drop of Rs. 121 million in EBITto Rs. 345 million, [2007/08: Rs. 467 million] driven primarilyby a reduced contribution from Tea Smallholders on accountof lower revenues and margins resulting in a drop in absolutegross profit. Cost rationalisation measures undertaken wereinadequate to compensate for this fall.

• Total EBIT from Others, including Plantation Services waspositively impacted by the disposal of the AssociatedMotorways (AMW) stake at a capital gain of Rs. 1.03 billion atthe holding company level. Negative goodwill on theacquisition of investments also contributed Rs. 641 million toEBIT.

• Higher interest income recorded by the holding companyarising from investment of funds at high interest ratesthroughout the year had a positive impact on EBIT.

Finance expenses Despite a high interest rate environment prevailing throughout theentire year and an increase in debt, group finance expensesincreased by only 5 per cent to Rs. 1.70 billion [2007/08: Rs. 1.62billion]. Of the total finance expenses, the holding companyaccounted for a majority as a result of drawing down USD 75million as a term loan from IFC. The Leisure share of financeexpenses declined from 47 per cent in the previous year to 29 percent in the current year. Although debt levels in Leisure wereessentially in line with the previous year, the industry groupbenefited in relation to its US dollar borrowings in the Maldivesdue to the rapid fall of LIBOR during the year. Both City Hotelsalso decreased finance expenses on account of lower debtbalances due to capital repayments during the year.

The interest cover of the group declined from 5.1 times to 4.7times as a result of the increase in finance expenses coupled witha marginal drop in EBIT. In spite of the decrease, the interestcover at 4.7 times is at very healthy levels.

Taxation Group tax expense increased by Rs. 272 million to Rs. 1.33 billion[2007/08: Rs. 1.05 billion]. Total tax expense comprised primarily ofRs. 1.22 billion as income tax and Rs. 102 million as dividend tax.

Consequent to the Supreme Court judgement on LMS, thecompany provided Rs. 519 million as additional taxes due to thereversal of the tax free status granted to the company. This oneoff provision had a significant impact on the total tax expense of

the group, resulting in the effective tax rate on consolidated profitsincreasing to 21.1 per cent as against 16.0 per cent in theprevious year. The holding company, however, saw a marked fallin the company's effective tax rate due to the realisation ofexempt and non-taxable income during the year. Eliminating thePBT and tax liability of LMS and the holding company, theeffective tax rate of the group stands at 19.1 per cent comparedwith 19.3 per cent in the previous year.

Further details on the tax impacts and contingent tax liabilities can be found in the Notes to the Financial Statements of the Annual Report.

Profit after taxation Group profit after tax (PAT) fell 10 per cent to Rs. 4.97 billion[2007/08: Rs. 5.52 billion]. With the exception of InformationTechnology, all industry groups made a positive contributiontowards PAT. Among the industry groups, the primary contributorsto PAT were Transportation, Property and Financial Services withPAT contributions of Rs. 1.67 billion, Rs. 486 million and Rs. 339million respectively. The holding company made a contribution toPAT on account of interest income, the gain on the sale of AMWshares and negative goodwill on the acquisition of UA.

Minority interest Minority interest (MI) declined to Rs. 232 million [2007/08: Rs. 406million] primarily as a result of lower profits in Property andPlantation Services, where the minority shareholding is high. TheMI share of profits in Consumer Foods and Retail declined as aresult of losses in Retail offsetting the higher share of profitsarising from Consumer Foods. The MI share of PAT decreased to4.7 per cent from 7.3 per cent in the previous year.

Profit attributable to equity holders of the parent The profit attributable to equity holders of the parent decreased 7per cent to Rs. 4.74 billion [2007/08: Rs. 5.12 billion]. The netprofit margin of the group declined to 9.1 per cent as against 10.0per cent in the previous year on account of a fall in profits onrelatively flat revenues emanating from the relatively highproportion of fixed costs.

As depicted in the table below, the fourth quarter performance ofthe group has improved relative to the preceding quarter. Notably,profit before tax of Leisure has increased as a result of the peakwinter season. With all four resorts in the Maldives fullyoperational, the fourth quarter performance of Maldivian Resortsin particular was encouraging.

Quarterly performance at a glance

(Rs. million) FY 2008/09

Q1 Q2 Q3 Q4 Total

Net turnover 11,086 10,729 9,307 9,901 41,023

PBT 1,145 1,864 918 2,374 6,301

Transportation 920 546 346 485 2,297

Leisure (358) (223) 122 592 133

Property 180 108 88 159 535

CF&R 0 74 100 104 278

Financial Services 186 86 136 78 486

IT (15) (2) (27) (77) (121)

Other 232 1,275 153 1,032 2,692

Profit attributable to

shareholders 833 1,012 765 2,132 4,742

Total assets 78,954 78,272 76,836 92,216 92,216

Total equity 49,110 48,604 47,336 50,542 50,542

Total debt 20,986 20,454 20,879 21,597 21,597


42

Economic value The economic value statement of the group has been compiledunder the Global Reporting Initiative (GRI) guidelines. Theeconomic value statement as per the GRI indicator EC1 - directeconomic value generated and distributed, is available in theFinancial Reports section of the Annual Report.

The direct economic value generated during the year was Rs.46.84 billion [2007/08: Rs. 46.35 billion]. This comprised primarilyof revenue, interest income, share of results of associates andprofit on sale of assets. The corresponding economic valuedistributed was Rs. 41.94 billion [2007/08: Rs. 42.80 billion]. Thiscomprised of Rs. 35.54 billion as operating and employee relatedcosts [2007/08: Rs. 35.50 billion], and a further Rs. 3.58 billion aspayments to providers of funds [2007/08: Rs. 4.80 billion]. Thegroup contributed a total of Rs. 2.78 billion as payments togovernment [2007/08: Rs. 2.45 billion], primarily on account oftaxes.

The economic value retained, comprising of profit after dividends,depreciation and amortisation was Rs. 4.90 billion [2007/08: Rs. 3.56 billion] which is retained for investment/growth.

Return on equity and return on capital employed Group capital employed increased by 19 per cent to Rs. 72.14billion as at 31 March 2009 [2007/08: Rs. 60.83 billion], primarilyon account of an increase in debt as discussed later in the GroupFinancial Position, Liquidity and Capital Resources section of theAnnual Report. EBIT declined marginally by 2 per cent to Rs. 8.00billion [2007/08: Rs. 8.20 billion] on account of lower profitability inmost industry groups. Resultantly, the return on capital employed(ROCE) of the group declined to 12.0 per cent from 13.9 per centin the previous year.

The negative impact on ROCE was exacerbated due to thedisproportionate impact on capital employed as a result of theinvestments in UA, SAGT, Ceylon Cold Stores (CCS) and JohnKeells PLC (JK PLC) towards the end of the year. However, thecorresponding returns in relation to the said investments wereonly recognised for the period in which the investments were held,thereby, having a disproportionate impact on both ROCE and ROEratios. This can be seen in the drop in the asset turnover of thegroup from 0.76 to 0.64 in the current year as a result of theconsolidation of UA having a disproportionate impact on theaverage assets figure.

ROCE = EBIT x Asset x Assets/margin turnover (debt+equity)

2008/09 12.0% = 15.3% x 0.64 x 1.23

2007/08 13.9% = 15.9% x 0.76 x 1.15

The return on equity (ROE) also recorded a drop to 10.7 per centfrom 12.5 per cent seen in the previous year. The ROE in thecurrent year was also affected by the impact of the acquisitions asexplained above. This can be seen in the following analysis wherethe return on assets (ROA) has fallen significantly to 6.1 per centas against 8.1 per cent in the previous year.

ROE = ROA x CEL x CSL

2008/09 10.7% = 6.1% x 0.95 x 1.83

2007/08 12.5% = 8.1% x 0.93 x 1.66

Transportation• ROCE of 19.1 per cent as against 30.5 per cent in the

previous year.

• Capital employed increased by Rs. 3.35 billion to Rs. 14.00billion as at 31 March 2009 as a result of the investments inSAGT. The investment of Rs. 2.25 billion in SAGT in March2009 had a disproportionate impact on the average capitalemployed of the industry group, while the share of profits inrelation to the newly acquired stake were considered onlyfrom the date of investment, resulting in a negative impact on ROCE.

• The decline in EBIT and EBIT margins in the Transportationsector had a negative impact on ROCE.

Leisure• ROCE of 2.4 per cent as against 4.9 per cent in the previous

year.

• Decrease in ROCE primarily attributable to a drop in EBITmargins in all sectors within the industry group.

• Capital employed of Rs. 25.78 billion, reflected a marginalgrowth of Rs. 457 million on account of the capitalisation ofthe breakwater costs at Cinnamon Island Alidhoo. However,average capital employed increased by Rs. 2.65 billion whencompared with the previous year's average.

• Asset turnover decreased marginally on account of flatrevenues coupled with a slight increase in assets arising fromcapital expenditure.

Property• ROCE of 11.4 per cent as against 19.2 per cent in the

previous year.

• Decrease in ROCE primarily as a result of a lower assetturnover due to lower recognition of revenues in propertydevelopment projects.

0

1,200

2,400

3,600

4,800

6,000

Profit attributable to groupNet profit margin

2004/05 2005/06 2006/07 2007/08 2008/09

Rs. million

8.7% 9.3% 9.1%10.0%

9.1%

8

10

12

14

16

18

ROCEROE

2004/05 2005/06 2006/07 2007/08 2008/09

13.3%

12.7%

15.4% 13.8%

11.7%

15.7%

13.9%

12.5%12.0%

10.7%

%

NET PROFIT MAGIN AND NET PROFIT ROE VS ROCE

-10 -5 0 5 10 15 20 25 30 35

2008/092007/08

19.1%30.5%

2.4%4.9%

11.4%19.2%

11.3%15.7%

12.8%23.7%

5.4%(7.3%)

ROCE (%)

CF&R

IT

Transportation

Leisure

Property

Financial Services

INDUSTRY GROUP ROCE COMPARISON


43

• Capital employed fell to Rs. 4.50 billion as against Rs. 4.85billion on account of a reduction in total assets consequent tothe transfer of a portion of the inventory of apartments toclients.

Consumer Foods & Retail• ROCE of 11.3 per cent as against 15.7 per cent in the

previous year.

• Although EBIT margins in Beverages and FrozenConfectionary segments improved, the decline in ROCE wassolely attributable to the decline in EBIT margins in Retail andConvenience Foods.

• Capital employed increased to Rs. 4.46 billion as against Rs.4.27 billion primarily due to capitalisation of expenditure inRetail in respect of new outlets.

• Increase in asset turnover to 2.08 from 1.97 as a result ofhigher revenues was inadequate to compensate for lowerEBIT margins.

Financial Services• ROCE of 12.8 per cent as against 23.7 per cent in the

previous year.

• As with the impact on ROCE arising from the investment inSAGT, the acquisition of a majority of shares in UA in February2009 had a disproportionate impact on the capital employedin Financial Services. With UA being treated as a subsidiary,its entire balance sheet has been consolidated into the groupresulting in a significant increase in total assets, and thereby,capital employed. However, the profits accruing from theincreased stake are recognised only from the date of theinvestment. This had a negative impact on the ROCE of theindustry group.

• The EBIT margins declined to 8.1 per cent as against 10.8 percent in the previous year owing to a fall in EBIT margins inBanking & Leasing and Stockbroking sectors.

• Capital employed increased significantly to Rs. 5.57 billion asagainst Rs. 2.00 billion in the previous year as a result of theinvestment in UA.

Information Technology• Recorded a negative ROCE of 7.3 per cent as against a

positive ROCE of 5.3 per cent in the previous year.

• The fall in EBIT margins from 4.3 per cent to a negative 4.3per cent was the sole reason for the fall in ROCE. AlthoughEBIT margins in all sectors fell when compared to last year,the primary reason for the drop was the significant fall in EBITof BPO related businesses as it continued to contend withtough market conditions in Sri Lanka and a protectionistpolicy in the US.

• Capital employed decreased to Rs. 1.47 billion as against Rs. 1.78 billion due to a reduction in capital employed in ITEnabled Services.

GROUP OUTLOOK The Sri Lankan economy is expected to see a slowdown in growthin the ensuing year due to the impact of the global economiccrisis. However, the biggest positive for Sri Lanka will be theopportunities created as a result of the victory of the armed forcesin liberating the North and East of the country. The economy isexpected to benefit significantly from development of the North

and the East, as well as from the stability and improved investorsentiment in the rest of the country. Development of infrastructureand facilities will not only drive growth in the long term, but alsoprovide employment opportunities and increased disposableincome. Renewed focus on agriculture in both the North and Eastis also expected to increase the contribution towards GDP andhave a positive impact on the wealth of people living in theseareas. Given the group's diverse portfolio of businesses and themyriad opportunities presented, the group is well positioned tobenefit from the development opportunities available as a result ofthe prospect of lasting peace due to the end of the conflict. Thefollowing brief discussion highlights the opportunities available tothe group, demonstrating our view that the group has “what ittakes” to lead growth in this environment.

- Whilst the global slowdown has affected cargo volumes andyields, the prospect of peace due to the end of the conflict inSri Lanka could result in increased volumes on account ofinfrastructure projects and enhanced economic activity. Theports, logistics and freight forwarding businesses are alsoexpected to benefit as a result.

- Needless to mention, one of the biggest gainers would be theLeisure industry group which has endured tough conditionsfor many years due to the conflict. The group has a diverseportfolio of hotels around the country. The refurbishment ofcertain hotels and the branding strategy undertaken in thepast years has laid a solid platform for the hotels to driveoccupancy. The Destination Management business will alsobenefit on account of a potential increase in arrivals to thecountry.

- The group has a large land bank in prime areas in Colombo,which can be developed at the appropriate time. The end tohostilities would result in capital flows and increased demandin rental markets, which in turn is expected to drive demandfor apartments. Pre-planning and feasibilities for somedevelopments have been carried out, thereby reducing thetime needed to launch a project given the right conditions.Apart from continuing with development of 'The Emperor', theProperty industry group has many projects in the pipeline.

- The opening up of the North and East, a largely untappedmarket, gives rise to opportunities to market products of theConsumer Foods segment. The strengths of the distributionnetworks could be leveraged to the maximum to ensure timelyentry into these markets. The investments made to enhancecapacity in beverages and improve efficiency in othermanufacturing processes have yielded results and is expectedto play a significant role in driving volumes in new markets.The Retail business would also be evaluating opportunities toenter into markets in the North and East, taking intoconsideration the strategic plan of the business.

- Growth of the North and East of the country would requirestrong support in financial services with banking andinsurance expected to be integral aspects of thisdevelopment. The group is poised to benefit from theopportunities of expanding branch networks, new customerbases and opening up of new markets for insurance products.The end to the conflict and prospect of peace has already hadan impact on the indices of the Colombo Stock Exchange,which have seen strong growth recently. This trend isexpected to continue, driven by a prospect of improvedcorporate earnings and potential capital gains on tradingopportunities. The stock broking business will benefitsignificantly through increased market volumes.


44

- Stability arising from the end of the conflict is expected tohave a positive impact on some of the businesses within theInformation Technology industry group. The ability to marketthe country as a viable location for business processoutsourcing businesses will assist in attracting larger and highvolume clients. The Office Automation business will also gaindue to increased demand stemming from the North and East.However, the Software Services segment is unlikely to be adirect beneficiary as most of its products cater to exportmarkets.

- From a group standpoint, the end to the conflict will also openavenues for growth in varied industries, notwithstanding thenumerous infrastructure projects that would materialise. Thegroup will be able to leverage its strong balance sheet andexpertise to participate in potential public-private partnershipsto drive growth in areas outside the existing portfolio ofbusinesses, given the right strategic fit.

Although the rupee is expected to gradually depreciate during thecourse of the year, with estimates varying quite widely, theprospect of capital inflows as a result of development of the Northand East could favour the outlook on the rupee. Given thedepletion of reserves in the latter part of 2008 and early 2009, it islikely that the Central Bank would favour building its reserves,thereby, limiting the possibility of the rupee appreciating from itscurrent levels. The group benefits significantly from depreciation ofthe rupee. With the exception of the Office Automation businessand the Beverage and Frozen Confectionary businesses whichrely on imported inputs, other businesses across the group wouldbenefit from depreciation as a majority of revenues emanate fromforeign currency related revenues.

The rapidly declining trend of inflation seen at present is likely tomoderate during the latter half of the ensuing year. Whilst thedepreciation of the rupee could result in an element of cost pushinflation, the impacts of this are not expected to be significant.With inflation expected to be in the region of 10 per cent or below,the group anticipates less pressure on its cost structures. Therelentless focus on process efficiencies across the group is likelyto drive margins in the ensuing year across the group. With theCentral Bank having loosened its monetary policy with theobjective of boosting growth, bank lending rates are likely to fallfurther during the course of the year, thereby, reducing the interestburden of the group during the ensuing year.

The global economy is expected to recover during the latter partof 2009, or more likely in mid 2010, with encouraging signs thatkey financial indicators in the US are bottoming out. Improvementin global economic conditions will have a positive impact on keyareas within the group. Although the group was evaluating manyopportunities to enter international markets in Leisure, Propertyand other areas, the financial crisis and the global slowdown gaverise to tremendous uncertainty and volatility. With the prospect ofimprovement in the global economy, the group will scrutinise themarkets for any available opportunities to enter into markets atmore attractive valuations.

GROUP FINANCIAL POSITION,LIQUIDITY AND CAPITAL RESOURCESSummary of key balance sheet items

Rs. million 2008/09 2007/08 Change % Explanatory highlights for YoY changes

Non current assets Property, plant and 29,965 28,381 1,584 6 • Increase of Rs. 969 million on account of PPE of UAequipment • Capitalisation of Alidhoo breakwater costs and

refurbishment costs in Leisure

Intangible assets 2,668 222 2,446 1,102 • Value of in force life business of Rs. 2.25 billion uponaquisition of UA

Investments in associates 13,056 9,953 3,103 31 • Additional investment of Rs. 2.73 billion in SAGT• Share of associate company profits net of dividend

Rs. 1.02 billion• Decrease of Rs. 889 million on account of disposal

of stake in AMW • Elimination of UA investment from associates on account

of being treated as subsidiary• Transfer of Quatrro F&A investment of Rs. 615 million

from other non current assets

Other investments 8,752 327 8,425 2,576 • Investments of UA of Rs. 7.91 billion relating to the life fund

Current assetsInventories 2,254 3,985 (1,731) (43) • Reduction in inventory at LMS as a result of new

operating model

Trade and other receivables 9,028 6,753 2,275 34 • Consolidation impact of UA receivables of Rs. 3.12 billion

Short term investments 17,400 12,647 4,753 38 • Proceeds from IFC loan and sale of stake in AMW, offset and cash in hand by investments in SAGT, UA, CCS, JK PLC and outflow

on JKH share repurchase• Consolidation of UA investments

Shareholders funds 45,582 43,397 2,185 5 • Profit attributable to company of Rs. 4.74 billion, offsetby dividend of Rs. 1.88 billion and share repurchase ofRs. 2.30 billion

• Adjustments for group share of net assets of SAGT

Non current liabilities Insurance provision 11,026 - 11,026 N/A • Impact of UA consolidation relating to insurance

obligations

Interest bearing borrowings 14,739 7,809 6,930 89 • Increase due to drawdown of USD 75 million loan fromIFC

• Offset by repayments of over Rs. 1.43 billion, primarily inborrowings of Leisure

Current liabilities Trade and other payables 6,505 7,869 (1,364) (17) • Reduction in LMS as a result of the change in the

operating model• Decrease partially offset by increase in payables in CF&R

and inclusion of UA payables

Current portion of interest 1,818 1,060 758 72 • Inclusion of capital repayments on IFC loan at a holding bearing borrowings company level

• Repayments on term borrowings in Maldives in Leisure

Bank overdraft 4,930 3,402 1,528 45 • Utilisation at holding company level to fund investments• Increased utilisation in Leisure to fund working capital

requirements

Note: PPE - Property plant and equipment; UA - Union Assurance; LMS - Lanka Marine Services; SAGT - South Asia Gateway Terminals; AMW - AssociatedMotorways; CCS - Ceylon Cold Stores; JK PLC - John Keells PLC; JKH - John Keells Holdings; IFC - International Finance Corporation; CF&R - ConsumerFoods and Retail

45


46

Balance sheet structure Total assets grew 30 per cent to Rs. 92.22 billion [2007/08: Rs.70.95 billion]. The balance sheet grew largely on account of theconsolidation impact of UA, which is now treated as a subsidiary,consequent to the group acquiring a majority of its shares. Thegraphical representation below highlights the changes in thebalance sheet structure of the group as compared with previousyears.

Non current assets Non current assets increased 34 per cent to Rs. 63.50 billion[2007/08: Rs. 47.51 billion]. The increase was primarily as a resultof an increase of Rs. 8.42 billion in other investments on accountof the increased investment in UA and the Rs. 3.10 billion increasein investments in associates, primarily on account of theinvestments in SAGT. Non current assets comprised primarily ofproperty, plant and equipment (PPE) of Rs. 29.97 billion,investment in associates of Rs. 13.06 billion and investments insubsidiaries of Rs. 8.75 billion.

Non current assets were adjusted for the impacts of theaccounting treatment relating to LMS resulting in the restatementof LMS land from the opening PPE balance. Historicaladjustments to the balance sheet were also done in relation to thisrestatement. Such accounting treatment is with the concurrenceof the Urgent Issues Task Force (UITF) of the Institute of CharteredAccountants of Sri Lanka. In addition to this, a further adjustmentrelating to asset impairment of Rs. 52 million was made to PPE inthe current year. Overall, capitalisation of refurbishment costs inMaldivian Resorts, costs pertaining to opening of outlets in Retailand consolidation of PPE of UA, resulted in the increase in PPE.

Investment in associates increased on account of the investmentsof Rs. 2.73 billion in SAGT, Rs. 615 million in Quattro F&ASolutions, a BPO venture, Rs. 1.02 billion as share of associatecompany profits net of dividends and Rs. 832 million as change innet assets of UA. These were partially offset by the disposal of thestake in AMW amounting to reversal of the investment cost of Rs.889 million and the reduction of Rs. 1.62 billion on account of UAbeing treated as a subsidiary.

Working capital Net working capital increased to Rs. 14.84 billion [2007/08: Rs.10.38 billion] as a result of an increase in short term investmentsby Rs. 4.89 billion and trade and other receivables by Rs. 2.27billion. Trade and other receivables increased as a result of theconsolidation impacts of UA relating to reinsurance receivables,insurance premium receivable and interest income receivable. Theincreases in short term investments and receivables was offset bythe fall in inventories by Rs. 1.73 billion, driven primarily by a fall ininventories at LMS as a result of the company implementing anew operating model as discussed before. Receivables increasedon account of the consolidation impacts of UA, although partially

offset by reductions in receivables in Leisure, Transportation andInformation Technology. Current liabilities increased marginally dueto an increase in overdrafts by Rs. 1.53 billion, although largelyoffset by a reduction in trade and other payables by Rs. 1.36billion. Utilisation of overdrafts increased at both the holdingcompany and in Maldivian Resorts in the Leisure industry group.

Activity and liquidity

2008/09 2007/08Current ratio 2.1 1.8 Quick ratio 1.9 1.5 Net working capital (Rs. Mn) 14,845 10,381 Asset turnover 0.6 0.8

Capital employed (Rs. Mn) 72,140 60,834 Total debt (Rs. Mn) 21,597 12,667 Net debt (Rs. Mn) 4,197 20 Debt/equity ratio (%) 42.7 26.3Net debt/equity ratio (%) 8.3 0.0Long-term debt to total debt (%) 68.3 61.8Debt/total assets (%) 23.4 17.9

Cash flowCash and cash equivalents increased by Rs. 2.51 billion to Rs.11.66 billion [2007/08: Rs. 9.24 billion] by the year end. Cashgenerated from operations was Rs. 4.00 billion compared with Rs.6.10 billion in the previous year. In spite of this drop, cashgenerated from operations, together with cash from investingactivities, were sufficient to meet the capital expenditure andinvestment commitments of the group. The net cash outflowarising from investing activities was Rs. 4.01 billion as a result ofinvestment in PPE, and the investments in subsidiaries andassociates. The acquisition of UA resulted in a net cash inflow ofRs. 171 million as a result of cash and cash equivalents acquired.Cash outflows from investing activities were partially offset by aninflow of Rs. 1.92 billion arising from the disposal of shares inAMW. In spite of cash outflows of Rs. 2.30 billion in respect of therepurchase of JKH shares and a further Rs. 2.11 billion as totaldividends paid by the group, the net cash flow from financingactivities was a positive Rs. 2.33 billion due to proceeds from theIFC loan of USD 75 million, which was drawn down in April 2008.

Leverage and capital structure

Capital structure Total assets were funded by shareholders funds (49 per cent),minority interest (6 per cent), long term creditors (30 per cent) andshort term creditors (15 per cent). Long term funding of assetswas Rs. 78.34 billion, amounting to 85 per cent of total assets,funded in the proportion of 58 per cent, 6 per cent and 36 per

2008/092008/09 2007/082007/08 2006/072006/07

92,21692,216 70,95070,950 65,17865,178

24,450

12,969

9,993

17,767

38,470

3,6968,129

14,882

33,020

14,490

10,738

12,701

43,397

4,7709,724

13,059

34,741

28,756

11,282

17,437

45,582

4,960

27,800

13,874

Rs. million

Cash and short term investments

Current liabilities

Other non current assets

Minority interest

Inventory and receivables

Non current liabilities

Shareholders funds

Property, plant & equipment

Assets

Liabilities

LiabilitiesAssets

BALANCE SHEET STRUCTURE LIQUIDITY MANAGEMENT

0

6,000

12,000

18,000

24,000

30,000

Cash and short-term investmentsCurrent assetsCurrent liabilities

2004/05 2005/06 2006/07 2007/08 2008/09

Rs. million

GROUP FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

47

cent by shareholders funds, minority interest and long termcreditors respectively.

DebtTotal debt of the group was Rs. 21.60 billion, an increase of Rs.8.93 billion as compared with the previous year. The increase indebt was primarily as a result of the drawdown of the USD 75million IFC loan at a holding company level. The loan is for aperiod of 9 years, inclusive of a grace period, with interest atLIBOR plus a margin of 2.75 per cent. The loan was drawn downin April 2008 to ensure the margin was locked in over the term ofthe loan. Drawdown of the loan was timely, particularlyconsidering the shortage of US dollars in the markets, both locallyand globally, as a result of tightening of credit due to the globalfinancial crisis. Drawdown on new rupee denominated loans wascurtailed due to the high borrowing costs prevalent throughout theyear. The increase in debt discussed above, resulted in the debt toequity ratio of the group increasing to 42.7 per cent comparedwith 26.3 per cent in the previous year. Net debt increased to Rs.4.20 billion as compared to Rs. 20 million in the previous year as aresult of the increase in debt coupled with the reduction in cashand cash equivalents on account of the share repurchase andinvestments in SAGT, UA, CCS and JK PLC in February 2009. Thenet debt to equity ratio increased to 8.3 per cent from zero percent the previous year.

Total debt comprised of Rs. 16.56 billion as interest bearingborrowings with the balance comprising of short term loans andoverdrafts. Bank overdrafts increased towards the end of the yearas a result of utilisation of overdrafts at a holding company level tofund the aforementioned investments at relatively favourableinterest rates vis-à-vis investment rates on deposits. Of theinterest bearing borrowings, a total of Rs. 1.43 billion was repaidduring the year, primarily on account of repayment of long termloans at Cinnamon Grand and certain resorts in the Maldives.

The holding company accounted for a majority of total debtcomprising of the IFC loan and Rs. 2 billion of debentures. Leisureand Consumer Foods & Retail accounted for a majority of thebalance, with debt of Rs. 7.19 billion and Rs. 1.41 billionrespectively.

Statement of changes in equityTotal shareholders funds increased to Rs. 45.58 billion, anincrease of Rs. 2.19 billion [2007/08: Rs. 43.40 billion]. Reservesincreased on account of profits attributable to the group of Rs.4.74 billion, offset by dividends paid amounting to Rs. 1.88 billionand Rs. 2.30 billion in respect of the repurchase of shares of theholding company. Revenue reserves were also impacted by arestatement of Rs. 841 million in respect of the prior periodadjustment of LMS.

Treasury managementThe events that unfolded in the preceding year necessitatedfurther emphasis on treasury management across the group.Renewed focus was laid on risk management and mitigation.Following is a brief discussion relating to broad guidelinesfollowed in respect of treasury related activities across the group.

Cash managementThe group manages its investments within guidelines set out inconsultation with the Group Executive Committee (GEC).Investments are placed in government securities or financialinstitutions with a minimum rating criterion as agreed with theGEC. The time horizon for investments of material sums of excessfunds are done in consultation with the GEC to ensure availabilityof funding for investments as required. Investments are monitoredby the Group Finance Director and members of the GEC on aregular basis. During the last year in particular, emphasis was

placed on ensuring investments and cash reserves were notconcentrated within a few institutions to diversify any potentialdefault risk.

Foreign currency/hedging instrumentsIn order to manage volatility and maximise opportunities toenhance returns, the group may enter into forward rateagreements and forward contracts. Any such transaction abovethe authority limits of the GEC would require the consent of theBoard of Directors of the relevant company. Forward rate andother mechanisms are discussed and consent granted by therelevant President of the industry group along with concurrence ofthe GEC. Based on governance guidelines and pre agreed limits,transactions exceeding a certain value would require the consentof the board of the relevant company.

Credit facilitiesIn an environment where banking facilities have becomeincreasingly tight, the group has leveraged its strength to ensureavailability of adequate funding lines to fund future expansion. Thecurrent net debt to equity ratio at 8.3 per cent signifies the abilityto leverage further if needed. The strength of the group balancesheet, coupled with strong cash reserves and availability of bankfinancing were instrumental in JKH retaining its AAA(lka) ratingfrom Fitch Ratings Lanka Limited. At present the group hasadequate unutilised facilities and cash reserves to fund new investments.

10 20 30 40 50

ROCE vs capital employed 2008/09

DestinationManagement

Rs. billionCapital employed

ROCE (%)

Transportation

Hotel Management (177%)

City Hotels Maldivian Resorts

Retail

IT

ConsumerFoods

FinancialServices

Property

Sri Lankan Resorts

Hurdle Rate 18%

-5

0

5

10

15

20

25

180


48

JKH employs active portfolio management as an important tool ineffectively managing its exposure to strategic growth sectors.Regular portfolio evaluation has enabled the group to enhance itsinvestments in core industry groups and divest businesses thatare cyclical or contribute disproportionately to management time.The process is based on a continuous evaluation and review ofthe performance, potential and longer term prospects of ourindustry groups, sectors and companies, grounded on four filters-

• 'Financial filter' - that has the JKH hurdle rate as its cornerstone

• 'Growth filter' - which evaluates a business in terms of itsindustry attractiveness

• 'Strategic fit' - that critiques the long term competitiveadvantage of a business/industry by evaluating the strengthof competitive forces, specific industry/business risks, abilityto control value drivers and the competencies and criticalsuccess factors already inherent in the group company.

• 'Complexity filter' - which considers factors such as seniormanagement time and the risk to brand, image andreputation.

JKH's hurdle rate (or required rate of return) is a function of theweighted average cost of capital (WACC), derived from thegroup's cost of equity, cost of debt, target leverage, tax rates andthe value creation premium required over and above the WACC.Strategic business units are risk assessed under headings such ascustomer concentration, suppliers/JV partner dependence, risk ofinternational entrant, labour dependence, cyclicality, dependenceon Sri Lankan economy, regulatory dependence and impact of theNorth-East conflict etc.

Given below is a graphical representation of an output of the JKHportfolio review and evaluation process.

The significant increase in investment in South Asia GatewayTerminals (Pvt) Ltd (SAGT), Ceylon Cold Stores PLC (CCS) andUnion Assurance PLC (UA) closer to the end of the year exertedpressure on the return on capital employed (ROCE) ofTransportation, Consumer Foods and Financial Services. These

investments resulted in a disproportionate impact on the averagecapital employed of the respective industry groups, while theshare of profits in relation to the newly acquired stakes wasconsidered only from the date of investment, resulting in anegative impact on ROCE. The Transportation industry groupcontinues to generate a healthy return over the hurdle requirementalbeit the increased investment in SAGT and lower earnings fromthe scaled-down operations of Lanka Marine Services (LMS). Thisis second only to the low capital-intensive Hotel Managementbusiness which has generated superior ROCE despite a weakoverall tourism industry. The Consumer Foods sector experienceda drop in ROCE despite improvements of EBIT margins inBeverages and Frozen Confectionary segments, due to thedecline in EBIT margin of Convenience Foods and the increase ininvestment in CCS during the latter half of the year. FinancialServices recorded a strong performance during the year. However,this is not reflected in ROCE due to the disproportionate impacton capital employed due to recent investments in UA as explainedabove. EBIT of the Property industry group dropped relative to theprevious year due to low recognition of revenue from 'TheEmperor'. Capital employed fell on account of a reduction in totalassets consequent to the transfer of a portion of the apartmentinventory of 'The Monarch' to clients. The Maldivian Resortssegment, which has been a strong performer for the Leisureindustry group in the past, experienced relatively low returnsduring 2008/09 due to the global economic crisis and theslowdown in long haul travel. This was due to the reduction inEBIT margins as revenues remained flat from the previous yearwhile capital employed increased due to the construction of abreakwater at Cinnamon Island Alidhoo.

The Destination Management business experienced negativereturns during 2008/09. This was mainly due to the drop inrevenues and EBIT margin as a result of a weak Sri Lankantourism industry, which has also been telling on the Sri LankanResorts segment. Retail sector returns were affected by thedecline in EBIT margins as well as an increase in capital employedprimarily due to capitalisation of expenditure in respect of newoutlets. This resulted in a negative return from this sector. The ITindustry group also recorded a negative return. The fall in EBITmargins was the sole reason for the fall in ROCE, particularly as aresult of the impact of the global crisis on the BPO relatedbusinesses.

PORTFOLIO MOVEMENTS AND EVALUATION

49

Portfolio movements

0

15

30

45

60

75

2004/05 2005/06 2006/07 2007/08 2008/09

Transportation Leisure Property CF&R Financial Services IT Other

Capital employedRs. billion

Investments

Mergers & restructuring

Alidhoo island in the Maldives for USD 3 million

Construction of resort on Alidhoo island for USD 22.5 million

Rs. 313 million subscription to the NTB rights issue to maintain stake at 29.9 per cent

Rs. 2.73 billion in South Asia Gateway Terminals and increased stake to 42.2 percent

2005/06 2006/07 2007/08 2008/09

80 per cent of Yala Village hotel for Rs. 0.2 billion

15 year sub lease on Dhonveli island in the Maldives for USD 21 million

Rs. 2.9 billion in Keells Hotels PLC and increased stake to 92.69 per cent

Joint venture with Raman Roy Associates to develop BPO business in the region - USD 15 million

20 per cent stake in Associated Motorways for Rs. 0.7 billion

Investment of USD 6.0 million for the completion of the Cinnamon Island Alidhoo

14 year sub lease on Ellaidhoo island in the Maldives for USD 12.5 million

Additional 7.5 per cent stake in South Asia Gateway Terminals for Rs. 3.6 billion

Merger of Mercantile Leasing with Nations Trust Bank

Sports and Recreation Bentota merged into parent CHR

DivestmentsKeells PlantationManagement Services (Namunukula plantation) for Rs. 0.2 billion

Keells Restaurants and Crescat Restaurants for Rs. 0.2 billion

Unawatuna Walk Inn fora consideration of Rs. 81 million

Changes in capital

Property owned by Keells Realtors for Rs. 0.5 billion

74 per cent stake in Keells Business Systems Ltd for Rs. 71 million

Four Destination Management sectorcompanies merged into Walkers Tours

Rs. 170 million in Keells Food Products and increased stake to 83.2 per cent

Rs. 598 million in Ceylon Cold Stores and increased stake to 80.5 per cent

Rs. 101 million in John Keells PLCand increased the stake to 86.9 per cent

Rs. 1.12 billion investment in Union Assurance and increased stake to 80.6 per cent

USD 5.72 million for 44 per cent equity stake in Quattro Finance &Accounting Solutions

USD 0.5 million for remaining 49 per cent of Mackinnons Keells Enterprises and Mackinnons Keells Air Services

20 per cent stake in AMW for a consideration of Rs. 1.92 billion

Remaining 26 per cent of Keells Restaurants for a consideration of Rs. 49 million

Remaining 22 per cent of Crescat Restaurants for a consideration of Rs. 12 million

Debenture issue of Rs. 2 billion

Rights issue of Rs. 12.9 billion

USD 75 million loan from theInternational Finance Corporation

Repurchase of 25.5 million shares amounting to Rs. 2.30 billion


50

ACQUISITIONS, NEW BUSINESSAND DIVESTMENTS ACQUISITIONS

Increase of holdings in SAGTDuring the year, two of the original consortium of investors inSAGT owning 7.5 per cent each, exercised their put options; theAsian Development Bank on 5 September 2008 and theInternational Finance Corporation on 2 March 2009. JKH acquiredits pro rata entitlement of 8.4 per cent for a total investment ofUSD 23.8 million [Rs. 2.73 billion] while the balance was acquiredby APM Terminals BV. At the end of the year, JKH's stake in SAGTwas 42.2 per cent compared to 33.7 per cent at the beginning ofthe year, the largest single shareholding.

Increase of holdings in group listed companiesOn 14 November 2008 JKH acquired 689,300 shares or 3.2 percent of Ceylon Cold Stores PLC at Rs. 135 per share, aninvestment of Rs. 94 million. JKH has been seeking to increase itsholdings in CCS, the main contributor of its Consumer Foodssector, which also controls a significant portion of the group's landbank in Colombo, as well as owns JayKay Marketing Services(Pvt) Ltd which operates ‘Keells Super’ chain of supermarkets.

In January 2009 the group invested Rs. 170 million in Keells FoodProducts PLC by subscribing to a 7:10 rights issue and increasingits stake in the company from 73.3 per cent to 83.2 per cent. Thenew equity infusion mainly supported the expansion plans of JohnKeells Foods India (Pvt) Ltd which markets processed meats insome of the major metros of India.

On 20 February 2009 JKH increased its holdings in three grouplisted companies as follows:

• A further 4,361,311 shares or 20.2 per cent of Ceylon ColdStores PLC was acquired at Rs.115 per share amounting toan investment of Rs. 504 million, increasing JKH's totalholding in the company to 80.5 per cent from 57.1 per centlast year.

