John Keells Holdings- Annual Report 2010

8/6/2019 John Keells Holdings- Annual Report 2010

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There is more to us than meets the eye.

John Keells Holdings PLC is a Company that has offered increasing investor

value over the years. We present here an ‘atomic-level’ view of our operations

that offers you many perspectives on how value is deployed, where it is stored

and the way it is multiplied within the Group.

Nearly a century and a half of growth and prosperity are not achieved without

strength in depth, without flexibility and without the willingness to re-invent oneself

- not once, but over and over again, as circumstances demand. Nor is such an

achievement possible without a strong sense of identity, of a living tradition. Such

is our Group - a complex, multi-faceted, seamlessly integrated organism that

generates value for the whole through the interaction of myriad energetic,

individually viable parts.

The closer you look, the more there is to see.



John Keells Holdings PLC (JKH) is the largest listed

Company on the Colombo Stock Exchange, with

business interests in Transportation, Leisure, Property,

Consumer Foods & Retail, Financial Services and

Information Technology, among others. Since its

modest beginnings as a produce and exchange

broker in the early 1870s, JKH has been known toconstantly re-align, re-position and re-invent itself in

pursuing growth sectors of the time. Our investment

philosophy is based on a positive outlook, bold

approach, commitment to delivery and flexibility to

change. JKH is also committed to maintaining

integrity, ethical dealings, sustainable development

and greater social responsibility in a multi-stakeholder

context. Having produced superior returns for our

shareholders and experienced significant growth, the

Group’s immediate phases of growth are fuelled by

our vision - ‘Building businesses that are leaders inthe region’.

Our values

We 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 Company 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

John Keells Holdings PLC2

ABOUT US

GROUP HIGHLIGHTS


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ORGANISATION STRUCTURE


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April 2010Walkers Tours and Whittall Boustead became the only destination

management companies to have obtained both ISO 9001 and

ISO 14001 certifications for quality management and

environmental management in Sri Lanka.

May 2010JKH was adjudged a gold award winner at HRM Awards Super

10 organised by the Association of Human Resource

Professionals (Sri Lanka).

The refurbishment of The Coral Gardens Hotel, Hikkaduwa

commenced. The Hotel will be re-branded and re-launched as

‘Chaaya Tranz’ in November 2011.

June 2010Fitch Ratings affirmed John Keells Holdings PLC's National Long-

term rating at 'AAA(lka)', as well as its senior unsecured notes at

'AAA(lka)'.

July 2010John Keells PLC executed a 2 for 1 subdivision of shares.

August 2010JKH was ranked first in LMD magazine’s “Most Respected

Entities in Sri Lanka” survey for 2010. JKH was ranked first for

the fifth time, in the six years since inception of the survey.

Trans Asia Hotels PLC executed a 2 for 1 subdivision of shares.

The Group divested the head lease of Alidhoo Island and

purchased the head lease of Dhonveli Island for a period of

eighteen years.

Construction work on the 200 room hotel in Beruwala - ‘Chaaya

Bey’, commenced.

October 2010 The Group’s property arm launched the ‘OnThree20’

development which is a 475 unit apartment complex in the heart

of Colombo.

November 2010JKH was placed first in Business Today magazine’s TOP 20

rankings. JKH was ranked first for the sixth time since 1999.

December 2010Ceylon Cold Stores PLC (CCS) launched its own cola under the

brand name ‘KIK’.

February 2011JKH was adjudged the winner in the large scale category in the

Sustainability Reporting Awards competition organised by the

ACCA Sri Lanka.

March 2011 The Group acquired 6.3 million shares of Nations Trust Bank

through the conversion of warrants with an investment of

Rs. 219.4 million, thereby maintaining its percentage stake in the

bank.

JKH acquired 5.6 million shares of Union Assurance PLC, thereby

increasing its stake to 95.6 per cent.

YEAR AT A GLANCEOPERATINGHIGHLIGHTS AND SIGNIFICANT EVENTS

FINANCIAL ACHIEVEMENTS & GOALS

Achievement

Indicator (%) Goal (as at 31 March)

2011 2010 2009

EBIT growth >20 44.5 (1.0) (2.6)

EPS growth (fully diluted) >20 54.5 11.4 (5.8)

Cash EPS growth (fully diluted) >20 30.0 46.5 (17.5)

Return on capital employed (ROCE)* >15 14.7 10.8 12.0

Return on equity (ROE)* >18 15.1 10.9 10.6

Net debt (cash) to equity 50 (6.2) (7.9) 8.8

* Goal is based on current and projected interest rates (for further details refer the Portfolio Movement and Evaluation section of the report)


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FINANCIAL HIGHLIGHTS

5

Year ended 31 March 2011 2010 Change % 2009

Earnings highlights and ratiosGroup revenue - consolidated Rs. million 60,500 47,980 26 41,023

Group revenue - including associates Rs. million 69,824 57,986 20 52,269

Group profit before interest and tax (EBIT) Rs. million 11,425 7,908 44 7,986

Group profit before tax Rs. million 10,629 6,538 63 6,291

Group profit after tax Rs. million 9,063 5,552 63 4,965

Group profit attributable to shareholders Rs. million 8,246 5,201 59 4,732

Dividends * Rs. million 1,869 1,844 1 1,883

Diluted earnings per share Rs. 13.01 8.42 54 7.56

Cash earnings per share Rs. 15.00 11.54 30 7.88

Interest cover No. of times 14.4 5.8 149 4.7

Return on equity (ROE) % 15.1 10.9 38 10.6

Return on capital employed (ROCE) % 14.7 10.8 35 12.0

Balance sheet highlights and ratios

Total assets Rs. million 110,292 98,658 12 92,140

Total debt Rs. million 14,641 17,453 (16) 21,597

Net debt (cash) ** Rs. million (4,168) (4,435) (6) 4,452

Total shareholders' funds Rs. million 59,587 49,832 20 45,506

No. of shares in issue millions 630 619 2 611

Net assets per share Rs. 94.63 80.44 18 74.44

Debt / equity % 21.8 31.0 (30) 42.8

Net debt (cash) / equity ** % (6.2) (7.9) (21) 8.8

Debt / total assets % 13.3 17.7 (25) 23.4

Market / shareholder information

Market price of share as at 31 March (actual) Rs. 285.60 184.00 55 62.75

Market price of share as at 31 March (diluted) Rs. 285.60 184.00 55 62.75

Market capitalisation Rs. million 179,840 113,983 58 38,362

Enterprise value ** Rs. million 175,672 109,548 60 42,815

Total shareholder return % 56.8 198.0 (71) (44.7)

Price earnings ratio (PER) (diluted) No. of times 22.0 21.8 - 8.3

Dividend payout % 32.2 38.5 (18) 42.0

Dividend per share Rs. 3.00 3.00 - 3.00

Dividend yield % .1 1.6 (36) 4.7

ther

Economic value generated Rs. million 69,787 55,602 26 48,220

Economic value distributed Rs. million 61,101 49,966 22 43,376Employees Rs. million 6,873 6,138 12 5,544

Government Rs. million 3,194 2,906 10 2,781

Others Rs. million 51,034 40,922 25 35,051

Economic value retained Rs. million 8,686 5,635 54 4,844

Total employees*** Number 11,389 10,885 5 10,501

* Cash dividends paid during the year

** Customer advances in the Property Development sector have been excluded

*** Excluding employees of the associate companies of the Group



I am pleased to present our Annual Report and Statement of

Accounts for the financial year ending 31st March 2011. Whilst

the results are the best ever in our history, I am of the view thatwe are yet to realise the full potential of the Group in this new and

exciting environment. A ‘closer look’ at our overall and industry

group performance, balance sheet, portfolio, employee depth,

sustainable development and governance model is appropriate

as is suggested by the theme of our Annual Report.

The Group’s profit before tax (PBT) was Rs. 10.63 billion, a 63 per

cent increase over the PBT of 2009/10 and the profit attributable

to equity holders at Rs. 8.25 billion was an increase of 59 per cent

over the previous year. It is encouraging to note that our

investment strategies in the past few years are contributing

towards our endeavours to better balance our portfolio of

businesses.

The recurring PBT was Rs. 8.83 billion, a 58 per cent increase

over that recorded in 2009/10.

Summarised below are the key financial highlights of our operating

performance during the year.

• Group revenue increased by 26 per cent to Rs. 60.50 billion

• Group PBT increased by 63 per cent to Rs. 10.63 billion

• Group profit after tax (PAT) also increased by 63 per cent to

Rs. 9.06 billion

• Group profit attributable to equity holders increased by 59 per

cent to Rs. 8.25 billion

• Earnings per share increased by 54 per cent to Rs. 13.01

• Cash earnings per share increased by 30 per cent to Rs. 15.00

• Total shareholder return was 56.8 per cent

• Net cash flow from operating activities was Rs. 8.50 billion

• Return on capital employed (ROCE) was 14.7 per cent

compared to 10.8 per cent in the previous year

• Return on equity (ROE) was 15.1 per cent compared to 10.9

per cent in the previous year

The strength of our balance sheet is demonstrated, amongst

others, by a debt to equity of 21.8 per cent, a net cash to equity

of 6.2 per cent, a debt to total assets of 13.3 per cent and an

interest cover of 14.4 times (previous year 5.8 times). Further, webelieve that the present asset turnover can be significantly

improved as increasing market demand emanating from a rapidly

growing economy, makes our current capacities work more

efficiently both in terms of asset utilisation as well as productivity.

Given that a detailed analysis of our industry groups is available

elsewhere in the Annual Report, I will restrict myself to discussing

the highlights of 2010/11 and the high level outlook for each of

them.