• 1,657,300 shares or 10.9 per cent of John Keells PLC wasacquired at Rs. 60 per share, an investment of Rs. 101 million,increasing JKH's holding to 86.9 per cent

• 13,864,965 shares or 37.0 per cent of Union Assurance PLCwas acquired at Rs.72 per share amounting to an investmentof Rs. 1.0 billion, triggering a mandatory offer as per theCompany Take-overs and Mergers Code 1995 of theSecurities & Exchange Commission.

During the period leading to the mandatory offer JKH purchased afurther 1,569,400 shares of UA on the Colombo Stock Exchangeat prices ranging from Rs. 69 - 72 per share for a totalconsideration of Rs. 113 million. The group has upped its stake inthe insurance business given the potential of UA to outperform inthe low-penetration insurance market. UA will also closely watchfor opportunities in the North and East.

Mandatory offer for the shares of Union AssuranceHaving triggered the Company Take-overs and Mergers Codeduring the acquisition of Union Assurance PLC (UA) shares inFebruary, JKH made a mandatory offer to purchase the rest of theshares of the company at Rs. 72 per share on 26 March 2009.During the offer JKH acquired a further 943,918 shares or 2.5 percent in UA for an investment of Rs. 68 million, increasing its total

holding to 80.6 per cent by 4 May 2009 from 37.0 per cent at thebeginning of the financial year. A total of Rs. 615 million innegative goodwill was credited to the P&L from the acquisition ofUA shares during the year. Now, as a subsidiary of the group, UAis consolidated with group results since March 2009.

Full-ownership of Indian logistics companiesIn line with the consolidation of the group's logistics businessesand the creation of a single logistics brand across a range oflogistics services, the group took a strategic decision to take fullownership control of its Indian logistics joint ventures in the freightforwarding and airline businesses, Mackinnons Keells Enterprises(Pvt) Ltd (MKEL) and Mackinnons Keells Air Services (Pvt) Ltd(MKASL).

Accordingly, in October 2008, the group acquired the remaining49 per cent of MKEL and MKASL, and infused further capital intoeach company in the form of fully convertible preference shares tofund the companies' expansion plans. The investment in the twocompanies was a total of USD 0.5 million [Rs. 58 million]. The twocompanies were renamed John Keells Logistics India (Pvt) Ltd andJohn Keells Air Services (Pvt) Ltd as a part of the brandingstrategy.

Note: In April 2008 JKH acquired a 44 per cent equity stake inQuatrro Finance & Accounting Solutions (Pvt) Limited for a valueof USD 5.72 million and commenced the first phase of a plannedUSD 2 million investment in the Indian processed meats industry.Details of these were stated in the John Keells Holdings PLCAnnual Report for 2007/08.

DIVESTMENTS

Sale of AMW sharesOn 28 July 2008 JKH sold its 20 per cent stake in AssociatedMotorways PLC (AMW). The exit timed immediately preceding thepeak of the global crisis marked the first successful transaction ofJohn Keells Capital (Pvt) Ltd. The group registered a capital gainof Rs. 1.03 billion, selling 11,138, 808 shares on the ColomboStock Exchange at Rs. 174.50 per share to the Al Futaim group ofDubai, for a total consideration of Rs. 1.92 billion, 24 months afterthe acquisition of the stake.

Divestment of remaining stake in restaurantsOn 30 March 2009, the group exercised its put options and soldits remaining promoter stakes in Gamma Pizzakraft (Pvt) Ltd(formerly Keells Restaurants (Pvt) Ltd - KRL) and FrenchRestaurants (Pvt) Ltd (formerly Crescat Restaurants (Pvt) Ltd -CRL) to the majority owner Gamma Pizzakraft Overseas (Pvt) Ltd.This is in line with the group's decision to exit from its restaurantbusiness in 2006.

The remaining 26.0 per cent of KRL was disposed for aconsideration of Rs. 49 million at a profit of Rs. 32 million, while21.8 per cent of CRL was sold for Rs. 12 million at a profit of Rs. 5.7 million.

RISK MANAGEMENT

51

Risk management is one of the key elements of JKH's system ofcorporate governance and calls for creating a proper balancebetween entrepreneurial attitude and risk levels associated withbusiness opportunities. The group fosters a high awareness ofbusiness risks and internal control procedures with a view toassessing its risk appetite and giving assurance to stakeholders ofthe existence of a process that regularly reviews the risk profile ofthe businesses, sectors, industry groups and the conglomerate.

Enterprise Risk Management (ERM) at JKH is a well structuredand disciplined approach aligning strategy, processes, people,technology and knowledge in evaluating and managing theuncertainties the enterprise faces as it creates value to all itsstakeholders. Through the ERM framework we want to obtainreasonable assurance that our business objectives can beachieved and our obligations to customers, shareholders,employees and society can be met.

Our risk management framework complies with the enterprise riskmanagement - integrated framework of COSO (the Committee ofSponsoring Organisations of the Treadway Commission) and thecode of conduct of the John Keells group. Our ERM takes acomprehensive approach, using organisational competencies andaccountabilities to anticipate, identify, prioritise, manage, andmonitor the portfolio of business risks impacting our organisationin order to consistently achieve business objectives and improveshareholder value.

The JKH Audit Committee is the prime mover in setting the riskmanagement policy of the group, primarily from an internalcontrol, accounting and financial reporting perspective while theGEC is the prime mover in setting the risk management strategyfrom an operations perspective. The Group Risk and ControlReview department (R&CR) at the centre converts the policy soset, into a set of processes, procedures and guidelines for theuniform adoption by the businesses within the group. Theoperations risk management function will move under thesustainability development function with effect from April 2009.

The main components of risk management are identification,measurement, management, reporting, monitoring and control.Given that the risk exposure varies between the individualbusiness areas, the group has established a common riskmanagement model with common definitions, reporting formatsand processes which enable senior management to better identifyand manage varying specific risks across our portfolio ofbusinesses. R&CR validates management's assertions of riskreduction and consults on other best practice improvements toeither fully eliminate the risk and/or reduce the risk. The modelwhich has been the subject of incremental evolution over the past5 years has worked well and has been of immense value to thegroup in making the appropriate, and very often competitive, bidin mergers and acquisitions.

The risks in the group are identified and analysed using auniversal risk register which has, over the years, been adapted tomeet the group's specific needs. The individual risk categories arefounded on the critical success factors necessary for achievingthe corporate strategy and its objectives. The risk areasconsidered include political, legal and regulatory, socio-economic, competition, internal processes, procurement, product,currency and interest rate fluctuations, information technology andhuman resources. Once the exposure is identified, well discussedmitigating actions are agreed at the various levels of the group'sorganisation hierarchy with a view to lowering, transferring,accepting or eliminating the identified risks.

The group rates its risk as ultra high, high, moderate, low andinsignificant after taking into consideration the probable

impact/severity ranking on one side and the likelihood/occurrenceranking on the other.

Key risk areas The company had made every effort to identify risks that are likelyto impact business. Notwithstanding such effort there may beinstances where risks which had not been previously envisionedhave crystallised as was the case with the LMS privatisationwhere the company, having followed the publicly advertisedprocedures and obtained the relevant approvals, did not foreseeany risks in the transaction other than the operational risksnormally associated with doing business until the fundamentalrights applications and subsequently the Supreme Courtjudgement. The risk management systems in place at John Keellsendeavours to identify risks proactively and manage them to thebenefit of all its stakeholders and all this was done when the riskwas identified.

The risk ratings after taking into consideration the current statusof the action plans, mitigation activities and control measures aredetailed below.

Political and economic Financial year 2008/09 2007/08 2006/07

Risk rating High Ultra High Ultra High

Action planThe group is actively working with the government, private sectorand other relevant stakeholders in influencing progress towardslasting peace, stability of economic factors and the operatingenvironment. The group acknowledges the important role that theprivate sector can play in increasing the quality of life by wealthcreation through good investment and increasing productivitythrough training, development and empowerment. In addition tothe various programmes undertaken by the group under thebanner of sustainability development, the group is wellrepresented in influential bodies such as the Ceylon Chamber ofCommerce, various industry associations, social think-tanks etc.

Enabling Infrastructure availabilityFinancial year 2008/09 2007/08 2006/07

Risk rating High Ultra High Ultra High

Action planThe lack of enabling infrastructure has been identified as one ofkey inhibitors of economic growth. It is most welcome to note thatthe government has, as one of its strategic priorities, focused ondeveloping and strengthening infrastructure that is required tocreate an enabling environment towards economic growth. Thegroup continues to lobby the authorities for progress in this areathrough chambers, trade associations and lobby groups andthrough direct dialogue. It is also a bidder for some infrastructureprojects in the country and has provided a proposal to thegovernment on the port city development.

Brand control and protection threatsFinancial year 2008/09 2007/08 2006/07

Risk rating Moderate Moderate Moderate

Action planThe brand audit conducted recently with assistance of specialistconsultants enabled the identification of the brand's potential risksamong all its key audiences - e.g., customers, employees, thefinancial community, influencers and regulators, as well ascompetitors. This bought about a collective effort to put brand riskin perspective i.e. to weigh it intelligently among other business


52

risks, and identify and address real threats to the brand. The JKHreputation was affected by the supreme court judgement on theLMS privatisation. While ensuring full compliance with thejudgement, the company will continue to serve its stakeholdersefficiently in a culture of integrity and transparency.

Internal operational process efficienciesFinancial year 2008/09 2007/08 2006/07


Action planEvery business unit has a mandatory objective of reviewing all itsprocesses at regular intervals and through such review to increaseproductivity and a better offering to both its external and internalcustomers. The Strategic Group Information Technology unit anda recently appointed Chief Process Officer provide guidance andtechnical support to businesses in this regard. Many manuallydriven processes have now been transformed into e-platformsand are achieving their outputs at a lower cost in an uniform, andmore disciplined, manner. The aforegoing coupled with theextensive use of SAP has facilitated more and more repetitiveprocesses moving under the Shared Services function where thebenefits of specialisation is already taken root. Staff training,learning and development is structured and mandatory and has itsorigins in a well developed performance management system.

Environmental, health and safety concernsFinancial year 2008/09 2007/08 2006/07


Action planThe group's attitude to health and safety of its employees,customers, contractors, suppliers and the public isuncompromising. Every effort is made to comply with all theapplicable laws and regulations and any lapses, if any, wouldtherefore be not deliberate. The group is also acutely aware of theneed to conserve nature and the products of nature such as waterand fuel. The sustainability programmes currently pursued by thegroup has made conservation and environment protection as twoof its top priorities. Threshholds have already been established forkey environmentally linked areas such as energy usage, waterusage etc. Awareness has been created through seminars, weband other communications and specific training. Employee Healthand Safety (EHS) surveys, physical risk surveys, energy audits,safety awareness programmes and training with the assistance ofspecialised consultants and organisations are parts of our actionplans in mitigating the risks in this area.

Legal and regulatory uncertaintiesFinancial year 2008/09 2007/08 2006/07

Risk rating Ultra High High High

Action planLegal and regulatory uncertainties are the main inhibitors ofincreased investment in Sri Lanka. Whilst we acknowledge thatstaying abreast of the constantly changing statutory andregulatory requirement is a key business competence, it is verydifficult to do business if the fundamental bases on which theinvestment is made are changed. Whilst the group continues tocampaign for a stable regulatory environment through establishedforums such as the industry associations and the chambers, theprogress made is far from satisfactory. Despite the heavy, andincreasing, cost of compliance in the country, the group, throughvehicles such as audits, quarterly compliance and other methodsof regular certification, ensures that it is in compliance with thelaws of the land.

Financial exposuresFinancial year 2008/09 2007/08 2006/07

Risk rating Moderate Moderate High

Action planThe basic risk strategies for interest, currency and liquiditymanagement, and the objectives and principles governing groupfinances are approved by the GEC following recommendation bythe central Group Treasury function and Finance function.Business, financing and other foreign exchange exposureactivities which are not in the local currency inevitably lead toforeign currency exposures. During the year, the group proactivelymonitored the currency behaviour and implemented variousmeasures in ensuring that financial exposure arising out ofcurrency fluctuations were kept to a minimum. These includedforward purchasing and selling. Interest rate risks are alsocentrally managed. A major challenge during the year, however,was the managing of debtors. SAP has enabled the group toestablish a data base of common customers and suppliers andthis has helped in credit control

Information technology dependencyFinancial year 2008/09 2007/08 2006/07


Action planRisk management and internal control has been augmented bythe greater use of SAP and other e-platforms. Given the everincreasing dependency of business on information technology, thegroup has devoted much time in ensuring the security of data andin ensuring the existence of fall back measures in the event of ITsystem failures. These include access control systems,uninterrupted electricity supply for time critical systems, back-upsystems and data mirroring. Additionally, we use firewalls andvirus scanners to prevent unauthorised access to the IT system.Disaster recovery plans are regularly reviewed and are randomlytested via surprise drills.

Human resources availabilityFinancial year 2008/09 2007/08 2006/07


Action planThe group continues to position itself as the preferred employerand in pursuance of such has over the years established worldclass HR systems and processes. Training, development,recognition and reward are the areas which have attracted themost focused attention. Our pay for performance scheme hasassisted in the facilitation of a meritocracy. Communications isanother key area in our action plans. Skip level meetings, 360degrees and climate surveys are regularly used to assessemployee morale and feelings.

Stakeholder promiseFinancial year 2008/09 2007/08 2006/07

Risk rating Moderate Moderate High

Action planThe group believes that its success depends on the degree towhich it can balance the interests of all its stakeholders. A multi-stakeholder effort to create a common framework for voluntaryreporting of the economic, environmental, and social impact ofentity-wide activity is currently underway with the groupsustainability initiative. Suitable action plans are drawn up in areasof ‘Economic contribution’, ‘Environmental footprint’, ‘More thana just workplace’, ‘Social commitment’ and ‘Customer centric’which are more fully described in the Sustainability Report.

Our group is conscious of its responsibility to the shareholders,the government and the society in which it operates and iscommitted to upholding the highest standards of ethical behaviourin conducting its business. The board strives to ensure that thecompany and all of its subsidiaries and associates comply withthe laws and regulations of the countries they operate in.

53

• The issued ordinary shares of JKH are listed on the ColomboStock Exchange (CSE)

CSE ticker symbol: JKH.N0000

• Newswire codes:

Bloomberg: JKH.SL, Dow Jones: P.JKH, Reuters: JKH.CM

The JKH shareThe year under review was a difficult one for the Colombo StockExchange (CSE), as it was for world equity markets, due to theliquidity crunch caused by the financial crisis which triggered aglobal economic downturn. Investor sentiment was furtheraffected by the conflict in the Northern parts of Sri Lanka for agreater part of the year.

During the year 2008/09, the All Share Price Index (ASPI) andMilanka Price Index (MPI) of the CSE recorded 37 per cent and 48per cent declines respectively.

The JKH share closed at Rs. 62.75 as at 31 March 2009 recordinga drop of 47 per cent during the year. The share started the yearat Rs. 120.00 and traded between a high of Rs. 121.00 and a lowof Rs. 49.50. The JKH share remained liquid throughout the year -and experienced a significant increase in liquidity during the lastquarter. Trading in the JKH share accounted for 8 per cent of thetotal market turnover in 2008/09 and 20 per cent of the totalmarket turnover during the 4th quarter.

Despite the fall in price during the year, the JKH share has largelybeen able to preserve its long term value relative to the market. Asdepicted in the chart below, the JKH share performance over thelast 5 years is mostly in line with market movements during thesame period.

Historically, JKH has been one of the most liquid shares on theCSE. As evident from the graph titled ‘share performance vs. ASPIand MPI (over 5 years)’, the JKH share has historically beenfollowing market movements, outperforming the market in upturnsand underperforming the market in downturns. This observation isfurther confirmed by the beta of 1.33 of the JKH share (note thatthe beta was calculated on daily JKH share and marketmovements as measured by ASPI for the 5 year period from 1April 2004 to 31 March 2009).

With the war in the North of Sri Lanka moving towards agovernment victory, investor sentiment improved considerably inthe last quarter of the year. This is reflected in the ASPI and MPIwhich have recorded increases of 9 per cent and 6 per cent

respectively during the last quarter (31 December 2008 - 31 March2009) amidst an increase in market activity. The JKH share priceincreased by 26 per cent during the same period outperformingthe ASPI and MPI by 15 per cent and 18 per cent respectively.

Ordinary shares in issueDuring the year under review, the number of JKH shares in issuedropped by 25 million due to the share repurchase in the 3rdquarter. The total number of shares in issue at the beginning ofthe financial year was 636 million. During the year a total of 25.5million shares were repurchased, resulting in the number of sharesin issue decreasing to 611 million. In addition to the shares inissue, there are 30.83 million shares equivalent of unexercisedESOPs as at 31 March 2009. These are eligible for immediateexercise as at the date of this report.

The balance of global depositary receipts (GDRs), in ordinaryshare equivalents, decreased to 1.0 million as at the end of theyear from 1.1 million at the beginning of the year mainly due to theshare repurchase.

Repurchase of ordinary sharesOn 25 September 2008, JKH announced its first share repurchasein the history of the company. The company offered to repurchaseshares on a pro rata basis of 1 share for every 25 shares held asat 10 October 2008, up to a maximum of 25.5 million shares. Therepurchase price was Rs. 90 per share. The company disbursedRs. 2.30 billion to shareholders via the repurchase.

Dividends The dividend policy of JKH seeks to ensure a dividend payoutwhich correlates with the growth in profits, whilst ensuring that thecompany retains adequate funds to support investments, thereby,facilitating the creation of sustainable shareholder value in theshort, medium and long term.

During the year, the company declared, and paid, 2 interimdividends of Rs. 1 per share. The company also announced a finaldividend of Rs. 1 per share based on the profits of the financialyear 2008/09 for payment on 10 June 2009. No special dividendwas announced during the year under review, compared to theyear 2007/08 when the company paid a special dividend of Rs. 2per share in addition to the 2 interim dividends and a finaldividend. Accordingly, the dividend per share (DPS) in the currentyear decreased to Rs. 3 per share compared to Rs. 5 per share inthe last year.

SHARE INFORMATION

10

50

90

130

Apr-08 Jul-08 Sep-08 Dec-08 Mar-09

2,000

4,000

6,000

8,000

34,000

JKH volume JKH ASPI MPI

IndexVolume(‘000 ) Index

JKHMPI

ASPI

100

200

300

400

-Apr-04 Nov-05 Jul-07 Mar-09

-

100

200

300

400

Apr-04 Nov-05 Jul-07 Mar-09

Index

JKH

Kuala Lumpur

Bombay

Singapore

SHARE VOLUMES & RELATIVE PERFORMANCE VS MARKET

SHARE PERFORMANCE VS ASPI & MPI(OVER 5 YEARS)

SHARE COMPARED WITH KEY REGIONALINDICES (OVER 5 YEARS)


54

The dividend payout ratio dropped to 42 per cent [2007/08: 81 percent], primarily due to the special dividend of Rs. 2 per share paidin the financial year 2007/08. In absolute terms, the dividend paidduring the financial year was Rs. 1.88 billion [2007/08: Rs. 3.18billion]. Including the repurchase of Rs. 2.30 billion, the totaldistribution to shareholders amount to Rs. 4.18 billion. The payoutratio taking repurchase disbursements into account would be 93per cent for the year, which is more than the payout for 2007/08.

2008/09 2007/08 2006/07Market cap (Rs. bn) 38.36 76.16 97.95Enterprise value (Rs. bn) 42.56 76.18 95.96Market value added (Rs. bn) (7.22) 32.76 59.47EV/EBITDA (times) 4.2 7.8 13.0 Diluted EPS (Rs.) 7.58 8.00 6.05 PER (diluted) 8.3 14.8 25.4 Price to book (times) 0.8 1.7 2.2 Price/cash earnings (times) 7.9 12.5 20.5Dividend yield (%) 4.7 4.8 2.3 Dividend payout (%) 42.0 81.0 62.8TSR (%) (44.7) (19.0) 38.5

Earnings per shareAlthough the weighted average number of shares in issue wasonly 626 million [2007/08: 640 million], the fully diluted earningsper share (EPS) for the period fell 5 per cent to Rs. 7.58 [2007/08:Rs. 8.00]. This was due to the drop in profit after tax attributableto the shareholders of 7 per cent to Rs. 4.74 billion largely due tothe one off items affecting the bottom line discussed in theManagement Discussion & Analysis section of the Annual Report.The cash EPS also fell 17 per cent to Rs. 7.95 [2007/08: Rs. 9.54]in the current year due to the drop in cash earnings of 19 per centcompared to the last year.

Total shareholder returnsThe total shareholder returns (TSR) of the JKH share was anegative 44.7 per cent as a result of the 47 per cent fall in the JKHshare price during the year, offset by dividends and the sharerepurchase. The average 1-year treasury bill rate for the sameperiod was 18.56 per cent. Even though the TSR on the JKHshare yielded negative returns, the JKH share has consistentlyoutperformed the 1-year treasury bill yield in the past.

Market capitalisation and enterprise valueMarket capitalisation of the company dropped by 50 per cent toRs. 38.36 billion during the year [2007/08: Rs.76.16 billion]. Theenterprise value as at 31 March 2009 dropped 44 per cent to Rs. 42.56 billion as a result of the drop in the marketcapitalisation, despite a Rs. 4.18 billion increase in net debt.

Price earnings ratioAs at 31 March 2009, the JKH share was trading at 8.3 timesearnings [2007/08: 14.8 times]. The drop in price earnings ratiohas been primarily due to the drop in share price although partiallyoffset by the contraction of EPS.

Price to bookAs at 31 March 2009, the price to book ratio of the group was 0.8times [2007/08: 1.8 times]. The drop in price to book can beprimarily attributed to the drop in market value of JKH. The bookvalue of the group increased by 5 per cent during the year under review.

LiquidityDuring the year, 109 million shares were traded, which is amarginal increase from last year. The average daily turnover of theJKH share was Rs. 34 million which amounted to 8 per cent of thedaily total market turnover. During the year, the percentage freefloat of the JKH share increased to 81 per cent of the marketcapitalisation from 75 per cent last year.

Distribution and composition of shareholdersThe total number of shareholders of JKH increased to 8,554 fromthe 8,475 seen last year. Out of the total number of shareholders,81 per cent of the shares in issue were held by public, while 6 percent of the shares were held by the directors, executives andconnected parties, and the balance 13 per cent by shareholdersholding more than 10 per cent as at 31 March 2009. In terms ofthe domicility of shareholders, 54 per cent of shares were held byresidents and 46 per cent was held by non-residents. Thiscompares to 50 per cent held by non-residents at the end of thelast year.

(5)

20

60

100Rs. billion

2005/06 2006/07 2007/08 2008/092004/05

Market capitalisation Net debt

0

1.5

3.0

4.5

Dividend paidShare repurchaseDividend payout

2004/05 2005/06 2006/07 2007/08 2008/090%

25%

50%

75%

100%

Rs. billion Payout %

67%63%

81%

42%

97%

Executive directors and spousesNon executive directors and connected partiesPublic non-resident and GDRs

Executives and connected partiesPublic residentShareholders holding more than 10%

2004/05 2005/06 2006/07 2007/08 2008/09

2%7%

33%

36%

22%

1%6%

35%

35%

23%

1%5%

23%

28%

43%

1%5%

20%

25%

50%

1%5%

35%

46%

13%

ENTERPRISE VALUE COMPOSITION DIVIDENDS VS PAYOUT RATIO(OVER 5 YEARS)

TREND IN COMPOSITION OF SHAREHOLDERS

SHARE INFORMATION

55

DISTRIBUTION OF SHAREHOLDERS

31 March 2009 31 March 2008Number of % Number of % Number of % Number of %

shareholders shares held shareholders shares held

Less than or equal to 1,000 4,961 58.0 1,318,107 0.2 5,151 60.8 1,229,290 0.21,001 to 5,000 1,869 21.8 4,554,652 0.7 1,717 20.3 4,123,286 0.65,001 to 10,000 536 6.3 3,833,768 0.6 477 5.6 3,380,914 0.510,001 to 50,000 779 9.1 16,069,789 2.6 747 8.8 15,525,960 2.450,001 to 100,000 132 1.5 9,053,132 1.5 115 1.4 7,916,985 1.2100,001 to 500,000 153 1.8 34,119,660 5.6 144 1.7 33,511,546 5.3500,001 to 1,000,000 34 0.4 25,215,666 4.1 31 0.4 23,687,279 3.7Over 1,000,001 90 1.1 517,188,222 84.6 93 1.1 546,619,292 85.9Grand total 8,554 100.0 611,352,996 100.0 8,475 100.0 635,994,552 100.0

COMPOSITION OF SHAREHOLDERS

31 March 2009 31 March 2008Number of number of Number of number of

shareholders shares held % shareholders shares held %Executive directors and spouses 6 8,469,617 1.4 6 8,598,117 1.4Non-executive directors and connected parties 1 4,138 0.1 12 124,274,250 19.5Executives and connected parties 69 29,305,734 4.8 123 28,901,205 4.5Public resident

Institutions 553 121,849,921 19.9 560 73,491,771 11.6Individuals 7,654 92,212,331 15.1 7,499 83,323,494 13.1

Public non-residentInstitutions 85 211,725,339 34.6 97 248,498,728 39.1Individuals 184 65,840,621 10.8 177 67,794,301 10.7

Global depositary receipts 1 993,406 0.2 1 1,112,686 0.2Shareholders holding more than 10% 1 80,951,889 13.2 - - 0.0Total 8,554 611,352,996 100.0 8,475 635,994,552 100.0

EMPLOYEE SHARE OPTION PLAN AS AT 31 MARCH 2009

OptionDate of Shares Expiry granted Shares* Excercised Lapsed/ Outstanding Current

grant granted date price adjusted cancelled price*

PLAN 2Award 3 23.01.2004 2,994,209 22.01.2009 104.25 5,129,406 2,907,721 2,221,685 - 70.81

PLAN 3Award 1 29.03.2005 5,503,850 28.03.2010 136.00 9,746,823 2,249,994 476,051 7,020,778 92.72Award 2 10.04.2006 6,645,575 09.04.2011 157.25 10,301,859 502,319 973,599 8,825,941 120.74Award 3 28.05.2007 10,551,062 27.05.2012 146.00 10,551,062 - 817,220 9,733,842 146.00

22,700,487 30,599,744 2,752,313 2,266,870 25,580,561

PLAN 4Award 1 25.03.2008 5,405,945 24.03.2013 120.00 5,405,945 - 160,400 5,245,545 120.00 Total 31,100,641 41,135,095 5,660,034 4,648,955 30,826,106

* Adjusted for bonus issues and rights issues

MARKET INFORMATION ON ORDINARY SHARES OF THE COMPANY

2008/09 Q4 Q3 Q2 Q1 2007/08

Share informationHighest price (Rs.) 121.00 72.00 87.00 109.00 121.00 156.75 Lowest price (Rs.) 49.50 50.00 49.50 81.00 110.00 116.25 As at period end (Rs.) 62.75 62.75 50.00 86.50 110.00 119.75 Dividends paid per share 3.00 1.00 1.00 - 1.00 5.00

Trading statisticsNumber of transactions 15,064 6,752 3,911 3,100 1,301 9,048 Number of shares traded (thousands) 109,156 56,990 22,348 18,302 11,516 104,754 % of total shares in issue 17.9 9.3 3.7 3.0 1.9 16.50Value of all shares traded (Rs. million) 8,097 3,514 1,411 1,847 1,325 13,930 Average daily turnover (Rs. million) 34 61 24 28 23 58 % of total market turnover 7.5 20.3 17.6 7.5 2.3 16.1Market capitalisation (Rs. million) 38,362 38,362 30,529 55,021 69,960 76,160 % of total market capitalisation 7.2 7.2 6.3 7.9 8.8 9.2


56

31 March 2009 31 March 2008S C Ratnayake 3,227,747 3,227,747A D Gunewardene 3,527,462 4,018,568G S A Gunesekera * 1,524,574 1,348,374J R F Peiris 189,628 3,428E F G Amerasinghe 4,136 4,136T Das Nil NilS Enderby Nil NilP D Rodrigo Nil NilS S Tiruchelvam Nil Nil

Options available under the employee share option plan of John Keells Holdings PLC

S C Ratnayake 1,745,781 1,931,981A D Gunewardene 1,573,624 1,759,824G S A Gunesekera * 1,074,411 1,260,611J R F Peiris 1,401,417 1,587,617

* Retiring w.e.f. 30 June 2009

TWENTY LARGEST SHAREHOLDERS OF THE COMPANY

31 March 2009 31 March 2008 Number of shares % Number of shares %

1 Mr S E Captain 80,951,889 13.2 81,364,526 12.8 2 Mr R Rajaratnam 56,358,764 9.2 58,186,212 9.2 3 Sri Lanka Insurance Corporation Ltd-Life Fund 28,062,085 4.6 N/A 4 The Emerging Markets South Asian Fund 20,142,258 3.3 7,025,900 1.1 5 Genesis Smaller Companies 15,708,495 2.6 15,988,995 2.5 6 Estate of A A N De Fonseka 14,964,269 2.4 15,819,977 2.5 7 Aberdeen Global Asia Pacific Equity Fund 14,885,803 2.4 15,737,023 2.5 8 Arisaig India Fund Limited 14,783,475 2.4 14,783,475 2.3 9 Genesis Group Trust Emerging Markets Fund 13,666,677 2.2 13,666,677 2.2

10 FS Asia Pacific 12,458,500 2.0 12,062,964 1.9 11 Sri Lanka Insurance Corporation Ltd-General Fund 10,800,000 1.8 N/A 12 Rubber Investment Trust Limited A/C no.1 10,763,178 1.8 10,847,729 1.7 13 Genesis Emerging Markets Opportunities Fund Limited 8,639,739 1.4 13,989,739 2.2 14 Fast Gain International Limited 7,805,062 1.3 7,406,314 1.215 Mr K Balendra 7,702,457 1.3 8,142,909 1.3 16 FS Global Emerging Markets Fund 7,269,400 1.2 6,955,246 1.1 17 Aberdeen Asia Pacific Fund 6,805,672 1.1 7,194,843 1.1 18 First State Asian Equity Plus Fund 6,480,700 1.1 5,699,504 0.919 Ms L A Captain 6,400,289 1.0 7,058,272 1.1 20 Employees Provident Fund 5,995,548 1.0 5,313,058 0.8

DIRECTORS' SHAREHOLDING

DIVIDENDS SINCE 1992/93

Year ended 31 March DPS (Rs.) Dividends (Rs.’000)1992 3.00 34,7011993 2.50 35,7541994 2.50 47,3401995 3.50 84,2851996 2.80 77,5861997 3.00 92,0501998 4.00 155,7831999 4.00 151,3432000 3.00 168,1502001 2.00 353,1282002 2.00 329,8692003 2.00 342,2032004 2.50 725,7832005 3.00 1,027,4972006 3.00 1,199,4602007 3.00 1,412,3062008 5.00 3,176,3022009 3.00 1,883,442

EMPLOYEE SHARE OPTIONS

Year ended 31 March Number of options excercised* (million)

1997 0.021998 0.161999 0.272000 0.472001 0.022002 1.782003 2.302004 4.082005 1.532006 2.042007 3.672008 4.062009 0.86

* First exercised in FY1997

GDR HISTORY* (IN TERMS OF ORDINARY SHARES, MILLION)

Year ended 31 March Issued ** Converted/Repurchased Balance1994 4.50 - 4.501995 - 0.21 4.291996 0.59 0.20 4.671997 0.27 2.80 2.141998 0.28 1.06 1.371999 - 0.75 0.632000 0.26 0.52 0.362001 0.72 0.23 0.852002 - 0.17 0.682003 - 0.16 0.522004 0.13 - 0.652005 0.06 - 0.712006 0.14 - 0.852007 0.12 - 0.972008 0.14 - 1.112009 1.11 0.12 0.99

* 1 GDR equivalent to 2 ordinary shares** First issued in FY1994 and subsequently increased along with bonus

issues of ordinary shares

SHARE INFORMATION

57

HISTORY OF SCRIP ISSUES & REPURCHASES SINCE 1992/93

Year ended Number of31 March Issue/repurchase Basis shares (million) Ex-date1992 Rights @ Rs. 160* 1:4 2.50 16-Jan-921993 Bonus 1:5 2.50 03-Sep-921994 GDRs n/a 4.50 n/a1995 Bonus 1:6 2.50 19-Jan-941995 Rights @ Rs. 200* 1:6 2.50 19-Jan-941996 Bonus 1:7 3.50 20-Dec-951997 Bonus 1:7 4.00 20-Jan-971998 Bonus 1:4 8.02 09-Jan-982000 Bonus 1:5 8.09 15-Jun-992000 Bonus 1:4 12.14 05-Jan-002001 Bonus 2:1 122.36 27-Jul-002004 Bonus 1:4 46.94 10-Jun-032004 Private placement n/a 24.00 21-Oct-032004 Rights @ Rs. 75* 1:7 37.42 07-Nov-032004 Bonus 1:10 30.02 13-May-042005 Bonus 1:5 66.34 10-May-052006 Bonus 1:7 57.16 13-Jun-062007 Rights @ Rs. 140* 1:5 92.10 23-Jan-072007 Bonus 1:7 78.96 13-Mar-072009 Repurchase @ Rs. 90* 1:25 25.50 13-Oct-08* unadjusted prices

ORDINARY SHARES IN ISSUE

Year ended 31 March Number of shares (million)1990 10.001991 10.001992 12.501993 15.001994 24.501995 24.501996 28.001997 32.021998 40.211999 40.472000 61.182001 183.562002 185.352003 187.642004 300.082005 331.632006 400.002007 552.942008 635.992009 611.35

FINANCIAL CALENDAR 2009/10

2008/09Interim financial statements

Three months ended 30 June 2008 29 August 2008Six months ended 30 September 2008 30 October 2008Nine months ended 31 December 2008 29 January 2009

First interim dividend paid on 24 October 2008Second interim dividend paid on 20 February 2009Final dividend proposed to be paid on 10 June 2009Annual Report 29 May 200930th Annual General Meeting 26 June 2009

2009/10Interim financial statements

Three months ended 30 June 2009 on or before 30 July 2009Six months ended 30 September 2009 on or before 29 October 2009Nine months ended 31 December 2009 on or before 28 January 2010

Annual Report 2009/10 on or before 28 May 201031st Annual General Meeting 25 June 2010

58

WHAT IT MEANSSUMMARY OF THE SUSTAINABILITY REPORT

Based on the commitment made by senior management in theprevious year and learning gathered through intensive studiesconducted by our task forces within the various Global ReportingInitiative (GRI) categories, John Keells Holdings (JKH) decided topublish a stand-alone Sustainability Report based on the GRI-G3 framework this year. The following is a summary of theSustainability Report, which is available on CD ROM as well as onthe Sustainability page of www.keells.com.

Reporting boundariesThe key topics highlighted by the comprehensive report are‘Economic contribution’, ‘Environmental footprint’, ‘More than justa workplace’, ‘Social commitment’ and ‘Customer centric’. Thereport covers all activities of the John Keells group with primaryfocus on the businesses over which we have control. This specificcategory includes the companies in which JKH has a majoritystake or management control (decision making). For the scope ofthis report, 37 companies have been selected on the criteria ofmanagement control, thus, focusing on a systematic sustainabilitydeployment throughout the value chain in time to come.

When considering the indicators selected for detailed analysis, itwas decided to be prudent and further complement ourstakeholders and the organisational strategy. Therefore, theindicators have been reported as per sector, considering theboundary and scope as mentioned earlier. However, the economicindicators would represent the entire group and not be subjectedto the above limitations. Much focus was directed to having arobust process with a responsibility delegated to seniormanagement, as per the relevant scope determined. As this is ourfirst report, there are no re-statements of information or othersignificant changes arising from previous reports.

A summary of the indicators discussed in the Sustainability Reportis mentioned below.

Group sustainability policySustainable Development is a globally accepted approach tosustaining economic growth without harming our planet orexhausting its resources while improving the quality of life for itscurrent and future inhabitants. Long-term value creation for ourvaried stakeholder groups depends on the sustainability of theperformance of our businesses, our environment and thecommunities in which we operate. In this endeavour, we arecommitted to achieving the highest standards of corporatecitizenship.

Our policy• The group will strive to conduct its activities in accordance

with the highest standards of corporate best practice and incompliance with all applicable local and internationalregulatory requirements and conventions.

• The group monitors and assesses the quality andenvironmental impact of its operations, services and productswhilst striving to include its supply chain partners andcustomers, where relevant and to the extent possible.

• The group is committed to transparency and opencommunication about its environmental and social practices inaddition to its economic performance. It seeks dialogue withits stakeholders in order to contribute to the development ofglobal best practice, while promoting the same commitmentto transparency and open communication from its partnersand customers.

• The group strives to be an employer of choice by providing asafe, secure and non-discriminatory working environment forits employees whose rights are fully safeguarded and who canhave equal opportunity to realise their full potential. All groupcompanies will abide by national laws and wherever possiblewill strive to emulate global best practice governing therespective sectors, seeking continuous improvement of healthand safety in the workplace.

• The group will promote good relationships with allcommunities of which we are a part and enhance their qualityof life and opportunities while respecting people's culture,ways of life and heritage.

How we do itAll companies in which JKH has a controlling interest will besubject to this policy as per the relevance to their business.

Through frequent awareness and integration of sustainabilitywithin the organisation, we will encourage other companies inwhich we have a significant influence, either as supply chainpartners or otherwise, to implement similar policies.

This broad policy statement will be complemented internally withmore detailed and specific guidelines, procedures and codesgoverning all areas of sustainability practices to be adoptedthroughout the group.

We will encourage and empower our staff to be proactive onsustainable performance, at work, at home and in the community.

We will monitor our performance against a progressively stringentyardstick and report periodically as per the GRI framework andreview policies, practices and targets pertaining to sustainabilitythrough the feedback received via regular and ongoingstakeholder engagements.

59

Our stakeholders The John Keells group, as a diverse conglomerate, inherentlynetworks with a wide array of stakeholders. Each sector has itsown stakeholders, whose criticality and importance could vary.The rationale behind the selection of stakeholders was initially toidentify all stakeholders within each sector and then rate them ontheir influence and legitimacy towards the organisation. Eachsector was then collated to obtain the final identification of themost significant stakeholders for the group during the givenperiod, which the organisation would ideally address through itsfirst Sustainability Report, in line with GRI-G3 requirements.

Furthermore, the 12 indicators selected for reporting purposeswould also complement the stakeholder group in addressingcommon issues as well as the commitment made by theorganisation towards the following stakeholders in the coming year.

- Community - Employees - Regulators and Government - Shareholders - Consumers

Discussion of indicators

Economic contributionAs a responsible corporate entity, the John Keells group isdistinctly aware of its responsibility in the area of financialperformance, towards all its stakeholders. The economic policy ofthe group is therefore geared towards a sustainable growth andperformance. The following GRI indicators are discussed in detailin our Sustainability Report:

EC1. Economic value generated and distributed

EC3. Coverage of the organisation's defined benefit planobligations

Environmental footprintThe John Keells group is committed to promoting soundenvironmental practices within its key businesses. With regard toits environmental footprint, the John Keells group decided tofocus on two main topics in this report - namely, energy andbiodiversity.

Therefore, this chapter elaborates on the group's performanceand impact with regard to the above mentioned. For the pastfinancial year the group reports indicator EN3 - Direct energy

JKH board

Change for the B E S T - Structure*

JKH Social Responsibility Foundation

CorporateCommunications

Group SustainabilityCommittee

Group Sustainability function

Consultants

Map

ping

and

con

trol

, to

rev

iew Pollcy to practicle

Sectors/SBUSector Champion – Sector Heads

Sustainability representative/coordinator (Integration of Sustainability at the sector level – minimum one for each sector)

GMC Monthly Review of1. Road Map & implementation2. Identification of stakeholders

• Group initiatives• Group risk• CIO• Group Financial

Controller• Certified internal

auditors

Sustainability (Area) task force/committee1. Identify stakeholders2. Determine materiality3. Define policy4. Define goals/targets5. Sets KPI6. Implementation7. Review and monitoring8. Recommend Cap-ex9. Pooling best practices10. Operating risk review

Meets once in two monthsCompany/FunctionsChampion - CEO

Sustainability coordinator (Integration ofSustainability at the sector level – minimum one for each company)

Management Committee monthly review of1. Road Map & implementation2. Identification of stakeholder issues

Profit centres & functions

* BEST: Building an Equitable and Sustainable Tomorrow


60

consumption by primary energy source and EN4 - Indirect energyconsumption by primary source in the comprehensive report. E11- Location and size of land owned, leased, managed in, oradjacent to, areas protected / high biodiversity value outsideprotected areas are also discussed in detail in our SustainabilityReport.

More than just a workplaceCreating a safe, secure and conducive environment for ourstakeholders - particularly our employees - is a high priority forthe John Keells group. In this light, we have formulated policies onhealth and safety, freedom of association and collectivebargaining, child labour, forced or compulsory labour anddiscrimination.

John Keells group is committed to maintaining workplaces thatare free from physical or verbal harassment or discrimination onthe basis of race, religion, gender, age, nationality, social origin,disability, political affiliation or opinion. The group also has acomprehensive policy in place regarding sexual harassment.

Indicator LA1 - Breakdown of total workforce by employment typeand by region and LA 4 - Percentage of employees covered bycollective bargaining are detailed in our Sustainability Report.

The comprehensive report also contains the details of JKHpractices as required by HR 6 - Operations identified as havingsignificant risk for incidents of child labour, and measures takeneliminate of child labour; and HR 7 - Incidents of forced orcompulsory labour.

Social commitment A strong commitment to society and the environment has beeninherent in the John Keells group throughout its existence. Thiscommitment has translated into our sponsorships and communityinvestment programmes, our staff engagement with the widercommunity through voluntary service as well as our ongoingdialogue with our stakeholders to better understand their needs.

The John Keells group's social commitment is defined bydiversity, carrying out as it does a range of initiatives, both long-and short-term, in six key focus areas - namely, education, health,environment, community and livelihood development, arts andculture and disaster relief - all united under the JKH banner andreflecting the diversity within the conglomerate. Details ofindicator SO1 - Programs / practices that assess & manage theimpacts of operations on communities, including entering,operating, and exiting are given in our Sustainability Report.

John Keells Social Responsibility Foundation (‘Foundation’) is thevehicle through which the John Keells group strategises, plansand implements its social responsibility activities since 2005.Individual companies of the John Keells group have the right andliberty to engage in community service activities whichcomplement their respective businesses as well as the broadfocus areas of the Foundation. The Foundation is dulyincorporated under the law and is also registered as a ‘VoluntarySocial Service Organisation’ with the Ministry of Social Welfare.

The Rumassala Nature Field Centre developed in conjunction with the CentralEnvironmental Authority; a first of its kind in Sri Lanka

SUSTAINABILITY REPORT

61

Staff volunteerism has become an integral part of the group'scommunity engagement strategy. This not only connects the JohnKeells family more closely with one another and the community,but also enables our employees to gain skills, motivation andenjoyment, while giving something back to the community.

The group upholds the distinction of being identified as one of themost respectable organisations operating within the country,having been named 'The most respected entity' by the LankaMonthly Digest (LMD) in their annual, nation-wide survey, for fourconsecutive years. Its credibility is further strengthened by itsstand that it is governed by a zero tolerance policy with regards tocorruption as well as many regulations with a mandatoryrequirement in compliance.

JKH also has identified a three-pronged approach, which hasevolved through time, further mandating the anti-corruption policythrough a transparent process.

• JKH values/code of conduct for executives

• Processes to reduce corruption during business

• Corruption as a specific organisational risk

Indicator SO2 - Extent of training and risk analysis to preventcorruption is discussed in detail in our Sustainability Report.

Customer centric At the John Keells group, our customers are important to us,whether they are in the local market or the international arena.Bearing them in mind, we have formulated a policy that will ensurethe highest standards in the products and services we deliver.

In pursuit of customer trust, all products and services will aim tobe transparent in terms of their scope, ingredients, servicedeliverables and standards, whilst indicating the degree ofenvironmental impact where applicable. The group will invest inimproving standards, seek certification by recognised authoritiesand display such certifications by appropriate labelling whereapplicable. Through proactive customer engagement, we willidentify changing needs and innovate, thereby working towardsdelivery of product and service excellence.

PR3 -Type of product information required by procedures, andpercentage of significant products subject to such informationrequirement is detailed in the comprehensive report.

Supporting the development of Sri Lankan arts and crafts with the Kala Pola initiative

WHAT WE DIDFINANCIAL INFORMATION


64

ANNUAL REPORT OF THE BOARD OF DIRECTORS

The directors have pleasure in presenting the 30th annual report ofyour company together with the audited financial statements ofJohn Keells Holdings PLC, and the audited consolidated financialstatements of the group for the year ended 31 March 2009.

PRINCIPAL ACTIVITIESJohn Keells Holdings PLC, the group’s holding company, manages aportfolio of holdings consisting of a range of diverse businessoperations, which together constitute the John Keells group, andprovides function based services to its subsidiaries and associates.

The companies within the group and its business activities aredescribed in the Group Directory under the SupplementaryInformation section of the comprehensive Annual Report.

REVIEW OF BUSINESS SEGMENTSA review of the financial and operational performance and futurebusiness developments of the group, sectors, and its business unitsare described in the management discussion and analysis section ofthe annual report. These reports together with the audited financialstatements reflect the state of the affairs of the company and thegroup.

Segment wise contribution to group revenue, results, assets andliabilities is provided in note 34 to the financial statements.

In April 2008, the group invested in a 44% equity stake in QuatrroFinance & Accounting Solutions (Pvt) Ltd (QF&A), the India basedFinancial and Accounting (F&A) business of the Quatrro Group. QF&Ain turn acquired the Chicago based Financial Process OutsourcingLLC, a niche player in the F&A outsourcing vertical, focusing on smalland medium enterprises.

Also in April, John Keells Foods India (Pvt) Ltd (JKFI) wasincorporated as a fully owned subsidiary of Keells Food ProductsPLC (KFPL) to manufacture and market processed meats. Theproceeds of the rights issue recently concluded by KFPL will beutilized to fund KFPL’s expansion plans in India through JKFI.

The group divested its stake in Associated Motorways PLC in Julyfor a profit of Rs. 1,026 mn.

In September 2008, Asian Development Bank exercised their putoption in respect of their share in South Asia Gateway Terminals Ltd.(SAGT) and John Keells Holdings PLC (JKH) acquired its pro rataentitlement of 4.22% of SAGT. On a similar basis, in March 2009International Finance Corporation exercised their put option inrespect of their share in SAGT and JKH again acquired it’s pro rataentitlement of 4.22%.

In November 2008, the group purchased the remaining shares ofJohn Keells Air Services India (Pvt) Ltd (formally known as MathesonKeells Air Services (Pvt) Ltd) and John Keells Logistics India (Pvt) Ltd

(formally known as Matheson Keells Enterprises (Pvt) Ltd), which arenow fully owned subsidiaries of the group.

The offer by JKH for the repurchase, on a pro rata basis of 1 sharefor every 25 shares, was finalized and paid in November 2008. Thetotal value of shares repurchased amounted to Rs. 2,295 mn.

In February 2009, JKH acquired, on the Colombo Stock Exchange,37% of Union Assurance PLC (UA), 20.2% of Ceylon Cold StoresPLC (CCS) and 10.9% of John Keells PLC (JKP). Resulting from theabove acquisitions, the group’s effective shareholding in UA, CCSand JKP increased to 73.9%, 80.5% and 86.9% respectively. Thepurchase of this additional stake in UA has made it a subsidiary ofthe group from an associate previously.

In compliance with SLAS 25, the transaction was recorded based onthe fair value balance sheet of UA (also refer note 5 in the notes tothe financial statements), resulting in a negative goodwill of Rs. 614mn, which is accounted in the income statement under otheroperating income.

A mandatory offer for the remaining shares of UA not held by JKHwas made under Section 31 of the Company Take-Overs andMergers Code 1995 on 26 March 2009. The company receivedacceptances for the purchase of 2.5%, representing 943,918ordinary shares by the expiry of the offer on 4 May 2009. Throughpurchases of UA shares on the Stock Exchange of 4.2% and themandatory offer, the group’s effective holding in UA has nowincreased to 80.6%.

In March 2009, Fitch Ratings affirmed the National Long-term ratingfor JKH at 'AAA(lka)'. Fitch also affirmed the National Long-termrating on JKH's senior unsecured notes at 'AAA(lka)'. JKH's ratingreflected the diversified nature of its businesses, the currently strongfinancial profile driven in part by its high cash position, continuedstrong operating cash generating ability and the dominant marketshare of its subsidiaries.

Lanka Marine Services (Pvt) Ltd (LMS)In July 2008, judgement was delivered by the Supreme Court ofSri Lanka in a Fundamental Rights application regarding theprivatization of LMS. In terms of the judgement, the State Grant,transferring title to the Bloemendhal Facility, the agreement with theBoard of Investment (BOI) in Sri Lanka and the Common UserFacilities Agreement were declared as null and void and LMS wasrequired to vacate the premises at Bloemendhal Road.

As reported in the interim financial statement for the 9 months ended31 December 2008, a total of Rs. 904 mn was charged to theconsolidated income statement in the current year, consisting of Rs.186 mn relating to additional customs duty, asset impairment / writeoff and other costs associated with the vacating of the LMSpremises; Rs. 46mn relating to stock losses; Rs. 519 mn relating to


65

additional taxes and Rs. 153 mn relating to payment to employees.No further expenses in this regard was charged in the last quarter of2008/09. The return of LMS land has been retrospectively adjustedby restating the initial entries in the books of LMS and the group asper SLAS 10. The Urgent Issues Task force (UITF) of the Institute ofChartered Accountants of Sri Lanka was approached in October togrant a ruling on the accounting treatment and the Ruling receivedfrom the UITF, matches with the accounting treatment adopted byLMS and the group.

Further, as reported in the interim financial statement for the 9months ended 31 December 2008, the contingent liability wasestimated at Rs. 1,308 mn and this related to VAT refunds, incometax assessments, business turnover tax, excise duties and penalties.These were largely disputed on the basis that LMS’ business activityis that of an export. Since 1 January 2009, LMS also receivedassessments for periods, which in the opinion of expert advisorswere statutorily time barred. All the contingent liabilities have nowbeen revisited, carefully scrutinised and discussed with legal and taxexperts. Based on the opinions received from such experts and onthe basis of information currently known, the group is of the view thatthe contingent liability exposure as at 31 March 2009 is Rs. 695 mn,as disclosed in note 36 to the financial statements.

LMS continues to provide its customers with all grades of bunkerfuels, as in the past, using a combination of floating storage and theshared land storage facility run by the SLPA.

REVENUERevenue generated by the company amounted to Rs. 587 mn (2008- Rs. 604 mn), whilst group revenue amounted to Rs. 41,023 mn(2008 - Rs. 41,805 mn). Contribution to group revenue, from thedifferent business segments is provided in note 34 to the financialstatements.

RESULTS AND APPROPRIATIONSThe profit after tax of the holding company was Rs. 4,363 mn (2008 -Rs. 3,803 mn) whilst the group profit attributable to equity holders ofthe parent for the year was Rs. 4,742 mn (2008 - Rs. 5,119 mn).

Results of the company and of the group are given in the incomestatement.

The final dividend of Rs. 1.00 (2008 – Rs. 1.00) per share for thefinancial year 2007/08 paid on 27 June 2008 together with the interimdividends of Rs. 1.00 per share, each, paid on 24 October 2008 and20 February 2009 respectively (2008 – Total interim dividends of Rs.4.00, including a one off extraordinary dividend of Rs. 2.00), results ina total dividend pay out of Rs. 3.00 (2008 - Rs. 5.00) per share duringthe year amounting to Rs. 1,883 mn (2008 - Rs. 3,176 mn).

Dividend per share has been computed based on the amount ofdividends recognized as distribution to the equity holders duringthe period.

As required by Section 56 (2) of the Companies Act No 7 of 2007, theBoard of directors have confirmed that the company satisfies thesolvency test in accordance with Section 57 of the Companies Actno 7 of 2007, and have obtained a certificate from the auditors, priorto declaring a final dividend of Rs. 1.00 per share for this year. Thefinal dividend will be paid on 10 June 2009 to those shareholders onthe register as on 29 May 2009.

Detailed description of the results and appropriations are givenbelow.

For the year ended 31 March 2009 2008In Rs. '000s

Profit earned before interest after providingfor all known liabilities, bad and doubtfuldebts and depreciation on property,plant and equipment 4,541,408 5,899,629

Interest paid (1,695,139) (1,618,255)

2,846,269 4,281,374Profit on sale of investments 1,063,971 55,155Change in fair value of

investment property 40,573 -

Profit accruing to the company andsubsidiaries 3,950,813 4,336,529

Share of results of associates 2,349,941 2,242,713

Profit before tax 6,300,754 6,579,242Provision for taxation including

deferred tax (1,326,590) (1,054,742)

Profit after tax 4,974,164 5,524,500Profit attributable to minority shareholders (232,346) (405,566)Amount available to the group's

shareholders 4,741,818 5,118,934Re-purchase of ordinary shares (2,295,000) -Other adjustments 143,188 (108,740)Balance brought forward from

the previous year 8,759,740 6,929,182

Amount available for appropriation 11,349,746 11,939,3761st interim dividend of Rs. 1.00 per share

(2008 – Rs.1.00) paid out ofdividend received. (636,085) (635,742)

2nd interim dividend of Rs. 1.00 per share(2008 – Rs. 2.00) paid out ofdividend received. (611,354) (1,271,896)

3rd interim dividendpaid out of dividend received in 2008. - (635,995)

10,102,307 9,395,743Final dividend declared of

Rs. 1.00 per share (2008 – Rs. 1.00)to be paid out of dividend received. * (611,353) (636,003)

Balance to be carried forward next year 9,490,954 8,759,740


66

* The final dividend declared for this financial year has not beenrecognised as at the balance sheet date in compliance with SLAS 12(Revised 2005) - Events after the Balance Sheet Date.

ACCOUNTING POLICIESDetails of accounting policies have been discussed in note 1 of thefinancial statements. There have been no changes in the accountingpolicies adopted by the group during the year under review.

DONATIONSTotal donations made by the company and group during the yearamounted to Rs. 0.9 mn (2008 - Rs. 0.8 mn) and Rs. 13 mn (2008 -Rs. 22 mn), respectively. Of these, the donations to approvedcharities were Rs. 0.4 mn (2008 - Rs. 0.1 mn) at company and Rs.3.1 mn (2008 - Rs. 10 mn) at group. The amounts do not includecontributions on account of corporate social responsibility (CSR)initiatives.

The John Keells Social Responsibility Foundation, which operateswith funds contributed by each of the companies in the group,handles most of the group’s CSR initiatives and activities. TheFoundation manages a range of programmes that underpin its keyprinciple of acting responsibly in all areas of business to bring aboutsustainable development. The CSR initiatives, including completedand on-going projects, are detailed in the Sustainability Report in thecomprehensive Annual Report.

In quantifying the group’s contribution to charities no account hasbeen taken of ’in-house’ costs or management time.

PROPERTY, PLANT AND EQUIPMENTThe book value of property, plant and equipment as at the balancesheet date amounted to Rs. 228 mn (2008 - Rs. 289 mn) and Rs.29,965 mn (2008 - Rs. 28,381 mn) for the company and grouprespectively. Property, plant and equipment balances of the group forthe previous financial years were restated to reflect the restatementof the LMS land entries.

Capital expenditure for the company and group amounted to Rs. 63mn (2008 - Rs. 20 mn) and Rs. 3,920 mn (2008 - Rs. 6,111 mn),respectively.

Details of property, plant and equipment and their movements aregiven in note 2 to the financial statements.

MARKET VALUE OF PROPERTIESAll land and buildings owned by group companies were revalued lastyear, with the exception of Trinco Walk Inn Ltd., International Touristand Hoteliers Ltd. and Wirawila Walk Inn Ltd, which were revalued inthe current financial year.

All properties classified as investment property were valued inaccordance with the requirements of SLAS 40 (2005). Valuations

were carried out by P B Kalugalgedera, Chartered ValuationSurveyor, G.J. Sumanasena, Incorporated Valuer and A.Y.Daniel &Son, Incorporated Valuer.

The carrying value of investment property of the company and groupamounted to Rs. 899 mn (2008 – Rs. 832 mn) and Rs. 2,329mn (2008- Rs. 2,288 mn) respectively. Investment properties of businessunits, when significantly occupied by group companies, are classifiedas property, plant and equipment in the consolidated financialstatements in compliance with SLAS 40 (2005).

Details of the revaluation of property, plant and equipment andinvestment property are provided in notes 2.4 and 4.1 to the financialstatements.

Details of group properties as at 31 March 2009 are disclosed in theGroup Real Estate Portfolio section of the comprehensive AnnualReport.

INVESTMENTSInvestments of the company and the group in subsidiaries,associates, joint ventures and other external equity investmentsamounted to Rs. 27,739 mn (2008 - Rs. 23,768 mn) and Rs. 13,188mn (2008 - Rs. 10,120 mn), respectively.

In 2007 the group divested a major portion of its equity interest in thequick service restaurant business retaining only a 26% and 21.8%interest in Gamma Pizzakraft Lanka (Pvt) Ltd. (formerly known asKeells Restaurants (Pvt) Ltd.) and French Restaurants (Pvt) Ltd.(formerly known as Crescat Restaurants (Pvt) Ltd.) respectively. Theremaining shares were divested in March 2009. Group profits on thedisposal amounted to Rs. 32 mn and Rs. 6 mn respectively.

Detailed description of the long term investments held as at thebalance sheet date, are given in note 6 to the financial statements.

STATED CAPITALThe authorised capital and par value concept in relation to sharecapital were abolished by the Companies Act No 07 of 2007. Thetotal amounts received by the company in respect of the issue ofshares are now referred to as stated capital. The total stated capitalof the company as at 31 March 2009 was Rs. 22,525 mn (2008 - Rs.22,464 mn) as given in note 12 to the financial statements.

Options in respect of 858,443 shares (2008 – 4,094,227 shares) wereexercised during the year under the employee share option plan, fora total consideration of Rs. 61 mn (2008 - Rs. 276 mn).

SHARE INFORMATIONThe distribution and composition of shareholders and the informationrelating to earnings, dividend, net assets, market value per share andshare trading is given in the Share Information section of thecomprehensive Annual Report.


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Given below, as additional disclosure, are the John Keells Holding’sBoard of directors’ shareholdings in group companies as at 31 March2009.

John Keells Holdings PLC (JKH)S C Ratnayake - 3,227,747 (2008 - 3,227,747)A D Gunewardene - 3,527,668 (2008 - 4,018,568)G S A Gunesekera - 1,524,574 (2008 - 1,348,374)J R F Peiris - 189,628 (2008 - 3,428)E F G Amerasinghe - 4,136 (2008 - 4,136)T Das - Nil (2008 - Nil)S Enderby - Nil (2008 - Nil)P D Rodrigo - Nil (2008 - Nil)S S Tiruchelvam - Nil (2008 - Nil)

Options available under the employee share option plan of JKH.S C Ratnayake - 1,745,781 (2008 - 1,931,981)A D Gunewardene - 1,573,624 (2008 - 1,759,824)G S A Gunesekera - 1,074,411 (2008 - 1,260,611)J R F Peiris - 1,401,417 (2008 - 1,587,617)

Asian Hotels and Properties PLCS C Ratnayake - 10,000 (2008 - 10,000)

Ceylon Cold Stores PLCS C Ratnayake - 760 (2008 - 760)A D Gunewardene - 7,000 (2008 - 7,000)G S A Gunesekera - 3,812 (2008 - 3,812)J R F Peiris - 150 (2008 - 150)

John Keells Hotels PLCS C Ratnayake - 468,984 (2008 - 468,984)A D Gunewardene - 62,480 (2008 - 62,480)G S A Gunesekera - 70,033 (2008 - 70,033)

Keells Food Products PLCS C Ratnayake - 4,250 (2008 - 2,500)G S A Gunesekera - 2,832 (2008 - 1,666)

Nations Trust Bank PLCA D Gunewardene - 3,253,666 (2008 - 3,281,933)G S A Gunesekera - 3,626 (2008 - 3,626)

Tea Smallholder Factories PLCG S A Gunesekera - 1,000 (2008 - 1,000)

Trans Asia Hotels PLCS C Ratnayake - 100 (2008 - 100)|A D Gunewardene - 100 (2008 - 100)G S A Gunesekera - 100 (2008 - 100)J R F Peiris - 100 (2008 - 100)

Union Assurance PLCA D Gunewardene - 3,746 (2008 - 3,746)

Further, warrants held at Nations Trust Bank PLC are as follows.

A D GunewardeneWarrants 2010 - 2,115,256 (2008 - 2,115,822)Warrants 2011 - 1,057,627 (2008 - 1,057,911)

G S A GunesekeraWarrants 2010 - 906 (2008 - 906)Warrants 2011 - 453 (2008 - 453)

MAJOR SHAREHOLDERSDetails of the twenty largest shareholders of the company and thepercentages held by each of them are disclosed in the ShareInformation section of the comprehensive Annual Report.

RESERVESTotal reserves as at 31 March 2009 for the company and groupamounted to Rs. 6,528 mn (2008 - Rs. 6,343 mn) and Rs. 23,057 mn(2008 - Rs. 20,933 mn), respectively. The total value of sharesrepurchased by JKH amounting to Rs. 2,295 mn, has been chargedagainst retained earnings in the statement of changes in equity.

The movement and composition of the capital and revenue reservesis disclosed in the statement of changes in equity.

DIRECTORSThe Board of directors of the company as at 31 March 2009 and theirbrief profiles are given in the Board of Directors section of thecomprehensive Annual Report.

R S Capitain resigned from the Board with effect from 6 May 2008.

M V Muhsin resigned from the Board with effect from 1 March 2009.

As announced on 6 April 2009, G S A Gunasekera has advised theboard of exercising his option for early retirement on reaching theage of 55 years with effect from 30 June 2009.

In accordance with Article 84 of the Articles of Association of thecompany, P D Rodrigo and S S Tiruchelvam retire by rotation andbeing eligible offer themselves for re-election.

The Company has also received notice of the resolution to proposethe re-election of T Das who is over 70 years of age and who retiresin terms of section 210 of the Companies Act. The resolutionproposes that the age limit stipulated in Section 210 of theCompanies Act No 7 of 2008 shall not apply to T Das who is 70years and that he be re-elected a director of the company

The group directory details the names of persons holding office asdirectors of the company and all its subsidiary and associatecompanies, as at 31 March 2009 and the names of persons whowere appointed or who ceased to hold office as directors during theperiod.


68

BOARD COMMITTEESThe following members serve on the Board Audit, Remuneration andNomination Committees;

Audit CommitteeP D Rodrigo - ChairmanE F G AmerasingheS EnderbyS S Tiruchelvam

The report of the Audit Committee is given under the BoardCommittee reports section of the comprehensive Annual Report.

Remuneration CommitteeE F G Amerasinghe - ChairmanM V Muhsin (resigned w.e.f. 1 March 2009)P D RodrigoS S Tiruchelvam

The report of the Remuneration Committee is given under the BoardCommittee reports section of the comprehensive Annual Report andthe remuneration policy is given in the Corporate Governance report.

Nominations CommitteeT Das - ChairmanS EnderbyM V Muhsin (resigned w.e.f. 1 March 2009)S C RatnayakeS S Tiruchelvam

The report of the Nominations Committee is given under the BoardCommittee reports section of the comprehensive Annual Report.

INTERESTS REGISTERThe Company has maintained an Interests Register as contemplatedby the Companies Act No 7 of 2007.

In compliance with the requirements of the Companies Act No. 7 of2007, this Annual Report also contains particulars of entries made inthe Interests Registers of subsidiaries which are public companies orprivate companies which have not dispensed with the requirement tomaintain an Interests Register as permitted by Section 30 of theCompanies Act No 7 of 2007.

Particulars of entries in the JKH interests registerInterests in contractsThe directors have all made a general disclosure to the Board ofdirectors as permitted by Section 192 (2) of the Companies Act No 7of 2007 and no additional interests have been disclosed by anydirector.

a) Share dealings:

NAME OF DIRECTOR NATURE OF SHARE DEALINGA D Gunewardene Sale of 490,900 sharesG S A Gunesekera Gift of 10,000 shares to son

Purchase of 186,200 sharesJ R F Peiris Purchase of 186,200 shares

b) Indemnities and remuneration1. The board approved the payment of remuneration of the executive

directors of the company, namely, S C Ratnayake, Chairman/CEO,A D Gunewardene, Deputy Chairman/President, G S AGunasekera, President and J R F Peiris, Group Finance Directorfor the period 1 April 2008 to 31 March 2009 comprising of:• Increments from 1 July 2008 based on individual

performance ratings matrices obtained in terms of theperformance management system of the company;

• Short term variable incentives based on individualperformance, organization performance and roleresponsibility for the said financial year;

as recommended by the Remuneration Committee havingconducted market surveys, spoken to experts and having takeninto consideration the specific management complexitiesassociated with the John Keells group and in keeping with thegroup remuneration policy.

2. The Supreme Court on 21 July 2008 ordered JKH, LMS,S C Ratnayake (current Chairman) and V Lintotawela, (formerChairman) to pay costs in a sum of Rs 250,000 in respect ofcase no SC (FR) 209/2007.

The company in agreement with LMS, its subsidiary, has agreed toshare the same equally amongst LMS and JKH in the proportion of 1:3.

The company paid the sum of Rs. 187,500 awarded as costs to bepaid by JKH its current Chairman S C Ratnayake and V Lintotawela(former Chairman) in Fundamental Rights case number SC (FR)209/2007 regarding the privatisation of LMS

Particulars of entries in interests register of subsidiariesAsian Hotels & Properties PLC

a) Share dealings

NAME OF DIRECTOR NATURE OF SHARE DEALING

B M A Amaerasekera Sale of 100 shares


69

b) Indemnities and remunerationThe board approved the payment to the executive director of thecompany, R Karunarajah of an increment from 1 July 2008 asprovided by his contract previously approved by the board andbased on his performance.

Ceylon Cold Stores PLCa) Indemnities and remunerationThe Board approved the payment to the executive director of thecompany J R Guneratne and M D De Silva of remuneration,comprising of:• Increments from 1 July 2008 based on individual performance

ratings matrices• Short term variable incentives based on individual performance,

organization performance and role responsibility for the saidfinancial year;

as recommended by the Remuneration Committee of JKH theholding company of Ceylon Cold Stores PLC in keeping with thegroup remuneration policy.

Keells Hotel Management Services Ltd.Indemnities and remunerationThe board approved the payment to the executive director of thecompany J E P Kehelpannala of remuneration, comprising of• Increments from 1 July 2008 based on individual performance

ratings matrices;• Short term variable incentives based on individual performance,

organization performance and role responsibility for the saidfinancial year;

as recommended by the Remuneration Committee of JKH in keepingwith the group remuneration policy.

Walkers Tours Ltd.Indemnities and remunerationThe board approved payment to the executive director of thecompany V Leelananda of remuneration comprising of:• Increment from 1 July 2008 based on individual performance

rating obtained by V Leelananda in terms of the performancemanagement system of the John Keells Group.

• Short term variable incentive for the period 1 April 2008 to 31March 2009 based on individual performance, organisationperformance rating and the career level of V Leelananda in termsof the variable pay plan of JKH; and

as recommended by the Remuneration Committee of JKH in keepingwith the group remuneration policy.

DIRECTORS’ REMUNERATIONDetails of the remuneration and other benefits received by thedirectors are set out in note 30 of the financial statements.

EMPLOYEE SHARE OPTION PLANAt the beginning of the year, the employee share option planconsisted of the second, third and fourth plans approved by theshareholders on 29 June 2001, 28 June 2004 and 13 December 2007respectively.

Under the second plan, the company was authorized to issue up tofive per cent of the issued share capital, with an annual limit of up totwo per cent, of non-transferable call share options. Options grantedunder this plan had to be exercised within five years of such grant.Under the third plan, the company was authorised to issue up to fiveper cent of the issued share capital within an annual limit of up totwo per cent of non-transferable call share options and the optionsgranted under this plan have to be exercised within five years of suchgrant. Under the fourth plan, the company was authorised to issue

EMPLOYEE SHARE OPTION PLAN AS AT 31ST MARCH 2009Date of Shares Expiry Option Shares ** Lapsed/ Current

grant granted date grant price adjusted Exercised cancelled Outstanding price **

PLAN 2Award 3 23.1.2004 2,994,209 22.1.2009 104.25 5,129,406 2,907,721 2,221,685 - 70.81

PLAN 3Award 1 29.3.2005 5,503,850 28.3.2010 136.00 9,746,823 2,249,994 476,051 7,020,778 92.72Award 2 10.4.2006 6,645,575 09.4.2011 157.25 10,301,859 502,319 973,599 8,825,941 120.74Award 3 28.5.2007 10,551,062 27.5.2012 146.00 10,551,062 - 817,220 9,733,842 146.00

22,700,487 30,599,744 2,752,313 2,266,870 25,580,561PLAN 4

25.3.2008 5,405,945 24.3.2013 120.00 5,405,945 - 160,400 5,245,545 120.00

Total 31,100,641 41,135,095 5,660,034 4,648,955 30,826,106

** Adjusted for bonus issues and right issues


70

nontransferable call share options, not exceeding in aggregate 0.85%of the shares in issue of the company as at the date of granting theaward and have to be exercised within five years of such grant.

The options outstanding for all the awards of plan 3 and plan 4 arevalid for exercise as at 31 March 2009, plan 2 having expired duringthe year.

Details of the options granted, options exercised, the grant price andthe options cancelled / outstanding as at the date of the directors'report have been tabulated above.


Directors’ declarations

The directors declare that:a) The company complied with all applicable laws and regulations

in conducting its business.

b) The directors have declared all material interests in contractsinvolving the company and refrained from voting on matters inwhich they were materially interested.

c) The company has made all endeavours to ensure the equitabletreatment of shareholders.

d) The business is a going concern with supporting assumptions orqualifications as necessary and.

e) We have conducted a review of internal controls coveringfinancial operational and compliance controls and riskmanagement and have obtained a reasonable assurance of theireffectiveness and successful adherence herewith.

The corporate governance report is given under the Profile andDiscussion section of the comprehensive Annual Report.

SUSTAINABILITYIn order to renew and reinvigorate the group’s efforts to address andbalance the economic, social and environmental responsibilities withbusiness priorities, a sustainability committee was formed during theyear. The committee will lead group wide efforts in identifyingemerging issues, developing coherent and effective strategies andpolicies and overseeing their implementation. The committee issupported by a sustainability function at the corporate centre andinitiatives will be rolled out throughout the group through a projectnamed “Building an equitable and sustainable tomorrow”.

The separate sustainability report included this year is a product ofthis initiative and the group will continue to report periodically as perthe GRI framework and review policies, practices and targetspertaining to sustainability through the feedback received via regularand ongoing stakeholder engagements.

EMPLOYMENTThe group has an equal opportunity policy and these principles areenshrined in specific selection, training, development and promotionpolicies, ensuring that all decisions are based on merit. The grouppractices equality of opportunity for all employees irrespective ofethnic origin, religion, political opinion, gender, marital status orphysical disability. Employee ownership in the company is facilitatedthrough the employee share option plan.

Details of the group’s human resource initiatives are detailed in theemployees’ section of the sustainability report.

The number of persons employed by the company and group as at31 March 2009 was 142 (2008 - 143) and 10,501 (2008 – 9,992),respectively.

There have been no material issues pertaining to employees andindustrial relations of the company.

SUPPLIER POLICYThe Group applies an overall policy of agreeing and clearlycommunicating terms of payment as part of the commercialagreements negotiated with suppliers, and endeavors to pay for allitems properly charged in accordance with these agreed terms. As at31 March 2009 the trade and other payables of the company andgroup amounted Rs. 393 mn (2008 - Rs. 314 mn) and Rs. 6,505 mn(2008 - Rs. 7,869 mn), respectively.

ENVIRONMENTAL PROTECTIONThe group complies with the relevant environmental laws, regulationsand endeavors to comply with best practices applicable in thecountry of operation. A summary of selected group activities in theabove area is contained in the Sustainability Report.

RESEARCH AND DEVELOPMENTThe group has an active approach to research and development andrecognises the contribution that it can make to the group’soperations. Significant expenditure has taken place over the yearsand substantial efforts will continue to be made to introduce newproducts and processes and develop existing products andprocesses to improve operational efficiency.

STATUTORY PAYMENTSThe directors confirm that to the best of their knowledge, all taxes,duties and levies payable by the company and its subsidiaries, allcontributions, levies and taxes payable on behalf of, and in respectof the employees of the company and its subsidiaries, and all otherknown statutory dues as were due and payable by the company andits subsidiaries as at the balance sheet date have been paid or,where relevant provided for, except as specified in note 36 to thefinancial statements, covering contingent liabilities.


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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 placeas an integral part of the annual strategic planning cycle and theprinciple risks and mitigating actions in place are reviewed regularlyby the Board and the Audit Committee. The Board, through theinvolvement of the risk review and control department takes steps togain assurance on the effectiveness of control systems in place. TheAudit Committee receives reports on the results of internal controlreviews and the head of the group risk review and controldepartment has direct access to the chairman of the AuditCommittee.

The risk management report is given under the ManagementDiscussion and Analysis section of the comprehensive Annual Report

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 thegroup other than those disclosed in note 41 to the financialstatements.

GOING CONCERNThe directors are satisfied that the company, its subsidiaries andassociates, have adequate resources to continue in operationalexistence for the foreseeable future, to justify adopting the goingconcern basis in preparing these financial statements.

AUDITORSMessrs Ernst & Young, Chartered Accountants, are willing tocontinue as Auditors of the company, and a resolution proposingtheir reappointment will be tabled at the annual general meeting.

The Auditors Report is found in the Financial Reports section of thecomprehensive Annual Report.

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

The group works with 5 firms of Chartered Accountants across thegroup, namely, Ernst & Young, KPMG Ford Rhodes Thornton and Co,PricewaterhouseCoopers, Someswaran Jayawickrama and Co. andDeloitte Haskins & Sells. Details of audit fees are set out in note 30 ofthe financial statements. The Auditors, do not have any relationship(other than that of an Auditor) with the company or any of itssubsidiaries.

Further details on the work of the Auditor and the Audit Committeeare set out in the Audit Committee Report.

ANNUAL REPORTThe Board of directors approved the consolidated financialstatements on 21 May 2009. The appropriate number of copies ofthis report will be submitted to the Colombo Stock Exchange and tothe Sri Lanka Accounting and Auditing Standards Monitoring Boardon 29 May 2009.

ANNUAL GENERAL MEETINGThe annual general meeting will be held at the Institute of CharteredAccountants of Sri Lanka, 30, Malalasekera Mawatha, Colombo 7, onFriday, 26 June 2009 at 10.00 a.m. The notice of meeting appears inthe Supplementary Information section of the comprehensive AnnualReport.

This annual report is signed for and on behalf of the Board ofdirectors.

By Order of the Board

Director Director

Keells Consultants Ltd.Secretaries

21 May 2009


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STATEMENT OF DIRECTORS’ RESPONSIBILITY

The responsibility of the directors in relation to the financialstatements is set out in the following statement. The responsibility ofthe auditors, in relation to the financial statements prepared inaccordance with the provision of the Companies Act No 7 of 2007, isset out in the Report of the Auditors.

The financial statements comprise of:• 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 thefinancial year and

• an income statement, which presents a true and fair view of theprofit and loss of the company and its subsidiaries for thefinancial year; which comply with the requirements of the act.

The directors are required to ensure that, in preparing these financialstatements:• the appropriate accounting polices 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 beenfollowed;

• judgements and estimates have been made which arereasonable and prudent.

The directors are also required to ensure that the company hasadequate resources to continue in operation to justify applying thegoing concern basis in preparing these financial statements.

Further, the directors have a responsibility to ensure that thecompany maintains sufficient accounting records to disclose, withreasonable accuracy the financial position of the company and of thegroup, and to ensure that the financial statements presented complywith the requirements of the act.

The directors are also responsible for taking reasonable steps tosafeguard the assets of the company and of the group and in this

regard to give proper consideration to the establishment ofappropriate internal control systems with a view to preventing anddetecting fraud and other irregularities.

The directors are required to prepare the financial statements and toprovide the auditors with every opportunity to take whatever stepsand undertake whatever inspections they may consider to beappropriate to enable them to give their independent audit opinion.

Further, as required by Section 56 (2) of the Companies Act No 7 of2007, the Board of directors have confirmed that the company,based on the information available, satisfies the solvency testimmediately after the distribution, in accordance with Section 57 ofthe Companies Act no 7 of 2007, and has obtained a certificate fromthe auditors, prior to declaring a final dividend of Rs 1.00 per sharefor this year, to be paid on 10 June 2009.