The Transportation group has remained the main contributor to

the Group’s after tax profits. Revenues at Rs. 13.43 billion and

PAT at Rs. 2.78 billion were 22 per cent and 31 per cent of theGroup’s total revenue and PAT respectively. Whilst the port

operations performed to expectations, the PAT growth of 22 per

cent over the previous year was mainly due to improved

performances by all the strategic business units driven by the

growth in the economy. Increased flight frequencies and the

advent of new airlines contributed to the performance of the

Airline segment in the subject year. This will also enable futuregrowth in both passenger and cargo volumes. Profitability in the

bunkering business grew on the back of efficiencies achieved in

operations and fuel purchasing, whilst shipping, air express and

logistics segments benefited from the pick up in trade volumes

arising out of increased economic activity. As the anticipated

growth in infrastructure projects materialises and economic

activity gathers further momentum, the outlook for the

Transportation group is positive.

As anticipated, the Leisure group had a good year. Revenues at

Rs. 13.81 billion and PAT at Rs. 2.32 billion were 23 per cent and

26 per cent of the Group’s total revenue and PAT respectively.

Overall, PAT in 2010/11 was a 138 per cent increase over

2009/10. During the financial year, country arrivals to Sri Lanka at

709,191 passengers being a 41 per cent increase over the

previous year and the Maldives country arrivals of 819,000 being

an 18 per cent increase over the previous year, resulted in the City

hotels, Sri Lankan Resorts, Maldivian Resorts and Destination

Management performing to expectations. The Maldives based

resorts benefited from the divestment of the loss making

Cinnamon Island Alidhoo and the acquisition of the head lease of

Chaaya Island Dhonveli. As has been stated in my quarterly

statements, we remain confident about Sri Lanka’s tourism

potential. Work commenced during the year on the construction

of the 200 roomed Chaaya Bey, in Beruwela which is due to open

in May 2012 and the complete refurbishment of the former Coral

Gardens, Hikkaduwa, which will be re-launched as Chaaya Tranzin November 2011. Other developments during the year included

the refurbishment and expansion of Chaaya Blu in Trincomalee,

refurbishment of the Courtyard Wing at the Cinnamon Grand,

refurbishment of Chaaya Lagoon Hakuraa Huraa Maldives,

refurbishment and re-launch of the Cinnamon Lodge Habarana

as a five star hotel and the soft re-fit of the Bentota Beach Hotel.

Yala Village was closed in May 2011 for expansion and

refurbishment and will be launched as Chaaya Wild in November

2011. The balance 216 rooms of Cinnamon Lakeside are in the

process of refurbishment which is expected to be completed by

September 2011. Given the positive outlook for tourism, we

expect to make substantial investments in the Leisure industry in

Sri Lanka. We believe that Sri Lanka has to be positioned as a

destination which provides visitors with a variety of ‘experiences’

if we are to attract the ‘2.5 million arrivals’ target by 2016. It is in

this light we are working with our Property group in exploring the

economic feasibility of creating multi-functional, integrated

developments.

The Property group with a revenue of Rs. 2.49 billion and a PAT

of Rs. 780 million contributed 4 per cent and 9 per cent

respectively to the total Group revenue and PAT. The PAT in

2010/11 was 128 per cent above the previous year with revenue

recognition crystallising more emphatically this year. The Emperor

construction will be completed by July 2011 and the handover of

apartments is expected to commence by August 2011.

Construction of the 475 apartment ‘OnThree20’ at Union Placecommenced in May 2011 with 60 per cent of the apartments sold

off-plan with more bookings still to be finalised. ‘OnThree20’ is

expected to be completed by December 2014. The Group will

continue to look for opportunities to maximise the potential of its

CHAIRMAN’S MESSAGE



large land bank in Colombo and will look to expand it with the

acquisition of sites with high development potential.

The Consumer Foods and Retail (CF&R) group with a revenue of

Rs. 18.36 billion and a PAT of Rs. 230 million contributed 30 per

cent and 3 per cent respectively to the total Group revenue and

PAT. The PAT in 2010/11 was 162 per cent above that recorded

in 2009/10. The volumes in Beverage, Frozen Confectionary and

Convenience Foods segments grew due to increase in demand

and the expansion of the new markets in the North and the East

which contributed towards maintaining market leadership in all

three segments. The Retail segment saw higher footfalls and

basket values with improved margins. CF&R is a group that we

believe in and we are well aware that its true potential has not been

realised as yet. We have taken a variety of measures in

repositioning our product and service offerings and we are

currently in the process of reviewing our operating practices in

both the manufacturing and retail segments. As a first step in its

repositioning strategy, the ‘Elephant House’ brand was re-

launched aligning itself with the aspirations of the consumers whilst

retaining the trust, loyalty and equity of the brand. The beverage

product portfolio was extended with the introduction of KIK Cola

in order to compete in the Cola segment, which is estimated to

be 30 per cent of the total carbonated soft drinks market in Sri

Lanka. KIK has had good customer acceptance and the initial

volumes are in line with expectations. The Elephant House frozen

confectionary range too was extended with the introduction of the

new production facility for a range of impulse products. The retail

sector established ‘KZone’ in Moratuwa, a 50,000 square foot

‘neighbourhood’ mall complete with a Keells Super outlet, adepartment store, various retailers and a food court. The Retail

Sector will continue to increase its footprint in select key locations.

As I stated earlier, the Consumer Foods and Retail group has

much more to contribute to the Group profitability and I am

confident that the steps we have taken to date will bear fruit.

The Financial Services group enjoyed another good year. Revenue

at Rs. 6.48 billion and PAT at Rs. 860 million contributed 11 per

cent and 9 per cent respectively to the total Group revenue and

PAT. The PAT in 2010/11 was 62 per cent above the previous

year. While the PAT in both the Insurance and Banking segments

grew by 56 per cent and 58 per cent respectively, the Stock

Broking segment, aided by a buoyant stock market, grew by 83

per cent. John Keells Capital, the investment banking arm of JKH

PLC, accounted under ‘Other’, has made its presence felt in the

Sri Lankan market through the execution of a number of

mandates and the creation of a strong pipeline of business for

2011/12. Given the ownership restriction imposed by the Central

Bank of Sri Lanka in commercial banks, the Group is exploring

the various options available to it to comply with the guidelines

by April 2012. The steady growth of the financial services industry

is expected to continue into the future as the economic activity in

Sri Lanka gets into higher gear.

The Information Technology group with a revenue of Rs. 3.11

billion and loss after tax of Rs. 22 million contributed 5 per cent

and 0.2 per cent (negative) to the total Group revenue and PAT. The loss after tax was Rs. 22 million, compared to the PAT of Rs.

18 million in the previous year. As intimated mid way through the

year, the BPO operations are making significant progress with the

current revenue run rate more than doubling from the previous

year with the acquisition of a number of substantial customers.

The costs of relocation to a new facility under our own

management and the impairment of a deferred tax asset bookedduring the previous year had one-off impacts on the results.

Everything else being equal, we are confident that the BPO

operations will contribute positively to Group profits in 2011/12.

The Office Automation segment, performed well with the

Samsung mobile phone agency business increasing its market

share significantly.

‘Other’, which includes Plantation Services, with a revenue of Rs.

2.82 billion and a PAT of Rs. 2.11 billion contributed 5 per cent

and 23 per cent respectively to total Group revenue and PAT. The

PAT in 2010/11 was 60 per cent higher than the PAT recorded in

2009/10 and included a capital gain of Rs. 1.79 billion from thesale of stakes in Asian Hotels and Properties PLC (AHPL) and in

John Keells Hotels PLC (KHL) compared to the Rs. 940 billion

capital gain made in 2009/10. Plantation Services segment was

impacted by the depressed tea prices and the PAT at Rs. 285

million was flat compared to 2009/10. The Group’s share of loss

after tax from its 24.6 per cent stake in Central Hospital (Pvt) Ltd

was Rs. 57 million. While the loss was expected in the first year

of the hospital’s operations, the growth in the occupancy levels

and the outpatient numbers is encouraging.

To our Employees, I say Thank You. We will continue to place

great importance on ensuring that the Group provides you a safe,

secure and a conducive environment to realise your true potential.

The section on ‘Stakeholder-Employees at JKH’, in the

Governance section of this Report explains in detail the policies

pursued and the processes and systems employed by the Group

in actualising that JKH remains - ‘more than just a workplace’.

Through the constant review of our governance model at regular

intervals we have, I believe, a best in class system and it is that

belief which spurs me to state that we have the organisational

capability to surpass our current and past achievements. We have

declared 2011 to be the ‘Year of Innovation’ and it is heartening

to note the unbridled enthusiasm with which our Employees have

embraced the objectives behind it.

As was stated by me last year, our Group pursues its business

goals under a stakeholder model of business governance. Webelieve that the long term value creation in our Group rests on

the sustainability of the performance of our businesses, our

environment and the communities in which we operate. In this

endeavour, we are committed to achieving the highest standards

7

“...we are yetto realise the full

potential of theGroup in this new

and excitingenvironment”



of corporate citizenship. As per our sustainability model, we have

taken specific steps in measuring and monitoring the impacts of

all our actions on all our stakeholders including the communitiesin which we operate and this process has been integrated into

our business model. The progress we have made in this regard is

encapsulated in our separate Sustainability Report which

accompanies this Annual Report. It is pleasing to note that this

year too, Det Norske Veritas AS (DNV) has provided the external

assurance that our Sustainability Report is a fair representation of

the Group’s sustainability related strategies, management

systems and performance and the report itself meets the general

content and quality requirements of the Global Reporting Initiative

(GRI) G3 and that it has met the Application Level B+ of the GRI

requirements. The 2010/11 Sustainability Report achieved the

GRI ‘application level check’ of B+, which reaffirms the report’s

compliance with GRI guidelines.

Corporate Social Responsibility (CSR) is regarded as a high

priority, not just for its philanthropy, but more for its linkage to the

creation of sustainable partnerships and sustainable social

deliverables. Our corporate social responsibility work continues

to flourish under the aegis of the John Keells Foundation (formerly

John Keells Social Responsibility Foundation). The Foundation

looks to improve the lives of communities touched by our

businesses by mustering the energies and commitment of the

very people involved in these businesses, with particular emphasis

on education, health, environment, community and livelihood

development, arts and culture and disaster relief. All such efforts

are aligned to the Millennium Development Goals and the

principles espoused by the United Nations Global Compact. At atime where people have little time in caring for their fellow beings,

it is most gratifying to see the enthusiastic voluntary participation

of our Group employees in various CSR projects. Such

participation has certainly exceeded our expectations.

Whilst the details are available in the Sustainability Report, the

highlights of the Foundation’s work during the year were;

• The reintroduction of foundation-level ‘English for Teens’

programme for school children within the age limits of 12 to

14 years from disadvantaged schooling backgrounds. A total

of 1,149 students registered during the year, entitling them to

course fees, examination fees, text books and other course

material. During the year, 503 students completed the coursewith a passing rate of 97 per cent. 584 students are registered

under the second intake of the programme of which 435 have

completed the programme with 97.7 per cent of them passing

the course.

• The conduction of ‘Final Step’, a five-day series of workshops

on soft skills at the University of Sri Jayewardenepura designed

for the benefit of university undergraduates towards grooming

them for employment. This workshop was in collaboration with

the Career Guidance Unit (CGU) of the university and attracted

an average of 260 undergraduates each day.

• Education of 15,078 persons in an effort to ensuring that

Sri Lanka remains a ‘low prevalent’ country for HIV and AIDS

through 111 sessions held and the adoption by the Group,and the implementation, of a HIV and AIDS Workplace Policy

in the lead up to World AIDS Day 2010.

• Eradication of avoidable blindness due to cataract in Sri Lanka

through the John Keells Vision Project. The Project continued

to touch the lives of vision-impaired persons, with a reported337 cataract operations being carried out island wide. In

addition, 282 spectacles were provided to adults during the

year under review.

• Consolidation of the activities at the Nature Field Centre at

Rumassala, in Galle in collaboration with the Central

Environmental Authority (CEA) aimed at facilitating experiential

learning about the environment and biodiversity, primarily

among school children. There was a total of 2,039 visitors

during the year attending programmes to raise awareness on

the need to protect the environment and our rich biodiversity

through eco-friendly practices and the importance of

co-existing in harmony with the environment.

• Adoption of the Mangalagama Village in the Ampara District

of the Eastern Province of Sri Lanka, this being the second

village to be selected for development after Halmillawe, the

adoption of which is now complete. This `border village’

affected by the long-drawn ethnic conflict, complements the

efforts of CCS in developing the cashew farmers of the village

to supply a substantial part of the cashew requirement for its

ice cream products.

• Sri Lanka’s popular open-air art gallery/art fair ‘Kala Pola’

which was conceptualised by the George Keyt Foundation,

enjoyed the unbroken patronage of the John Keells Group for

the 17th consecutive year. This year there were 320 artists and

sculptors displaying their creativity on canvas and other media

to over 27,000 visitors. The total estimated sales for the day

were Rs. 7 million.

As you are aware, your Board declared a final dividend of Rs 1.00

per share to be paid on 9 June 2011 and also recommended, for

the consideration and approval of the shareholders, at a General

Meeting, that, subject to the approval of the Colombo Stock

Exchange, the number of shares in issue be increased by way of

a share sub-division whereby three (3) existing shares will be sub-

divided to four (4).

In closing, we at JKH look to the future with excitement.

I would like to welcome Dr. Indrajit Coomaraswamy as a memberof the Board and thank my colleagues for their guidance and

support.

Finally, on behalf of the Board and everyone in the John Keells

Group, I wish to thank all of you, our stakeholders, for the support

that you extended to us during the past year and I look to your

faith in, and support of, the exciting plans that we have for the

coming years.

Susantha Ratnayake

Chairman

20 May 2011

CHAIRMAN’S MESSAGE



MANAGEMENT DISCUSSIONAND ANALYSIS



OVERVIEW

The Management Discussion & Analysis (MD&A) section of this

report will discuss the performance of the Group in the context of the macro-economic environment and also the challenges andopportunities faced by the JKH Group. This section will cover abrief review of the key macro-economic variables and its impacton the Group and will thereafter review the performance of theGroup and its financial position. Details pertaining to the strategies,operations and performance of each of the industry groups arediscussed in the Chairman’s Message and also the Industry Group Analysis section of the report. Further details on the economicoutlook and review are discussed in the section on the Sri LankanEconomy in the Supplementary Information section of this report.

In the backdrop of the improved economic environment, JKHachieved a landmark performance with its profit before tax (PBT)

exceeding Rs. 10 billion for the first time. We now take a ‘closerlook’ at what it takes to achieve such results.

The following table identifies key macro-economic variables anddiscusses its current and/or potential impacts on the businesseswithin their Group. Whilst there are many other variables that couldbe discussed, the following discussion is based on the keyvariables considered important. Naturally, the study of externalrisks and related impacts would be covered under a morestructured process within the risk management framework of theGroup.

REVIEWRevenue

The favourable economic conditions in the country had a positiveimpact on the performance of the Group. In the year under review,Group revenue increased by 26 per cent to Rs. 60.50 billion

[2009/10: Rs. 47.98 billion] primarily due to the increase in Leisure, Transportation and Consumer Foods & Retail (CF&R) – whichcontinue to be the highest contributors to Group revenue. In termsof geographical mix, revenues were very much skewed towardsSri Lanka with approximately 87 per cent of revenues originating

CONSOLIDATED GROUP PERFORMANCE

Macro variable Movement Cause Impact to JKH

GDP growth Increased to 8.0% in 2010 asagainst 3.5% in 2009

Growth in all sectors driven by stableenvironment, post the conflict. Increasedoutput in tea, paddy as well as higherprices in international markets for keyexports. Industry sector also grew drivenby food and beverage and garments. TheServices sector grew due to expansion inwholesale and retail and the restaurantsubsectors

All businesses benefited from the highergrowth which had a cascading effectthroughout the economy. Improvedbusiness conditions positively impactedB2B sectors whilst improved sentimentand disposable incomes had a positiveimpact on consumption

Inflation The annual average CCPIincreased to 6.2% as at 31March 2011 from 3.2% in theprevious year

Increase driven partially by base effectsfrom the previous year. Certain supplyrelated shocks due to floods andincreases in global oil and food pricesalso impacted inflation, although policymakers did not cite concerns regardingdemand-driven inflation

Relatively muted inflation helped containcertain costs in businesses. However,increases in commodities and electricityrate hikes had impacts on the consumerfoods and hotel businesses. Subduedinflation and inflation expectations from aconsumer’s viewpoint had a positive

impact on businesses with a retail focus

Interest rates AWPLR fell to 8.98% in March2011 from 10.74% in theprevious year. The 3 monthGovernment treasury bill rate fellto 6.98% by March 2011 from8.45% in the previous year

CBSL policy to encourage growthresulted in a relaxed monetary policy anddirection to financial markets

Reduced finance costs for LKRborrowings. Lower interest rates alsohelped spur businesses such as property,stock broking and bank lending andprovided an impetus to consumptionrelated businesses

Interest rates -global

Remained in line with last yearwith LIBOR essentially the same.3 month LIBOR decreasedmarginally to 0.2517% from0.3095% in the previous year.Swap costs for a five yearinterest rate swap fell to 2.3%levels from 2.7% levels last year

Lower growth outlook driven by highunemployment and muted inflationallowed the US Federal Reserve tomaintain a loose monetary policythroughout the period. Swap costsfluctuated based on negative outlook forthe US economy and then increasedbased on rate hike expectations in 2011

Lower finance expenses on account of theIFC borrowing at the holding company anddollar denominated debt in the Maldives.No swaps were entered into as it wasbelieved that remaining on a floatinginterest rate would be more beneficial inthe current environment which had apositive impact on the Group

Exchange rates The Sri Lankan Rupee (LKR)appreciated to Rs. 110.46 as at31 March 2011 against the USdollar compared to Rs. 114.09last year. The Rupee howeverdepreciated marginally againstthe Euro and GBP due tostrengthening of the cross ratesagainst the USD

Continued inflows of US dollars into thecountry enabled the CBSL to adopt amore controlled appreciation of the LKR.Excess liquidity in the system alsonecessitated some level of appreciationby the CBSL. The Euro and GBPstrengthened against the US dollar dueto the rate hike by the ECB andexpectations for interest rates to moveup faster than in the US

The appreciation of the LKR presentedchallenges for some businesses whichhave foreign currency denominatedrevenue streams – particularly in Leisure.Steps were taken to proactively monitorthese exposures and to take the necessarymeasures to mitigate these exposures.Similar steps were taken in relation to theEuro and GBP although overall exposurelevels are not considered material in thecontext of the Group

Overview of macro-economic conditions

Notes – GDP – gross domestic product; CCPI – Colombo consumer price index; AWPLR – average weighted prime lending rate; LIBOR – London interbank offered rate; IFC – International Finance Corporation; LKR – Sri Lanka rupee; CBSL – Central Bank of Sri Lanka; GBP – Sterling pound; ECB – European Central Bank; USD – United States dollar; B2B - business to business



from domestic sources. Considering the high growth prospects inSri Lanka, this skew is not expected to have a negative impact in

the short to medium term. Group revenue, inclusive of associatecompany revenue increased by 20 per cent to Rs. 69.82 billion[2009/10: Rs. 57.99 billion].