The directors are of the view that they have discharged theirresponsibilities 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, allcontributions, levies and taxes payable on behalf of and in respect ofthe employees of the company and its subsidiaries, and all otherknown statutory dues as were due and payable by the company andits subsidiaries as at the balance sheet date have been paid, orwhere relevant provided for, except as specified in Note 36 to thefinancial statements covering contingent liabilities

By order of the Board

Keells Consultants LtdSecretaries

21 May 2009

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INDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS OF JOHN KEELLS HOLDINGS PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of JohnKeells Holdings PLC (“Company”), the consolidated financialstatements of the Company and its subsidiaries which comprise thebalance sheets as at 31 March 2009, and the income statements,statements of changes in equity and cash flow statements for theyear then ended, and a summary of significant accounting policiesand other explanatory notes.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentationof these financial statements in accordance with Sri LankaAccounting Standards. This responsibility includes: designing,implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are freefrom material misstatement, whether due to fraud or error; selectingand applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with Sri Lanka Auditing Standards. Those standardsrequire that we plan and perform the audit to obtain reasonableassurance whether the financial statements are free from materialmisstatement.

An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating theoverall financial statement presentation.

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

OpinionIn our opinion, so far as appears from our examination, the Companymaintained proper accounting records for the year ended 31 March2009 and the financial statements give a true and fair view of theCompany’s state of affairs as at 31 March 2009 and its profit andcash flows for the year then ended in accordance with Sri LankaAccounting Standards.

In our opinion, the consolidated financial statements give a true andfair view of the state of affairs as at 31 March 2009 and the profit andcash flows for the year then ended, in accordance with Sri LankaAccounting Standards, of the Company and its subsidiaries dealtwith 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 therequirements of Sections 151(2) and 153(2) to 153(7) of theCompanies Act No. 07 of 2007.

21 May 2009

Colombo.

REPORT OF THE AUDITORS


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BALANCE SHEET

Group CompanyAs at 31st March Note 2009 2008 2009 2008In Rs.'000s Re-stated

ASSETSNon-current assetsProperty, plant and equipment 2 29,965,422 28,381,329 227,877 289,430Leasehold property 3 4,775,712 4,638,234 - -Investment property 4 2,329,015 2,288,442 899,000 832,158Intangible assets 5 2,667,891 221,684 - -Investments in subsidiaries and joint ventures 6 5,115 5,115 19,693,717 17,452,415Investments in associates 6 13,055,642 9,952,651 7,959,247 6,204,776Other investments 6 8,751,603 327,416 814,112 94,957Deferred tax assets 7 147,846 91,074 - -Other non-current assets 8 1,799,000 1,603,746 84,740 65,687

63,497,246 47,509,691 29,678,693 24,939,423

Current assetsInventories 9 2,254,303 3,985,025 810 825Investments held for sale 6 14,299 37,331 3,900 15,860Trade and other receivables 10 9,027,653 6,753,452 777,843 263,336Amounts due from related parties 35 22,129 17,485 200,560 227,481Short term investments 11 15,347,437 10,455,366 11,431,363 6,984,736Cash in hand and at bank 2,052,642 2,191,251 16,748 242,702

28,718,463 23,439,910 12,431,224 7,734,940Total assets 92,215,709 70,949,601 42,109,917 32,674,363

EQUITY AND LIABILITIESEquity attributable to equity holders of the parentStated capital 12 22,525,108 22,464,267 22,525,108 22,464,267Capital reserves 13 7,436,723 6,019,027 - -Revenue reserves 14 15,620,270 14,913,706 6,527,647 6,342,817

45,582,101 43,397,000 29,052,755 28,807,084Minority interest 4,960,310 4,769,775 - -

Total equity 50,542,411 48,166,775 29,052,755 28,807,084

Non-current liabilitiesNon-interest bearing borrowings 15 21,000 21,000 - -Insurance provisions 16 11,025,614 - - -Interest bearing borrowings 17 14,739,141 7,809,452 10,482,593 2,595,493Deferred tax liabilities 18 777,236 736,045 - -Employee benefit liabilities 19 956,917 798,600 92,358 80,330Other deferred liabilities 20 5,167 7,110 - -Other non-current liabilities 274,576 352,051 - -

27,799,651 9,724,258 10,574,951 2,675,823Current liabilitiesTrade and other payables 21 6,505,477 7,869,039 393,311 313,634Amounts due to related parties 35 16,471 24,953 5,619 9,996Income tax liabilities 22 514,362 328,104 - -Short term borrowings 23 90,000 375,000 - -Current portion of interest bearing borrowings 17 1,817,511 1,059,752 777,650 300,000Bank overdrafts 4,929,826 3,401,720 1,305,631 567,826

13,873,647 13,058,568 2,482,211 1,191,456Total equity and liabilities 92,215,709 70,949,601 42,109,917 32,674,363

I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007.

M.J.S. RajakariarGroup Financial Controller

The Board of Directors is responsible for the preparation and presentation of these financial statements.

S.C. Ratnayake J.R.F. PeirisChairman Group Finance Director

The accounting policies and notes as set out in pages 80 to 127 form an integral part of these financial statements.21 May 2009

75

INCOME STATEMENT

Group CompanyFor the year ended 31st March Note 2009 2008 2009 2008In Rs.'000s Re-stated

Revenue 24 41,022,520 41,805,343 587,312 603,665

Cost of sales (31,211,564) (30,645,298) (222,356) (274,505)

Gross profit 9,810,956 11,160,045 364,956 329,160

Dividend income 25 53,765 93,405 2,482,685 3,159,389

Other operating income 26 3,735,102 2,716,887 1,910,671 1,644,114

Distribution expenses (1,382,765) (1,339,501) - -

Administrative expenses (6,255,278) (5,528,801) (661,411) (637,441)

Other operating expenses 27 (1,382,180) (1,202,402) (40,232) (36,872)

Finance expenses 28 (1,695,139) (1,618,255) (913,009) (583,794)

Change in fair value of investment property 4 40,573 - 66,842 -

Share of results of associates 2,349,941 2,242,713 - -

Profit on sale of non-current investments 29 1,025,779 55,151 1,209,803 41,236

Profit before tax 30 6,300,754 6,579,242 4,420,305 3,915,792

Tax expense 31 (1,326,590) (1,054,742) (57,033) (112,702)

Profit for the year 4,974,164 5,524,500 4,363,272 3,803,090

Attributable to:Equity holders of the parent 4,741,818 5,118,934Minority interest 232,346 405,566

4,974,164 5,524,500

Earnings per share Rs. Rs.Basic 32 7.58 8.06Diluted 32 7.58 8.00

Dividend per share 33 3.00 5.00

Figures in brackets indicate deductions.

The accounting policies and notes as set out in pages 80 to 127 form an integral part of these financial statements.

21 May 2009


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CASH FLOW STATEMENT

Group CompanyFor the year ended 31st March Note 2009 2008 2009 2008In Rs.'000s Re-stated

CASH FLOWS FROM OPERATING ACTIVITIESProfit before working capital changes A 3,789,921 5,381,234 4,187,967 4,576,086

(Increase)/decrease in inventories 1,276,007 93,864 14 22(Increase)/decrease in receivables and prepayments 787,668 213,624 (429,054) 526,884(Increase)/decrease in other non-current assets (110,067) (1,044,779) (19,052) 26,257Increase/(decrease) in creditors and accruals (1,952,124) 1,451,893 73,253 (154,269)Increase/(decrease) in insurance provision 173,537 - - -Cash generated from operations 3,964,942 6,095,836 3,813,128 4,974,980

Interest received 2,265,663 2,083,916 - -Finance expenses paid (1,695,139) (1,618,255) (913,009) (583,794)Dividend received 1,090,588 1,491,552 - -Tax paid (1,345,337) (1,061,346) (56,075) (151,736)Gratuity paid (92,960) (77,830) (3,280) (13,704)Net cash flow from operating activities 4,187,757 6,913,873 2,840,764 4,225,746

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIESPurchase and construction of property, plant and equipment (2,036,118) (2,778,167) (62,937) (19,723)Addition to investment property - (21,384) - (32,158)Advances paid on investment - (615,358) - -Addition to intangible assets (23,140) - - -Acquisition of subsidiary B 170,872 (331,410) - -Increase in interest in subsidiaries (716,348) (1,952) (2,020,901) (3,022,226)Increase in interest in associates (2,728,160) (858,036) (2,728,161) (209,643)Investment in government securities - - (731,587) -Proceeds from sale of property, plant and equipment 88,647 105,107 11,811 410Proceeds from sale of non-current investments 1,915,261 137,706 1,915,261 53,032Proceeds from / (repayment of) other investments (684,696) - - -Grants received for investing activities 315 4,970 - -Net cash flow from / (used in) investing activities (4,013,367) (4,358,524) (3,616,514) (3,230,308)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIESProceeds from issue of shares - company 60,841 218,373 60,841 218,373Re-purchase of ordinary shares (2,295,000) - (2,295,000) -Proceeds from minority on issue of rights in subsidiaries 5,109 86,900 - -Dividend paid to equity holders of parent (1,883,442) (3,176,302) (1,883,442) (3,176,302)Dividend paid to minority shareholders (223,657) (205,304) - -Proceeds from long term borrowings 8,380,950 1,139,239 8,070,950 -Repayment of long term borrowings (1,428,046) (2,011,519) (300,000) (700,000)Proceeds from/(repayment of) short term borrowings (net) (285,000) (2,313,311) - (500,000)Net cash flow from/(used in) financing activities 2,331,755 (6,261,924) 3,653,349 (4,157,929)

NET INCREASE / (DECREASE) IN CASH ANDCASH EQUIVALENTS 2,506,145 (3,706,575) 2,877,599 (3,162,491)

CASH AND CASH EQUIVALENTS AT THE BEGINNING 9,158,290 12,951,472 6,659,612 9,822,103

CASH AND CASH EQUIVALENTS AT THE END 11,664,435 9,244,897 9,537,211 6,659,612

ANALYSIS OF CASH AND CASH EQUIVALENTSFavourable balancesCash in hand and at bank 2,052,642 2,191,251 16,748 242,702Short term investments 15,347,437 10,455,366 11,431,363 6,984,736Transfer to short term investments (200,549) - - -Exchange gain included in short term investments (605,269) - (605,269) -Unfavourable balancesBank overdrafts (4,929,826) (3,401,720) (1,305,631) (567,826)Total cash and cash equivalents as previously reported 11,664,435 9,244,897 9,537,211 6,659,612Effect of exchange rate changes - (86,607) - -Cash and cash equivalents restated 11,664,435 9,158,290 9,537,211 6,659,612

Figures in brackets indicate deductions.The accounting policies and notes as set out in pages 80 to 127 form an integral part of these financial statements.

CASH FLOW STATEMENT

77

Group CompanyFor the year ended 31st March 2009 2008 2009 2008In Rs.'000s Re-stated

A Profit before working capital changesProfit before tax 6,300,754 6,579,242 4,420,305 3,915,792Adjustments for:Interest income (2,265,663) (2,083,916) - -Dividend income (53,765) (93,405) - -Finance expenses 1,695,139 1,618,255 913,009 583,794Change in fair value of investment property (40,573) - (66,842) -Share of results of associates (2,349,941) (2,242,713) - -(Profit) / loss on sale of non-current investments (1,025,779) (55,151) (1,209,803) (41,236)Depreciation of property, plant and equipment 1,731,626 1,443,471 116,498 110,116Impairment losses on property, plant & equipment and investments 100,943 3,283 60,263 -(Profit) / loss on sale of property, plant and equipment (37,590) (69,346) (3,820) (94)(Profit) / loss on sale of other investments (38,192) (4) (37,037) (4)Amortisation / depreciation of non-current assets 307,583 178,420 - -Amortisation of other deferred liabilities (2,258) (1,622) - -Gratuity provision and related costs 165,788 165,417 15,308 7,718(Gain) / loss on foreign exchange 75,138 (5,051) (19,914) -Surplus of insurance claim on property, plant and equipment (42,676) -(Gain) / loss on revaluation of property, plant and equipment - (155) - -Write back of dealer deposits (89,167) - - -Negative goodwill on acquisitions (641,377) (56,625) - -Unrealised profits (69) 1,134 - -

3,789,921 5,381,234 4,187,967 4,576,086

B Acquisition of subsidiaryThe fair value of assets acquired and liabilities assumed of Union Assurance PLC were as follows.

Property, plant and equipment (974,816)Intangible assets (2,298,500)Other non current assets (454,671)Other investments (8,104,141)Inventories (3,481)Trade and other receivables (2,748,315)Insurance provision 10,852,077Deferred tax liabilities 13,085Employee benefit liabilities 84,736Income tax liabilities 20,907Trade and other payables 695,398Cash and cash equivalents (1,286,600)

Total net assets (4,204,321)

Net assets acquired - 41.15% of above (1,730,429)Negative goodwill 614,701

Cash consideration paid on acquisition of subsidiary (1,115,728)Cash and cash equivalents acquired 1,286,600

Net cash outflow on acquisition of subsidiary 170,872

Note : The assets and liabilities as at the acquisition date are stated at their provisional fair values and may be amended in accordance withSLAS 25 (Revised 2004) - Business Combination.

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78

STATEMENT OF CHANGES IN EQUITYGROUP

STATEMENT OF CHANGES IN EQUITY

79

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80

NOTES TO THE FINANCIAL STATEMENTS

1. ACCOUNTING POLICIESJohn Keells Holdings PLC. is a public limited liability companyincorporated and domiciled in Sri Lanka and listed on theColombo Stock Exchange. The registered office and principalplace of business of the company is located at 130, GlennieStreet, Colombo 2.

Ordinary shares of the company are listed on the ColomboStock Exchange. Global depository receipts (GDRs) of JohnKeells Holdings PLC. are listed on the Luxembourg StockExchange.

In the annual report of the Board of directors and in thefinancial statements, “the company” refers to John KeellsHoldings PLC. as the holding company and “the group” refersto the companies whose accounts have been consolidatedtherein. The financial statements for the year ended 31 March2009 were authorised for issue by the directors on 21 May2009.

John Keells Holdings PLC became the holding company ofthe group during the financial year ended 31 March 1986. Theprinciple activities of the group are stated in the annual reportof the Board of directors.

All values presented in the financial statements are in SriLanka rupees thousands (Rs. ’000) unless otherwise indicated.The significant accounting policies are being discussed below.

1.1. GENERAL POLICIES

1.1.1. Statement of complianceThe balance sheet, statement of income, statement ofchanges in equity and the cashflow statement, together withthe accounting policies and notes (the ”financial statements”)have been prepared in compliance with the Sri LankaAccounting Standards (SLAS) issued by the Institute ofChartered Accountants of Sri Lanka and the requirement ofthe Companies Act No. 7 of 2007.

1.1.2. Basis of preparationThe financial statements, presented in Sri Lanka rupees, havebeen prepared on an accrual basis and under the historicalcost convention unless stated otherwise.

1.1.3. Use of estimates and judgementsThe preparation of financial statements in conformity withSLAS, requires management to make judgments, estimatesand assumptions that affect the application of accountingpolicies and the reported amounts of assets, liabilities, incomeand expenses.

The estimates and underlying assumptions are based onhistorical experience and various other factors that are

believed to be reasonable under the circumstances, theresults of which form the basis of making the judgments aboutthe carrying amount of assets and liabilities that are not readilyapparent from other sources.

The estimates and underlying assumptions are reviewed on anongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised if therevision affects only that period, or in the period of the revisionand future periods if the revision affects both current andfuture periods.

Judgements made by management in the application of SLASthat have a significant effect on the financial statements arementioned below.

Policy NoteProperty, plant & equipmentValuation and depreciation 1.5.1 2.4

Amortisation of leasehold property 1.5.2 3Valuation of investment property 1.5.3 4.1Valuation of intangible assets 1.5.4 5Deferred tax 1.4.2 7,18Impairment of assets 1.5.6 2,5,6Insurance provision – life 1.6.3 16.1Employee benefit liabilities 1.6.1 19

1.1.4. Changes in accounting policiesThe accounting policies adopted are consistent with those ofthe previous financial year.

1.1.5. Comparative informationPrevious years figures and phrases have been re-arranged,wherever necessary, to conform to the current year’spresentation.

1.1.6. Events after the balance sheet dateAll material post balance sheet events have been consideredand appropriate adjustments or disclosures have been madein the respective notes to the financial statements.

1.2. CONSOLIDATION POLICY

1.2.1. Basis of consolidationThe consolidated financial statements include the financialstatements of the company, its subsidiaries and othercompanies over which it has control and have been preparedin compliance with the group’s accounting policies.

All intra group balances, transactions, income and expensesand profits and losses resulting from intra group transactionsthat are recognised in assets, are eliminated in full.


81

1.2.2. Acquisitions and divestmentsAcquisitions of subsidiaries are accounted for using the purchasemethod of accounting. The results of subsidiaries, joint venturesand associates acquired or incorporated during the year havebeen included from the date of acquisition, or incorporation whileresults of subsidiaries, joint ventures and associates disposedhave been included up to the date of disposal.

1.2.3. SubsidiariesSubsidiaries are those enterprises controlled by the parent.Control exists when the parent holds more than 51% of thevoting rights or otherwise has a controlling interest.

Subsidiaries are consolidated from the date the parent obtainscontrol until the date that control ceases.

Subsidiaries consolidated have been listed in the groupdirectory.

The following subsidiaries have been incorporated outsideSri Lanka:

Name Country ofIncorporation

John Keells Air Services India (Pvt) Ltd IndiaJohn Keells Foods India (Pvt) Ltd. IndiaJohn Keells Logistics India (Pvt) Ltd IndiaSerene Holidays (Pvt) Ltd. IndiaAuxicogent Alpha (Pvt) Ltd MauritiusAuxicogent Holdings (Pvt) Ltd MauritiusAuxicogent International (Pvt) Ltd MauritiusAuxicogent Investments Mauritius (Pvt) Ltd MauritiusJohn Keells Hotels Mauritius (Pvt) Ltd MauritiusJohn Keells Holdings Mauritius (Pvt) Ltd MauritiusKeells Foods Products Mauritius (Pvt) Ltd MauritiusFantasea World Investments (Pte) Ltd Republic of

MaldivesJohn Keells Maldivian Resorts (Pte) Ltd Republic of

MaldivesMack Air Services Maldives (Pte) Ltd Republic of

MaldivesTranquility (Pte) Ltd Republic of

MaldivesTravel Club (Pte) Ltd Republic of

MaldivesJohn Keells Singapore (Pte) Ltd SingaporeJohn Keells Computer Services (UK) Ltd United

KingdomAuxicogent International US inc. USA

The total profits and losses for the period, of the company andof its subsidiaries included in consolidation and all assets andliabilities of the company and of its subsidiaries included in

consolidation are shown in the consolidated income statementand balance sheet respectively.

Minority interests which represents the portion of profit or lossand net assets not held by the group, are shown as acomponent of profit for the period in the income statementand as a component of equity in the consolidated balancesheet, separately from parent shareholders’ equity.

The consolidated cash flow statement includes the cash flowsof the company and its subsidiaries.

1.2.4. Joint ventureA joint venture is a contractual arrangement, whereby thegroup and other parties undertake an economic activity that issubject to joint control. The group recognises its interest in thejoint venture using the proportionate consolidation method.The group’s share of each of the assets, liabilities, income andexpenses of the joint venture are combined with the similaritems, line by line, in the consolidated financial statements.

Information Systems Associates (a joint venture) has beenincorporated in United Arab Emirates.

1.2.5. AssociatesAssociates are those investments over which the group hassignificant influence and holds 20% to 50% of the equity andwhich are neither subsidiaries nor joint ventures of the group.

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

Associate companies of the group which have beenaccounted for under the equity method of accounting are:

Associated Motorways PLC (divested interest in July 2008)Maersk Lanka (Pvt) Ltd.Nations Trust Bank PLC.South Asia Gateway Terminals (Pvt) Ltd.Union Assurance PLC (consolidated as a subsidiary from20. 02 2009)Quatrro Business Support Services (Pvt) Ltd.Quatrro Finance & Accounting Solutions (Pvt) Ltd.

All associates are incorporated in Sri Lanka, except forQuatrro Business Support Services (Pvt) Ltd. and QuatrroFinance & Accounting Solutions (Pvt) Ltd. which areincorporated in India.

The investments in associates are carried in the balance sheetat cost plus post acquisition changes in the group’s share ofnet assets of the associates. Goodwill relating to an associateis included in the carrying amount of the investment. After


82

application of the equity method, the group determineswhether it is necessary to recognise any additional impairmentloss with respect to the group’s net investment in theassociate. The income statement reflects the share of theresults of operations of the associate. Where there has been achange recognised directly in the equity of the associate, thegroup recognises its share of any changes in the statement ofchanges in equity.

When the group’s share of losses in an associate equals orexceeds the interest in the undertaking, the group does notrecognise further losses unless it has incurred obligations ormade payments on behalf of the entity.

The accounting policies of associate companies conform tothose used for similar transactions of the group. Accountingpolicies that are specific to the business of associatecompanies are discussed in note 1.8.

1.2.6. GoodwillGoodwill acquired in a business combination is initiallymeasured at cost being the excess of the cost of the businesscombination over the group’s interest in the net fair value ofthe identifiable assets, liabilities and contingent liabilities.Following initial recognition, goodwill is measured at cost lessany accumulated impairment losses. Goodwill is reviewed forimpairment, annually or more frequently if events or changesin circumstances indicate that the carrying value may beimpaired.

For the purpose of impairment testing, goodwill acquired in abusiness combination is, from the acquisition date, allocatedto groups of cash-generating units that are expected tobenefit from the synergies of the combination.

Impairment is determined by assessing the recoverableamount of the cash-generating unit to which the goodwillrelates. Where the recoverable amount of the cash generatingunit is less than the carrying amount, an impairment loss isrecognised. The impairment loss is allocated first to reducethe carrying amount of any goodwill allocated to the unit andthen to the other assets pro-rata to the carrying amount ofeach asset in the unit.

Goodwill and fair value adjustments arising on the acquisitionof a foreign operation are treated as assets and liabilities ofthe foreign operation and translated at the closing rate.

Where goodwill forms part of a cash-generating unit and partof the operation within that unit is disposed of, the goodwillassociated with the operation disposed of is included in thecarrying amount of the operation when determining the gain orloss on disposal of the operation.

1.2.7. Financial yearAs per the group policy, results of all subsidiaries, jointventures and associates with alternate year ends are treatedas follows:

Subsidiaries: 12 month period drawn up to 31 March

Joint ventures and associates: 12 month period using theassociate’s or joint venture’s year end

In the case of joint ventures and associates, where thereporting dates are different to group reporting dates,adjustments are made for any significant transactions orevents upto 31 March.

1.3. FOREIGN CURRENCY TRANSLATION

1.3.1. Foreign currency transactionsThe consolidated financial statements are presented in SriLanka rupees, which is the company’s functional andpresentation currency.

The functional currency is the currency of the primaryeconomic environment in which the entities of the groupoperate.

All foreign exchange transactions are converted to Sri Lankarupees, at the rates of exchange prevailing at the time thetransactions are effected.

Monetary assets and liabilities denominated in foreigncurrency are retranslated to Sri Lanka rupee equivalents at theexchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using exchangerates that existed when the values were determined. Theresulting gains and losses are accounted for in the incomestatement.

1.3.2. Foreign operationsThe balance sheet and income statement of overseassubsidiaries and joint ventures which are deemed to be foreignoperations are translated to Sri Lanka rupees at the rate ofexchange prevailing as at the balance sheet date and at theaverage annual rate of exchange for the period respectively.

The exchange differences arising on the translation are takendirectly to a separate component of equity. On disposal of aforeign entity, the deferred cumulative amount recognised inequity relating to that particular foreign operation isrecognised in the income statement.

The exchange rates applicable during the period were asfollows:


83

Balance Sheet Income StatementAverage rate

2008/09 2007/08 2008/09 2007/08Rs. Rs. Rs. Rs.

Singapore dollar 76.05 78.16 76.36 74.84Pound sterling 165.59 215.01 188.37 220.74US dollar 115.53 107.78 109.83 110.30Indian rupee 2.27 2.72 2.42 2.75UAE dhiram 31.45 29.35 29.90 30.03

1.4. TAX

1.4.1. Current taxProvision for income tax is based on the elements of incomeand expenditure as reported in the financial statements and iscomputed in accordance with the provisions of the relevanttax statutes.

1.4.2. Deferred taxDeferred taxation is the tax attributable to the temporarydifferences that arise when taxation authorities recognize andmeasure assets and liabilities with rules, that differ from thoseof the consolidated financial statements.

Deferred tax is provided using the liability method ontemporary differences at the balance sheet date between thetax bases of assets and liabilities and their carrying amountsfor financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporarydifferences.

Deferred tax assets are recognised for all deductibletemporary differences, carry-forward of unused tax creditsand unused tax losses, to the extent that it is probable thattaxable profit will be available against which the deductibletemporary differences, and the carry-forward of unused taxcredits and unused tax losses can be utilized.

The carrying amount of deferred tax assets is reviewed ateach balance sheet date and reduced to the extent that it isno longer probable that sufficient taxable profit will beavailable to allow all or part of the deferred tax asset to beutilised. Unrecognised deferred tax assets are reassessed ateach balance sheet date and are recognised to the extent thatit has become probable that future taxable profit will allow thedeferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at tax ratesthat are expected to apply to the year when the asset isrealised or liability is settled, based on the tax rates and taxlaws that have been enacted or substantively enacted as atthe balance sheet date.

Deferred tax assets and deferred tax liabilities are offset, if alegally enforceable right exists to set off current tax assetsagainst current tax liabilities and when the deferred taxesrelate to the same taxable entity and the same taxationauthority.

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

1.5. VALUATION OF ASSETS AND THEIR BASES OF MEASUREMENT

1.5.1. Property, plant and equipmentProperty, plant and equipment is stated at cost or fair valueless accumulated depreciation and any accumulatedimpairment in value.

The carrying values of property plant and equipment arereviewed for impairment when events or changes incircumstances indicate that the carrying value may not berecoverable.

All items of property, plant and equipment are initially recordedat cost. Where items of property, plant and equipment aresubsequently revalued, the entire class of such assets arerevalued at fair value. The group has adopted a policy ofrevaluing assets every 5 years, except for properties held forrental and occupied mainly by group companies, which arerevalued every 3 years.

When an asset is revalued, any increase in the carryingamount is credited directly to a revaluation reserve, except tothe extent that it reverses a revaluation decrease of the sameasset previously recognised in the income statement, in whichcase the increase is recognised in the income statement. Anyrevaluation deficit that offsets a previous surplus in the sameasset is directly offset against the surplus in the revaluationreserve and any excess recognised as an expense. Upondisposal, any revaluation reserve relating to the asset sold istransferred to retained earnings.

Items of property, plant and equipment are derecognized uponreplacement, disposal or when no future economic benefitsare expected from its use. Any gain or loss arising onderecognition of the asset is included in the income statementin the year the asset is derecognised.

a) DepreciationProvision for depreciation is calculated by using a straightlinemethod on the cost or valuation of all property, plant andequipment, other than freehold land, in order to write off suchamounts over the estimated useful economic life of suchassets.


84

The estimated useful life of assets are as follows:

Assets Years

Buildings (other than hotels) 50Hotel buildings 60 - 75Plant and machinery 10 - 20Equipment 2 - 8Furniture and fittings 2 - 15Motor vehicles 4 - 10

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

b) Finance leasesProperty, plant and equipment on finance leases, whicheffectively transfer to the group substantially all the risk andbenefits incidental to ownership of the leased items, arecapitalised and disclosed as finance leases at their cash priceand depreciated over the period the group is expected tobenefit from the use of the leased assets.

The corresponding principal amount payable to the lessor isshown as a liability. Lease payments are apportioned betweenthe finance charges and reduction of the lease liability so as toachieve a constant rate of interest on the outstanding balanceof the liability. The interest payable over the period of the leaseis transferred to an interest in suspense account. The interestelement of the rental obligations pertaining to each financialyear is charged to the income statement over the period oflease.

The cost of improvements to buildings on leasehold land iscapitalised, disclosed as leasehold improvements, anddepreciated over the unexpired period of the lease or theestimated useful life of the improvements, whichever isshorter.

c) Operating leasesLeases, where the lessor effectively retains substantially all ofthe risks and benefits of ownership over the term of the lease,are classified as operating leases.

Lease payments are recognised as an expense in the incomestatement on a straight-line basis over the term of the lease.

1.5.2. Leasehold propertyPrepaid lease rentals paid to acquire land use rights areamortised over the lease term in accordance with the patternof benefits provided. Leasehold property are tested forimpairment annually and is written down where applicable.The impairment loss if any, is recognised in the incomestatement.

1.5.3. Investment propertyProperties held to earn rental income, and properties held forcapital appreciation have been classified as investmentproperty.

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

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

Investment properties are derecognised when disposed, orpermanently withdrawn from use because no future economicbenefits are expected. Any gains or losses on retirement ordisposal are recognised in the income statement in the year ofretirement or disposal.

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

Where group companies occupy a significant portion of theinvestment property of a subsidiary, such investmentproperties are treated as property, plant and equipment in theconsolidated financial statements, and accounted for as perSLAS 18 (revised) Property, Plant and Equipment.

1.5.4. Intangible assetsAn intangible asset is initially recognised at cost, if it isprobable that future economic benefit will flow to theenterprise, and the cost of the asset can be measured reliably.

Following initial recognition, intangible assets are carried atcost less any accumulated amortisation and any accumulatedimpairment losses.

Intangible assets with finite lives are amortised over the usefuleconomic life and assessed for impairment whenever there isan indication that the intangible asset may be impaired. Theamortisation period and the amortisation method for anintangible asset with a finite useful life is reviewed at least ateach financial year-end.

Intangible assets with indefinite useful lives are tested forimpairment annually either individually or at the cash-generating unit level.


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1.5.4.1 Present value of acquired in-force business (PVIB)The present value of future profits on a portfolio of long termlife insurance contracts as at the acquisition date isrecognised as an intangible asset. Subject to initialrecognition, the intangible asset is carried at cost lessaccumulated amortisation and accumulated impairmentlosses.

The PVIB is amortised over the average useful life of therelated contracts in the portfolio. The amortisation charge andany impairment losses would be recognised in theconsolidated income statement as an expense.

1.5.5. Equity investmentsAll quoted and unquoted securities, which are held as non-current investments, are valued at cost. All quoted equitiesheld as short term investments are stated at market valueswith the resultant gain or loss recognized in the incomestatement. The cost of investment is the cost of acquisitioninclusive of brokerage and costs of transaction. The carryingamounts of long term investments are reduced to recognise adecline which is considered other than temporary, in the valueof investments, determined on an individual investment basis.

In the company’s financial statements, investments insubsidiaries, joint ventures and associate companies havebeen accounted for at cost, net of any impairment losseswhich are charged to the income statement. Income fromthese investments are recognised only to the extent ofdividends received.

1.5.6. Impairment of assetsThe group assesses at each reporting date whether there is anindication that an asset may be impaired. If any suchindication exists, or when annual impairment testing for anasset is required, the group makes an estimate of the asset’srecoverable amount. An asset’s recoverable amount is thehigher of an asset’s or cash generating unit’s fair value lesscosts to sell and its value in use and is determined for anindividual asset, unless the asset does not generate cashinflows that are largely independent of those from other assetsor groups of assets. Where the carrying amount of an assetexceeds its recoverable amount, the asset is consideredimpaired and is written down to its recoverable amount. Inassessing value in use, the estimated future cash flows arediscounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value ofmoney and the risks specific to the asset.

Impairment losses are recognised in the income statement,except that, impairment losses in respect of property, plantand equipment are recognised against the revaluation reserveto the extent that it reverses a previous revaluation surplus.

An assessment is made at each reporting date as to whetherthere is any indication that previously recognized impairmentlosses may no longer exist or may have decreased. Previouslyrecognised impairment losses other than in respect ofgoodwill, are reversed only if there has been an increase in therecoverable amount of the asset. Such increase is recognisedto the extent of the carrying amount had no impairment lossesbeen recognised previously.

1.5.7. Other non-current assetsBottle depreciation of Ceylon Cold Stores PLC.Returnable glass bottles are reflected under non-currentassets at cost less depreciation. Depreciation is provided overits useful life of 5 years up to the net realisable value. The netrealisable value of returnable glass bottles equals to thedeposits received by the company or cost whichever is lower.The written down value of bottle breakages during thefinancial year is written off to the income statement.

Upon termination of dealership, the weighted average cost ofbottles not returned less the deposit is written off to theincome statement.

1.5.8. InventoriesInventories are valued at the lower of cost and net realizablevalue. Net realisable value is the estimated selling price lessestimated costs of completion and the estimated costsnecessary to make the sale.

The costs incurred in bringing inventories to its presentlocation and condition, are accounted for as follows:

Raw materials - On a weighted average basis

Finished goods and - At the cost of directWork-in-progress materials direct labour and an

appropriate proportion of fixedproduction overheads based onnormal operating capacity;

Produce inventories - At since realised price;

Other inventories - At actual cost.

1.5.9. Trade and other receivablesTrade and other receivables are stated at the amounts they areestimated to realise, net of provisions for bad and doubtfulreceivables.

A provision for doubtful debts is made when the debt exceeds180 days, and collection of the full amount is no longerprobable. Bad debts are written off when identified.


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1.5.9.1.Reinsurance ReceivableReinsurance assets include the balances due from bothinsurance and reinsurance companies for paid and unpaidlosses and loss adjustment expenses. Amounts recoverablefrom reinsurers are estimated in a manner consistent with theclaim liability associated with the reinsured policy.Reinsurance is recorded gross in the consolidated balancesheet unless a right to offset exists.

If a reinsurance asset is impaired, the company reduces thecarrying amount accordingly and recognises a loss in thestatement of income. A reinsurance asset is impaired if thereis objective evidence, as a result of an event that occurredafter the initial recognition of the reinsurance asset, that thecompany may not receive all amounts due to it under theterms of the contract, and the event has a reliably measurableimpact on the amount that the company will receive from thereinsurer.

1.5.9.2 Premiums ReceivableCollectibility of premiums and other debts are reviewed on anongoing basis. Debts that are known to be uncollectible arewritten off. A provision for doubtful debts is raised when somedoubt as to collection exists.

1.5.10. Short-term investmentsTreasury bills and other interest bearing securities held forresale in the near future to benefit from short-term marketmovements are accounted for at cost plus the relevantproportion of the discounts or premiums.

1.5.11. Cash and cash equivalentsCash and cash equivalents in the cash flow statementcomprise cash at bank and in hand and short term depositswith a maturity of 3 months or less, net of outstanding bankoverdrafts.

1.6. LIABILITIES AND PROVISIONS

1.6.1. Defined benefit plan - gratuityThe liability recognized in the balance sheet is the presentvalue of the defined benefit obligation at the balance sheetdate using the projected unit credit method.

1.6.2. Defined contribution plan - Employees' Provident Fund andEmployees' Trust FundEmployees are eligible for Employees’ Provident Fundcontributions and Employees’ Trust Fund contributions in linewith respective statutes and regulations. The companiescontribute the defined percentages of gross emoluments ofemployees to an approved Employees’ Provident Fund and tothe Employees’ Trust Fund respectively, which are externallyfunded.

1.6.3. Insurance provision - lifeThe Directors agree to the life insurance business provisionson the recommendation of the independent external actuaryfollowing his annual investigation of the life insurancebusiness.

The actuarial valuation takes into account all liabilitiesincluding contingent liabilities and is based on assumptionsrecommended by the independent external actuary.

1.6.4. Insurance - generalClaims expenses and liabilities for outstanding claims arerecognised in respect of direct and inwards reinsurancebusiness. The liability covers claims reported but not yet paid,incurred but not reported claims (IBNR) and the anticipateddirect and indirect costs of settling those claims. Claimsoutstanding are assessed by reviewing individual claim filesand estimating changes in the ultimate cost of settling claims.The provision in respect of IBNR is actuarially valued to ensurea more realistic estimation of the future liability based on pastexperience and trends.

1.6.5. Grants and subsidiesGrants and subsidies are recognised at their fair value. Whenthe grant or subsidy relates to an expense item, it isrecognised as income over the period necessary to match it tothe costs, which it is intended to compensate for, on asystematic basis. Grants and subsidies related to assets aredeferred in the balance sheet and credited to the incomestatement over the useful life of the asset.

1.6.6. Provisions, contingent assets and contingent liabilitiesProvisions are made for all obligations existing as at thebalance sheet date when it is probable that such an obligationwill result in an outflow of resources and a reliable estimatecan be made of the quantum of the outflow.

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

Contingent assets are disclosed, where inflow of economicbenefit is probable.

1.7. INCOME STATEMENT1.7.1. Revenue recognition

Revenue is recognised to the extent that it is probable that theeconomic benefits will flow to the group, and the revenue andassociated costs incurred or to be incurred can be reliablymeasured. Revenue is measured at the fair value of theconsideration received or receivable, net of trade discountsand value added taxes, after eliminating sales within thegroup.


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The following specific criteria are used for recognition ofrevenue:

a) Sale of goodsRevenue from the sale of goods is recognised when thesignificant risk and rewards of ownership of the goods havepassed to the buyer with the group retaining neither acontinuing managerial involvement to the degree usuallyassociated with ownership, nor an effective control over thegoods sold.

b) Rendering of servicesRevenue from rendering of services is recognised in theaccounting period in which the services are rendered orperformed.

c) General Insurance Business - Gross Written PremiumGross written premium is generally recognised as written uponinception of the policy. Upon inception of the contract,premiums are recorded as written and are earned primarily ona pro-rata basis over the term of the related policy coverage.However, for those contracts for which the period of riskdiffers significantly from the contract period, premiums areearned over the period of risk in proportion to the amount ofinsurance protection provided. Earned premiums arecomputed on the 24th basis except for marine business,which is computed on a 60-40 basis.

d) Life Insurance Business - Gross Written PremiumPremiums from traditional life insurance contracts, includingparticipating contracts and non participating contracts, arerecognised as revenue when cash is received from thepolicyholder.

e) Turnover based taxesTurnover based taxes include value added tax, economicservice charge, turnover tax and tourism development levy.Companies in the group pay such taxes in accordance withthe respective statutes.

1.7.2. DividendDividend income is recognised on a cash basis.

1.7.3. Rental incomeRental income is recognised on an accrual basis over the termof the lease.

1.7.4. Gains and lossesNet gains and losses of a revenue nature arising from thedisposal of property, plant and equipment and other non-current assets, including investments, are accounted for in theincome statement, after deducting from the proceeds ondisposal, the carrying amount of such assets and the relatedselling expenses.