Earnings before interest and tax

The growth in revenue translated into a considerable increase inearnings before interest and tax (EBIT). In the year under review,Group EBIT increased 44 per cent to Rs. 11.43 billion [2009/10:Rs. 7.91 billion], an increase of Rs. 3.52 billion against last year.Growth in EBIT was driven by all industry groups, although mostsignificantly by Leisure. The Leisure EBIT increased by 88 per centto Rs. 2.80 billion as against Rs. 1.49 billion. Transportation, at Rs.2.94 billion [2009/10: Rs. 2.39 billion] has the highest contributionto EBIT, amounting to 26 per cent of Group EBIT. Overall, theincrease in Group EBIT was driven by an increase in gross profitsas a result of higher revenues and the increase in other operatingincome. The gross profit margin of the Group declined to 22.6 percent as against 23.1 per cent as growth in revenues were primarilydriven by lower margin, high volume businesses. The absoluteincrease in gross profits was Rs. 2.58 billion. EBIT was alsopositively impacted by the growth in other operating income mainlydue to a profit on sale of disposal of Asian Hotels & Properties PLC(AHPL) and John Keells Hotels PLC (KHL) shares by the holding

company, offset by a reduction in interest income also at theholding company level. The overall administrative, distribution and

other operating expenses of the Group did not increasesignificantly as increases related to costs of expansion, launch of new products and marketing were partly offset by reductions insublease rentals in the Maldives as a result of the restructuringreferred to in the Leisure industry group analysis.

Industry group EBIT margins

The Group EBIT margin increased to 16.4 per cent from 13.6 percent in the previous year. As illustrated below, all industry groupswitnessed an increase in EBIT margins, with the exception of Transportation where an increase in revenue did not see acorresponding increase in EBIT, where despite a lower margin,asset utilisation improved on account of the revenue increase.

Finance expenses

The finance expenses of the Group declined to Rs. 796 million[2009/10: Rs. 1.37 billion], a reduction of Rs. 574 million. Thisreduction was a combination of reduced debt levels in the Group

as well as the reduction in interest rates. Leisure and the holdingcompany continue to account for a bulk of the finance expensewithin the Group, collectively accounting for over 80 per cent of total finance expenses. The interest cover of the Group hasincreased to 14.4 times driven by the growth in EBIT as well as areduction in the finance expense.

11

EBIT margins (%) Transportation 16.1 16.9 15.2

Leisure 20.3 12.9 6.5

Property 4.1 24.0 33.7

Consumer Foods & Retail .7 2.6 3.5

Financial Services 13.8 9.0 8.1

Information Technology 2.9 0.6 (4.3)

Other 87.1 83.6 131.7

Overall Group 16.4 13.6 15.3



Taxation

The Group tax expense increased to Rs. 1.57 billion [2009/10: Rs.

985 million]. The effective tax rate on Group profits was 14.7 percent compared with 15.1 per cent in the previous year. FinancialServices and Consumer Foods & Retail were the highestcontributors to Group tax with taxes of Rs. 473 million and Rs.349 million respectively. The effective tax rates for both industrygroups fell during the year. During the year, the Governmentannounced the reduction of corporate tax rates from 35 per centto 28 per cent for standard rate companies to be implementedfrom April 2011 onwards. This reduction will have a positive impacton companies within this tax bracket. There was additional relief granted to the banks where the financial value added tax (VAT)was eliminated, although there is a mechanism to administer thecash pool from such savings. The biggest beneficiaries of the taxreductions are expected to be the Financial Services group andConsumer Foods which were in any case groups with higher tax

rate companies.

For further details on tax impacts of the Group refer the Notes tothe Financial Statements in the Annual Report.

Group profit after taxation (PAT) increased by 63 per cent to Rs.9.06 billion [2009/10: Rs. 5.55 billion] with all industry groups withthe exception of Information Technology (IT) making a positivecontribution to PAT. IT was impacted by the impairment of adeferred tax asset booked during the previous year, and on apositive note, was profitable at an EBIT level. Of the industrygroups, Transportation and Leisure were the highest contributorsto PAT with contributions of Rs. 2.78 billion [2009/10: Rs. 2.28

billion] and Rs. 2.32 billion [2009/10: Rs. 973 million] respectively.Other including Plantation Services recorded a PAT of Rs. 2.11billion primarily on the account of the capital gains on the sale of shares by the holding company.

Minority interest

Minority interest (MI) increased to Rs. 818 million [2009/10: Rs.351 million] due to the higher contribution from Leisure which hasa relatively higher minority shareholding. The MI share of profits inProperty also increased due to the higher profits recorded by AsianHotels & Properties PLC.

Profit attributable to equity holders of the parent

The profit attributable to equity holders of the parent increased by59 per cent to Rs. 8.25 billion [2009/10: Rs. 5.20 billion]. The netprofit margin of the Group increased to 11.8 per cent as against9.0 per cent in the previous year.

The positive momentum in performance is aptly illustrated whenreviewing the quarterly performance table below. Net revenues

have shown a strong and consistent rate of increase quarter onquarter. Profit before taxation (PBT) also demonstrates a similartrend with the exception of Q2 where PBT is skewed due to theprofit from the sale of shares in AHPL and KHL by the holdingcompany. The performance of Leisure is noteworthy where PBT in the peak season in Q4 alone was Rs. 1.54 billion in spite of roominventory not being at full capacity due to the closure of rooms forrefurbishment. Transportation continues to be the single largestcontributor to the Group with a PBT of Rs. 2.93 billion for 2010/11.

Contribution to Sri Lankan economy

The economic value statement as per the Global ReportingInitiative (GRI) Indicator EC1 is available in the Financial Informationsection of the Annual Report.

• The direct economic value generated in 2010/11 wasRs. 69.79 billion [2009/2010: Rs.55.60 billion] comprisingprimarily of revenue, interest income, share of results of associates and profits on sale of assets.

• The corresponding economic value distributed was Rs. 61.10billion [ 2009/2010: Rs. 49.97 billion], comprising primarily of

• Rs. 54.38 billion in operating and employee related costs[2009/2010: Rs. 43.47]

• Rs. 3.48 billion in payments to providers of funds

[2009/2010: Rs. 3.57 billion]

• The Group contributed a total of Rs. 3.19 billion [2009/2010:Rs. 2.91 billion] as payments to government primarily onaccount of taxes

• The economic value retained, comprising of profits afterdividends, depreciation, and amortisation was Rs. 8.69 billion[2009/2010: Rs. 5.64 billion] which will be utilised towardsinvestment/growth.

Return on capital employed and return on equity

The return on capital employed (ROCE) for the Group increasedto 14.7 per cent as against 10.8 per cent in the previous year. Theincrease in ROCE was a result of higher EBIT margins as well as

improved asset turnover. Group capital employed increased toRs. 81.84 billion in the current year as against Rs. 73.71 billion inthe previous year due to the investments undertaken during theyear and the revaluation of land and investment property. TheROCE of all industry groups increased compared to the previousyear.

CONSOLIDATED GROUP PERFORMANCE

FY 20010/11

Rs. Million 1 Q2 Q3 Q4 Total

Net revenue 12,919 13,967 15,616 17,998 60,500

PBT 1,531 3,445 2,356 3,297 10,629

Transportation 802 556 611 960 2,929Leisure (14) 337 632 1,537 2,492

Property 145 145 222 319 831

CF&R 169 137 156 117 579

Financial Services 377 308 528 120 1,333

IT 1 34 14 65 114

Other 52 1,928 192 178 2,350

Profit attributable to

equity holders 1,010 2,927 1,757 2,552 8,246

Total assets 97,520 104,170 104,348 110,292 110,292

Total equity 56,559 60,803 62,210 67,195 67,195

Total debt 17,478 17,965 15,378 14,641 14,641



The previous graph illustrates the relative EBIT contribution of each

industry group against the capital employed and ROCE. Duringthe year, the Group revised its hurdle rates for ROE to 18 per centfrom 20 per cent previously and for ROCE to 15 per cent from 18per cent previously. Further details on the ROCE of each of theindustry groups can be found in the Portfolio Movement andEvaluation section of the Annual Report.

The return on equity (ROE) of the Group improved to 15.1 per centas against 10.9 per cent in the previous year. The ROE increase

was primarily due to an increase in the return on assets to 8.7 percent from 5.8 per cent in the prior year.

OUTLOOK AND THE FUTURE

The year ahead looks quite promising from where we stand today. The overall economy is expected to continue its growth

momentum of 2010. Whilst inflation could see an uptick, webelieve interest rates and exchange rates will remain relatively

stable, providing a conducive environment for growth. In thisbackdrop, the Group expects to continue its high trajectory growth

momentum building on the Rs. 10.63 billion PBT of 2010/11.

Whilst all our industry groups will strive to meet our return hurdles,the environment and external factors may favour certain industries.

Leisure would be a definite beneficiary. With more rooms available

for occupancy in the ensuing year, coupled with increases inaverage room rates (ARRs) due to negotiations when contracting,the profits from Leisure are expected to continue its growth

momentum. Improvement in corporate earnings will have a

cascading effect and would positively impact B2B markets as wellas retail level consumption. CF&R, Banking and Insurance are likely

to benefit from such an improvement.

The announcement of mega mixed property developments is a

positive sign. It will create momentum and also uplift the profile of the country through some well-established international brand

names having a presence in the country. We will continue with ourstrategy of capitalising on our land bank which includes sites which

have excellent development potential. Other infrastructure

development in certain strategic sectors is another area the Groupwould continue to monitor and evaluate.

The significant growth in certain industries and the scaling up byall players in the respective markets has resulted in a dearth of

skilled professionals in certain areas. JKH has always beenconscious of the need to train and develop the staff and has

placed great emphasis on the HR related initiatives required tocontinue to motivate and inspire staff at JKH. Further details on

staff related initiatives can be found in the Governance section

under Stakeholder-Employees at JKH.

In line with the global trend in enabling a common language for

financial reporting, the Institute of Chartered Accountants of

Sri Lanka have taken steps to adopt International FinancialReporting Standards (IFRS) by issuing new accounting standardscomprising of Sri Lanka Accounting Standards (SLFRS) and Lanka

Accounting Standards (LKAS) for annual financial periodsbeginning on or after 1 January 2012. The adoption of SLFRS and

LKAS would have an impact on the reported financial results of

the Group, the impact of which is being presently evaluated.

The areas where there could be a significant impact to the Group

would be the method of accounting for consolidated results of theparent, accounting for financial assets and liabilities of the Group,

specifically in the financial services and insurance businesses andrevenue recognition in selected sectors. The Group is proposing

to adopt SLFRS & LKAS for the financial period beginning 1 April

2012 and will present the financial statements for the year ending31 March 2013 using SLFRS and LKAS.