Gains and losses arising from activities incidental to the mainrevenue generating activities and those arising from a group ofsimilar transactions which are not material, are aggregated,reported and presented on a net basis.

Any losses arising from guaranteed rentals are accounted forin the year of incurring the same. A provision is recognised ifthe best estimate indicates a loss.

1.7.5. Other incomeOther income is recognised on an accrual basis.

1.7.6. Expenditure recognitionExpenses are recognised in the income statement on thebasis of a direct association between the cost incurred andthe earning of specific items of income. All expenditureincurred in the running of the business and in maintaining theproperty, plant and equipment in a state of efficiency has beencharged to the income statement.

For the purpose of presentation of the income statement, the“function of expenses” method has been adopted, on thebasis that it presents fairly the elements of the company andgroup’s performance.

1.7.7. Borrowing costsBorrowing costs are recognised as an expense in the period inwhich they are incurred, unless they are incurred in respect ofqualifying assets in which case it is capitalised.

1.8. SIGNIFICANT ACCOUNTING POLICIES THAT ARE SPECIFIC TO THEBUSINESS OF ASSOCIATE COMPANIES

1.8.1. Nations Trust Bank PLC

Revenue recognition

(a) Interest income from customer advancesIn terms of the provisions of the Sri Lanka AccountingStandard No. 23 on Revenue Recognition and Disclosures inthe financial statements of banks and the guidelines issued bythe Central Bank of Sri Lanka, interest receivable isrecognised on an accrual basis. Interest ceases to be takeninto revenue when the recovery of interest or principal is inarrears for over three (3) months and interest accrued untilsuch advances being classified as nonperforming are alsoeliminated from interest income and transferred to interest insuspense. The interest income on non-performing advances isrecognised on a cash basis.

(b) Income on discounting of bills of exchangeIncome from discounting of bills of exchange is recognized ona cash basis.


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(c) Income from Government and other discounted securitiesDiscounts on treasury bills, treasury bonds and commercialpapers are recognised on a straight-line basis over the periodto maturity as income. Premium on treasury bonds areaccounted for on a similar basis. The discount and thepremium are dealt within the income statement.

Income from all other interest-bearing investments isrecognised as revenue on an accrual basis.

(d) Fees and commission incomeFees and commission income comprise mainly of feesreceivable from customers for guarantees, factoring, creditcards and other services provided by the Bank together withforeign and domestic tariff. Such income is recognised asrevenue as the services are provided.

(e) Profit or loss on sale of securitiesProfit or loss arising from the sale of marketable securities isaccounted for on a cash basis and is categorised under otherincome.

(f) Lease incomeThe bank follows the finance method of accounting for leaseincome.

1.8.2. South Asia Gateway Terminals (Pvt) Ltd.

(a) Revenue recognitionStevedoring revenue is recognised on the berthing time of thevessel. Storage revenue is recognised on the issue of deliveryadvice.

1.9. EMPLOYEE SHARE OPTION PLANOn 29 June 2001, shareholders approved a second plan,whereby the company could issue annually, nontransferablecall share options, not exceeding in aggregate 2% of the totalissued capital of the company as at the date of granting everyaward under this plan, to a total of 5% of the total issuedshare capital as at the date of the last award. Approvals of theCSE and the SEC have been obtained for this plan. On22 January 2009 this plan expired, the total number of optionsgranted under this plan, after allowing for bonus issues andrights issues, was 5,129,406 of which 2,907,721 had beenexercised and 2,221,685 had lapsed.

On 28 June 2004, shareholders approved a third plan,whereby the company could issue annually non-transferablecall share options, not exceeding in aggregate 2% of the totalissued capital of the company as at the date of granting everyaward under this plan, to a total of 5% of the total issuedshare capital as at the date of the last award. Approvals of theCSE and SEC have been obtained for this plan. As at 31March 2009, the total number of options granted under this

plan, after allowing for bonus issues and rights issues, was30,599,744 of which 2,752,313 had been exercised, 2,266,870had lapsed and 25,580,561 remain unexercised.

On 13 December 2007, shareholders approved a fourth plan,whereby the company could issue non-transferable call shareoptions, not exceeding in aggregate 0.85% of the shares inissue of the company as at the date of granting the award.Approvals of the CSE and SEC have been obtained for thisplan. As at 31 March 2009, the total number of optionsgranted under this plan, was 5,405,945 of which 160,400 hadlapsed and 5,245,545 remain unexercised.

As at 31 March 2009, the total number of options grantedunder the second, third and fourth plans, after allowing forbonus issues and rights issues, was 41,135,095. Of this total,5,660,034 options had been exercised, 4,648,955 options hadlapsed and 30,826,106 remain unexercised.

Of the 30,826,106 options unexercised and outstanding as at31 March 2009 (2008 – 34,862,428), 7,020,778 are exercisablebefore 28 March 2010, 8,825,941 are exercisable before 9April 2011, 9,733,842 are exercisable before 27 May 2012 and5,245,545 are exercisable before 24 March 2013.

1.10. SEGMENT INFORMATION

1.10.1. Reporting segmentsThe group’s internal organisation and management isstructured based on individual products and services whichare similar in nature and process and where the risk and returnare similar. The primary segments represent this businessstructure.

The secondary segments are determined based on thegroup’s geographical spread of operations. The geographicalanalysis of turnover and profits are based on location ofcustomers and assets respectively.

The activities of each of the reported business segments ofthe group are detailed in the group directory.

1.10.2. Segment informationSegment information has been prepared in conformity with theaccounting policies adopted for preparing and presenting theconsolidated financial statements of the group.


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2 PROPERTY, PLANT AND EQUIPMENT2.1 Group

Buildings on Equipment, Capital Total TotalLand and leasehold Plant and furniture Motor work in 2009 2008

In Rs. '000s buildings land machinery and fittings vehicles Others progress

Cost or valuationAt the beginningof the year - - - - - - - - 26,784,796

Prior period adjustment - LMS - - - - - - - - (725,861)

At the beginningof the year (Re-stated) 14,342,963 7,738,405 4,310,584 4,493,307 517,651 2,620,095 224,010 34,247,015 26,058,935

Additions 14,135 347,071 410,663 496,086 65,555 145,360 933,022 2,411,892 2,800,836Acquisition of subsidiary 716,819 - - 739,089 46,361 - 5,571 1,507,840 3,310,266Disposals (19,280) - (82,789) (173,267) (36,555) (256,905) (1,003) (569,799) (866,636)Adjustment due to sale ofnon-current investments - - - - - - - - (77,182)

Revaluations 78,940 (16,590) - - - - - 62,350 2,796,695Impairment - (28,800) (53,732) (12,436) - (12,122) (14,536) (121,626) (1,786)Reclassified as IP - - - - - - - - 238,263Transfers 21,054 835,326 (54,177) 230,564 9,741 (10,117) (956,012) 76,379 (12,376)

At the end of the year 15,154,631 8,875,412 4,530,549 5,773,343 602,753 2,486,311 191,052 37,614,051 34,247,015

Accumulated depreciationAt the beginning of the year (39,530) (326,929) (1,702,206) (1,961,267) (257,650) (1,578,104) - (5,865,686) (6,381,100)Charge for the year (113,808) (367,595) (285,072) (577,945) (62,013) (325,193) - (1,731,626) (1,443,471)Acquisition of subsidiary (7,424) - - (483,409) (42,191) - - (533,024) -Disposals 573 - 50,123 152,671 22,821 245,229 - 471,417 830,876Adjustment due to sale ofnon-current investments - - - - - - - - 21,689

Revaluations 47,747 - - - - - - 47,747 1,098,729Impairment - 613 17,881 10,612 - 3,576 - 32,682 (1,497)Transfers 1,088 - 13,774 (98,134) 1,150 11,983 - (70,139) 9,088

At the end of the year (111,354) (693,911) (1,905,500) (2,957,472) (337,883) (1,642,509) - (7,648,629) (5,865,686)

Carrying valueAs at 31 March 2009 15,043,277 8,181,501 2,625,049 2,815,871 264,870 843,802 191,052 29,965,422As at 31 March 2008(Re-stated) 14,303,433 7,411,476 2,608,378 2,532,040 260,001 1,041,991 224,010 28,381,329


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2.2 CompanyPlant and Equipment, Motor Total Total

machinery furniture vehicles 2009 2008In Rs. '000s and fittings

CostAt the beginning of the year 31,795 599,394 29,114 660,303 641,570Additions 239 13,206 49,492 62,937 19,723Disposals - (2,421) (11,976) (14,397) (990)

At the end of the year 32,034 610,179 66,630 708,843 660,303

Accumulated depreciationAt the beginning of the year (22,469) (337,589) (10,815) (370,873) (261,431)Charge for the year (1,455) (108,075) (6,968) (116,498) (110,116)Disposals - 1,085 5,320 6,405 674

At the end of the year (23,924) (444,579) (12,463) (480,966) (370,873)

Carrying valueAs at 31 March 2009 8,110 165,600 54,167 227,877As at 31 March 2008 9,326 261,805 18,299 289,430

Group CompanyAs at 31st March 2009 2008 2009 2008In Rs.'000s Re-stated

2.3 Land and buildingAt cost 2,696,999 1,596,485 - -At valuation 20,527,779 20,118,424 - -

Net book value 23,224,778 21,714,909 - -

2.4 Carrying valueAt cost 9,240,716 14,103,863 227,877 289,430At valuation 20,704,367 14,248,748 - -On finance lease 20,339 28,718 - -

29,965,422 28,381,329 227,877 289,430


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Details of group's land, building and other properties stated at valuation are indicated below

Property Method of Effective date Propertyvaluation of valuation valuer

Buildings on leasehold land and other properties of Land and building 20 October 2005 R.G Wijesinghe,Yala Village (Pvt) Ltd. method Consultant Valuer

and Assessor.

Buildings on leasehold land and other properties of Open market value 04 May 2007 Haleen GouseTranquility (Pte) Ltd. method Incorporated Valuer.

Land and building of Union Assurance PLC. Investment 31 Dec 2007 P.B Kalugalagedara,method Chartered Valuation

Surveyor.

Land and building of Open market value 31 March 2008 P.B Kalugalagedara,Whittall Boustead Ltd. method Chartered ValuationKeells Food Products PLC. Surveyor.Ceylon Cold Stores PLC.

Land of Resort Hotels Ltd. Land and building 31 March 2008 R.G Wijesinghe,method Consultant Valuer

and Assessor.

Land and building of Land and building 31 March 2008 R.G Wijesinghe,Kandy Walk Inn Ltd. method Consultant ValuerTransware Logistics (Pvt) Ltd. and Assessor.

Buildings on leasehold land of Land and building 31 March 2008 R.G Wijesinghe,Ceylon Holiday Resorts Ltd. method Consultant Valuer- Bentota Beach Hotel and Assessor.

Habarana Lodge Ltd.Habarana Walk Inn Ltd.

Land and building of Land and building 31 March 2008 G.J Sumanasena,Tea Smallholder Factories PLC. method Incorporated Valuer.

Plant and machinery of Contractors testTea Smallholder Factories PLC. method

Buildings on leasehold land of Land and building 31 March 2008 A.Y.Daniel & Son,Trans Asia Hotels PLC. method Incorporated Valuer.

Buildings on leasehold land and other properties of Land and building 31 March 2008 H.R de Silva,Ceylon Holiday Resorts Ltd. method Chartered Valuation- Coral Gardens Hotel Surveyor (UK)


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Property Method of Effective date Propertyvaluation of valuation valuer

Land and building of Contractors (cost) 31 March 2008 A.Y.Daniel & Son,Asian Hotels and Properties PLC. Summation basis Incorporated Valuer.

Land of International Tourists & Hoteliers Ltd. Land and building 31 Dec 2008 R.G Wijesinghe,method Consultant Valuer

and Assessor.

Land and building of Open market value 31 March 2009 P.B Kalugalagedara,John Keells Holdings PLC. method Chartered ValuationJohn Keells PLC. Surveyor.Mackinnons and Keells Financial Services Ltd.Keells Realtors Ltd.Whittall Boustead Ltd.JK Properties (Pvt) Ltd.

Land and building of Trinco walk Inn Ltd. Land and building 31 March 2009 R.G Wijesinghe,and Wirawila Walk Inn Ltd. method Consultant Valuer

and Assessor.

The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows

GroupAs at 31st March 2009 2008In Rs. '000s Re-stated

Cost 11,480,916 11,065,184Accumulated depreciation (1,837,400) (1,570,018)

Carrying value 9,643,516 9,495,166

2.5 Finance leasesProperty, plant and equipment include capitalised finance leases. The carrying value of these assets are as follows:

As at 31st March Accumulated GroupIn Rs. '000s Cost depreciation 2009 2008

Motor vehicles 30,814 (10,475) 20,339 28,718


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2.6 Exchange gain / (loss)Additions to property, plant and equipment include exchange differences arising from the translation of balances to Sri Lanka rupees.

GroupAs at 31st March 2009 2008In Rs. '000s

Buildings on leasehold land 292,068 88,475Plant and machinery 30,561 7,361Equipment, furniture and fittings 37,841 (40,471)Motor vehicles 4,321 (52,073)Other assets 7,524 4,770Capital work in progress 3,459 -

375,774 8,062

2.7 Group land and buildings with a carrying value of Rs. 1,459 mn (2008 - Rs. 1,348 mn) have been pledged as security for term loansobtained, details of which are disclosed in Note 17.3.

2.8 Group property, plant and equipment with a cost of Rs.2,436 mn (2008 - Rs. 1,476 mn) have been fully depreciated and continue to be inuse by the group. The cost of fully depreciated assets of the company amounts to Rs. 133 mn (2008 - Rs. 59 mn).

GroupAs at 31st March 2009 2008In Rs. '000s

3 LEASEHOLD PROPERTYCost 4,803,400 4,803,400Accumulated amortisation (229,207) (115,014)Exchange gain / (loss) 201,519 (50,152)

4,775,712 4,638,234

Prepaid lease rentals paid to acquire land use rights have been classified as leasehold property and are amortised over the lease term inaccordance with the pattern of benefits provided.


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3.1 Details of leasehold PropertyProperty Land extent Lease period Amount

(in acres) 2009 2008

John Keells Maldivian Resorts (Pte.) Ltd.Dhonveli Beach & Spa Resort, 36.96 15 years from 16-5-2006 2,303,241 2,205,367Republic of Maldives

John Keells Warehousing (Pvt) Ltd.Muthurajawela 6.00 50 years from 19-9-2001 44,558 45,647

Rajawella Hotels Ltd. 10.00 95 years and 10 months from02-02-2000 35,833 36,294

Tea Smallholder Factories PLC.Karawita Tea Factory 4.99 50 years from 15-8-1997 11,382 12,893

Trans Asia Hotels PLC.Colombo 7.20 99 years from 7-8-1981 880,684 893,088

Travel Club (Pte) Ltd.Ellaidhoo Island Resort, Republic of Maldives 13.75 14 years from 4-8-2006 1,417,432 1,359,369

Yala Village (Pvt) Ltd. 10.00 30 years from 27-11-1997 82,582 85,576

4,775,712 4,638,234

Group CompanyAs at 31st March 2009 2008 2009 2008In Rs.'000s

4 INVESTMENT PROPERTYAt the beginning of the year 2,288,442 2,505,321 832,158 800,000Additions - 21,384 - 32,158Reclassified as property, plant and equipment - (238,263) - -Change in fair value during the year 40,573 - 66,842 -

At the end of the year 2,329,015 2,288,442 899,000 832,158

4.1 Valuation details of investment propertyInvestment properties were valued by qualified professional valuers as at 31-3-2009, details of which are as follows.

Property Method of valuation Valuer

GroupAsian Hotels and Properties PLC. Investment method P.B. Kalugalagedera, Chartered Valuation SurveyorCrescat Boulevard, Colombo 3

Tea Smallholder Factories PLC. Investment method G.J. Sumanasena, Incorporated ValuerStores Complex, Peliyagoda

Trans Asia Hotels PLC. Accredited contractor basis A.Y. Daniel & Son, Incorporated ValuerCommercial Centre, Colombo 2

CompanyJohn Keells Holdings PLC. Open market value P.B. Kalugalagedera, Chartered Valuation SurveyorGalaha Building, Colombo 2

Rental income earned from investment property by the group and company amount to Rs. 239 mn (2008 - Rs. 239 mn) and Rs. 48 mn.(2008 - Rs. 36 mn) respectively. Direct operating expenses incurred by the group and company amounted to Rs. 63 mn (2008 - Rs. 50 mn)and Rs. 8 mn (2008 - Rs. 3 mn) respectively.

As at 31st March GroupIn Rs. '000s PVIB Goodwill Software Other 2009 2008

Re-stated

5 INTANGIBLE ASSETSCost/carrying valueAt the beginning of the year - - - - - 345,511Prior period adjustment - LMS - - - - - (119,569)

At the beginning of the year (Re-stated) - 210,320 26,831 - 237,151 225,942Additions / transfers - 137,100 25,426 - 162,526 11,676Acquisition of subsidiary 2,249,000 - - 49,500 2,298,500 -Adjustment due to sale of non-current investments - - - - - (467)

At the end of the year 2,249,000 347,420 52,257 49,500 2,698,177 237,151

Accumulated amortisationAt the beginning of the year - - (15,467) - (15,467) (6,750)Amortisation - - (14,819) - (14,819) (8,717)

At the end of the year - - (30,286) - (30,286) (15,467)

Impairment - - - - - -

Net carrying value 2,249,000 347,420 21,971 49,500 2,667,891 221,684

Present value of acquired in-force business (PVIB)SLAS 25 - Business Combinations, requires the acquirer to fair value the assets, liabilities, intangible assets and contingent liabilities of theacquiree company as at the acquisition date. Accordingly, upon acquiring a controlling stake in Union Assurance PLC (UA), the group hasrecognised in the consolidated financial statements an intangible asset representing the present value of of future profits on UA's portfolioof long term life insurance contracts, known as the present value of acquired in-force business (PVIB) at the acquisition date. PVIBrecognised at the acquisition date will be amortised over the life of the business acquired.

Based on the average residual period of the life insurance contracts in UA's portfolio as at the acquisition date, the annual amortisationcharge to the consolidated income statement over the 12 years commencing from financial year 2009/10 is estimated to be Rs. 187.5 mn.In addition, the PVIB would be reviewed annually for any impairment in value.

SoftwareSoftware with a finite life is amortised over the period of the expected economic benefit.

Other intangible assets - Union Assurance PLCRepresents the cost of acquisition of the business from the four former branches, Aitken Spence Insurance Ltd. Carsons Insurance Ltd.,ACW Insurance (Pvt) Ltd, and Whitall Boustead Ltd. This balance is not amortised but tested for impairment annually.

GoodwillAs from 1 April 2006, goodwill is no longer amortised but tested for impairment annually. Goodwill acquired through businesscombinations have been allocated to 8 cash generating units (CGU's) for impairment testing as follows:

Net Carrying Value of Goodwill

Chaaya Hotels and Resorts 148,000Financial Services 71,017Consumer Foods and Retail 57,025Cinnamon Hotels and Resorts 40,116Logistics, Ports and Shipping 11,926Property 13,874Airlines 5,054Destination Management 408

347,420

The recoverable amount of all CGUs has been determined based on the fair value less cost to sell or the value in use calculation.


95


96

Key assumptions used in the VIU calculationsGross marginsThe basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceeding thebudgeted year adjusted for projected market conditions.

Discount ratesThe discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium.

InflationThe basis used to determine the value assigned to the budgeted cost inflation is the inflation rate based on projected economicconditions.

Volume growthVolume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of the two yearsimmediately preceeding the budgeted year and future industry growth rates. Cashflows beyond the five year period are extrapolated usinga zero growth rate.

Group CompanyAs at 31st March Note 2009 2008 2009 2008In Rs.'000s Re-stated

6 INVESTMENTS6.1 Carrying value

Investments in subsidiariesInvestments consolidatedQuoted 6.2 - - 15,360,742 13,126,857Unquoted 6.3 - - 4,281,378 4,273,961

Investments not consolidatedUnquoted 6.4 5,115 5,115 5,115 5,115

5,115 5,115 19,647,235 17,405,933Investments in joint ventures 6.5 - - 46,482 46,482

Investments in subsidiaries and joint ventures 5,115 5,115 19,693,717 17,452,415

Investments in associates 6.6 13,055,642 9,952,651 7,959,247 6,204,776

Other investmentsOther equity investmentsQuoted 6.7 4 30 - -Unquoted 6.8 113,387 125,194 82,525 94,957

113,391 125,224 82,525 94,957Other investments 6.11 8,638,212 202,192 731,587 -

8,751,603 327,416 814,112 94,957

Investments held for sale 6.9 14,299 37,331 3,900 15,860

21,826,659 10,322,513 28,470,976 23,768,008


97

Group CompanyAt at 31st March Number of 2009 2008 Number of 2009 2008In Rs.'000s shares shares

6.2 Group quoted investmentsAsian Hotels and Properties PLC. 185,530,612 5,564,807 5,564,807 185,530,612 5,564,807 5,564,807Ceylon Cold Stores PLC. 17,381,649 788,476 190,599 15,060,722 775,440 177,562Ceylon Cold Stores PLC. - Preference shares 118 1 1 118 1 1John Keells Hotels PLC. 1,012,239,871 5,381,179 5,381,179 1,012,239,871 5,381,179 5,381,179John Keells PLC. 13,208,696 394,830 294,174 13,208,696 394,830 294,174Keells Food Products PLC. 7,180,063 248,058 77,648 5,581,307 202,397 51,003Tea Smallholder Factories PLC. 5,643,000 63,466 63,466 5,643,000 63,466 63,466Trans Asia Hotels PLC. 46,026,821 2,254,710 2,254,710 24,321,064 1,594,665 1,594,665Union Assurance PLC. 29,297,528 1,418,631 - 25,275,050 1,383,957 -

16,114,158 13,826,584 15,360,742 13,126,857

Market value of these quoted investments were Rs. 20,138 mn (2008 - Rs. 21,319 mn) and Rs. 17,703 mn (2008 - Rs. 19,240 mn) for thegroup and company respectively.


6.3 Group unquoted investmentsAuxicogent Alpha (Pvt) Ltd. 7,350 792 792 - - -Auxicogent Alpha (Pvt) Ltd. - Preference A 57,200,000 615,358 615,358 - - -Auxicogent Holdings (Pvt) Ltd. 15,000,000 1,543,353 1,543,353 - - -Auxicogent International (Pvt) Ltd. 1,500,000,000 1,615,204 1,615,204 - - -Auxicogent International Lanka (Pvt) Ltd. 28,277,379 283,626 160,352 - - -Auxicogent International US inc. 5,000 538 - - - -Auxicogent Investments Mauritius (Pvt) Ltd. 14,700 1,584 1,584 - - -Auxicogent Investments Mauritius (Pvt) Ltd. -

Preference A 57,200,000 615,358 615,358 - - -Ceylon Holiday Resorts Ltd. 7,734,544 566,571 566,571 - - -DHL Keells (Pvt) Ltd. 1,000,000 10,000 10,000 1,000,000 10,000 10,000Elephant House Farms Ltd. 400,000 4,000 4,000 - - -Facets (Pvt) Ltd. 15,000 450 - 15,000 - -Fantasea World Investments (Pte) Ltd. 7,297 433,708 433,708 - - -Habarana Lodge Ltd. 12,981,548 695,082 695,082 - - -Habarana Walk Inn Ltd. 4,321,381 311,981 311,981 - - -InfoMate (Pvt) Ltd. 2,000,000 20,000 20,000 2,000,000 20,000 20,000International Tourists and Hoteliers Ltd. 7,545,593 247,495 247,495 - - -J K Packaging (Pvt) Ltd. 1,450,000 - - 1,450,000 - -J K Properties (Pvt) Ltd. 24,000,000 192,169 240,000 24,000,000 192,169 240,000Jaykay Marketing Services (Pvt) Ltd. 49,800,000 522,892 522,892 - - -John Keells Air Services India (Pvt) Ltd. 186,120 3,271 - 94,921 - -John Keells Air Services India (Pvt) Ltd.

Redeemable non voting preference shares 6,500,000 14,815 - - - -John Keells Computer Services (Pvt) Ltd. 9,650,000 96,500 96,500 9,650,000 96,500 96,500John Keells Computer Services (UK) Ltd. 98 9 9 98 9 9John Keells Foods India (Pvt) Ltd. 3,399,990 67,343 - - - -


98


John Keells Holdings Mauritius (Pvt) Ltd. 512,225 55,249 - 512,225 55,248 -John Keells Hotels Mauritius (Pvt) Ltd. 9,100 980 - - - -John Keells International (Pvt) Ltd. 154,500,000 1,545,000 1,545,000 154,500,000 1,545,000 1,545,000John Keells Logistics (Pvt) Ltd. 20,000,000 200,000 200,000 20,000,000 200,000 200,000John Keells Logistics India (Pvt) Ltd. 1,231,371 14,546 - 627,999 - -John Keells Logistics India (Pvt) Ltd. -

Redeemable non voting preference shares 3,400,000 59,329 41,098 2,600,000 41,097 41,097John Keells Logistics Lanka (Pvt) Ltd. 2,500,000 69 69 2,500,000 69 69John Keells Maldivian Resorts (Pte) Ltd. 31,321,738 3,172,350 3,172,350 - - -John Keells Office Automation (Pvt) Ltd. 500,000 5,000 5,000 500,000 5,000 5,000John Keells Singapore (Pte) Ltd. 160,000 4,209 4,209 160,000 4,209 4,209John Keells Software Technologies (Pvt) Ltd. 800,000 - - 800,000 - -John Keells Stock Brokers (Pvt) Ltd. 750,000 500 500 180,000 120 120John Keells Teas Ltd. 12,000 120 120 12,000 120 120John Keells Warehousing (Pvt) Ltd. 12,000,000 120,000 120,000 - - -Kandy Walk Inn Ltd. 5,160,309 367,324 367,324 - - -Keells Consultants Ltd. 15,700 1,299 1,299 15,700 1,299 1,299Keells Food Products Mauritius (Pvt) Ltd. 9,850 1,028 - - - -Keells Hotel Management Services Ltd. 1,000,000 19,055 19,055 1,000,000 19,055 19,055Keells Realtors Ltd. 7,500,000 75,000 75,000 3,000,000 30,000 30,000Keells Shipping (Pvt) Ltd. 50,000 502 502 50,000 502 502Lanka Marine Services Ltd. 34,805,470 1,325,218 1,325,218 34,805,470 1,325,218 1,325,218Mack Air Ltd. 500,000 60 60 500,000 60 60Mack Air Services Maldives (Pvt) Ltd. 4,900 2,035 2,035 4,700 2,021 2,021Mackinnon & Keells Financial Services Ltd. 1,080,000 12,806 12,806 972,000 11,912 11,912Mackinnon Mackenzie and Company (Shipping) Ltd. 500,000 14,200 14,200 - - -Mackinnon Mackenzie and Company of Ceylon Ltd. 9,000 - - 6,600 - -Mackinnons American Express Travel (Pvt) Ltd. 350,000 161 161 350,000 161 161Mortlake Ltd. 300 327,240 327,240 300 327,240 327,240Nexus Networks (Pvt) Ltd. 10,000 100 100 10,000 100 100Rajawella Hotels Company Ltd. 2,000,000 20,000 20,000 - - -Resort Hotels Ltd. 75,007 750 750 - - -Serene Holidays (Pvt) Ltd. 1,050,000 34,153 6,385 - - -Tranquility (Pte) Ltd. 637,500 1,106,270 553,750 - - -Trans-ware Logistics (Pvt) Ltd. 11,000,000 111,100 111,100 11,000,000 111,100 111,100Travel Club (Pte) Ltd. 29,059 302,640 302,640 - - -Trinco Walk Inn Ltd. 3,000,000 95,940 95,940 - - -Walkers Air Services Ltd. 750,000 7,503 7,503 750,000 7,503 7,503Walkers Tours Ltd. 4,925,577 128,140 128,140 4,925,577 128,141 128,141Whittall Boustead (Travel) Ltd. 750,000 40,984 40,984 675,000 40,935 40,935Whittall Boustead Ltd. 9,918,880 133,382 133,382 7,258,264 106,590 106,590Wirawila Walk Inn Ltd. 1,500,000 21,885 21,885 - - -Yala Village (Pvt) Ltd. 16,210,800 200,000 200,000 - - -Yala Village (Pvt) Ltd.-

Non voting preference shares 10,000,000 100,000 100,000 - - -

17,488,226 16,656,044 4,281,378 4,273,961

Directors' valuation of unquoted investments amount to Rs. 17,488 mn (2008 - Rs. 16,656 mn) and Rs. 4,281 mn (2008 - Rs. 4,274 mn) forthe group and company respectively.


99


6.4 Investments in subsidiaries not consolidatedKeells Systems Integrators Ltd. 500,000 5,115 5,115 500,000 5,115 5,115

5,115 5,115 5,115 5,115

Keells System Integrators Ltd. is a non-operating subsidiary, currently under liquidation, with a net asset value that equals the book valueof investments.


6.5 Investments in joint venturesInformation Systems Associates 73 46,482 46,482 73 46,482 46,482

46,482 46,482 46,482 46,482

The directors' valuation of the unquoted investments referred to in notes 6.4 and 6.5 amount to Rs. 52 mn (2008 - Rs. 52 mn)

Group CompanyAt at 31st March Number of 2009 2008 Number of 2009 2008In Rs.'000s shares Re-stated shares

6.6 Investments in associatesQuoted

Associated Motorways PLC. - - 705,458 - - 705,458Nations Trust Bank PLC. 50,146,689 965,863 965,863 33,542,933 612,730 612,730Union Assurance PLC. - - 275,886 - - 268,232

UnquotedMaersk Lanka (Pvt) Ltd. 30,000 150 150 30,000 150 150South Asia Gateway Terminals (Pvt) Ltd. 159,826,750 7,375,263 4,647,103 159,826,750 7,346,367 4,618,206Quatrro Business Support Services (Pvt) Ltd. 49,000 12,689 12,689 - - -Quatrro Business Support Services (Pvt) Ltd.- Preference A 12,593,506 544,620 544,620 - - -

Quatrro Finance &Accounting Solutions (Pvt) Ltd. 77,326,071 615,358 - - - -

Profit accruing to the group net of dividend 2,769,604 2,174,317 - -Adjustment on account of associate company

share of net assets 772,095 626,565 - -

13,055,642 9,952,651 7,959,247 6,204,776


100

GroupAs at 31st March 2009 2008In Rs.'000s Re-stated

Summarised financial information of associatesGroup share of balance sheetTotal assets 29,916,568 29,289,486Total liabilities (21,745,186) (22,408,157)

Net assets 8,171,382 6,881,329Goodwill 4,889,595 3,076,726Unrealised profits on transactions with associates (5,335) (5,404)

13,055,642 9,952,651

Group share of revenue and profitRevenue 11,246,505 9,623,341Profit 2,349,941 2,242,713

Market value of quoted associate investments were Rs. 1,191 mn (2008 - Rs.3,663 mn) and Rs. 797 mn (2008 - Rs. 2,940 mn) for thegroup and company respectively. The directors' valuation of unquoted associate investments amounts to Rs 11,758 mn (2008- Rs 7,236mn) and Rs 7,347 mn (2008 - Rs 4,618 mn) for the group and company respectively.

GroupAt at 31st March Number of 2009 2008In Rs.'000s shares

6.7 Other quoted equity investmentsCeylon Hotels Corporation 500 4 30

4 30

Market value of other quoted equity investments were Rs. 0.06 mn (2008 - Rs. 0.01 mn)


6.8 Other unquoted equity investmentsACW Insurance Co. Ltd. 450,000 1,269 1,269 - - -Asia Power (Pvt) Ltd. 777,055 79,507 79,507 777,055 79,507 79,507Facets (Pvt) Ltd. - - 450 - - 450Fitch Rating Lanka Ltd. 62,500 625 - - - -Pyramid Unit Trust 310,000 3,100 3,100 - - -Rainforest Ecolodge (Pvt) Ltd. 2,500,000 25,000 25,000 - - -Rajawella Holdings Ltd. 3,000,000 3,018 15,000 3,000,000 3,018 15,000SLFFA Cargo Services Ltd. 64,642 716 716 - - -Sri Lanka Hotel Tourism Training Institute. 15,004 150 150 - - -Sri Lanka Port Management &Consultancy Services Ltd. 100 1 1 - - -The York Company Ltd. 100 1 1 - - -

113,387 125,194 82,525 94,957


101


6.9 Equity investments held for saleCrescat Restaurants (Pvt) Ltd. - - 6,494 - - -Gamma Pizzakraft Lanka (Pvt) Ltd. - - 16,538 - - 11,960KBSL Information Technologies Ltd. 390,000 14,299 14,299 390,000 3,900 3,900

14,299 37,331 3,900 15,860

Total value of investments including subsidiaries 46,837,313 40,649,431 27,739,389 23,768,008Group investments (33,648,866) (30,529,110) - -

Total value of investments 13,188,447 10,120,321 27,739,389 23,768,008

The director's valuation of other unquoted equity investments and equity investments held for sale, referred to in Note 6.8 and 6.9amounts to Rs. 128 mn (2008 - Rs. 163 mn) and Rs. 86 mn (2008 - Rs. 111 mn) for the group and company respectively.

Group CompanyAs at 31st March 2009 2008 2009 2008In Rs.'000s Re-stated

6.10 Movement in equity investmentsAt the beginning of the year 10,120,321 8,668,409 23,768,008 20,547,931Prior period adjustment - SAGT - 66,131 - -

At the beginning of the year (Re-stated) 10,120,321 8,734,540 23,768,008 20,547,931Additions 2,728,160 858,036 4,749,062 3,231,869New acquisitions 615,983 - - -Disposals and transfers (1,004,826) 14,299 (717,418) (11,792)Net movement in fall in value of investments / impairment (12,008) - (60,263) -Adjustment on account of associate company share of net assets 145,530 (136,164) - -Share of results of associates net of dividend 595,287 649,610 - -

At the end of the year 13,188,447 10,120,321 27,739,389 23,768,008

6.11 Other investmentsAsset backed securities 193,500 - - -Bank deposits 100,000 - - -Debentures 1,395,000 - - -Government securities 6,949,712 202,192 731,587 -

8,638,212 202,192 731,587 -


102

GroupAs at 31st March 2009 2008In Rs.'000s

7 DEFERRED TAX ASSETAt the beginning of the year 91,074 74,013Credit / (release) 52,622 23,143Adjustment due to sale of non-current investments - (1,752)Transfers / exchange translation difference 4,150 (4,330)

At the end of the year 147,846 91,074

The closing deferred tax asset relates to the following:Accelerated depreciation for tax purposes (87,221) (73,763)Employee benefit liability 53,228 50,160Losses available for offset against future taxable income 168,771 102,374Others 13,068 12,303

147,846 91,074

The group has tax losses amounting to Rs. 3,329 mn (2008 - Rs. 2,648 mn) that are available indefinitely for offset against future taxableprofits of the companies in which the tax losses arose.

Deferred tax assets amounting to Rs. 262 mn (2008 - 210 mn) for the group and Rs. 570 mn (2008 - Rs. 575 mn) for the company have notbeen recognized since the companies do not expect these assets to reverse in the forseeable future.

Group CompanyAs at 31st March Note 2009 2008 2009 2008In Rs.'000s

8 OTHER NON-CURRENT ASSETSBottle stocks 390,976 490,273 - -Loans and advances - 649,485 - -Loans to executives 8.1 623,904 266,089 63,740 44,687Loans to life policyholders 201,360 - - -Loans to subsidiaries - - 21,000 21,000Work-in-progress apartments 566,260 192,899 - -Others 16,500 5,000 - -

1,799,000 1,603,746 84,740 65,687

8.1 Loans to executivesAt the beginning of the year 364,096 400,145 58,540 72,116New acquisitions 293,324 - - -Loans granted / transfers 282,648 167,943 45,886 26,022Loans recovered (164,676) (191,638) (21,514) (39,598)Adjustment due to sale of non-current investments - (12,354) - -

At the end of the year 775,392 364,096 82,912 58,540

Receivable within one year 151,488 98,007 19,172 13,853Receivable after one year 623,904 266,089 63,740 44,687

775,392 364,096 82,912 58,540


103


9 INVENTORIESRaw materials 173,480 188,313 - -Work-in-progress 278,551 776,382 - -Finished goods 1,269,941 2,399,708 - -Produce stocks 109,576 249,628 - -Other stocks 422,755 370,994 810 825

2,254,303 3,985,025 810 825

Group inventories with a carrying value of Rs. 235 mn (2008 - Rs. 44 mn) have been pledged as security for term loans obtained, details ofwhich are disclosed in note 17.3.


10 TRADE AND OTHER RECEIVABLESTrade and other receivables 5,341,629 5,466,539 744,530 235,342Reinsurance receivables 10.1 943,528 - - -Premium receivable 10.2 893,043 - - -Refundable deposits and prepayments 79,142 - - -Tax refunds 1,618,823 1,188,906 14,141 14,141Loans to executives 8.1 151,488 98,007 19,172 13,853

9,027,653 6,753,452 777,843 263,336


10.1 Reinsurance receivablesReinsurance receivables on outstanding claims 898,883 -Reinsurance receivables on settled claims net of dues 46,335 -Provision for bad debts (1,690) -

943,528 -

10.2 Premium receivablePremium receivable 901,074 -Less: Provision for bad debts (8,031) -

893,043 -


104


11 SHORT TERM INVESTMENTSAsset backed securities 304,500 - - -Bank deposits 145,626 2,971,070 11,074,292 325,000Commercial papers 13,026,349 1,222,182 - 1,214,900Government securities 1,820,452 6,262,114 357,071 5,444,836Quoted equities at market value 11.1 50,510 - - -

15,347,437 10,455,366 11,431,363 6,984,736

Group cost Group market valueAs at 31st March Number of 2009 2008 2009 2008In Rs.'000s shares

11.1 Quoted equities at market valueAitken Spence Hotel Holdings PLC. 83,500 7,413 - 7,515 -Aitken Spence PLC. 76,600 26,150 - 24,129 -Central Finance Company PLC. 47,800 10,548 - 7,505 -Hemas Holdings PLC. 81,150 6,708 - 4,889 -Tokyo Cement Company (Lanka) PLC. 51,780 7,817 - 6,472

58,636 - 50,510 -

As at 31st March 2009 2008Number of Value of Number of Value of

shares shares shares sharesin '000s in Rs. '000s in '000s in Rs. '000s

12 STATED CAPITALFully paid ordinary sharesAt the beginning of the year 635,994 22,464,267 552,940 22,245,894Share options exercised 858 60,841 4,094 276,409Bonus issue /share issue expenses - - 78,960 (58,036)Re-purchase of ordinary shares (25,500) - - -

At the end of the year 611,352 22,525,108 635,994 22,464,267

The composition of shares in issue is given under the Share Information section of the Annual Report.