Annual Report 2010/11 13

ROE = ROA x CEL* x CSL**

2010/11 15.1% = 8.7% x 0.91 x 1.91

2009/10 10.9% = 5.8% x 0.94 x 2.00

* CEL- common earnings leverage; **CSL - capital structure leverage

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

2010/11 14.7% = 16.4% x 0.67 x 1.34

2009/10 10.8% = 13.6% x 0.61 x 1.31



CAPITAL RESOURCES AND LIQUIDITY

Item 2011Rs.Mn

2010Rs.Mn

ChangeRs.Mn

Change%

Explanatory highlights for YoY changes

Property, plant andequipment

28,628 29,989 (1,361) (5) • Additions of Rs. 4.98 bill ion in relation to capital expenditure in hotels,JMSL mall expansion and CCS equipment for ice cream impulse range

• Transfer out of Rs. 3.18 billion from PPE under Tranquility post therestructuring in the Maldives

• Revaluation of CCS property of Rs. 1.69 billion, more than offset by thesubsequent re-classification as investment property. The surplus onrevaluation was accounted under revaluation reserves and had noimpact on the income statement

• Depreciation charge of Rs. 1.70 billion

Leasehold property 9,516 4,577 4,939 108 • Addition of Rs. 5.54 bill ion as a result of the purchase of the headlease of Dhonveli Island for 18 years under Tranquility

Investment property 5,386 2,334 3,052 131 • CCS re-classif ication of land as an investment property - Rs. 2.58billion

• Fair value gain on IP at AHPL of Rs. 216 million and Trans Asia of Rs. 228 million

Investments inassociates

14,670 14,309 361 3 • Associate company profits of Rs. 2.34 billion, offset by dividends of Rs. 2.19 billion

• Subscription to NTB warrants

Other investments 11,792 8,415 3,377 40 • Increase in investments under UA life fund of Rs. 2.87 billion

Other non-current

assets

3,231 1,725 1,506 87 • Transfer of The Emperor apartments as work in progress of Rs.2.47

billion, partially offset by transfer to cost of sales of Rs.1.65 billion

• Transfer of Rs. 880 million from PPE due to OnThree20 project of JKRP

Inventories 3,144 2,295 849 37 • JKOA – inventory of mobile phone stocks and other products• JMSL, CCS and KFP - all consumer related businesses due to higher

seasonal inventory requirements

• LMS - higher global oil prices resulting in an increase in the value of inventory and arrival of stocks at the end of the month

Trade and otherreceivables

12,072 9,934 2,138 22 • Primarily on LMS, Cinnamon Grand, CCS, JKOA and JMSL due tohigher operating volumes

Short terminvestments and cashin hand

18,994 22,314 (3,320) (15) • Reduction in funds at KHL raised via the rights issue which have nowbeen deployed in on-going hotel projects

• AHPL - funds utilised to repay debt and pay dividends

Shareholders' funds 59,587 49,832 9,755 20 • Profit for the year of Rs. 8.26 bi llion and surplus on revaluation of Rs.2.45 billion offset by dividends of Rs. 1.87 billion

Insurance provision 12,663 10,236 2,427 24 • Increase in provision due to UA insurance funds

Non-current interestbearing borrowings

8,353 10,539 (2,186) (21) • Reduction in JKH due to repayment of IFC loan installments

• Repayment of loans of AHPL - Cinnamon Grand

• Restructuring in Maldives – settlement and re-financing of loan withminimal net impact

Trade and otherpayables

12,380 11,577 803 7 • LMS on higher volumes similar to receivables

• JMSL due to increased inventory for the season and JKSB trade dueson higher daily turnover

Current portion of interest bearingborrowings

2,134 4,169 (2,035) (49) • Payment of Rs. 2 billion of JKH debentures in October 2010

Bank overdraft 3,904 2,576 1,328 52 • Increased in JMSL and CCS to fund higher working capital

requirements in a rapidly growing market

Summary of key balance sheet items

Note: CCS – Ceylon Cold Stores; JKMR – John Keells Maldivian Resorts; IP – investment property; AHPL – Asian Hotels & Properties; NTB – Nations Trust Bank; UA – Union Assurance; JMSL – Jaykay Marketing Services; KFP – Keells Foods Products ; LMS – Lanka Marine Services; KHL – John Keells Hotels; IFC – International Finance Corporation; JKOA – John Keells Office Automation; JKRP – John Keells Residential Properties; JKSB - John Keells Stock Brokers



BALANCE SHEET STRUCTURE

Total assets increased by Rs. 11.63 billion to Rs. 110.29 billion

[2009/10: Rs. 98.66 billion] primarily due to increases in leasehold

property, investment property and other investments as described

in the summary table.

Non-current assets

Non-current assets of the Group were Rs. 76.06 billion [2009/10:

Rs. 64.09 billion], an increase of Rs. 11.97 billion. Non-current

assets increased primarily due to an increase in leasehold

property, investment property and other investments. Leasehold

property increased by Rs. 4.94 million primarily due to therestructuring done in the Maldives which resulted in the purchase

of the head lease on Dhonveli Island for a period of 18 years.

Investment property increased by Rs. 3.05 billion mainly due to a

re-classification of the revalued Ceylon Cold Stores (CCS) land as

an investment property, based on the change in the nature of its

use.

Working capital

Net working capital of the Group decreased to Rs. 14.78 billion

[2009/10: Rs. 15.01 billion] due to a reduction in short term

investments and cash. The overall working capital requirements

of the Group pertaining to inventory and trade and other

receivables increased in tandem with the growth in volumes. The

nature of some of the consumer related businesses are such that

working capital requirements have increased significantly.

However, the overall working capital cycle of the Group has

declined due to focused efforts of managing inventory and

accounts receivables.

CASH FLOW

Cash and cash equivalents decreased by Rs. 2.72 billion to Rs.

12.02 billion by the end of the year [2009/10: Rs. 14.74 billion].

Net cash from operating activities decreased to Rs. 8.50 billion

as against Rs. 9.49 billion due to increased working capital

requirements, thus impacting the cash generated from

operations. Net cash used in investing activities was Rs. 4.47

billion [2009/10: Rs. 5.82 billion]. In the current year, cash investedin purchase of property, plant and equipment was Rs. 4.98 billion

which is significantly higher than in the previous year. This capital

expenditure was largely in the Leisure and Consumer Foods &

Retail industry groups which accounted for Rs. 3.05 billion and

Rs. 1.27 billion respectively. This was however offset to an extent

with the cash proceeds from the sale of shares in AHPL and KHL.

Net cash used in financing activities was Rs. 6.79 billion [2009/10:

Rs. 636 million] mainly due to the high level of debt repayments

amounting to Rs. 5.60 billion.

LEVERAGE AND CAPITAL STRUCTURE

Capital structure

Total assets of Rs. 110.29 billion were funded by shareholders’funds (54 per cent), minority interest (7 per cent), long term

creditors (21 per cent) and short term creditors (18 per cent).

Thus, the long term funding of assets was Rs. 90.87 billion – 83

per cent of total assets.

Debt

The total debt of the Group was Rs. 14.64 billion [2009/10:

Rs. 17.45 billion], a decline of Rs. 2.81 billion from last year. The

primary source of debt reduction was at the JKH holding

company level due to repayment of Rs. 2 billion of debentures in

October 2010. JKH also repaid International Finance Corporation

bi-annually on the USD 75 million term loan which has resulted in

the reduction of debt. In addition, Cinnamon Grand repaid its longterm debt considering the high level of cash reserves built up due

to improved cash inflows from its operations. It was financially

prudent to settle the long term loan given the interest rate

differentials between investment and borrowing rates. The

2010/11 2009/10

Current ratio (times) 1.8 1.8

Quick ratio (times) 1.6 1.6

Net working capital (Rs. Mn) 14,779 15,007

Asset turnover (times) 0.7 0.6

Capital employed (Rs. Mn) 81,836 73,715

Total debt (Rs. Mn) 14,641 17,453

Net debt (cash) (Rs. Mn) (4,168) (4,435)

Debt/equity ratio (%) 21.8 31.0

Net debt (cash)/equity ratio (%) (6.2) (7.9)

Long-term debt to total debt (%) 57.2 60.5

Debt/total assets (%) 13.3 17.7

Debt/EBITDA (times) 1.1 1.7



restructuring in the Maldives required settlement of debt which

was then re-financed with an extension of the maturity.

The debt to equity ratio of the Group declined to 21.8 per cent

from 31.0 per cent in the previous year. These are very low debt

to equity ratios, demonstrating the borrowing capacity of the

Group to fund its next phase of growth. Reinforcing this position,

the debt to EBITDA cover stood at just 1.1 times against 1.7 times

in the previous year, where norms would be for companies to

borrow upto 4-5 times its EBITDA. Long term to total debt

declined marginally to 57.2 per cent from 60.5 per cent in the

previous year. The Leisure industry group and the holding

company continue to have the largest share of the overall debt.

STATEMENT OF CHANGES IN EQUITY

Total equity increased to Rs. 67.19 billion [2009/10: Rs. 56.26billion]. The increase was due to a profit contribution of Rs. 9.06

billion, revaluations of Rs. 2.87 billion, offset by dividends paid of

Rs. 1.87 billion.

TREASURY M ANAGEMENT

During the year, interest rates continued to decline at a relatively

slower pace than the previous year. Reductions in interest rates

naturally had a positive impact on highly leveraged companies.

The Group also proactively managed the funding requirements

and converted some long term facilities into shorter tenures taking

into account the more attractive pricing on the lower end of the

yield curve. Considering the outlook for the Rupee, the Group will

evaluate, where possible, opportunities to fund debt in US dollars

to take advantage of the yield differential. However, ensuring

adequate foreign currency inflows is critical to ensure a ‘natural

hedge’. The appreciation of the Rupee has a negative impact on

a number of businesses across the Group. The Group continued

to implement necessary steps to monitor foreign currency

exposures and to mitigate these proactively, if thought fit.