30,826,106 shares (2008 - 34,862,428) have been reserved to be issued under the employee share option plan as at 31 March 2009. Thenumber of issued and fully paid shares is disclosed in the report of the Board of Directors.

GroupAs at 31st March Note 2009 2008In Rs.'000s

13 CAPITAL RESERVESRevaluation reserve 13.1 5,517,736 4,692,088Exchange translation reserve 13.2 1,493,222 908,299Other capital reserves 13.3 425,765 418,640

7,436,723 6,019,027


105

13.1 Revaluation reserve consists of the net surplus on the revaluation of property, plant and equipment and intangible assets.

13.2 Exchange translation reserve comprises the net exchange movement arising on the translation of net equity investments of overseassubsidiaries, joint ventures and associates into Sri Lankan rupees.

13.3 Other capital reserves comprises of capital redemption reserve funds arising from the redemption of preference shares of subsidiaries.


14 REVENUE RESERVESGeneral reserves 14.1 3,870,775 3,870,775 2,600,000 2,600,000Dividend reserve 14.2 1,572,188 1,572,188 1,519,322 1,519,322Investment equalisation reserve 14.3 75,000 75,000 75,000 75,000

Other revenue reserves 5,517,963 5,517,963 4,194,322 4,194,322Accumulated profit 10,102,307 9,395,743 2,333,325 2,148,495

15,620,270 14,913,706 6,527,647 6,342,817

14.1 General reserve represents amounts set aside by the directors for future expansion, and to meet any contingencies.

14.2 Dividend reserve represents dividend received and available for distribution.

14.3 Investment equalisation reserve comprises amounts set aside by the directors for impairment of long term investments of the company.


15 NON-INTEREST BEARING BORROWINGSAt the beginning of the year 21,000 30,000Repayments - (9,000)


Repayable within one year - -Repayable after one year 21,000 21,000

21,000 21,000

GroupAs at 31st March Note 2009 2008In Rs.'000s

16 INSURANCE PROVISIONSProvision - life 16.1 8,528,065 -Provision - general 16.2 2,497,549 -

11,025,614 -


106


16.1 Insurance provision - lifeProvision - life 8,371,689 -Unclaimed benefits 156,376 -

8,528,065 -

Long duration contract liabilities included in the life insurance fund, result primarily from traditional participating and non participating lifeinsurance products. Short duration contract liabilities are primarily group term, accident and health insurance products. The actuarialreserves have been established based on the following;- Interest rates which vary by product and as required by regulations issued by the Insurance Board of Sri Lanka (IBSL).- Mortality rates based on published mortality tables adjusted for actual experience as required by regulations issued by the IBSL.- Surrender rates based on the actual experience.

The amount of policyholder dividend to be paid is determined annually by the company. The dividend includes life policyholders share ofnet income that is required to be allocated by the insurance contract or by insurance regulations.

The actuarial valuation of the life insurance business was conducted by M Poopalanathan of Actuarial & Management Consultants (Pvt)Ltd, as at 31 December 2008.


16.2 Insurance provision - generalReserve for net unearned premiums 1,253,498 -Reserve for net deferred acquisition cost (14,429) -Reserve for gross outstanding claims 1,258,480 -

2,497,549 -


17 INTEREST BEARING BORROWINGS17.1 Movement

At the beginning of the year 8,869,204 7,825,546 2,895,493 3,595,493Additions 8,380,950 1,153,846 8,070,950 -New acquisitions - 1,961,985 - -Repayments (1,428,046) (2,002,519) (300,000) (700,000)Adjustments / exchange difference 734,544 (69,654) 593,800 -

At the end of the year 16,556,652 8,869,204 11,260,243 2,895,493

Repayable within one year 1,817,511 1,059,752 777,650 300,000Repayable after one year 14,739,141 7,809,452 10,482,593 2,595,493

16,556,652 8,869,204 11,260,243 2,895,493

Group interest bearing borrowings include finance lease obligations amounting to Rs. 29 mn (2008 - Rs. 40 mn), details of which aredisclosed in note 17.2


107


17.2 Finance leasesAt the beginning of the year 39,994 34,223Additions - 14,607Repayments (10,841) (8,836)


Finance lease obligations repayable within 1 yearGross liability 11,861 8,408Finance charges (3,218) (2,009)

Net lease obligation 8,643 6,399

Finance lease obligations repayable between 1 and 5 yearsGross liability 24,123 35,936Finance charges (5,030) (5,194)


Finance lease obligations repayable after 5 yearsGross liability 1,417 2,853Finance charges - -


17.3 Security and repayment terms

Lending Nature of Interest rate Repayment 2009 2008institution facility and security terms

John Keells Debentures Fixed, semi fixed Bullet repayment at end 1,995,493 1,995,493Holdings PLC. & floating of tenure of 4 years,

Bi-annual repayments.

DFCC Term loan AWPLR+0.25% Quarterly installments 600,000 800,000revised quarterly over 5 years with a grace

period of 6 months.

HNB pension & Fixed rate - 100,000retirement fund note

IFC 6 months LIBOR+2.75%, Bi-annual repayments 8,664,750 -share certificates of commencing fromAsian Hotels & December 2009Properties PLC andJohn Keells Hotels PLC

11,260,243 2,895,493


108



Group companiesAsian Hotels andProperties PLC.Cinnamon Grand Commercial Term loan AWPLR, revised 13 quarterly installments 306,586 573,291

Bank quarterly unsecured with a grace period of18 months

HNB Term loan AWPLR + 0.75% 32 monthly installments 437,980 557,980with a grace period of18 months

Ceylon Cold Stores PLC. NDB E Friendly loan 6.5%, Kaduwela land, 60 monthly installments 13,540 16,996building and machinery commencing March 2008of soft drink plant

NDB Project loan 10.5%, Kaduwela land, 60 monthly installments 149,333 194,135building and machinery commencing Aug 2007of soft drink plant

DFCC Project loan 10.5%, Kaduwela land, 48 monthly installments 161,458 223,958building and machinery commencing Nov 2007of soft drink plant

DFCC Term loan 18.25%, Kaduwela land, 48 monthly installments 100,000 120,000building and machinery commencing July 2008of soft drink plant

Ceylon Holiday Resorts Ltd. NTB Finance lease 3,666 5,082

DHL Keells (Pvt) Ltd. SCB Term loan SLIBOR + .35% 24 monthly installments 53,684 -

Habarana Lodge Ltd. NTB Finance lease 2,142 2,541

Habarana Walk Inn Ltd. NTB Finance Lease 1,832 2,541

Jaykay Marketing HNB Term loan 6 month TB rate+1.35%, 60 monthly installments - 19,250Services (Pvt) Ltd. negative pledge of commencing

stocks and debtors March 2004of Keells SuperMt. Lavinia, Nugegodaand Borella

HNB Term loan AWPLR +0.5%, 48 monthly installments 134,226 -stocks in trade ofKeells Super


109



John Keells Logistics NTB Finance lease 9,251 12,173(Pvt) Ltd.

SCB Term Loan 1 month SLIBOR+1% 12 quarterly 100,000 -Negative pledge installmentsof assets. commencing August 2010.

John Keells Maldivian Sampath Term loan 3 months LIBOR + 1.3% 30 quarterly installments 1,201,512 1,293,360Resorts (Pte) Ltd. Bank for first two years and commencing after a

LIBOR + 1.5% thereafter, grace period ofrevised quarterly 18 months

John Keells Deutsche Asset backed 21.98%, corporate Repayment over 10 years 66,389 75,483Warehousing (Pvt) Ltd. Bank notes guarantee of commencing May 2003

John Keells PLC.

Kandy Walk Inn Ltd. NTB Finance lease 1,832 2,541

Keells Foods HNB Term loan - 3,700Products PLC.

Tea Smallholder People's Term loan 9% 83 monthly 12,682 14,953Factories PLC. Bank installments

Trans Asia Hotels PLC. Sampath Bank Term loan AWPLR, unsecured 48 monthly installments 55,406 90,411commencing November 2007

UDA Finance lease 8,598 10,034

Trinco Walk Inn Ltd. NTB Finance lease 1,832 2,541

Travel Club (Pte) Ltd. BOC Maldives Term loan LIBOR + 2% 28 quarterly 982,005 916,130installments

Tranquility (Pte) Ltd. BOC Maldives Term loan LIBOR + 1.5%, 5 years 1,642,310 1,833,925leased back security

Whittall Boustead Ltd. Debenture 7.5%, unsecured 145 145

Yala Village (Pvt) Ltd. NTB Finance lease - 2,541

Reversal of debenture to Union Assurance PLC. (150,000) -16,556,652 8,869,204


110

GroupAs at 31st March 2009 2008In Rs.'000s Re-stated

18 DEFERRED TAX LIABILITIESAt the beginning of the year 736,045 591,867New acquisitions 13,085 -Charge 23,912 148,486Transfers/ exchange translation difference 4,194 (4,308)


The closing deferred tax liability balance relates to the following:Accelerated depreciation for tax purposes 611,374 685,953Revaluation of land and building to fair value 305,206 184,217Revaluation of investment property to fair value 43,617 36,427Employee benefit liability (121,566) (112,331)Losses available for offset against future taxable income (91,804) (83,799)Deferred tax effect on consolidation adjustments & others 30,409 25,578

777,236 736,045

18.1 Deferred tax for tax holiday companiesSri Lanka Accounting Standard 14 Income Taxes does not specify the recognition and measurement of deferred tax for companies whichenjoy tax holidays under local jurisdictions.

Section 17 of the Board of Investment Law No 4 of 1978, under which The Board of Investment (BOI) in Sri Lanka is set up, has given theBoard the power to grant exemptions from the Inland Revenue Act. The Board on entering into agreement with entities in the group hasstated that the provisions of the respective Inland Revenue Acts to the imposition, payment and recovery of income tax in respect of theprofits and income of the enterprise shall not apply during the period of the tax exemption. For certain companies the BOI has given theoption to pay tax as a percentage of turnover or at a concessionery rate after the expiration of the tax holiday period.

The Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka is at present interpreting the applicability ofSLAS 14 to companies under BOI tax holidays and if deemed applicable will specify the method of computing and the timing ofaccounting for deferred tax during the tax holiday period.

The group awaits the ruling of the UITF to determine the accounting for deferred tax in relation to tax holiday companies.


19 EMPLOYEE BENEFIT LIABILITIESAt the beginning of the year 798,600 718,315 80,330 86,316Charge 101,072 105,040 7,978 6,229New acquisitions 84,736 - - -Transfers - - 133 (4,173)Interest cost 79,860 71,831 8,033 8,631Payments (92,960) (77,830) (3,280) (13,704)(Gain)/Loss arising from changes in assumptions or due to(over)/under provision in the previous year (15,144) (11,454) (836) (2,969)Adjustment due to sale of non-current investments - (7,695) - -Exchange translation difference 753 393 - -

At the end of the year 956,917 798,600 92,358 80,330


111

The employee benefit liability of listed companies with more than 100 employees and Jaykay Marketing Services (Pvt) Ltd is based on theactuarial valuation carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries. The employee benefit liability of allother companies in the group are based on the gratuity formula in Appendix E of SLAS 16 - Employee Benefits.

The principal assumptions used in determining the cost of employee benefits were:Discount rate 10%Future salary increases 10%


20 OTHER DEFERRED LIABILITIESAt the beginning of the year 7,110 3,762Grants received 315 4,970Amortisation (2,258) (1,622)


Amounts expected to be amortised within 1 year 512 2,078Amounts expected to be amortised after 1 year 4,655 5,032

5,167 7,110

Basis of amortisationTea Smallholder Factories PLC.

Sri Lanka Tea Board subsidy 10% p.a. 2,269 3,887

Yala Village (Pvt) Ltd.Ceylon Chamber of Commerce grant 10% p.a. 2,898 3,223

5,167 7,110


21 TRADE AND OTHER PAYABLESTrade payables 1,821,385 3,813,965 - -Reinsurance payables 426,955 - - -Advances and deposits 901,930 1,348,782 - -Sundry creditors including accrued expenses 2,906,944 2,139,094 393,311 313,634Other payables 448,263 567,198 - -

6,505,477 7,869,039 393,311 313,634


112


22 INCOME TAX LIABILITIESAt the beginning of the year 328,104 188,250 - 4,766Provision 1,127,766 744,550 57,033 136,419New acquisitions 20,907 - - -Payments and set off against refunds (962,415) (604,696) (57,033) (141,185)

At the end of the year 514,362 328,104 - -


23 SHORT TERM BORROWINGSLoans 90,000 375,000 - -

90,000 375,000 - -

Group CompanyFor the year ended 31st March 2009 2008 2009 2008In Rs.'000s

24 REVENUE24.1 Gross revenue

Gross revenue 41,381,306 42,181,917 587,312 603,665Turnover tax (358,786) (376,574) - -

Net revenue 41,022,520 41,805,343 587,312 603,665

Value added tax of Rs. 2,389 mn (2008 Rs. 2,287 mn) for the group and Rs. 101 mn (2008 Rs. 73 mn) for the company has been deductedin arriving at gross revenue.

2009 2008Group Group

Sale of Rendering of external Sale of Rendering of externalgoods services revenue goods services revenue

24.2 Business segment analysisTransportation 9,747,603 1,695,211 11,442,814 11,310,964 1,708,045 13,019,009Leisure - 9,662,348 9,662,348 - 9,791,701 9,791,701Property - 1,578,329 1,578,329 - 2,617,565 2,617,565Consumer Foods & Retail 6,407,745 7,722,459 14,130,204 5,548,617 5,835,326 11,383,943Financial Services - 499,317 499,317 - 163,284 163,284Information Technology 919,434 686,101 1,605,535 1,466,723 621,089 2,087,812Others - 2,103,973 2,103,973 - 2,742,029 2,742,029

Group revenue 17,074,782 23,947,738 41,022,520 18,326,304 23,479,039 41,805,343


113

Group2009 2008

24.3 Geographical segment analysis (by location of customers)Sri Lanka 34,523,248 34,967,270Asia (excluding Sri Lanka) 4,763,686 4,900,930Europe 1,623,358 1,544,748Others 112,228 392,395

Total group external revenue 41,022,520 41,805,343


25 DIVIDEND INCOMEIncome from investments in related parties - - 2,429,788 3,067,373Income from other investments 53,765 93,405 52,897 92,016

53,765 93,405 2,482,685 3,159,389


26 OTHER OPERATING INCOMEInterest income 2,265,663 2,083,916 1,842,793 1,633,980Negative goodwill on acquisitions 641,377 56,625 - -Exchange gain 282,105 274,510 15,258 -Insurance claims 64,859 - - -Profit on sale of property, plant and equipment 37,590 69,346 3,820 94Profit on sale of other investments 38,192 4 37,037 4Sundry income 405,316 232,486 11,763 10,036

3,735,102 2,716,887 1,910,671 1,644,114

Negative goodwill on acquisitions includes Rs. 614 mn resulting from the acquisition of Union Assurance PLC.

27 OTHER OPERATING EXPENSESOther operating expenses consists mainly of power and energy costs, repairs and maintenance expenditure of the group.


28 FINANCE EXPENSESInterest expense on borrowingsLong term 1,213,837 961,825 886,410 505,326Short term 481,302 656,430 26,599 78,468

1,695,139 1,618,255 913,009 583,794


114


29 PROFIT ON SALE OF NON-CURRENT INVESTMENTSAssociated Motorways PLC. 1,025,779 - 1,209,803 -KBSL Information Technologies Ltd. - 11,601 - 41,236Unawatuna Walk Inn Ltd. - 43,550 - -

1,025,779 55,151 1,209,803 41,236


30 PROFIT BEFORE TAXProfit before tax is stated after charging allexpenses including the following:Remuneration to executive directors 215,819 191,431 121,620 100,026Remuneration to non executive directors 21,952 23,142 11,073 12,476Auditors’ remuneration

Audit 23,794 25,309 3,572 4,033Non-audit 6,617 7,021 262 260

Costs of defined employee benefitsDefined benefit plan cost 165,788 165,417 15,175 11,891Defined contribution plan cost - EPF and ETF 385,852 350,233 43,525 40,980

Staff expenses 4,802,755 4,283,638 211,115 278,193Depreciation 1,731,626 1,443,471 116,498 110,116Amortisation of finite life intangible assets 14,819 8,717 - -Impairment losses 100,943 3,283 60,263 -Operating lease payments 999,239 525,344 - -Donations 13,455 21,823 941 797

31 TAX EXPENSECurrent income taxCurrent tax charge 797,276 948,573 55,682 136,419

(Over)/under provision of current tax of previous years 520,224 (5,157) 1,351 -Economic service charge 31.2 (8,438) (40,843) - (23,717)10% Withholding tax on inter company dividends 102,287 184,203 - -

Deferred income taxRelating to origination and reversal oftemporary differences 31.3 (84,759) (32,034) - -

1,326,590 1,054,742 57,033 112,702


115


31.1 Reconciliation between tax expense and the product of accounting profitProfit before tax 6,300,754 6,579,242 4,420,305 3,915,792Dividend income from group companies 2,692,642 4,087,683 - -Share of results of associates (2,349,941) (2,242,713) - -Other consolidation adjustments (315,307) (7,070) - -

6,328,148 8,417,142 4,420,305 3,915,792Exempt profits (1,208,946) (1,967,851) (494,464) -Profits not charged to income tax (1,361,684) (821,735) (1,246,839) (41,241)Resident dividend (2,635,832) (3,505,174) (2,482,685) (3,156,274)

Accounting profit / (loss) chargeable to income taxes 1,121,686 2,122,382 196,317 718,277

Tax effect on chargeable profits 391,885 727,456 68,710 250,664Tax effect on non deductible expenses 179,809 79,730 88,941 21,243Tax effect on deductions claimed (121,105) (36,746) (51,844) (34,580)Net tax effect of unrecognised deferred tax assets for the year 64,923 53,398 - -Net tax effect of unrecognised deferred tax assets for prior years (6,107) (110,265) (50,949) (102,259)Tax effect on rate differentials (8,282) (6,815) - -Consolidation adjustments - 11,974 - -(Over)/under provision for previous years 520,224 (5,157) 1,352 -Other income based taxes

Economic service charge (203) (32,790) - (23,717)Social responsibility levy 10,139 8,190 823 1,351Fringe benefit tax (indian companies) 2,271 2,209 - -10% WHT on inter company dividends 102,287 184,203 - -Current and deferred tax share of associates 190,749 179,355 - -

1,326,590 1,054,742 57,033 112,702

Income tax charged atStandard rate 35% 567,179 665,749 54,858 134,757Concessionary Rate of 15% 46,061 80,722 - -Off-Shore dividend 10% - 324 - 311Off-Shore profits at varying rates 177 1,493 - -

(Over)/under provision for previous years 520,224 (5,157) 1,352 -

1,133,641 743,131 56,210 135,068Deferred tax charge / (reversal) (112,294) (29,556) - -Other income based taxes

Economic service charge (203) (32,790) - (23,717)Social responsibility levy 10,139 8,190 823 1,351Fringe benefit tax (indian companies) 2,271 2,209 - -10% WHT on inter company dividends 102,287 184,203 - -Current and deferred tax share of associates 190,749 179,355 - -

Total income tax expense 1,326,590 1,054,742 57,033 112,702

Group tax expense is based on the taxable profit of individual companies within the group. At present the tax laws of Sri Lanka do notprovide for group taxation.


116


31.2 Economic service charge (ESC)ESC written-off/(written back) (203) (32,790) - (23,717)Share of associate company ESC (8,235) (8,053) - -

(8,438) (40,843) - (23,717)


31.3 Deferred tax expenseIncome statementDeferred tax expense arising from

Accelerated depreciation for tax purposes (30,975) (12,160) - -Revaluation of investment property to fair value 7,190 - - -Employee benefit liabilities (21,817) (22,364) - -Benefit arising from tax losses (76,327) (4,849) - -Others 9,635 9,817 - -

(112,294) (29,556) - -Share of associate company deferred tax 27,535 (2,478) - -

Deferred tax charge/(reversal) (84,759) (32,034) - -

Statement of changes in equityDeferred tax expense arising fromRevaluation of land and building to fair value 83,584 154,899 - -

Total deferred tax charge/(reversal) (1,175) 122,865 - -

Deferred tax has been computed at 35% for all standard rate companies (including listed companies) and at rates as disclosed in note31.6 and 31.7.

Temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has notbeen recognised, amounts to Rs. 1,663 mn (2008 Rs. 1,220 mn). The deferred tax effect on undistributed reserves of subsidiaries has notbeen recognised since the parent can control the timing of the reversal of these temporary differences. The deferred tax liability ontemporary differences relating to undistributed profits of associates has not been recognized as there is no current intention of distributingretained earnings to the holding company.

However, the group has recognised the deferred tax impact pertaining to the current year on declared dividends of subsidiaries andassociates amounting to Rs. 42 mn.


31.4 Tax losses carried forwardTax losses brought forward 2,648,021 2,579,686 1,240,548 1,439,750Adjustments on finalization of liability (19,917) 129,009 (10,078) 62,110Tax losses arising during the year 806,777 437,338 - -Utilisation of tax losses (215,529) (463,695) (105,808) (261,312)Adjustments due to acquisitions / disposals / mergers 109,382 (34,317) - -

3,328,734 2,648,021 1,124,662 1,240,548


117

Year of Cost of Relief Liability to additionalinvestment approved claimed tax on disposal

investment investments of Investment

31.5 Details of investment reliefCompany 1999/2000 579,036 218,270 -

The company is eligible for qualifying payment relief granted under section 31 (2) (s) of the Inland Revenue Act No 28 of 1979 and thetransitional povisions in Section 218 of the Inland Revenue Act No 10 of 2006. The company had claimed qualifying payment relief ofRs. 39 mn for the year and the balance investment relief has been carried forward for set off in future years.

31.6 Applicable rates of income taxThe tax liability of resident companies are computed at the standard rate of 35% except for the following companies which enjoy full orpartial exemptions and concessions.

Company / Sector Basis Exemptions/ Periodconcessions

Exemptions / concessions granted under the Inland Revenue ActCeylon Cold Stores PLC. Off-Shore activities for payment Exempt Open-ended

in foreign currencyJohn Keells Computer Services (Pvt) Ltd. - do - - do - - do -John Keels Office Automation (Pvt) Ltd. - do - - do - - do -Keells Hotel Management Services Ltd. - do - - do - - do -Walkers Tours Ltd. - do - - do - - do -John Keells Computer Services (Pvt) Ltd. On-shore activities for payment Exempt Open-ended

in foreign currencyWalkers Air Services (Pvt) Ltd. - do - - do - - do -Ceylon Cold Stores PLC. Manufacture of dairy products Exempt Upto 31 March 2011Leisure Sector Promotion of tourism 15% Open-endedMackinnons American Express Travels (Pvt) Ltd. - do - - do - - do -Consumer Foods and Retail sector Qualified export profits 15% Upto 31 March 2014

Exemptions / concessions granted under the Board of Investment LawAsian Hotels and Properties PLC. Construction and operation of Exempt 15 years from April 1996 with a

office and apartment complex 3 year extension on merger

Auxicogent International Lanka (Pvt) Ltd. Business / knowledge process Exempt 8 years from 1st year of profitoutsourcing centre or 2 years from operations

InfoMate (Pvt) Ltd. Provision of IT enabled services Exempt 3 years from April 2007

John Keells International (Pvt) Ltd. Regional operating headquarters Exempt 3 years upto March 2009

John Keells Logistics (Pvt) Ltd. Integrated supply chain Exempt 5 years from 1st year of profitmanagement or 2 years from operations

South Asia Gateway Terminals (Pvt) Ltd. "Port Services" at Exempt 20 years from September 1999Queen Elizabeth Quay

John Keells Warehousing (Pvt) Ltd. Construction and operation 15% 7 years from April 2003of warehouse complex

Yala Village (Pvt) Ltd. Construction and operation of 15% 15 years from September 2003safari-styled tourist hotel


118

Other miscellaneous concessionsExemption on interest income earned from foreign currency denominated accounts.Gains from sale of shares held for more than two years is excluded from chargeability to income tax.Income / profits from offshore dividends and interest is exempt from income tax.

31.7 Income tax rates of off-shore subsidiaries

Country of incorporation Rate

Auxicogent Alpha (Pvt) Ltd. Mauritius 3%(Effective)Auxicogent Holdings (Pvt) Ltd. Mauritius 3%(Effective)Auxicogent International (Pvt) Ltd. Mauritius 3%(Effective)Auxicogent International US Inc. USA 35%(Max)Auxicogent Investments Mauritius (Pvt) Ltd. Mauritius 3%(Effective)Fantasea World Investments (Pte) Ltd. Republic of Maldives NilInformation System Associates United Arab Emirates NilJohn Keells Air Services India (Pvt) Ltd. India 33.99%(Effective)John Keells Computer Services (UK) Ltd. United Kingdom 30%John Keells Foods India (Pvt)Ltd. India 33.99%(Effective)John Keells Holdings Mauritius (Pvt) Ltd. Mauritius 3%(Effective)John Keells Hotels Mauritius (Pvt.) Ltd. Mauritius 3%(Effective)John Keells Logistics India (Pvt) Ltd. India 33.99%(Effective)John Keells Maldivian Resorts (Pte) Ltd. Republic of Maldives NilJohn Keells Singapore (Pte) Ltd. Singapore 17%Keells Food Products Mauritius (Pvt.) Ltd. Mauritius 3%(Effective)Mack Air Services Maldives (Pte) Ltd. Republic of Maldives NilSerene Holidays (Pvt) Ltd. India 33.99%(Effective)Tranquility (Pte) Ltd. Republic of Maldives NilTravel Club (Pte) Ltd. Republic of Maldives Nil

Companies incorporated in India are subject to a Fringe Benefit Tax (FBT), charged on selected expenses at specified rates, against eachitem of expense. Applicable rates of FBT vary from 5% to 100% depending on the item of expense.

GroupFor the year ended 31st March 2009 2008In Rs.'000s

32 EARNINGS PER SHARE32.1 Basic earnings per share

Profit attributable to equity holders of the parent 4,741,818 5,118,934

Weighted average number of ordinary shares 32.3 625,638 635,223

Basic earnings per share 7.58 8.06

32.2 Diluted earnings per shareProfit attributable to equity holders of the parent 4,741,818 5,118,934

Adjusted weighted average number of ordinary shares 32.3 625,737 639,800

Diluted earnings per share 7.58 8.00


119

GroupFor the year ended 31st March 2009 2008In 000s

32.3 Amount used as denominatorOrdinary shares at the beginning of the year 635,995 552,940Bonus shares issued - 78,960Re-purchase of ordinary shares (10,625) -Effect of share options exercised and rights issue of shares 268 3,323

Weighted average number of ordinary shares in issue before dilution 625,638 635,223Number of shares outstanding under the share option scheme 33,403 30,941Number of shares that would have been issued at fair value (33,304) (26,364)

Adjusted weighted average number of ordinary shares 625,737 639,800

For the year ended 31st March Rs. 2009 Rs. 2008In Rs.'000s

33 DIVIDEND PER SHAREEquity dividend on ordinary shares

Declared and paid during the yearFinal dividend* 1.00 636,003 1.00 632,669Interim dividend 2.00 1,247,439 4.00 2,543,633

Total dividend 3.00 1,883,442 5.00 3,176,302

*Previous years' final dividend paid in the current year.


120

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133

2,83

328

3,46

9(1

67,1

67)

43,389

2,32

3,52

777

7,02

94,

741,

818

5,11

8,93

4Minority

interest

31,6

3839

,792

4,87

013

,959

76,0

1012

1,50

137

,442

94,861

6,34

08,58

2-

-76

,046

126,87

123

2,34

640

5,56

6

1,66

7,11

52,90

4,29

012

8,05

634

7,00

748

6,39

178

5,40

112

1,02

324

8,46

233

9,17

329

2,05

1(1

67,1

67)

43,389

2,39

9,57

390

3,90

04,

974,

164

5,52

4,50

0

Purcha

seof

prop

erty,p

lant

&eq

uipm

ent

107,

884

244,08

71,

625,

695

1,58

0,13

511

,944

60,888

478,

513

753,68

83,

942

290

64,2

1311

8,57

311

9,70

143

,175

2,41

1,89

22,80

0,83

6De

prec

iatio

n96

,070

83,631

1,00

2,67

782

1,51

610

,450

26,928

362,

607

311,70

29,

351

2,67

046

,185

26,320

204,

286

170,70

41,

731,

626

1,44

3,47

1Gratuity

prov

ision

andrelatedco

sts

16,3

0921

,392

58,3

0944

,713

1,54

82,24

847

,558

56,300

2,85

41,72

614

,169

17,896

25,0

4121

,142

165,

788

165,41

7

Inad

ditio

nto

segm

entres

ults

othe

rinformationsu

chas

finan

ceex

pens

es,tax

expe

nses

have

been

alloca

tedto

segm

ents

forb

etterp

rese

ntation.


121

34.2

Prim

ary

segm

ents

(bus

ines

sse

gmen

ts)

Trans

porta

tion

Leisu

rePr

oper

tyCo

nsum

erFo

ods&

Reta

ilFin

ancia

lSer

vices

Info

rmat

ionTe

chno

logy

Othe

rsGr

oup

Tota

lFo

rthe

year

ende

d31

stM

arch

2009

2008

2009

2008

2009

2008

2009

2008

2009

2008

2009

2008

2009

2008

2009

2008

InRs

.’000

sRe

-sta

ted

Re-s

tate

d

Prop

erty,p

lant

andeq

uipm

ent

841,

764

1,72

9,62

219

,419

,589

18,813

,835

806,

891

759,03

13,

780,

148

3,67

8,99

597

5,67

96,27

219

0,07

316

8,13

41,

098,

560

1,12

9,24

727

,112

,704

25,494

,164

Leas

eho

ldprop

erty

--

4,71

9,77

14,57

9,69

4-

--

--

--

-55

,941

58,540

4,77

5,71

24,63

8,23

4Inve

stmen

tprope

rties

--

1,14

0,01

61,13

0,75

52,

410,

750

2,37

8,92

8-

--

--

-1,

929,

000

1,79

3,09

55,

479,

766

5,30

2,77

8Intang

ible

asse

ts-

--

--

--

-2,

298,

500

-21

,971

11,364

--

2,32

0,47

111

,364

Other

inve

stmen

ts71

571

525

,057

227,27

511

,405

12,445

3,10

03,10

07,

907,

250

--

-80

4,07

683

,881

8,75

1,60

332

7,41

6Other

non-cu

rrent

asse

ts61

,541

58,800

60,7

9846

,281

578,

008

199,34

848

5,16

558

0,28

849

5,31

710

,106

38,2

2364

9,90

879

,948

59,015

1,79

9,00

01,60

3,74

6Intercom

pany

lend

ing

43,9

5043

,950

2,26

5,75

52,53

5,59

7-

--

-15

0,00

0-

16,0

0212

,427

61,0

0021

,000

2,53

6,70

72,61

2,97

4

Segm

entn

on-c

urre

ntas

sets

947,

970

1,83

3,08

727

,630

,986

27,333

,437

3,80

7,05

43,34

9,75

24,

268,

413

4,26

2,38

311

,826

,746

16,378

266,

269

841,83

34,

028,

525

3,14

4,77

852

,775

,963

39,990

,676

Inve

stmen

tsin

asso

ciates

10,8

82,6

826,80

6,07

8-

--

--

-1,

323,

994

1,86

0,67

484

8,96

642

5,40

6-

860,49

313

,055

,642

9,95

2,65

1Inve

stmen

tinsu

bsidiarie

san

djointv

enture

5,11

55,11

5De

ferre

dtaxas

sets

147,

846

91,074

Goo

dwill

347,

420

210,32

0Elim

inations

/adjus

tmen

ts(2

,834

,740

)(2,740

,145

)

Tota

lnon

-cur

rent

asse

ts63

,497

,246

47,509

,691

Inve

ntories

129,

730

1,53

5,43

122

4,60

922

8,33

028

2,54

474

0,12

51,

399,

447

1,14

8,69

44,

083

-11

2,81

774

,538

124,

081

268,29

22,

277,

311

3,99

5,41

0Trad

e&othe

rrec

eiva

bles

929,

222

1,12

5,10

64,

503,

863

3,88

4,81

991

,421

120,01

51,

199,

473

1,06

0,31

72,

866,

102

528,65

41,

271,

449

458,89

41,

419,

841

1,09

5,40

412

,281

,371

8,27

3,20

9Inve

stmen

tshe

ldfors

ale

--

--

-6,49

4-

--

--

-14

,299

30,837

14,2

9937

,331

Shortterm

inve

stmen

ts1,

102,

568

1,39

8,16

746

3,57

925

0,12

959

5,70

21,09

8,42

511

,969

5,80

01,

176,

764

143,00

017

0,56

414

5,40

311

,826

,291

7,41

4,44

215

,347

,437

10,455

,366

Cash

inha

ndan

dat

bank

276,

050

633,87

780

2,53

574

6,47

511

9,81

6(6,771

)68

,086

87,893

471,

690

3,76

310

4,18

024

9,98

413

8,61

744

5,58

91,

980,

974

2,16

0,81

0

Segm

entc

urre

ntas

sets

2,43

7,57

04,69

2,58

15,

994,

586

5,10

9,75

31,

089,

483

1,95

8,28

82,

678,

975

2,30

2,70

44,

518,

639

675,41

71,

659,

010

928,81

913

,523

,129

9,25

4,56

431

,901

,392

24,922

,126

Taxrefund

s1,

618,

823

1,18

8,90

6Elim

inations

/adjus

tmen

ts(4

,801

,752

)(2,671

,122

)

Tota

lcur

rent

asse

ts28

,718

,463

23,439

,910

Tota

lass

ets

92,2

15,7

0970

,949

,601

Noninterest

bearingbo

rrowings

85,9

5085

,950

3,36

8,53

93,39

4,44

2(1

,023

,247

)(774

,049

)-

--

--

--

-2,

431,

242

2,70

6,34

3Interest

bearingbo

rrowings

124,

252

12,173

3,83

6,35

94,70

0,73

8-

-38

0,30

042

1,83

1-

--

-10

,548

,230

2,67

4,71

014

,889

,141

7,80

9,45

2Em

ploy

eebe

nefit

liability

71,2

5978

,957

260,

722

232,54

325

,010

24,000

286,

395

256,82

897

,309

9,86

568

,485

60,453

147,

737

135,95

495

6,91

779

8,60

0Other

deferre

dliabilities

--

2,89

83,22

3-

--

--

--

-2,

269

3,88

75,

167

7,11

0Other

noncu

rrent

liabilities

--

--

--

274,

576

352,05

1-

--

--

-27

4,57

635

2,05

1Insu

ranc

eprov

ision

--

--

--

--

11,0

25,6

14-

--

--

11,0

25,6

14-

Segm

entn

on-c

urre

ntlia

bilit

ies

281,

461

177,08

07,

468,

518

8,33

0,94

6(9

98,2

37)

(750

,049

)94

1,27

11,03

0,71

011

,122

,923

9,86

568

,485

60,453

10,6

98,2

362,81

4,55

129

,582

,657

11,673

,556

Deferre

dtaxliabilities

777,

236

736,04

5Elim

inations

/adjus

tmen

ts(2

,560

,242

)(2,685

,343

)

Tota

lnon

-cur

rent

liabi

litie

s27

,799

,651

9,72

4,25

8

Trad

e&othe

rpay

ables

663,

752

2,32

5,21

01,

866,

403

2,76

4,56

449

2,84

949

7,78

71,

887,

099

1,56

4,22

51,

139,

783

535,94

51,

157,

107

321,67

31,

011,

148

926,47

08,

218,

141

8,93

5,87

4Sh

ortterm

borro

wings

94,7

1290

,958

2,85

2,71

31,36

2,55

131

,000

56,000

65,9

2047

3,07

7-

-3,

575

-12

6,87

539

,387

3,17

4,79

52,02

1,97

3Cu

rrent

portion

ofinterest

bearingbo

rrowings

38,6

84-

809,

342

592,18

0-

-17

8,25

715

6,20

7-

--

-79

1,22

831

1,36

51,

817,

511

1,05

9,75

2Ba

nkov

erdrafts

133,

458

238,59

32,

542,

908

1,75

3,84

536

,946

81,868

849,

883

618,73

088

712

,353

49,8

521,71

21,

315,

892

694,61

94,

929,

826

3,40

1,72

0

Segm

entc

urre

ntlia

bilit

ies

930,

606

2,65

4,76

18,

071,

366

6,47

3,14

056

0,79

563

5,65

52,

981,

159

2,81

2,23

91,

140,

670

548,29

81,

210,

534

323,38

53,

245,

143

1,97

1,84

118

,140

,273

15,419

,319

Inco

metaxliabilities

514,

362

328,10

4Elim

inations

/adjus

tmen

ts(4

,780

,988

)(2,688

,855

)

Tota

lcur

rent

liabi

litie

s13

,873

,647

13,058

,568

Tota

llia

bilit

ies

41,6

73,2

9822

,782

,826

Totalseg

men

tassets

3,38

5,54

06,52

5,66

833

,625

,572

32,443

,190

4,89

6,53

75,30

8,04

06,

947,

388

6,56

5,08

716

,345

,385

691,79

51,

925,

279

1,77

0,65

217

,551

,654

12,399

,342

84,6

77,3

5564

,912

,802

Totalseg

men

tliabilities

1,21

2,06

72,83

1,84

115

,539

,884

14,804

,086

(437

,442

)(114

,394

)3,

922,

430

3,84

2,94

912

,263

,593

558,16

31,

279,

019

383,83

813

,943

,379

4,78

6,39

247

,722

,930

27,092

,875


122

34.3 Secondary segments ( geographical segments, based on the location of assets)

Sri Lanka Asia (excluding Sri Lanka) Others Group Total2009 2008 2009 2008 2009 2008 2009 2008

Segment revenue 37,727,056 38,216,931 4,411,169 4,704,444 57,020 36,931 42,195,245 42,958,306Segment results 1,602,889 3,162,263 176,524 492,142 (25,876) (41,023) 1,753,537 3,613,382Segment assets 67,565,095 49,125,318 15,996,705 14,321,458 1,115,555 1,466,026 84,677,355 64,912,802Segment liabilities 34,872,680 16,453,744 11,976,805 10,586,619 873,445 52,512 47,722,930 27,092,875Investment in associates 12,206,676 9,527,245 - - 848,966 425,406 13,055,642 9,952,651Purchase of property,plant and equipment 988,343 1,495,096 1,423,231 1,305,594 318 146 2,411,892 2,800,836

Depreciation 1,243,606 1,124,657 484,551 315,989 3,469 2,825 1,731,626 1,443,471Gratuity provision andrelated costs 163,244 165,748 2,544 (331) - - 165,788 165,417

Impairment losses 100,943 3,283 - - - - 100,943 3,283Grants and subsidies amortised 2,258 1,622 - - - - 2,258 1,622

35 RELATED PARTY TRANSACTIONSThe company carried out transactions in the ordinary course of business at commercial rates with related entities. The list of directors ateach of the subsidiary and associate companies have been disclosed in the group directory.


35.1 Amounts due from related partiesSubsidiaries - - 199,755 227,276Joint ventures - 13,171 - -Associates 22,129 4,314 805 205Companies under common control - - - -Key management personnel (KMP) - - - -Close family members of KMP - - - -Companies controlled / jointly controlled / significantlyinfluenced by KMP and their close family members - - - -

Post employment benefit plan - - - -

22,129 17,485 200,560 227,481

35.2 Amounts due to related partiesSubsidiaries - - 5,619 9,996Joint ventures 16,471 - - -Associates - 692 - -Companies under common control - - - -Key management personnel - - - -Close family members of KMP - - - -Companies controlled / jointly controlled / significantlyinfluenced by KMP and their close family members - 24,261 - -

Post employment benefit plan - - - -

16,471 24,953 5,619 9,996


123


35.3 Transactions with related partiesSubsidiaries

(Purchases) / sales of goods - - (4,827) (3,042)(Receiving) / rendering of services - - (449,567) (436,845)(Purchases) / sale of property plant & equipment - - 118 410Loans (taken) / given - - 984,764 308,000Interest (paid) / received - - 39,218 47,728Rent (taken) / given - - (3,540) (17,330)Guarantees (taken) / given - - 1,531 859

Joint Ventures(Receiving) / rendering of services 23,173 13,338 - -

Associates(Purchases) / sales of goods 5,317 (396) - -(Receiving) / rendering of services (32,576) (311,856) (2,649) (2,149)Interest (paid) / received 526,863 1,345,788 304,916 365,161Leases (taken) / given - (12,173) - -

Key management personnel(Receiving) / rendering of services 3,983 4,592 - -

Close family members of KMP(Receiving) / rendering of services 1 1,893 - -

Companies controlled / jointly controlled / significantlyinfluenced by KMP and their close family members(Purchases) / sales of goods (5,184) (76,522) - -(Receiving) / rendering of services - 4,781 - -

Post employment benefit planContributions to the provident fund 171,120 165,825 37,883 35,668

35.4 Terms and conditions of transactions with related partiesTransactions with related parties are carried out in the ordinary course of the business. Outstanding balances at year end are unsecured,interest free and settlement occurs in cash.

35.5 Compensation of key management personnelKey management personnel include members of the Board of directors of John Keells Holdings PLC and its subsidiary companies.


124


Short-term employee benefits 237,771 214,573 132,693 112,502Post employment benefits - - - -Other long-term benefits - - - -Termination benefits 1,429 - - -Share based payments - - - -

239,200 214,573 132,693 112,502

Directors' interest in the employee share option plan of the companyAs at 31 March 2009, the executive members of the Board of directors held options to purchase ordinary shares under the employee shareoption plan as follows

1,504,648 Ordinary shares at a price of Rs. 92.72 each, exercisable before 28-3-20101,369,857 Ordinary shares at a price of Rs. 120.74 each, exercisable before 9-4-20111,380,403 Ordinary shares at a price of Rs. 146.00 each, exercisable before 27-5-20121,540,325 Ordinary shares at a price of Rs. 120.00 each, exercisable before 24-3-2013

No share options have been granted to the non-executive members of the Board of directors under the employee share option plan.

36 CONTINGENT LIABILITIES

JOHN KEELLS HOLDINGS PLC (JKH)

The Contingent Liability of JKH as at 31 March 2009, relates to the following:-

• GST & VAT assessments for the year of assessment 2002/03. The company has filed appeals against these assessments and theseare currently pending with the Board of Review of the Department of Inland Revenue.

• Income tax assessment for the year of assessment 2006/07. The company has filed an appeal against this assessment and iscurrently pending the hearing of the Commissioner General of Inland Revenue.

Having discussed with independent legal and tax experts and based on information available, the contingent liability as at 31 March 2009is estimated at Rs. 123 mn.

LANKA MARINE SERVICES (PVT) LIMITED (LMS)

The contingent liability of LMS as at 31 March 2009, relates to the following:

• Value Added Tax (VAT) refunds in dispute with the Department of Inland Revenue - The company contends that the supply ofbunkers to foreign ships constitutes an export that qualifies for zero rating and that it is entitled to a refund of VAT paid on inputs. TheDepartment of Inland Revenue, which earlier accepted the company's claim, had later reversed its position. Opinions fromindependent tax consultants and independent legal counsel all support the company's position and the company is now pursuing itsclaim in accordance with the provisions in the Value Added Tax Act, No. 14 of 2002 for resolution of disputes. The appeals made by thecompany are currently with the Court of Appeal of Sri Lanka.

• Income tax assessments relating to years of assessments 2001/02 - The company has appealed against these assessments,whereby refunds have been claimed on the basis that its business activity is that of an export, and this has been disputed by theDepartment of Inland Revenue. The appeal made by the company is currently with the Board of Review of the Department of InlandRevenue awaiting the case stated to be forwarded to the Court of Appeal of Sri Lanka.


125

• Post privatisation turnover tax levied by the Western Provincial Council 2003 and 2004 - The company has also disputed this onthe basis that its business activity is that of an export. The appeal made by the company is pending further review by the WesternProvincial Council.

• Excise Duty and VAT claimed by Sri Lanka Customs on a single gas oil procurement from Ceylon Petroleum Corporation - Thecustoms inquiry was held and consequently a show-cause letter was issued. However, the company made an application to the courtof appeal to quash the order made by the inquiring officer. The matter is pending before the Court of Appeal.

• Income Tax Assessments relating to years of assessments 2005/06 and 2006/07 – Assessments were received in August 2008,consequent to the Supreme Court judgement, whereby the original BOI concessions granted were annulled. Although the assessmentswere based on normal tax rates the company computed and paid income taxes at tax rates of 15 per cent, based on opinions fromindependent legal counsel and tax consultants, that the supply of bunkers to foreign vessels is an export and therefore income is liablefor tax at 15 per cent as provided in the Inland Revenue Act. Appeals have been lodged against the balance taxes assessed andpenalties charged by the Inland Revenue.

• Income tax assessments relating to years of assessments 2002/03, 2003/04 and 2004/05 – Income tax assessments werereceived in January 2009, once again based on normal tax rates. It is the view of the company based on expert legal and tax advisethat the subject years were statutorily time barred under Section 134 (5) (a) of the Inland Revenue Act and that penalties will not apply.


TEA SMALLHOLDER FACTORIES PLC (TSFP)

The contingent liability of TSFP as at 31 March 2009, relates to the following:-

• Income tax assessments in respect of for the years of assessment 2003/04 to 2007/08 – Management fees in excess of Rs. 1million for the said years have been disallowed. The company has filed appeals against these assessments and these are currentlypending with the Board of Review of the Department of Inland Revenue.


37 CAPITAL COMMITMENTSGroupCapital commitments approved and contracted as at the balance sheet date, not provided for in financial statements amounts to Rs.2,157mn. Details are given below.

GroupAs at 31st March 2009 2008In 000s

Asian Hotels and Properties PLC. - Crescat Division 2,102,506 3,782,710Asian Hotels and Properties PLC.- Cinnamon Grand 40,497 32,105Ceylon Cold Stores PLC. 14,366 30,971Lanka Marine Services Ltd. - 66,088Trans Asia Hotels PLC. - 4,848

CompanyThe company does not have significant capital committments as at the balance sheet date.


126

GroupAs at 31st March 2009 2008In 000s

38 LEASE COMMITMENTSLease rentals due on non-cancellable operating leases:Within one year 803,894 1,052,888Between one and five years 3,351,988 4,436,478After 5 years 14,046,739 16,916,811

18,202,621 22,406,177

38.1 Details of leases

Company Lessor Leased properties

Ceylon Cold Stores PLC. Colombo Divisional Secretariat Land occupied.

Ceylon Holiday Resorts Ltd.Bentota Beach Hotel Sri Lanka Tourist Board Land occupied.Coral Gardens Hotel Sri Lanka Tourist Board Land occupied.

Fantasea World Investment (Pte) Ltd. Government of Maldives Land occupied.

Habarana Lodge Ltd. Kekirawa Divisional Secretariat Land occupied.

Habarana Walk Inn Ltd. Kekirawa Divisional Secretariat Land occupied.

John Keells Maldivian Resorts (Pte) Ltd. Government of Maldives & a sub lease with Land occupied.Yacht Tours Maldives (Pvt) Ltd.

Jaykay Marketing Services (Pvt) Ltd. R.J. S. Exports (Pvt) Ltd./Mr. Ramesh Abeywardena Land occupied.

John Keells PLC. Divisional Secretariat Land occupied.

John Keells Singapore (Pte) Ltd. Mengiwa (Pvt) Limited Office space occupied.

Mack Air Services Maldives (Pte) Ltd State Trading Organization PLC Office space occupied.

Travel Club (Pte) Ltd. Government of Maldives and a sub leasewith Ellaidhoo Investments (Pte) Ltd. Land occupied.

Tranquility (Pte) Ltd. Government of Maldives Land occupied.

Yala Village (Pvt) Ltd. Sri Lanka Tourist Board Land occupied.


127

39 ASSETS PLEDGEDShare certificates pledged by John Keells Holdings PLC

Pledged to Share certificates of No of shares

Bankers Trustee Company Limited South Asia Gateway Terminals (Pvt) Ltd 99,447,756International Finance Corporation Asian Hotels and Properties PLC 185,530,612International Finance Corporation John Keells Hotels PLC 1,012,239,871

40 PRIOR PERIOD ADJUSTMENTLanka Marine Services (Pvt) Ltd (LMS)As was reported in the interim report for the six months ended 30 September 2009, the return of LMS land was retrospectively restated inthe books of the company and group. The Urgent Issues Task force (UITF) of the Institute of Chartered Accountants of Sri Lanka wasapproached to confirm that the treatment adopted by the company and the group was correct. The Ruling received from the UITF,matches with the accounting treatment adopted by the company and the group. Accordingly, the handing over of the LMS land to the SriLanka Ports Authority (SLPA), based on the Supreme Court judgement on the LMS privatisation, has been treated as a prior period error(as per SLAS 10) in both the books of LMS and in the group accounts.

The “failure to use or misuse of reliable information” was a key criteria used by the UITF in confirming that the hand-over of the landshould be treated as a prior period error. The underlying reasoning was based on the Supreme Court judgement which stated that no grantof land, in law, had taken place. Further, the Supreme Court ruled that the land grant was made without the advice of the provincial councilas required in terms of the nineth schedule of the constitution of Sri Lanka and was not in compliance with the constitutional requirementsand in reality, the land belongs to the SLPA as per the Act and John Keells Holdings PLC had no legal right to the land whatsoever.

Land and buildings of Rs. 726 mn was restated and written off against brought forward retained earnings as of 1 April 2007. Goodwillarising from the initial acquisition of Rs. 864 mn was also restated and written off against brought forward retained earnings as of 1 April2007.

South Asia Gateway Terminals (Pvt) Ltd.Rs. 69 mn classified as Calls in Advance was credited to retained earnings with retrospective effect.

41 POST BALANCE SHEET EVENTSOn 23 April 2009, the company purchased four million ordinary shares of John Keells Logistics Lanka (Pvt) Ltd., at a cost of Rs. 10 pershare.

Further to the mandatory offer made by the company on 26 March 2009 to the remaining share holders of Union Assurance PLC, thecompany received acceptances for the purchase of 943,918 ordinary shares and accordingly at Rs. 72.00 per share, paid out Rs. 67.9 mnby the expiry date of the offer.

The Board of directors of the company has declared a final dividend of Rs.1.00 per share for the financial year ended 31 March 2009. Asrequired by section 56 (2) of the Companies Act No 7 of 2007, the Board of directors has confirmed that the company satisfies thesolvency test in accordance with section 57 of the Companies Act No. 07 of 2007, and has obtained a certificate from the auditors, prior todeclaring a final dividend which is to be paid on 10 June 2009.

In accordance with the Sri Lanka Accounting Standard 12 (revised 2005), Events after the Balance Sheet date, the final dividend has notbeen recognized as a liability in the financial statements as at 31 March 2009.


128

ECONOMIC VALUE STATEMENTCo

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129

HISTORY OF THEJOHN KEELLS GROUP1870The foundation was laid for the corporate journey of John KeellsHoldings, when two English brothers, George and Edwin John set up E.John & Co., a firm of produce and exchange brokers.

1948The firm merged with two London based tea brokers, William Jas andHy Thompson & Co., and Geo White & Co., thereby evolving into aprivate liability company in the name of E. John, Thompson, White &Company Ltd.

1960Ever more enthusiastic to expand its activities, the firm amalgamatedwith Keell and Waldock Ltd., another long established produce, shareand freight broking company thus changing its name to John KeellThompson White Ltd.

1973The company acquired a controlling stake in Walkers Tours and Travels(Ceylon) Ltd., one of the country's leading inbound tour operators.

1974The firm became a rupee quoted public company and took the name ofJohn Keells Ltd.

1979John Keells Holdings Ltd (JKH) is incorporated to own and mange allgroup companies.

1986JKH obtained a quotation on the Colombo Stock Exchange amidst aheavily over-subscribed public share issue, at the time country’slargest IPO.

1991JKH was involved in the biggest ever deal at the time, when Whittallsgroup of companies was acquired thus gaining controlling stakes inCeylon Cold Stores (the country's leading producer of carbonated softdrinks and ice cream), Ceylon Holiday Resorts (owner of Bentota BeachHotel and Coral Gardens Hotel) and a stake in Union Assurance.

1994JKH became the first Sri Lankan company to obtain a listing abroad, andissued Global Depository Receipts (GDRs) that were quoted on theLuxembourg Stock Exchange.

1996Velidhu Resort Hotel, an 80 roomed island resort in the Maldives, wasacquired making it JKH's first major overseas investment.

1999Nations Trust Bank (NTB) was established in a joint venture with the IFCand Central Finance. NTB subsequently acquired the business of theColombo branch of Overseas Trust Bank of Hong Kong. Fortunemagazine named JKH ‘One of the ten best Asian stocks to buy’. SouthAsia Gateway Terminals (SAGT) the largest private sector investment inSri Lanka at that time commenced operations to own, operate anddevelop the Queen Elizabeth Quay at the port of Colombo. In alliancewith several international and multinational organizations, JKH was thelargest local shareholder of SAGT with a 26.25 per cent stake.

DECADE AT A GLANCE2000 - 2001JKH was rated among the best 300 small companies in the world byForbes Global magazine. JKH also became the first company in SriLanka to obtain the SL AAA rating from Fitch Ratings. Moreover, JKH wasthe only Sri Lankan company to be admitted as a full member of theWorld Economic Forum. During this period two international operationswere launched - Matheson Keells Enterprises in Cochin, India (theshipping agent for PIL) and Mack Air Services, Maldives (the generalsales agent for American Airlines, Gulf Air, Leisure Cargo and JetAirways in the Maldives).

2001 - 2002JKH was ranked one of the ‘world's best 200 small companies’, the onlySri Lankan entity to be named in the list by Forbes global magazine.

2002 - 2003JKH acquired Lanka Marine Services, the bunkering facility at the port ofColombo. Nations Trust Bank acquired the local operations of AmericanExpress. During the year the group exited from its vegetarian foodfranchise Komala's.

2003 - 2004In the largest ever transaction on the Colombo Stock Exchange at thattime, JKH acquired Asian Hotels & Properties, an acquisition thatbrought with it 40 per cent of the five star room capacity in Colombo.The group sold its 50 per cent stake in RPK Management Services (Pvt)Ltd (its Plantations management company).

2004 - 2005John Keells Hotels Limited (KHL) was created as a holding company forall group resorts. JKH acquired a controlling stake in Mercantile LeasingLimited (MLL). The John Keells Social Responsibility Foundation, thegroup's corporate social responsibility (CSR) arm, was established as acharitable company and registered as a voluntary social serviceorganisation.

2005 - 2006The group entered into an MOU to develop a third resort in the Maldiveson Alidhoo Island. JKH acquired 80 per cent of Yala Village Hotel. Withthe sale of Keells Plantations, the group exited from the ownership ofplantations. JKH entered into the business process outsourcing (BPO)space through a joint venture with Raman Roy Associates. The groupalso launched its new hotel brands ‘Cinnamon Hotels & Resorts’ and‘Chaaya Hotels & Resorts’. NTB merged with Mercantile Leasing Limited.

2006 - 2007The group acquired a lease on Dhonveli Beach and Spa in the Maldivesand Ellaidhoo Tourist Resort in the Maldives, further enhancing itsregional presence. Furthermore, JKH acquired 20 per cent of AssociatedMotorways PLC. JKH increased its stake in SAGT by 7.5 per cent to 33.75per cent. The group exited its restaurant businesses with the sale ofmajority stakes in Keells Restaurants (Pvt) Limited and CrescatRestaurants (Pvt) Limited. As mandated by the new Companies Act, JohnKeells Holdings Ltd was renamed as John Keells Holdings PLC

2007 - 2008Cinnamon Island Alidhoo, the group’s first resort in the Maldives underthe ‘Cinnamon Hotels & Resorts’ brand, commenced operations. Thelease held by the group in the Velidhu Island of the Maldives, expired.The International Finance Corporation (IFC), a member of the World Bankgroup, signed a long term funding arrangement amounting to USD 75million to support the group's expansion plans.

2008 - 2009Please refer Operating Highlights and Significant Events section.


130

Year ended 31 March 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000Rs. million

OPERATING RESULTSGroup revenue 41,023 41,805 32,855 29,463 23,232 22,285 16,784 11,777 11,822 10,462EBIT 7,996 8,197 6,115 4,850 3,569 3,458 1,311 1,206 1,527 1,696Finance expenses (1,695) (1,618) (1,314) (525) (404) (458) (329) (324) (222) (246)Share of results of associates 2,350 2,243 1,701 958 833 703 451 322 266 153Profit before tax 6,301 6,579 4,801 4,325 3,165 2,393 937 883 1,305 1,450Tax expense (1,327) (1,055) (852) (819) (646) (286) (316) (290) (304) (285)Profit after tax 4,974 5,525 3,949 3,506 2,520 2,107 621 592 1,001 1,165Extra-ordinary item - - - - 185 - - - - -

Profit for the year 4,974 5,525 3,949 3,506 2,705 2,107 621 592 1,001 1,165

Attributable to:Minority interest 232 406 409 442 414 202 169 49 221 247Equity holders of the parent 4,742 5,119 3,540 3,064 2,291 1,905 452 543 780 918

4,974 5,525 3,949 3,506 2,705 2,107 621 592 1,001 1,165

CAPITAL EMPLOYEDStated capital 22,525 22,464 22,246 9,205 9,095 9,005 2,794 2,691 2,620 2,619Capital reserves 7,437 6,019 3,137 2,815 2,115 1,892 1,938 1,632 1,788 1,571Revenue reserves 15,620 14,914 13,087 10,011 6,686 5,545 4,281 4,028 3,839 3,351

45,582 43,397 38,470 22,031 17,896 16,442 9,013 8,351 8,247 7,541Minority interest 4,960 4,770 3,696 3,630 3,712 4,936 2,057 1,802 1,959 2,058

Total equity 50,542 48,167 42,166 25,661 21,608 21,378 11,070 10,153 10,206 9,599

Total debt 21,597 12,667 15,363 5,327 9,105 4,056 4,121 3,568 2,588 2,267

72,139 60,834 57,529 30,988 30,713 25,434 15,191 13,721 12,794 11,866

ASSETS EMPLOYEDProperty, plant and equipment 29,965 28,381 19,688 18,423 19,299 18,104 9,444 8,928 9,135 3,963Other non current assets 33,532 19,128 17,730 8,850 6,033 3,649 3,719 3,039 2,269 6,602Current assets 28,718 23,440 27,759 11,478 13,589 9,798 6,134 9,243 8,304 7,993Liabilities net of debt (20,076) (10,115) (7,648) (7,763) (8,208) (6,117) (4,106) (7,489) (6,914) (6,692)

72,139 60,834 57,529 30,988 30,713 25,434 15,191 13,721 12,794 11,866

CASH FLOWCash flows fromoperating activities 4,188 6,914 2,523 2,664 4,620 3,138 1,891 1,149 1,638 2,154

Cash flows from / (used in)investing activities (4,013) (4,359) (10,088) (2,848) (4,482) (6,746) (2,002) (1,001) (1,261) (1,848)

Cashflows from / (used in)financing activities 2,332 (6,262) 18,422 (1,027) 271 5,414 (31) (330) (645) 518

Net increase / (decrease) incash and cash equivalents 2,506 (3,707) 10,856 (1,211) 409 1,806 (142) (182) (268) 824

KEY INDICATORSBasic earnings per share (Rs.) 7.6 8.1 6.1 5.4 4.0 3.5 1.1 1.1 1.5 1.8Interest cover (no. of times) 4.7 5.1 4.7 9.2 8.8 6.2 6.5 3.7 6.9 6.9Net assets per share* (Rs.) 74.6 68.2 69.6 57.0 46.9 57.4 52.3 45.4 44.6 123.3Enterprise value 42,560 76,181 95,962 64,389 47,222 33,578 15,841 9,968 4,424 5,512

EV/EBITDA 4.2 7.8 13.0 10.7 10.0 9.1 5.5 5.1 2.0 2.5Debt/equity ratio (%) 42.7 26.3 36.4 20.8 29.0 18.3 34.7 35.4 26.1 23.8Dividend payout 1,883 3,176 1,412 1,197 1,075 726 342 330 353 168Current ratio (no. of times) 2.1 1.8 1.9 1.2 1.2 1.6 1.2 1.1 1.1 1.2Market price per shareunadjusted (Rs.) 62.8 119.8 155.0 157.8 137.5 111.0 70.8 58.0 33.5 119.0

Market price per share diluted (Rs.) 62.8 118.8 153.7 113.5 82.5 60.5 29.1 23.8 13.8 16.3

* Net assets per share has been calculated based on the net assets of the company and number of shares in issue as at the end of each year.

DECADE AT A GLANCESELECTED GROUP FINANCIAL DATA

131

Balance sheetfor information purposes only

Group CompanyAs at 31st March 2009 2008 2009 2008In USD'000s

ASSETSNon-current assetsProperty, plant and equipment 259,374 263,324 1,972 2,686Leasehold property 41,337 43,034 - -Investment property 20,159 21,233 7,782 7,721Intangible assets 23,093 2,057 - -Investments in subsidiaries and joint ventures 44 47 170,464 161,926Investments in associates 113,007 92,342 68,893 57,569Other investments 75,752 3,038 7,047 881Deferred tax asset 1,280 845 - -Other non-current assets 15,572 14,880 733 609

549,618 440,800 256,891 231,392

Current assetsInventories 19,513 36,974 7 8Investments held for sale 124 346 34 147Trade and other receivables 78,141 62,660 6,733 2,443Amounts due from related parties 192 162 1,736 2,111Short term investments 132,844 97,007 98,947 64,805Cash in hand and at bank 17,766 20,333 145 2,251

248,580 217,482 107,602 71,765

Total assets 798,198 658,282 364,493 303,157

EQUITY AND LIABILITIESEquity attributable to equity holders of the parentStated capital 194,972 208,427 194,972 208,427Capital reserves 64,370 55,845 - -Revenue reserves 135,205 138,372 56,502 58,850

394,547 402,644 251,474 267,277Minority interest 42,935 44,255 - -

Total equity 437,482 446,899 251,474 267,277

Non-current liabilitiesNon-interest bearing borrowings 182 195 - -Insurance provisions 95,435 - - -Interest bearing borrowings 127,578 72,457 90,735 24,081Deferred tax liabilities 6,728 6,829 - -Employee benefit liabilities 8,283 7,410 799 745Other deferred liabilities 45 66 - -Other non-current liabilities 2,377 3,266 - -

240,628 90,223 91,534 24,826

Current liabilitiesTrade and other payables 56,311 73,010 3,404 2,910Amounts due to related parties 143 232 49 93Income tax liabilities 4,452 3,044 - -Short term borrowings 779 3,479 - -Current portion of interest bearing borrowings 15,732 9,833 6,731 2,783Bank overdrafts 42,671 31,562 11,301 5,268

120,088 121,160 21,485 11,054

Total equity and liabilities 798,198 658,282 364,493 303,157

Exchange rate 115.53 107.78 115.53 107.78

INDICATIVE US DOLLARFINANCIAL STATEMENTS

Income statementfor information purposes only

Group CompanyAs at 31st March 2009 2008 2009 2008In USD'000s

Revenue 355,081 387,877 5,084 5,601Cost of sales (270,160) (284,332) (1,925) (2,547)

Gross profit 84,921 103,545 3,159 3,054

Dividend income 465 867 21,490 29,313

Other operating income 32,330 25,208 16,538 15,254

Distribution expenses (11,969) (12,428) - -

Administrative expenses (54,144) (51,297) (5,725) (5,914)

Other operating expenses (11,964) (11,156) (348) (342)

Finance expenses (14,673) (15,014) (7,903) (5,417)

Change in fair value of investment property 351 - 579 -

Share of results of associates 20,341 20,808 - -

Profit on sale of non-current investments 8,879 512 10,472 383

Profit before tax 54,537 61,045 38,262 36,331Tax expense (11,483) (9,786) (494) (1,046)

Profit for the year 43,054 51,259 37,768 35,285

Attributable to:Equity holders of the parent 41,043 47,496Minority interest 2,011 3,763

43,054 51,259

Exchange rate 115.53 107.78 115.53 107.78

This information does not constitute a full set of financial statements in compliance with SLAS. The financial statements should be read togetherwith the Auditors' opinion and the financial statements (together with the notes to the financial statements). Exchange rates prevailing at eachyear end have been used to convert the income statement and balance sheet.


132

INDICATIVE US DOLLARFINANCIAL STATEMENTS

133

Net book valueBuildings Land in acres 2009 2008

Owning company and location in (Sq. Ft) Freehold Leasehold Rs. '000s Rs. '000s

PROPERTIES IN COLOMBOCeylon Cold Stores PLC.

Slave Island Complex, Colombo 2. 94,655 4.97 3.12 931,112 933,259

John Keells Holdings PLC.320, Union Place, Colombo 2. 81,920 1.94 - 885,664 822,376

John Keells PLC.130, Glennie Street , Colombo 2. 122,338 1.78 0.58 620,361 606,01856/1, 58, 58 1/1 Kirulapone Avenue, Colombo 5. 0.08 1,250 1,250

John Keells Properties (Pvt) Ltd.125, Glennie Street, Colombo 2. 30,840 0.49 - 198,558 237,463

Keells Realtors Ltd.427 & 429, Ferguson Road, Colombo 15 27,750 1.22 - 124,161 97,014

Mackinnon & Keells Financial Services Ltd.Leyden Bastian Road, York Street, Colombo 01. 31,656 0.45 - 271,832 296,548

Union Assurance PLC.No 20, St. Michaels' Road, Colombo 03. 57,916 0.58 - 585,222 -

Whittall Boustead Ltd.148, Vauxhall Street, Colombo 2. 62,818 3.06 - 942,176 875,303

509,893 14.57 3.70 4,560,336 3,869,231

PROPERTIES OUTSIDE COLOMBOCeylon Cold Stores PLC.

Kaduwela 242,439 26.15 - 515,899 517,846Trincomalee 24,905 1.14 - 30,021 30,021

Jaykay Marketing Services (Pvt) Ltd.385, Negombo Road, Wattala. 12,820 - 0.30 9,556 10,909Liberty Plaza, Colombo 3. 10,000 - -388, Galle Road, Mount Lavinia. 6,000 - 0.24 7,617 9,070

John Keells PLC.17/1, Temple Road, Ekala, Ja-Ela. - 2.64 - 59,000 42,190

John Keells Warehousing (Pvt) Ltd.Muthurajawela. 141,276 - 6.00 149,511 152,984

Keells Food India (Pvt) Ltd.M 56/A, Greater Kailash Market Part II, New Delhi. - - 0.04 2,636 -

Keells Food Products PLC.41, Temple Road, Ekala, Ja-Ela. 50,199 3.00 3.26 124,538 126,282

Tea Smallholder Factories PLC.Peliyagoda. 31,633 - 0.99 79,000 79,000Neluwa. 46,708 18.27 - 32,216 32,186Hingalgoda. 56,796 9.61 - 35,782 35,934Halwitigala. 56,686 12.26 - 30,678 31,426Kurupanawa. 62,401 5.41 - 39,167 40,069Pasgoda. 40,354 10.59 - 21,699 22,222New Panawenna. 41,772 15.58 - 30,373 30,272Broadlands. 58,063 1.22 - 39,475 35,946Randola - - - - 18,798Raxawa. 24,623 - 11,568 11,860Karawita. 66,874 - 4.98 91,589 93,854Hindul Oya. 10,500 - - 1,778 1,819

GROUP REAL ESTATE PORTFOLIO

Net book valueBuildings Land in acres 2009 2008

Owning company and location in (Sq. Ft) Freehold Leasehold Rs. '000s Rs. '000s

PROPERTIES OUTSIDE COLOMBOTransware Logistics ( Pvt) Ltd.

Tudella, Ja-Ela. 65,000 22.00 - 372,653 427,763

Union Assurance PLC.No 06,Rajapihilla Road, Kurunegala. 27,412 0.18 - 121,881 -

Whittall Boustead Ltd.150, Badulla Road, Nuwara Eliya. 4,346 0.46 - 69,904 70,000

1,080,807 128.51 15.81 1,876,541 1,820,451

HOTEL PROPERTIESAsian Hotels and Properties PLC.

Cinnamon Grand Premises, Colombo 2. 648,813 11.04 - 8,150,122 8,212,004Crescat Boulevard, Colombo 2. 180,144 - - 1,110,000 1,078,688

Ceylon Holiday Resorts Ltd.Bentota Beach Hotel & Club Intersport, Bentota. 201,356 0.70 11.02 433,918 456,151Coral Gardens Hotel, Hikkaduwa. 167,350 - 4.36 168,171 175,000Central Laundary, Warahena. 16,110 1.40 - 29,326 30,073

Fantasea World Investments (Pte) Ltd.Club Hakururaa, Republic of Maldives. 142,682 - 13.42 570,108 559,846

Habarana Lodge Ltd.The Lodge, Habarana. 194,606 - 25.47 475,922 489,238

Habarana Walk Inn Ltd.Chaaya Village, Habarana. 162,323 - 9.34 199,526 209,846

International Tourists and Hoteliers Ltd.Hotel Bayroo, Beruwela. - 6.55 - 78,000 50,800

John Keells Maldivian Resorts (Pte) Ltd.Dhonveli, Republic of Maldives. 245,518 - 18.62 2,620,720 2,382,860

Kandy Walk Inn Ltd.The Citadel, Kandy. 116,725 5.79 - 308,514 311,831

Resort Hotels Ltd.Nilaveli. 4,485 44.37 - 107,900 107,900

Rajawella Hotels Ltd. 3,700 - 10.00 36,401 36,889

Trans Asia Hotels PLC.115, Sir Chittampalam A Gardiner Mawatha, 425,628 - 7.20 3,629,079 3,688,842Colombo 2.

Tranquility (Pvt) Ltd.Allaidhoo, Republic of Maldives. 215,000 - 36.96 3,450,654 2,732,224

Travel Club (Pte) Ltd.Ellaidhoo, Republic of Maldives. 179,876 - 13.75 2,019,656 1,951,615

Trinco Walk Inn Ltd.Club Oceanic, Trincomalee. 89,960 28.24 - 233,247 220,718

Wirawila Walk Inn Ltd.Randunukelle Estate, Wirawila. - 25.15 - 32,574 20,120

Yala Village (Pvt) Ltd.The Village, Yala. 67,330 - 10.00 238,790 237,258

3,061,606 123.24 160.14 23,892,628 22,951,903

Consolidated value of land and buildings 4,652,306 266.32 179.65 30,329,505 28,641,585


134

GROUP REAL ESTATE PORTFOLIO

135

TRANSPORTATIONPorts and ShippingKeells Shipping (Pvt) Ltd (100%)Shipping agency representation & logistics servicesNo. 11, York Street, Colombo 1�: +94 11 2475200Directors: S C Ratnayake - Chairman,

J R F Peiris, R M David,L D Ramanayake

Stated capital: Rs. 500,000

Mackinnon Mackenzie & Co (Shipping) Ltd (99.69%)Shipping agency representation & logistics services4, Leyden Bastian Road, Colombo 1�: +94 11 2307526Directors: S C Ratnayake - Chairman,


Stated capital: Rs. 5,000,000

Maersk Lanka (Pvt) Ltd (30%)Shipping agency representation & freightforwarding servicesNo. 36, D. R. Wijewardene Mawatha, Colombo 10�: +94 11 2423700Directors: W T Ellawala, H O Madsen,

Dinesh Lal, Hariharan Iyer, R M DavidStated capital: Rs. 10,000,000

South Asia Gateway Terminals (Pvt) Ltd (42.19%)Ports & shipping servicesPort of Colombo, P. O. Box 141, Colombo 1.�: +94 11 2457500Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,R M David, C Kuo Cheng,H O Madsen, L D Ramanayake,H M Jepsen, H G Wieske,S Senerath, J H Madsen, D Duff,R Vokes (resigned w.e.f. 5.9.2008),W G Samarathunga (resigned w.e.f25.9.2008) D C Alagarathnam (appointedw.e.f 5.9.2008), N Keppetipola(appointed w.e.f 2.10.2008)

Stated capital: Rs. 3,788,485,900

TransportationDHL Keells (Pvt) Ltd (50%)Express courier servicesNo. 148, Vauxhall Street, Colombo 2.�: +94 11 2304304 / 4798600Directors: S C Ratnayake - Chairman,

R M David, M A Monteiro,G K A Tanner (resigned w.e.f 6.2.2009),S P C Ong (Appointed w.e.f, 9.2.2009)


John Keells Logistics (Pvt) Ltd (100%)Integrated supply chain & third party logisticssolutionsNo. 11, York Street, Colombo 1�: +94 11 2475200Directors: S C Ratnayake - Chairman,

J R F Peiris, R M David,A D Gunawardene, L D Ramanayake


John Keells Logistics India (Pvt) Ltd (100%)(Formerly known as Matheson Keells Enterprises(Pvt) Ltd)Shipping agency representation & logistics servicesNo. 22, 4th Floor, Oxford Palazzo, Rustambagh MainRoad, Off Airport Road,Bangalore - 560017, India�: +91 80 42040004, 42040005Directors: S C Ratnayake - Chairman,

R M David, R S Fernando,L D Ramanayake, A Poddar (resignedw.e.f, 10.10.2008), B K Sarronwala(resigned w.e.f, 10.10.2008),B K Poddar (resigned w.e.f, 10.10.2008),S R Kalyanam (resigned w.e.f.10.10.2008)


John Keells Logistics Lanka (Pvt) Ltd (100%)(Formerly known as Mack International Freight(Pvt) Ltd)International freight forwarder & logistics servicesNo. 11, York Street, Colombo 1�: +94 11 2475200Directors: S C Ratnayake - Chairman,



Lanka Marine Services (Pvt) Ltd (99.44%)Importer & supplier of heavy marine fuel oils &lubricants4, Leyden Bastian Road, Colombo 1�: +94 11 2475200Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,R M David, L D Ramanayake,R S Fernando (appointed w.e.f16.8.2008)


Mackinnon Mackenzie & Co of Ceylon Ltd (99.5%)Formerly Foreign recruitment agents & consultantsNo. 11, York Street, Colombo 1�: +94 11 2475200Directors: S C Ratnayake - Chairman,

J R F Peiris, R M DavidStated capital: Rs. 90,000

Trans-ware Logistics (Pvt) Ltd (50%)Formerly an Integrated container depot. operations &logistics servicesNo.150,150/1, Pamunugama Road, Tudella, Ja-Ela�: +94 11 2232577 - 87Directors: S C Ratnayake - Chairman, J R F Peiris,

R M David, Q K Liang, Z M Amin,H B M Nashir (resigned w.e.f,16.1.2009)


Whittall Boustead Pvt Ltd - Cargo Division (99.96%)International freight forwarder & logistics servicesNo.148, Vauxhall Street Colombo 2�: +94 11 2475299Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,R M David, S Rajendra


John Keells Air Services India (Pvt) Ltd (100%)(Formerly known as Matheson Keells AirServices (Pvt) LtdGeneral sales agents for airlines in India.No.22, 4th Floor, Oxford Palazzo,Rustambagh Main Road, Off Airport Road,Bangalore - 560017, India�: +91 80 42040004, 42040005Directors: S C Ratnayake - Chairman, R M David,

R S Fernando, L D Ramanayake,A Poddar (resigned w.e.f, 10.10.2008),B K Sarronwala (resigned w.e.f,10.10.2008), S R Kalyanam (resignedw.e.f, 10.10.2008)


Mack Air (Pvt) Ltd (100%)General sales agents for airlinesNo. 11, York Street, Colombo 1�: Jet Airways - +94 11 2318770Directors: S C Ratnayake - Chairman,

J R F Peiris, R M David,C N Lawrence, L D Ramanayake


Mackinnons American Express Travel (Pvt) Ltd (70%)IATA accredited travel agent and travel relatedservicesCeylon Cold Stores BuildingNo. 1 Justice Akbar Mawatha, Colombo 2�: +94 11 2318600 - 2318619Directors: S C Ratnayake - Chairman,

R M David, K K Mukerji,L D Ramanayake, S S Ahmed(resigned w.e.f 16.3.2009),


Mack Air Services Maldives (Pte) Ltd (49%)General sales agents for airlines in the Maldives4th Floor, STO Aifaanu Building,Boduthakurufaanu Magu, Male 20-05Republic of Maldives�: +9603334708 - 09Directors: S C Ratnayake - Chairman,