The investment policies of the Group continue as before within

the guidelines set out by the Group Executive Committee (GEC).

Investments are placed with financial institutions meeting aminimum rating criterion as agreed with the GEC. Long term

investments are done in consultation with the Group Finance

Director and members of the GEC to ensure availability of

adequate funding to meet investments in the project pipeline.

JKH retained its AAA(lka) rating from Fitch Ratings Lanka Limited

on account of its strong balance sheet and steady performance.

In addition to its sizeable cash reserves, the Group continues to

have significant credit facilities available with banks in Sri Lanka.

The availability of cash reserves has not necessitated utilisation

of a majority of the funding lines available, particularly at a holding

company level. However, the Company is looking to proactivelymanage potential funding requirements and we have finalised a

few large stand-by loan facilities with some large banks. The

current cash position of the Group and leverage ratios

demonstrate its ability to leverage its balance sheet further if the

requirement arises.


CAPITAL RESOURCES AND LIQUIDITY



2010/11 18.31 13.81 2.49 18.36 9.50 4.23 3.12

2009/10 14.18 11.50 1.62 15.84 9.43 2.59 2.82

2008/09 15.44 9.66 1.58 14.13 5.98 2.73 2.75

INDUSTRY GROUP ANALYSIS

INDUSTRY GROUP FINANCIAL HIGHLIGHTS

17

T R P

L E I S U R E

P R O P

C F & R

F I N

S E R

I T O T H E R

2010/11 2.94 2.80 0.85 0.68 1.31 0.12 2.72

2009/10 2.39 1.49 0.39 0.42 0.85 0.02 2.36

2008/09 2.34 0.62 0.53 0.49 0.49 (0.12) 3.63

T R

P

L E

I S U R E

P R

O P

C F

& R

F I N

S E R

I T O T H E R

2010/11 14.17 30.69 7.73 6.97 6.39 1.77 14.10

2009/10 13.80 29.57 6.13 4.00 6.40 1.39 12.43

2008/09 13.92 25.78 5.45 4.46 5.57 1.47 15.42

T R P

L E I S U R E

P R O P

C F & R

F I N

S E R

I T O T H E R

2010/11 16.19 33.71 8.67 10.26 23.96 2.42 15.09

2009/10 14.83 32.54 6.99 7.02 21.46 1.74 14.08

2008/09 14.81 28.40 5.73 7.06 17.88 1.80 16.47

TOTAL ASSETS Rs. billion

T R P

L E I S U R E

P R O P

C F & R

F I N

S E R

I T O T H E R

2010/11 572 4,459 99 3,029 1,121 979 1,130

2009/10 543 4,319 104 2,878 996 818 1,227

2008/09 643 3,986 120 3,016 924 638 1,174

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

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

*** EBIT per employee is calculated excluding the employees of associate companies

EMPLOYEES*** Num er

T R P

L E I S U R E

P R O P

C F & R

F I N

S E R

I T O T H E R

TURNOVER * s. illion

EBIT Rs. illion

APITAL EMPLOYED** s. on



With a vision to be recognised as a leading provider of

transportation solutions and related services through a balanced

portfolio of businesses in selected markets, the Transportationindustry group operates under the following two strategic sectors-

• Ports & Shipping

• Transportation

• Logistics

• Airlines

These operations offer a complete array of transportation related

services in Sri Lanka and the region. Businesses in the industry

group include operations of South Asia Gateway Terminals in the

Port of Colombo, a marine bunkering business, joint

ventures/associations with leading transportation multinationals

and logistics, travel and airline services in Sri Lanka, India andMaldives.

TRANSPORTATION

ROCEof 21%

Increasedflights by JetAirways and

Gulf Air

Profit Growthof 138%



Ports & Shipping Transportation

The businesses withinthe sector

Operations of a private terminal in thePort of Colombo under South AsiaGateway Terminals

Logistics services which include operations of DHL air express in SriLanka, third party logistics and freight forwarding solutions under the JohnKeells Logistics brand, bunkering services under LMS

Associate company stake in Maersk Lanka

Representation of airlines as general sales agents through Mack Air in SriLanka and through its subsidiary in Maldives – on-line operations by Jet Airways, Gulf Air and Mihin Lanka. Travel agency business through MAET

Revenue and growth Rs. 4.89 billion (inclusive of associatecompany revenue) – growth of 4% as aresult of marginal growth in revenues of SAGT and Maersk Lanka

Rs. 13.43 billion – growth of 41% driven by higher volumes across theLogistics and Airlines segments. Revenues of LMS also increased in linewith volume growth in the sector and due to higher global oil prices

EBIT and growth Rs. 2.14 bill ion – drop of 1% due to

marginal fall in EBIT level at SAGT dueto foreign currency translation impact

Rs. 798 million – growth of 245% on the back of improved performances

across the Airline and Logistics segments. LMS performance alsoimproved due to rising oil prices and more stable pricing policies adoptedin the market

Key developmentsduring the year

• The Port of Colombo handled acombined volume in excess of 4million TEUs, with SAGT having avolume of 1.97 million TEUs for thecalendar year 2010

• SAGT invested in an upgrade of itsIT systems in accounting andprocurement to further enhanceprocess efficiencies. Alsoimplemented ‘e-post’, an electronicbased invoicing system

• JKLL expanded its third party logistics business into the petroleumindustry, including warehousing, inventory management and island-wide distribution

• Jet Airways increased frequencies and Gulf Air and Mihin Lankacommenced on-line operations from Colombo and Maldivesrespectively

• DHL increased its market share in the fast growing air express category

• JKLI and JKLLL – rebranded in India and Sri Lanka and expanded itsglobal footprint through agency tie-ups. JKLI also relocated its offices inkey metros with a view to providing its customers higher levels of service delivery

Key external/internal

variables affectingbusiness

• Recovery from the global financial

crisis and increasing trade volumesglobally, particularly from India, willhave a positive impact ontransshipment volumes

• Improvement in the domesticeconomy and resulting growth inimport and export volumes willpositively impact revenues

• Continued appreciation of theRupee could have an impact ontranslation in the JKH accounts,since reporting currency for SAGT isin USD

• Improvement in the domestic economy and resulting growth in import

volumes would have a positive impact on logistics opportunities• Increased tourist arrivals and regional traffic will positively impact the

Airlines segment. However, with airlines moving towards directmarketing, market share and volumes in some segments of the travelagency business could reduce over time

• Shortage of capacity and skilled manpower in the Indian freightforwarding industry

• Higher trade volumes at the Port of Colombo will positively impact theoverall market size of the bunkering industry

Outlook/action plans • SAGT will take delivery of two new,ship-to-shore cranes during the yearwhich will enhance capacity

• Upgrading of prime movers withinvestment in 15 new prime movers

• Continue to evaluate opportunitiesfor development and managementof port operations directly andthrough Public-Private partnerships

• JKLL will explore opportunities to construct and manage astate-of-the-art warehousing complex, catering to multiple 3PL clients

• Increased frequencies by Jet Airways and Mihin Air will positivelyimpact market share in the passenger and cargo markets

Operational review and discussion

The Transportation industry group witnessed steady overall

growth during the year driven by improved revenues from

logistics, bunkering and airlines. Revenues grew by 37 per cent

to Rs. 13.43 billion [2009/10: Rs. 9.81 billion]. Revenues,

including associate company revenues, grew by 29 per cent to

Rs. 18.31 billion [2009/10: Rs. 14.18 billion]. The Transportation

group EBIT increased by 23 per cent to Rs. 2.94 billion [2009/10:

Rs. 2.39 billion]. The Ports & Shipping sector continued to be thedominant contributor in terms of EBIT, although year on year

growth was flat, resulting in a slightly lower growth rate in EBIT

than revenue.

Note – JKLLL – John Keells Logistics Lanka; JKLI – John Keells Logistics India; JKLL – John Keells Logistics; LMS – Lanka Marine Services; MAET – Mackinnons American Express Travels; SAGT – South Asia Gateway Terminals; 3PL – third party logistics; TEU – twenty foot equivalent container unit; IT - information technology



The improvement in economic conditions in Sri Lanka and

resultant improvement in trade volumes had a positive impact on

the port operations and logistics businesses. SAGT achievedcontainer volumes of almost 2 million TEUs, which consist

primarily of transshipment volumes. Whilst transshipment will

continue to play a vital role, development of the domestic

economy would also have a positive impact on container volumes

and margins.

Improved trade activity will also have a positive impact on the

logistics businesses. The continued growth of the apparel sector

and expectations for this momentum to continue is expected to

have a positive impact on the air express business of DHL. The

establishment of the ‘John Keells Logistics’ brand had a positive

impact on the market. The businesses falling under the John

Keells Logistics brand are able to market itself better as an overall

solutions provider under one brand which has helped in signing

on new customers.

The John Keells Logistics India (JKLI) operation has also been

revamped with increased focus on expanding networks through

agency tie ups. JKLI will have a renewed focus on the air freight

segment in India which is expected to grow rapidly in the short to

medium term. We are witnessing significant investment in

capacity expansion by our competitors in India and will continue

to monitor the impact on the industry.

The increase in global oil prices had a positive impact on revenues

of the bunkering business whilst margins also improved due to

the benefit of purchasing inventory in an environment of increasingprices. After the volatility witnessed last year, the market settled

down with more stable pricing policies being adopted overall.

The Airlines segment witnessed strong growth during the year

driven by higher passenger and cargo volumes. The

commencement of on-line operations by two key partners – Gulf

Air and Mihin Lanka, where both airlines commenced direct

frequencies out of Colombo and Maldives respectively, had a

positive impact on revenues and EBIT. With tourism arrivals set

to grow over the next few years, this volume growth is expected

to continue.

Return on capital employed

• ROCE increased to 21.0 per cent against 17.3 per cent in the

last year.• EBIT margins fell to 16.1 per cent from 16.9 per cent as

revenue growth was largely driven by the relatively lower

margin bunkering business.