J R F Peiris, R M David, S Hameed,A Shihab

Stated capital: Rs. 677,891

Walkers Air Services Ltd (100%)General sales agents for airlinesNo. 11 A, York Street, Colombo 1�: +94 11 2348100/ 2424483 /2430380/2430442Directors: S C Ratnayake - Chairman,



LEISUREHotel ManagementKeells Hotel Management Services Ltd (100%)Manager & marketer of resort hotelsNo.130, Glennie Street, Colombo 2.�: +94 11 2306600Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,J E P Kehelpannala


John Keells Maldivian Resorts (Pte) Ltd (100%)Hotel holding company in the Maldives7th Floor, M.Hasowa Building,Boduthakurufaanu Magu, Male.�: +96 33 13738 /33 26219Directors: S C Ratnayake - Chairman,



John Keells Hotels PLC (92.69%)Holding company of group resort hotel companiesin Sri Lanka & MaldivesNo.130, Glennie Street, Colombo 2.�:+94 11 2306600Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,J E P Kehelpannala, M A Omar,R T Wijesinha, D A Cabraal,G S A Gunasekara


John Keells Hotels Mauritius (Pvt) Ltd (92.69%)Hotel holding company in the MauritiusIFS Court, TwentyEight, Cybercity, Ebene, Mauritius�:(230) 467 3000Directors: K D Joory–Chairman, A D Gunewardene,

J R F Peiris, F SoreefanStated capital: Rs.981,435

City HotelsAsian Hotels and Properties PLC - Cinnamon GrandColombo (83.80%)Owner & operator of the five star city hotel‘Cinnamon Grand’77, Galle Road, Colombo 3�: +94 11 2437437 /2497442Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,R J Karunarajah, M T L Fernando,B M Amarasekera, I Samarawickrama,S. Rajendra

Stated capital: Rs.3,345,118,012

Trans Asia Hotels PLC (85.02%)Owner & operator of the five star city hotel‘Trans Asia’.No. 115,Sir Chittampalam A. GardinerMawatha, Colombo 2.�: +94 11 2491000Directors: S C Ratnayake - Chairman,

G S A Gunesekera, A D Gunewardene,J R F Peiris, D S J Pelpola,N L Gooneratne, R L Nanayakkara,A R Gunasekara


Resort HotelsCeylon Holiday Resorts Ltd (90.77%)Owner & operator of ‘Bentota Beach Hotel’in Bentota and ‘Coral Gardens Hotel’ in Hikkaduwa�:+94 34 2275176 / 2275266Directors: S C Ratnayake - Chairman,



Habarana Lodge Ltd (91.15%)Owner & operator of ‘The Cinnamon Lodge’ inHabaranaP.O Box 2, Habarana�:+94 66 2270011-2/ 2270072Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,G S A Gunasekara, J E P Kehelpannala


GROUP DIRECTORY


136

Tranquility (Pte) Ltd (92.69%)Owner and operator of ‘Cinnamon Island Alidhoo’ inthe MaldivesHaa Alif Atoll, Republic of Maldives�: +96 6501111/ 6505520Directors: S C Ratnayake – Chairman

A D Gunewardene, J E P KehelpannalaStated capital: Rs.552,519,608

Fantasea World Investments (Pte) Ltd (92.69%)Owner & operator of ‘Chaaya Lagoon Hakuraa Huraa’in MaldivesMeemu Atoll, Republic of Maldives.�: +96 6720014 /6720065Directors: S C Ratnayake - Chairman,



Habarana Walk Inn Ltd (91.55%)Owner & operator of ‘Chaaya Village Habarana’P.O Box 1, Habarana�:+94 66 2270046-7/2270077Directors: S C Ratnayake - Chairman,



International Tourists and Hoteliers Ltd (90.24%)Owner of real estateNo.130, Glennie Street, Colombo 2.�:+94 11 2421101-8Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,J E P Kehelpannala, H G Arrawawala,W M S Fernando, D C Alagaratnam


John Keells Maldivian Resorts (Pte) Ltd (92.69%)Operator of ‘Chaaya Island Dhonveli’ in the Maldives7th Floor, M.Hasowa Building,Boduthakurufaanu Magu, Male.�: +96 3313738 /3326219Directors: S C Ratnayake- Chairman,



Kandy Walk Inn Ltd (91.10%)Owner & operator of ‘The Chaaya Citadel’ in KandyNo.124, Srimath Kuda Ratwatte Mawatha, Kandy�:+94 81 2234365-6/2237273-4Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,J E P Kehelpannala, R T Molligoda


Rajawella Hotels Ltd (92.69%)Owner of real estateNo.130, Glennie Street, Colombo 2.�:+94 11 2306780Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F PeirisStated capital: Rs. 20,000,000

Resort Hotels Ltd (90.77%)Owner of real estateNo.130, Glennie Street, Colombo 2.�:+94 11 2306780Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F PeirisStated capital: Rs. 750,070

Travel Club (Pte) Ltd (92.69%)Operator of ‘Chaaya Reef Ellaidhoo’ in MaldivesNorth Air Atoll, Republic of Maldives.�: +96 6660839 /6660664Directors: S C Ratnayake – Chairman,



Trinco Walk Inn Ltd (92.69%)Owner and operator of ‘The Club Oceanic Hotel’ inTrincomaleeAlles Garden, Uppuveli,Sampathiv Post,Trincomalee�:+94 26 2222307/2221611Directors: S C Ratnayake – Chairman,


Stated capital: Rs.119,850,070

Wirawila Walk Inn Ltd (92.69%)Owner of real estateNo.130, Glennie Street, Colombo 2.�:+94 11 2306780Directors: S C Ratnayake – Chairman,

A D Gunewardene, G S A GunasekaraStated capital: Rs. 15,000,000

Yala Village (Pvt) Ltd (83.08%)Owner and operator of ‘Yala Village’ in YalaP.O Box 1, Kirinda, Tissamaharama�: +94 47 2239449-52Directors: M A Perera - Chairman,

S C Ratnayake, A D Gunewardene,J R F Peiris, J A Davis,J E P Kehelpannala


Destination ManagementSerene Holidays (Pvt) Ltd (98.84%)Tour operators421, Midas, Shar plaza,JB Cpitals Nagar,Andheri,kurla road, andheri(East),Mumbai 400 059, India�: +91 22 40053036-8Directors: A.D Gunewardene,V LeelanandaStated capital: Rs.22,758,176

Walkers Tours Ltd (98.51%)Inbound tour operatorsNo.130, Glennie Street, Colombo 2.�: +94 11 2306000Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,V Leelananda


Whittall Boustead (Travel) Ltd (100%)Inbound tour operatorNo.130, Glennie Street Colombo 2.�: +94 11 2306000Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,V Leelananda


PROPERTYProperty DevelopmentAsian Hotels and Properties PLC - Crescat Boulevard,The Monarch, The Emperor (83.80%)Developer and manager of integrated propertiesNo.77, Galle Road, Colombo 3�: +94 11 5540404Directors: S C Ratnayake- Chairman,

A D Gunewardene, J R F Peiris,R J Karunarajah, M T L Fernando,B M Amarasekera, I Samarawickrama,S Rajendra


Real EstateJ K Properties (Pvt) Ltd (100%)Property developerNo.130, Glennie Street, Colombo 2.�: +94 11 2306000 /2421101-9Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,S. Rajendra (appointed w.e.f 5.2.2009)


Keells Realtors Ltd (95.56%)Owner of land and buildingNo.130, Glennie Street, Colombo 2.�: +94 11 2306000 /2421101-9Directors: S C Ratnayake – Chairman

A D Gunewardene, J R F Peiris,S Rajendra


Whittall Boustead Ltd - Real Estate Division-(99.96%)Company secretarial services and renting of officespaceNo. 148, Vauxhall Street,Colombo 2.�: +94 11 2329161 /2327805Directors: S C Ratnayake, A D Gunewardene,

J R F Peiris, R M David, S RajendraStated capital: Rs.99,304,300

CONSUMER FOODS AND RETAILConsumer FoodsCeylon Cold Stores PLC (80.47%)Beverages, frozen confectionery, processedmeats, dairy products and holdingcompany of JayKay Marketing Services (Pvt) Ltd.No. 1, Justice Akbar Mawatha, Colombo 2�: +94 11 2328221/7, 2318777Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,J R Gunaratne, U P Liyanage,P S Jayawardena, A R RasiahM D de Silva (resigned w.e.f 31.3.2009)


Keells Food Products PLC (83.18%)Manufacturer and distributor of brandedmeat and convenience food products.P.O Box 10, No.16, Minuwangoda Road,Ekala, Ja-Ela�: +94 11 2236317/ 2236364Directors: S C Ratnayake- Chairman,

A D Gunewardene, J R F Peiris,J R Gunaratne, R PierisS H Amarasekera, A D E I Perera,M P Jayawardena, M D de Silva (resignedw.e.f 31.3.2009)


John Keells Foods India (Pvt) Ltd (83.18%)Manufacturer and distributor of branded meat andconvenience food products.M-56/A Greater Kailash market Part IINew Delhi -110048�:+91 47600300 - 31Directors: S C Ratnayake - Chairman

J R F Peiris, J R GunaratneStated capital:Rs.67,342,862

Keells Food Products Mauritius (Pvt) Ltd (83.18%)Investment holding companyIFS Court, Twenty Eight, Cybercity, Ebene, Mauritius�: +23 467 3000Directors: K D Joory– Chairman,

A D Gunewardene, J R F Peiris,F Soreefan

Stated capital: Rs.981,435

RetailJayKay Marketing Services (Pvt) Ltd (80.47%)Operator of ‘Keells Super’ chain of supermarketsNo.125, Glennie Street, Colombo 2�: +94 11 2343792 / 2343794-98Directors: S C Ratnayake- Chairman,

J R F Peiris, J R Gunaratne (resignedw.e.f 18.3.2009),M R N Jayasundera-Moraes,K N J Balendra (appointed w.e.f18.3.2009)


FINANCIAL SERVICESJohn Keells Stock Brokers (Pvt) Ltd (90.04%)Stock broking servicesNo.130, Glennie Street, Colombo 2.�: +94 11 2446694-5 /2338066 /4710721-4,2306250Directors: A D Gunewardene - Chairman,

S C Ratnayake, J R F Peiris,K N J Balendra


Nations Trust Bank PLC (29.9%)Commercial banking and leasing operationsNo. 242, Union Place, Colombo 2.�: +94 11 4313131Directors: A D Gunewardene - Chairman

S C Ratnayake, J R F Peiris,A K Gunaratne, E H Wijenaike,Z H Zavahir, C H S K Piyaratna,A R Rasiah,D Weerakoon,M E Wickremesinghe

Stated capital Rs. 2,061,553,991

Union Assurance PLC (80.6%)Life and general insurance underwritersNo.20, St. Michaels' Road, Colombo 3�: +94 11 2428428Directors: A D Gunewardene - Chairman

H A Rehmanjee, J R F Peiris,M A Tharmaratnam, P C P Tissera(resigned w.e.f 1.4.2009),D C R Gunawardena(resigned w.e.f 1.4.2009),J D Bandaranayake (resigned w.e.f1.4.2009), K N J Balendra (appointedw.e.f 1.4.2009), A K Gunaratne (appointedw.e.f 1.4.2009), Ashan de Zoysa(appointed w.e.f 1.4.2009),Gerald De Saram (appointed w.e.f1.4.2009)


137

INFORMATION TECHNOLOGYIT ServicesInformation Systems Associates (49%)Software development services (Bahrain)P.O Box. 132, Sajaah, UAE�: +97 165088810Directors: A Ali, D Hubbard,

A Hamdany,J R F Peiris,G S Dewaraja, R M David (resigned w.e.f,24.3.2009), R S Fernando (appointedw.e.f 24.3.2009)


John Keells Computer Services (UK) Ltd (100%)Software development services (UK)Thompson House 42-44 Dolben Street,London. SC1 0UQ�:2300770 -606Directors: A D Gunewardene - Chairman,

G S Dewaraja, R M David (resigned w.e.f5.2.2009) R S Fernando (appointed w.e.f5.2.2009)


John Keells Computer Services (Pvt) Ltd (100%)Software servicesNo. 148, Vauxhall Street, Colombo 2.�: +94 11 2300770-77Directors: A D Gunewardene - Chairman

S C Ratnayake, J R F Peiris,G S Dewaraja, R M David (resigned w.e.f.5.2.2009), R S Fernando (appointed w.e.f5.2.2009)


John Keells Software Technologies (Pvt) Ltd (100%)Marketer of software packagesNo. 148, Vauxhall Street, Colombo 2.�: +94 11 2300770-77Directors: A D Gunewardene - Chairman,

J R F Peiris, G S Dewaraja,R M David (resigned w.e.f, 5.2.2009),R S Fernando (appointed w.e.f 5.2.2009)


Office AutomationJohn Keells Office Automation (Pvt) Ltd (100%)Dealers in office automation equipmentNo.320/1, Union Place, Colombo 2�: +94 11 2431576 / 4702611, 2313000Directors: A D Gunewardene - Chairman,

J R F Peiris, G S Dewaraja,R M David (resigned w.e.f. 5.2.2009),R S Fernando (appointed w.e.f 5.2.2009)


IT Enabled ServicesAuxicogent Alpha (Pvt) Ltd (100%)Investment holding companyIFS Court, 28, Cybercity,Ebene, Mauritius�: +230 467 3000Directors: S C Ratnayake – Chairman

A D Gunewardene, J R F Peiris,K D Joory, F Soreefan, R M David(resigned w.e.f, 9.3.2009), K N J Balendra(appointed w.e.f 9.3.2009), R S Fernando(appointed w.e.f 9.3.2009)

Stated Capital: Rs.617,293,783

Auxicogent Holdings (Pvt) Ltd.(100%)Holding company of Auxi group companiesIFS Court, TwentyEight, Cybercity, Ebene,Mauritius�: +230 467 3000Directors: S C Ratnayake – Chairman

A D Gunewardene, J R F Peiris,R M David, K D Joory, F Soreefan


Auxicogent International (Pvt) Ltd (100%)Investment holding companyIFS Court, 28, Cybercity,Ebene, Mauritius�:+230 467 3000Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,R M David, K D Joory, F Soreefan,R Dutta, R Roy, R S Fernando(appointed w.e.f 9.3.2009),


Auxicogent International Lanka (Pvt) Ltd (100%)BPO operationsNo.4, Leyden Bastian Road, Colombo 1�: +94 11 2475375Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,R M David, R S Fernando


Auxicogent International US Inc (100%)To manage the US based sales team for QuatrroBusiness Support Services441 Centerwood Drive, Tarpon Springs,Florida 34688�:727-942-0736Director: Edward QuinteroStated capital: Rs.538,250

Auxicogent Investments Mauritius (Pvt) Ltd (100%)Investment holding companyIFS Court, 28, Cybercity,Ebene, Mauritius�: +230 467 3000Directors: S C Ratnayake – Chairman,

A D Gunewardene, J R F Peiris,K D Joory, F Soreefan, R M David(resigned w.e.f. 9.3.2009), K.N.J.Balendra(appointed w.e.f 9.3.2009), R.S. Fernando(appointed w.e.f 9.3.2009)

Stated Capital: Rs. 618,085,966

InfoMate (Pvt) Ltd (100%)IT enabled servicesNo.320/1, Union Place, Colombo 2�: +94 11 2318224 /2318240Directors: S C Ratnayake, J R F Peiris,

M J S Rajakariar, R.S. Fernando(appointed w.e.f 5.2.2009)


Quatrro Business Support Services (Pvt) Ltd (49%)(Formerly known as Auxicogent BPO Solutions (Pvt)Ltd)BPO operationsA-16/9, Vasant Vihar, New Delhi�:+91 124 4561000Directors: J R F Peiris, Sunil Rawal,

Upendra Singh, R M David (resigned w.e.f9.3.2009) R.S. Fernando (appointed w.e.f27.6.2008) K N J Balendra (appointedw.e.f 9.3.2009)


Quatrro Finance and Accounting Solutions (Pvt) Ltd(44%)IT based services, electronic remote processingservices, e-servicesA-16/9, Vasant Vihar, New Delhi-110057�:+91 124 4561000Directors: Suresh Subramanian,

Vishwanath Sivaswamy (resigned w.e.f.21.6.2008), R S Fernando (appointedw.e.f 21.6.2008), Cesar Soriano(appointed w.e.f 27.8.2008),V Balakrishnan (appointed w.e.f27.8.2008), K N J Balendra (appointedw.e.f 25.11.2008), S Varadarajan(appointed w.e.f 21.6.2008)


OTHERPlantation ServicesJohn Keells PLC (86.90 %)Commodity brokersNo.130, Glennie Street, Colombo 2.�: +94 11 2306000 /2421101-9Directors: S C Ratnayake- Chairman,

A D Gunewardene, G S A Gunesekera,J R F Peiris, S T Ratwatte,K D W Ratnayake, T de Zoysa,Y A Jordon Hansen,


John Keells (Teas) Ltd (100%)Manager of bought tea factories & othersNo.130, Glennie Street, Colombo 2.�: +94 11 2335880/2306500Directors: S C Ratnayake - Chairman,

G S A Gunesekera, J R F PeirisStated capital: Rs. 120,000

John Keells Warehousing (Pvt) Ltd (86.90%)Warehousing of rubber and teaNo.93,1st Lane,Kerawalapitiya, Wattala,Muturajawala�: +94 11 4819560Directors: S C Ratnayake- Chairman,

G S A Gunesekera, J R F PeirisStated capital: Rs.120,000,000

Tea Smallholder Factories PLC (37.62%)Owner and operator of factories for tea smallholders320/1, Union Place,Colombo 2�: +94 11 2335880 / 5332071Directors: S C Ratnayake – Chairman,

A D Gunewardene,G S A Gunesekera, J R F Peiris,E H Wijenaike,R Seevaratnam,R E Rambukwella, A S Jayatilleke,J S Ratwatte


Centre & Others

Facets (Pvt) LtdOwner of real estateNo. 130, Glennie Street,Colombo 2.�: +94 11 2306000Directors: S C Ratnayake - Chairman,

J R F PeirisStated capital: Rs. 150,000

John Keells Holdings PLCGroup holding company & function based servicesNo.130, Glennie Street, Colombo 2.�: +94 11 2306000 /2421101-9Directors: S C Ratnayake- Chairman,

A D Gunewardene,G S A Gunesekera, J R F Peiris,E F G Amerasinghe, Steven Enderby,P D Rodrigo, T Das, S S Thiruchelvam,M V Muhsin (resigned w.e.f, 1.3.2009),R S Captain (resigned w.e.f, 6.5.2008)


John Keells Holdings Mauritius (Pvt) Ltd (100%)Holding company in the MauritiusIFS Court, 28, Cybercity, Ebene, Mauritius�:+230 4673000Directors: K D Joory - Chairman A F Soreefan,

A D Gunewardene, J R F Peiris,S. C. Ratnayake


John Keells International (Pvt) Ltd (100%)Regional holding company providing administrative &function based servicesNo.130, Glennie Street, Colombo 2.�: +94 11 2306000 /2421101-9Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F PeirisStated capital: Rs. 1,545,000,000

J K Packaging (Pvt) Ltd (100%)Formerly a printing and packaging services providerfor the export marketNo.130, Glennie Street, Colombo 2�: +94 11 2475308Directors: S C Ratnayake- Chairman,

R. M. David, R. S. FernandoStated capital: Rs.14,500,000

John Keells Singapore (Pte) Ltd (80%)International trading servicesNo.30, Bideford Road,#07-02/03,Thongsia Building, Singapore-229922�: +65 67329636Directors: S C Ratnayake- Chairman,

J R F Peiris, R.M David,R Ponnampalam


Keells Consultants Ltd (98.13%)Company secretarial services to the groupNo.130, Glennie Street, Colombo 2.�: +94 11 2421101-9Directors: S C Ratnayake- Chairman,

A D Gunewardene, J R F Peiris,D C Alagaratnam


Mackinnon and Keells Financial Services Ltd (99.81%)Rental of office spaceNo. 4, Layden Bastian Road, Colombo 1�: +94 11 2475102-3Directors: S C Ratnayake - Chairman,

A D Gunewardene, J R F Peiris,S Rajendra


Mortlake Ltd (100%)Investment CompanyNo. 148, Vauxhall Street,Colombo 2.�: +94 112475308Directors: S C Ratnayake - Chairman,

A D Gunewardene,G S A Gunesekera, J R F Peiris


Nexus Networks (Pvt) Ltd (99.99%)Operator of a loyalty card programmeNo. 125, Glennie Street, Colombo 2.�: +94 11 2343792 / 2343794-98Directors: S C Ratnayake – Chairman,

J R F Peiris, M R N Jayasundera -Moraes, J R Gunaratne (resigned w.e.f.5.2.2009), K N J Balendra (appointedw.e.f 5.2.2009)


Effective holding percentages indicated in brackets.

GROUP DIRECTORY


138

MACRO SNAPSHOT

Macro economic outlook - 2009Growth prospects for Sri Lanka in the medium term will substantially improvewith the end of the conflict along with a reduction in the risk profile of thecountry. However in the short term, the impact of the global crisis is likely tohold back growth.

Inflation has fallen significantly and as at end March headline ColomboConsumers’ Price Index (CCPI) inflation was showing an increase of only 5.3per cent year-on-year (YoY) which is the lowest headline inflation seen since2004. Lower inflation has led to a significant relaxation of monetary policy inthe first few months of 2009, and as a result interest rates are likely to be lowerthan in the previous year. Though headline CCPI might continue to fall in thenext few months, these extremely low inflation numbers partly reflect high baseeffects and extremely low levels of inflation may not be sustainable for a longperiod. The medium term macro economic framework of the Central Bank ofSri Lanka (CBSL) assumes inflation (as measured by the GDP deflator) to be 9per cent in 2009 and 9.5 per cent in 2010.

Exports are expected to fall sharply in 2009, but the fall in imports is expectedto be much greater, resulting in a sharp fall in both the trade and currentaccount deficits.

The year that wasGross Domestic Product (GDP) growth for 2008 was 6 per cent YoY comparedto 6.8 per cent YoY for the previous year. There was a marked slowdown ingrowth in the final quarter of the year to 4.3 per cent YoY, reflecting the initialimpacts of the global economic crisis on the Sri Lankan economy. TheAgricultural sector saw a significant acceleration in its growth momentum witha 7.5 per cent YoY growth compared to a 3.4 per cent YoY growth in the prioryear. However the growth rates of the Industry and Services sectors declined.The improvement in the Agricultural sector's growth was mainly the result ofimprovements in the Paddy, Tea, Coconut and Rubber sub segments.

The Industrial sector's growth of 5.9 per cent YoY compares with a growth rateof 7.6 per cent YoY in 2007, with a growth slowdown in all the sub segments ofthe sector. The slowdown in exports markets substantially impacted the growthin industrial exports. The Manufacturing segment, which is the largestcomponent of this sector of the economy, grew by 4.9 per cent YoY asopposed to 6.4 per cent YoY in the previous year. The Services sector whichaccounts for nearly 60 per cent of GDP, grew 5.6 per cent YoY in 2008,compared to a growth rate of 7.1 per cent YoY for 2007. The growth rate in thefourth quarter of services was particularly low at 3.8 per cent YoY. Declininggrowth rates compared to 2007 were experienced in almost all the componentsof this sector, with Post & Telecommunications and Import Trade being the onlyexceptions to this. The Hotels & Restaurants segment continued to contractinto 2008, while Export Trade showed a very sharp slowdown in growth.

Earnings from exports grew by 6.5 per cent YoY to USD 8.14 billion.Agricultural exports grew 23.1 per cent YoY, mainly as a result of Tea.

The largest contributor, Industrial Exports grew by a meagre 3.2 per centYoY.

Expenditure on Imports in 2008 was USD 14.01 billion, which was an increaseof 24 per cent YoY. The high global commodity prices in the first half of the yearwas a major cause for the increased expenditure on imports. Petroleumimports rose 35 per cent over 2007.

With import growth far outstripping the growth of exports, the trade deficitexpanded by 60.6 per cent to USD 5.87 billion. Though remittances continuedto be strong and grew by 16.7 per cent YoY, it was only able to partially counterthe growth in the trade deficit. As such the current account deficit more thandoubled to USD 3.78 billion. The balance of payments position deterioratedcompared to the last few years and recorded a deficit of USD 1.23 billion with amarked worsening seen in the final quarter due to the impact of the globalcrisis on capital flows to Sri Lanka. As a result Gross Official Reservesexcluding Asian Currency Unit (ACU) receipts declined to USD 1.75 million.

The tourism industry continued to perform poorly, with tourist arrivals declining11 per cent YoY to 438,475 from 494,008 in 2007. The prevailing securityconcerns and resultant adverse travel advisories have been the underlyingreasons for this industry's disappointing performance. Unlike the previous yearwhere gross tourist receipts remained flat, in 2008 it declined by 13 per centYoY. Room occupancy rates in the island contracted by 5 per cent YoY andtotal employment in the industry also declined by 14 per cent YoY. Of thearrivals, 73 per cent were here for holidaying purposes.

Per capita income in USD terms in 2008 was USD 2,014, which was a 23 percent growth over the corresponding period of the previous year. The very highgrowth in per capital income reflects the impact of a very low depreciation ofthe Sri Lankan rupee despite very high domestic inflation. High inflation led to asharp rise in nominal per capita income in rupee terms, and with thedepreciation of the rupee being limited, per capita income in USD terms rosesignificantly.

The CCPI annual average increase for the year ended 2008 was 22.6 per centfrom 15.8 per cent in the prior year. However this reflects very high inflation inthe earlier part of the year with a substantial slowdown seen in the later part ofthe year. The point to point YoY CCPI increase fell from 28.2 per cent in June to14.4 per cent in December with a further fall to a 5.3 per cent increase seen byMarch. Interest rates remained high as a result of tightening monetary policy totackle inflation. However reflecting the fall in inflation and the need to boostgrowth, monetary policy has been relaxed in the first few months of 2009.

The All Share Price Index (ASPI) declined by 41 per cent YoY to 1,503 points byend December 2008, with a very sharp fall witnessed in the final quarter of theyear similar to that seen in all financial markets. Likewise, the more sensitiveMilanka Price Index (MPI) declined by 50 per cent YoY to 1,631 points. Therewas a slight recovery in the first three months of 2009 and by end March 2009,the ASPI was recorded at 1,638 points.

Summary Indicator Units 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

GDP growth Per cent 4.7 4.3 6.0 (1.5) 4.0 5.9 5.4 6.2 7.7 6.8 6.0GDP(current prices) Rs. billion 1,018 1,106 1,258 1,407 1,582 1,822 2,091 2,453 2,939 3,579 4,411GDP(current prices) USD billion 15.8 15.7 16.6 15.7 16.5 18.9 20.7 24.4 28.3 32.3 40.7GDP per capita (USD) growth Per cent 3.4 (2.4) 4.5 (6.5) 3.5 12.8 8.3 16.9 14.5 15.0 23.3GDP per capita USD 881 860 899 841 870 981 1,062 1,241 1,421 1,634 2014GDP per capita Rs. ’000 56.8 60.7 68.1 75.1 83.2 94.7 107.4 124.7 147.8 178.9 218.2Inflation (CCPI) YoY - old series Per cent 9.4 4.7 6.2 14.2 9.6 6.3 7.6 11.6 13.7 17.5 N/AInflation (CCPI) YoY - new series Per cent 9.0 11.0 10.0 15.8 22.6Current account balance USD billion (0.2) (0.6) (1.1) (0.2) (0.2) (0.07) (0.6) (0.7) (1.5) (1.4) (3.8)Current account % of GDP Per cent (1.4) (3.6) (6.4) (1.4) (1.4) (0.4) (3.1) (2.7) (5.3) (4.3) (9.3)Population Million 18.8 19.0 19.1 18.8 19.0 19.3 19.5 19.7 19.9 20.0 20.2Exchange rate (annual average) USD/Rs. 64.59 70.4 75.8 89.4 95.7 96.5 101.2 100.5 104.0 110.6 108.33Exchange rate change (annual average) Per cent 9.5 9.0 7.7 17.9 7.0 0.9 4.8 -0.7 3.4 6.4 (2.1)12 month T-Bill yield (year end) Per cent 12.6 12.8 18.2 13.7 9.9 8.0 7.7 10.4 13.0 20.0 19.1Prime lending rate (year end) Per cent 14.9 15.9 21.5 14.3 12.2 9.3 10.2 12.2 15.2 18.0 18.5M2b money supply growth Per cent 13.2 13.4 12.9 13.6 13.4 15.3 19.6 19.1 17.8 16.6 8.5Exports USD billion 4.8 4.6 5.5 4.8 4.7 5.1 5.8 6.3 6.9 7.6 8.1Imports USD billion 5.9 6.0 7.3 6.0 6.1 6.7 8.0 8.9 10.3 11.3 14.0Balance of payments Per cent of GDP 0.2 (1.7) (3.1) 1.3 2.0 2.7 (1.0) 2.1 0.7 1.6 (3.0)Budget deficit Per cent of GDP (9.2) (7.5) (9.9) (10.8) (8.9) (7.7) (7.9) (8.4) (8.0) (7.7) (7.7)Unemployment rate Per cent 9.2 8.9 7.6 7.9 8.8 8.4 8.3 7.2 6.5 6.0 5.2All Share Price Index (year end) Points 597 573 448 621 815 1,062 1,507 1,922 2,722 2,541 1,503Tourist arrivals No.' 000 381 436 400 337 393 501 566 549 560 494 438

139

Accrual basisRecording revenues & expenses in the period in which they are earnedor incurred regardless of whether cash is received or disbursed in thatperiod.

BetaCovariance between daily market return and daily JKH share returndivided by variance of daily JKH share return over a period of 5 years.

Capital employedShareholders’ funds plus minority interest and debt.

Capital structure leverage (CSL)Average total assets divided by average shareholders equity.

Cash earnings per shareProfit after tax adjusted for non cash items minus share of associatecompany profits plus dividends from associate companies divided bythe weighted average number of ordinary shares in issue during theperiod.

Cash interest and tax coverCash flow from operations before working capital changes divided bycash interest and tax payments.

Cash ratioCash plus short term investments divided by current liabilities.

Cash to price earningsDiluted market price per share divided by diluted cash earnings pershare.

Common earnings leverage (CEL)Profit attributable to equity holders of the parent divided by profit after tax.

Contingent liabilitiesA condition or situation existing at the balance sheet date due to pastevents, 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 divided by current liabilities.

Debt/equity ratioDebt as a percentage of shareholders’ funds and minority interest.

Diluted earnings per share (EPS)Profit attributable to equity holders of the parent divided by theweighted average number of ordinary shares in issue during the periodadjusted for options granted but not exercised.

Dividend payout ratioDividend as a percentage of company profits adjusted for non cashitems.

Dividend yieldDividends adjusted for changes in number of shares in issue as apercentage of the share price at the end of the period.

Earnings per shareProfit attributable to equity holders of the parent divided by theweighted average number of ordinary shares in issue during the period.

EBITEarnings before interest and tax (includes other operating income).

EBIT marginEBIT divided by turnover inclusive of share of associate companyturnover.

EBITDAEarnings before interest, tax, depreciation and amortisation.

Effective rate of taxationTax expense divided by profit before tax.

EV (enterprise value)Market capitalisation plus net debt.

Interest coverConsolidated profit before interest and tax over finance expenses.

Long term debt to total debtLong term loans as a percentage of total debt.

Market capitalisationNumber of shares in issue at the end of period multiplied by the marketprice at end of period.

Market value addedMarket capitalisation minus shareholder’s funds.

Net assetsTotal assets minus current liabilities minus long term liabilities minusminority interest.

Net assets per shareNet assets divided by the number of shares in issue.

Net debtTotal debt minus (cash plus short term deposits).

Net profit marginProfit after tax divided by turnover inclusive of share of associatecompany turnover.

Net working capitalCurrent assets minus current liabilities.

Price earnings ratioMarket price per share (diluted) over diluted earnings per share.

Price to book ratioMarket price per share (diluted) over net asset value per share.

Quick ratioCash plus short term investments plus receivables, divided by currentliabilities.

Return on assetsProfit after tax divided by the average total assets.

Return on capital employedConsolidated profit before interest and tax as a percentage of averagecapital employed.

Return on equityProfit attributable to shareholders as a percentage of averageshareholders’ funds.

Sales to assets ratio/total asset turnoverTurnover including share of associate company turnover divided byaverage total assets.

Share turn ratioTotal volume of shares traded during the year divided by averagenumber of shares in issue.

Shareholders fundsTotal of stated capital, capital reserves and revenue reserves.

Total debtLong term loans plus short term loans and overdrafts.

Total equityShareholders funds plus minority interest.

Total shareholder return(P1 - P0 +D) / P0 x 100P1 = Market price at the end of the financial yearP0 = Diluted market price at the end of the previous financial yearD = Adjusted dividend for the year

GLOSSARY OF FINANCIAL TERMS


140

Name of companyJohn Keells Holdings PLC

Legal formPublic Limited Liability CompanyIncorporated in Sri Lanka in 1979Ordinary shares listed on theColombo Stock ExchangeGDRs listed on the Luxembourg Stock Exchange

Company registration No.PQ 14

DirectorsS C Ratnayake - ChairmanA D Gunewardene - Deputy ChairmanG S A GunesekeraJ R F PeirisE F G AmerasingheT DasS EnderbyP D RodrigoS S Tiruchelvam

Audit CommitteeP D Rodrigo - ChairmanE F G AmerasingheS EnderbyS S Tiruchelvam

Remuneration CommitteeE F G Amerasinghe - ChairmanP D RodrigoS S Tiruchelvam

Nominations CommitteeT Das - ChairmanS EnderbyS C RatnayakeS S Tiruchelvam

BankersBank of CeylonCitibank NACommercial BankDeutsche Bank AGDFCC BankDFCC Vardhana BankHatton National BankHongkong and Shanghai Banking CorporationICICI BankNations Trust BankNDB BankPeople's BankSampath BankSeylan BankStandard Chartered Bank

Depository for GDRsCitibank NANew York

Registered office of the company130 Glennie StreetColombo 2Sri Lanka

Contact detailsP.O. Box 76130 Glennie StreetColombo 2Sri Lanka

Telephone : +94 11 230 6000Facsimile : +94 11 244 7087

Internet : www.keells.comEmail : [email protected]

Secretaries and registrarsKeells Consultants Limited130 Glennie StreetColombo 2Sri Lanka


Investor RelationsJohn Keells Holdings PLCP.O. Box 76130 Glennie StreetColombo 2Sri Lanka


Email : [email protected]

Contact for MediaCorporate Communications divisionJohn Keells Holdings PLCP.O. Box 76130 Glennie StreetColombo 2Sri Lanka


AuditorsErnst & YoungChartered AccountantsP O Box 101ColomboSri Lanka

CORPORATE INFORMATION

141

NOTICE OF MEETING

Notice is hereby given that the Thirtieth Annual General Meeting ofJohn Keells Holdings PLC will be held on 26 June 2009 at10.00 am at The Auditorium, The Institute of CharteredAccountants of Sri Lanka, 30A, Malalasekera Mawatha(Longdon Place), Colombo 7.

The business to be brought before the meeting will be:

• to read the notice convening the meeting.

• to receive and consider the Annual Report and FinancialStatements of the company for the financial year ended 31March 2009 with the Report of the Auditors thereon.

• to re-elect as director, P D Rodrigo, who retires in terms ofArticle 84 of the Articles of Association of the company.

• to re-elect as director, S S Tiruchelvam, who retires in terms ofArticle 84 of the Articles of Association of the company.

• to re-elect as director, T Das who is over the age of 70 yearsand who retires in terms of section 210 of the Companies ActNo. 7 of 2007, for which notice of the following ordinaryresolution has been given by a member for the purpose:

‘THAT the age limit stipulated in section 210 of the CompaniesAct No. 7 of 2007 shall not apply to T Das, who is 70 years andthat he be re-elected a director of the company.’

• to authorise the directors to determine and make donations.

• to re-appoint Auditors and to authorise the directors todetermine their remuneration.

• to consider any other business of which due notice has beengiven.

By order of the boardJOHN KEELLS HOLDINGS PLC

Keells Consultants LtdSecretaries29 May 2009

Notes: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 usethe Form of Proxy enclosed.

iv. In order to be valid, the completed Form of Proxy must belodged at the registered office of the company not less than 48hours before the meeting.


142

NOTES

143

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

........................................................................................................................................................................................................... being a

member/s of John Keells Holdings PLC hereby appoint ...........................................................................................................................of

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

SUSANTHA CHAMINDA RATNAYAKE of Colombo, or failing him

AJIT DAMON GUNEWARDENE of Colombo, or failing him

GERARD SUMITHRA ABEYWARDENE GUNESEKERA of Colombo, or failing him

JAMES RONNIE FELITUS PEIRIS of Colombo, or failing him

EMMANUEL FRANKLYN GAMINI AMERASINGHE of Colombo, or failing him

TARUN DAS of India, or failing him

STEVEN ENDERBY of India, or failing him

PARAKRAMA DEVASIRI RODRIGO of Colombo, or failing him

SITHIE SUBAHNIYA TIRUCHELVAM of Colombo

as my/our proxy to represent me/us and vote on my/our behalf at the Thirtieth Annual General Meeting of the company to be held on

26 June 2009 at 10.00 a.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

Signed on this ………………… day of …………………… Two Thousand and Nine.

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

Signature/s of shareholder/s

NOTE:INSTRUCTIONS AS TO COMPLETION OF FORM OF PROXY ARE NOTED ON THE REVERSE.

FORM OF PROXY


144

INSTRUCTIONS AS TO COMPLETION OF FORM OF PROXY1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the

date of signature.

2. The completed Form of Proxy should be deposited at the Registered Office of the company at No. 130, Glennie Street,

Colombo 2, not later than 48 hours before the time appointed for the holding of the meeting.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should accompany the completed Form of Proxy

for registration, if such Power of Attorney has not already been registered with the company.

4. If the appointer is a company or corporation, the Form of Proxy should be executed under its common seal or by a duly

authorised officer of the company or corporation in accordance with its Articles of Association or Constitution.

5. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shall

exercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting.

Please fill in the following details:

Name : ……………………………………………………………………………………

Address : ……………………………………………………………………………………

…………………………………………………………………………………….

…………………………………………………………………………………….

Jointly with : ……………………………………………………………………………………

Share Folio No. : ……………………………………………………………………………………

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21453 JKH 2009 - John Keells Holdings PLC › resource › annual-report › john... · As we all know, there are currently silver linings for Sri Lanka among the global dark clouds