• However, asset utilisation improved with asset turnover

increasing to 1.18 as against 0.96 on the back of revenue

growth in the bunkering business as well as the other logistics

and airlines businesses, which more than offset the negative

impact on ROCE due to the reduction in EBIT margins.


(Rs. million) 2010/11 2009/10 Chg % 2008/09

Turnover* 18,314 14,177 29.2 15,435

EBIT 2,941 2,391 23.0 2,340

PBT 2,929 2,366 23.8 2,287

PAT 2,781 2,282 21.9 1,658

Total assets 16,185 14,831 9.1 14,806

Total equity 13,954 13,498 3.4 13,605

Total debt 218 298 (27.0) 317

Capital employed** 14,172 13,796 2.7 13,922

Capital expenditure 70 53 30.9 103

No. of employees 572 543 5.3 643

EBIT per employee*** 5.1 4.4 16.7 3.6

* Turnover is inclusive of the Group's share of associate company

turnover ** For associate companies the capital employed is representative of

the Group’s equity investment in these companies




LEISURE

21

The Leisure industry group is organised into-

• City Hotels

• Sri Lankan Resorts

• Maldivian Resorts

• Destination Management

• Hotel Management

Representing JKH's single largest net asset

exposure, the Leisure industry group

encompasses two city hotels that offer 40 per

cent of the five star room capacity in

Colombo and seven resort hotels spread in

prime tourist locations all over Sri Lanka and

three resorts in the Maldives offering beaches,

mountains, wildlife and cultural splendourunder the two brands ‘Cinnamon Hotels and

Resorts’ and ‘Chaaya Hotels and Resorts’.

The Leisure industry group also has

destination management businesses in

Sri Lanka and India.

Profit growthof 138%

Chaaya Beyunder

construction

A n in terior illust r a t i o n o f C h a a y a T r a n z , H i k k a d u w a t o b e o

p e n e d i n N

o v e m

b e r 2 0 1 1




City Hotels Sri Lankan Resorts Maldivian Resorts DestinationManagement


Cinnamon Grand – 501rooms

7 resort hotels in Sri Lanka – 798 rooms

3 resort hotels in Maldives – 340 rooms

Walkers Tours andWhittall Bousteadinbound tour operations

Cinnamon Lakeside(CLS) – 340 rooms

Inbound tour operationsin India

Revenue and growth Rs. 4.81 billion – a 49%growth on back ofincreasing ARRs andoccupancies. Also due tolower base last year, asCLS was closed for 5months

Rs. 1.44 billion – growth of50% on account of turnaroundin all resorts

Rs. 4.04 billion – a fall of15% as a result of thedivestment of the Alidhooresort and closure ofChaaya Lagoon forrefurbishment

Rs. 3.52 billion – a 38%growth due to increasein volumes from all keymarkets

EBIT and growth Rs. 1.42 billion – a 165%growth driven by revenuegrowth and highoperating leverage

Rs. 158 million – growth of540% driven by higherrevenues and an increase inthe EBIT margin

Rs. 641 million – 14%growth as a result ofdivestment of the loss-making Alidhoo resort.Closure of Chaaya Lagoonimpacted EBIT growth

Rs. 190 million – 60%growth driven by higherrevenues and highoperating leverage onaccount of largely fixedcost base


• Commenced therefurbishment of 216rooms at CLS at a costof Rs. 379 million

• Completed therefurbishment of thesouth wing, and theatrium within, of theCinnamon Grand. Thenewly refurbished wingis now known as the‘Courtyard’ wing

• Opened Chaaya Blu inTrincomalee

• Commenced construction ofChaaya Bey in Beruwala

• Refurbishment of CoralGardens hotel in Hikkaduwa

• Cinnamon Lodge, Habaranarefurbished and upgraded to

a five star property

• Refurbished ChaayaLagoon in the Maldives

• Divestment of headlease of Alidhoo Island

• Purchased the headlease of Dhonveli islandfor a period of 18 years

• Higher volume growthin leisure marketcompared to marketgrowth

• Assistedentrepreneurs througha unique self-financingscheme to invest invehicles on asustainability model,thereby allowing forexpansion in capacity

Key external/ internalvariables affectingbusiness

• Increase in minimumroom rates to USD 100

• Possible shortage ofexperienced/trainedstaff in the future

• Introduction of newelectricity tariffs forhotels

• Appreciation of theRupee

• Long haul travel beingaffected due to high cost ofair travel coupled witheconomic issues intraditional European markets

• Possible shortage ofexperienced/trained staff inthe future

• Appreciation of the Rupee

• Long haul travel beingaffected due to highcost of air travelcoupled with economicissues in traditionalEuropean markets

• Introduction of businessprofit tax of 15%

• Introduction of goodsand services tax of3.5% effective fromJanuary 2011

• Lack of top qualityinventory (hotelrooms)

• Ability to retain andrecruit experienced/ trained staff

• Appreciation of theRupee and volatility ofcross currencies(Euro and GBP)

Outlook/action plans • Further increase inminimum rates to USD125, effective fromApril 2011, will ensuregrowth in ARR

• Continued growth inbusiness travel andtourist arrivals isexpected to positivelyimpact occupancies

• Cost structures -particularly staffing andheat, lighting andpower to be managed

• Floating restaurantproject at CLS to becompleted

• Continue to grow roominventory in Sri LankanResorts and leveragestrength to re-position SriLanka as an emergingdestination with a diverseoffering

• Diversify distributionchannels including digitalchannels

• Refurbishment of YalaVillage and reposition asluxury game lodge

• Chaaya Tranz to beoperational from November2011

• Cost structures - particularlystaffing and heat, lightingand power to be managed

• Diversify distributionchannels includingdigital channels

• Introduce energy savingand green practices toreduce carbon footprint

• Strong focus onbreaking into emergingmarkets such as Chinaand India

• Focus on enhancingvolumes fromtraditional westernEuropean marketsthrough tour operatorrelationships

• Concentrated effort innew emergingmarkets such asChina and India whichare expected to showhigh volume growth

• Target MICE segmentwhich demonstrateshigh potential

• Tap into high endniche segments suchas cruises, studytours, luxury jets etc.

ARR – average room rate; USD – US dollar; EBIT – earnings before interest and tax; GBP – Sterling pound; MICE – meetings, incentives,conferences, exhibitions



In addition to the sectors referred to in the previous table, the

Hotel Management sector functions as the hotel management

arm of the Leisure industry group. The sector achieved an EBIT of Rs. 387 million – a growth of 59 per cent on the back of an

improvement in the performance of hotels under management.

Going forward, one of the key variables affecting the sector will

be the ability to retain and recruit experienced staff. The action

plans in this regard are discussed in detail in the operational

review. The outlook for Hotel Management is positive where the

portfolio of hotels under management is expected to increase with

the addition of Chaaya Bey, the re-launch of Chaaya Tranz and

other new hotel ventures. The strategy will be to expand the

inventory of hotels under management, not necessarily owned by

the Group.


The Leisure industry group recorded a strong performance during

the year, witnessing growth in all its sectors driven primarily by the

growth in tourism in Sri Lanka. Overall arrivals into the country

increased by 41 per cent to 709,101 tourists, having a positive

impact on the hotels and destination management businesses

during the financial year. Revenue grew by 20 per cent to Rs.

13.81 billion [2009/10: Rs. 11.50 billion]. EBIT increased by 88

per cent to Rs. 2.80 billion [2009/10: Rs. 1.49 billion],

demonstrating the high operating leverage of the city and resort

hotels. This performance was recorded in the backdrop of room

inventory not being at maximum levels throughout the entire year

due to the closure of Coral Gardens hotel, the partial closure of

Cinnamon Lodge Habarana, Cinnamon Lakeside and Chaaya

Lagoon Hakuraa Huraa in the Maldives.

Reflecting the rapidly changing landscape and the need to create

a unique value proposition to our clients, the Leisure industry

group launched its new vision during the year – “We will always

be the Hospitality Trendsetter”. Our positive outlook on the leisure

industry is demonstrated through our investments in expanding

room inventory as well as refurbishing and upgrading our existing

hotels to reflect our vision. The Group committed in excess of Rs.

5 billion in the current financial year, which includes the

development of a brand new 200 room hotel in Beruwala to be

branded as Chaaya Bey. In addition, we are currently refurbishing

Coral Gardens Hotel, Hikkaduwa which will be re-branded as

Chaaya Tranz. The hotel is expected to commence operations in

November 2011.

The anticipated growth in tourism in Sri Lanka is expected to

continue during the next few years. The tourism industry expects

arrivals of 1 million tourists in three years. This level of growth

would require a significant addition to the current room inventory

in the country. In order to meet demand expectations, the Leisure

group intends to add a minimum of 200 rooms per year in the

next five years, which could be in Resort Hotels as well as City

Hotels. The creation of tourism development zones and entry of

reputed international hotel chains would also improve the

attractiveness and visibility of Sri Lanka as an emerging

destination, whilst changing the competitive landscape. The need

for integrated developments, encompassing hotels,

entertainment, convention facilities and retail space is importantto ensure a unique positioning and creation of iconic

developments that would attract visitors, similar to other hotel

developments in the region. The need for development of related

infrastructure still has to be addressed, although the emergence

of new services such as internal air taxi operations is a positive

step.

Whilst traditional western European markets will continue to be

of importance to the Sri Lankan and Maldivian operations, new

emerging travel markets such as China, India and the Middle East

are expected to provide impetus to growth. The Leisure industry

group recognises the importance of such emerging markets and

has implemented strategies to capitalise on this opportunity,

which includes ensuring that products and services cater to such

segments as well. The importance of such destinations is

exemplified by the Chinese market becoming number one into

the Maldives. The Destination Management sector in particular

will look to capitalise on this opportunity by leveraging on existing

tour operator networks and establishing new networks as well.

During the year, the Maldivian Resorts were restructured with thedivestment of the head lease of Alidhoo island, which resulted in

the discontinuation of the Cinnamon brand presence in the

Maldives. The Group purchased the head lease of Dhonveli island

for a period of 18 years. As a result of the restructuring and

divestment of the loss-making Alidhoo resort, the profitability of

Maldivian Resorts has increased significantly. This was achieved

in spite of the closure of Chaaya Lagoon Hakuraa Huraa for 4

months due to a USD 2.6 million refurbishment. The change in

the tax policies in the Maldives has resulted in the introduction of

a business profit tax of 15 per cent, effective from the ensuing

financial year. A goods and services tax of 3.5 per cent was also

introduced with effect from January 2011. The introduction of

these taxes will have an impact on the net profitability of the

resorts. However, since these changes were discussed over a

period of time, the industry has had adequate time to take

necessary steps to partially mitigate the impact.

23



The resurgence of tourism and business travel positively impacted

the City Hotels sector with both Cinnamon Grand and Cinnamon

Lakeside witnessing sharp growth. During the year, the minimumrate policy increased the rate of five star rooms to USD 100. This

naturally had a positive impact on average room rates (ARR),

whilst not impacting occupancies due to the growth in arrivals.

Cinnamon Lakeside will expand its food and beverage portfolio

through the launch of a floating restaurant to be introduced in the

ensuing year.

The growth in tourism and expansion in capacity is likely to stretch

the infrastructure resources of the country which will need to

evolve at a rapid pace. Whilst infrastructure is important to achieve

this growth, the development of human capital is considered

critical considering the service oriented nature of the industry.

Training and development of staff will assume greater importance

with high levels of growth and additions to the employee cadre in

order to maintain our high service standards. The Group has been

conscious of this need and has taken steps to continuously

ensure staff are given adequate exposure and training to developthe requisite competencies.The Group has tied up with an

internationally reputed 5 star training academy to cater to this

requirement. Many senior and middle level managers have already

undergone overseas training under this programme.


• ROCE increased to 9.3 per cent against 5.4 per cent.

• EBIT margins improved considerably to 20.3 per cent from

12.9 per cent, driven by higher ARRs/margins as well as the

high operating leverage enjoyed by the hotels and destination

management businesses considering the relatively high level

of fixed costs.

• Asset turnover at 0.42 times as against 0.38 times did notincrease significantly as a result of relatively lower overall

revenue growth due to closure of some hotels for

refurbishments as discussed above.


(Rs. million) 2010/11 2009/10 Chg % 2008/09

Turnover 13,810 11,500 20.1 9,662

EBIT 2,799 1,485 88.5 624

PBT 2,492 1,011 146.4 133

PAT 2,319 973 138.3 128

Total assets 33,711 32,539 3.6 28,400

Total equity 25,317 23,535 7.6 18,592

Total debt 5,377 6,040 (11.0) 7,189

Capital employed 30,694 29,574 3.8 25,780

Capital expenditure ,055 1,298 135.3 1,213

No. of employees 4,459 4,319 3.2 3,986

EBIT per employee 0.6 0.3 82.6 0.2



Owning a significant land bank in prime areas of Colombo,

the Property industry group is one of the largest private

sector proprietors of real estate in Colombo. As thecontrolling shareholder of Asian Hotels and Properties PLC

- the owners and promoters of ‘Crescat City’ which houses

the five star hotel ‘Cinnamon Grand’, the up-market

shopping mall ‘The Crescat Boulevard’, the 30-storey

luxury apartment complex ‘The Monarch’, the 35-storey

luxury apartment complex ‘The Emperor’, and the

‘Angsana City Club & Spa’, the Property Development arm

concentrates primarily on development and sale of

residential apartments such as the recently launched

‘OnThree20’ project and the operations of the Crescat

Boulevard. Management and operation of office sites within

the city are handled under the Real Estate arm.

PROPERTY

25

EBIT growthof 119%

Revenue

growth54%




The Property industry group witnessed considerable growth

during the year with revenues growing by 54 per cent to Rs. 2.49

billion [2009/10: Rs. 1,62 billion], primarily due to the revenue

recognition cycle of The Emperor project. EBIT increased 119 per

cent to Rs. 851 million [2009/10: Rs. 388 million] primarily driven

by the revenue recognition of The Emperor and fair value gain of

Rs. 216 million on investment property. The fair value gain was

on account of a revaluation of the Crescat Boulevard.

The property markets in Sri Lanka have hardened with prices for

large blocks of land in Colombo city and suburbs increasing. A

continuation of current interest rates could have a further positive

impact on property prices. During the year, the Property

Development sector launched ‘OnThree20’ – a 475 unit

residential apartment complex centrally located in Union Place.

The product targets the luxury market at the mid to upper middle

class category. Over 60 per cent of units have been sold.

Construction commenced in April 2011 with completion expected

in December 2014. Development of OnThree20 will be done by

John Keells Residential Properties (Private) Limited, which is a

wholly owned subsidiary of JKH.

The Emperor project is nearing completion and the hand over of

units is expected to commence from August 2011. Whilst revenue

has been recognised throughout the project, a fair portion of



Property Development Real Estate


Development and sale of residential apartments– currently ‘TheEmperor’ and ‘OnThree20’ condominium projects

Renting of the commercial office sites and themanagement of the Group’s real estate within thecity

Owning and operating the Crescat Boulevard mall

Revenue and growth Rs. 2.44 billion – 56% growth due to cycles of revenuerecognition of The Emperor project which is nearing completion.Revenues of the mall operations also increased on the back of higher occupancies and an increase in the rentable space

Rs. 49 million – 6% fall as a result of the scalingdown of operations on one of the major sites onUnion Place and making way for the OnThree20project

EBIT and growth Rs. 779 million – 158% growth due to the corresponding profitrecognition based on higher revenue as above and fair valuegain on investment property amounting to Rs. 216 million

Rs. 71 million – 18% fall due to relocation costsborne due to the commencement of theOnThree20 project at Union Place


• Launch of OnThree20 – a 475 unit residential apartmentbuilding project on Union Place consisting of three towers.Over 60% of units are sold prior to formal launch

• Excellent sales at the Emperor with only 5 units out of thetotal of 163 remaining

• The OnThree20 project model was established based on anefficient design-based construction model to optimiseconstruction costs, thus giving the ability to competitivelyprice units

• The Crescat Boulevard mall was expanded with the additionof approximately 5,000 square feet of retail space

• Continued focus on energy saving initiativesacross the Group

• Steps to optimise the utilisation of space andensure minimal un-occupied space

Key external/internalvariables affectingbusiness

• Improvement in macro-economic conditions resulting inhigher disposable incomes and the reduction in interest ratesgenerally has a positive impact on the property market

• The increase in the cost of construction materials could drivethe cost of construction higher

• The shortage of specialised resources and manpower couldbecome an issue if the construction industry grows veryrapidly

• The growth in the economy has resulted inincreased demand for office space within thecity. However since the Real Estate sector hasprioritised the meeting of the requirements of the Group’s office needs, especially with oneof its major sites handed over fordevelopment, the sector has not been able tocapitalise on this growth

Outlook/action plans • Increase in tourism, per capita income and changes inlifestyles will increase the potential for retail and commercialdevelopments and residential apartments. Sri Lanka isrelatively under-priced compared to the region

• Expansion of the Group’s land bank to ensure continuousdevelopment pipeline. The Group is currently finalising the

purchase of a 6 acre site in Ja-Ela which has excellentdevelopment potential

• Continue to focus on driving efficiencies andmanaging costs

• Optimise space utilisation



revenue recognition will take place upon hand over. The

operations of the Crescat Boulevard were scaled up during the

year, with an addition of approximately 5,000 square feet.Occupancies increased during the year and yields also increased.

In the ensuing year, the Property group will continue to monitor

the market and evaluate opportunities to expand its land bank in

Colombo with a view to acquiring sites with a high development

value. We will also pursue opportunities for joint ventures by

leveraging on the expertise in managing developments and the

marketing depth that we have acquired. Currently, we are in the

process of finalising the purchase of a 6 acre site in Kapuwatte,

Ja-Ela, which has excellent development potential as it is located

adjacent to the Colombo-Katunayake airport road with a wide

road frontage. Development plans for this site are currently being

drawn up. The possibility that interest rates will remain at present

levels could spur the property market in the medium term as

property becomes an alternative investment choice. The increase

in disposable incomes and the increased availability of creditcould also spur home ownership. The establishment of an efficient

design based construction model will allow for flexibility in

developing products targeted at the appropriate segment of the

market.


• ROCE increased to 12.3 per cent against 6.7 per cent.

• EBIT margins improved considerably to 34.1 per cent from

24.0 per cent, due to the revenue recognition on The Emperor

project.

27

(Rs. million) 2010/11 2009/10 Chg % 2008/09

Turnover 2,494 1,620 53.9 1,578

EBIT 851 388 119.0 532

PBT 831 378 119.8 535

PAT 780 342 128.2 486

Total assets 8,671 6,986 24.1 5,730

Total equity 7,856 6,119 28.4 5,410

Total debt (125) 14 (979.0) 37


Capital expenditure 6 6 7.4 12No. of employees 99 104 (4.8) 120

EBIT per employee 8.6 3.7 130.1 4.4

‘ T h e E

m p e r o

r ’ a p a r t men t projec t n e a r i n g c o m p l e t i o n



The Consumer Foods sector is home to a portfolio of

leading brands including ‘Elephant House’ carbonated soft

drinks, ice creams and the ‘Keells’ and ‘Krest’ ranges of processed meats, all market leaders in their respective

categories and supported by a well-established island-wide

distribution channel.

The Consumer Foods sector of the industry group

competes in the following three major categories-

• Beverages

• Frozen Confectionary

• Convenience Foods

The Retail sector focuses on modern organised retailing

through the ‘Keells Super’ chain of supermarkets and inpartnership with Nations Trust Bank, has created ‘Nexus’,

the most successful coalition loyalty card in the country

CONSUMER FOODS & RETAIL

ProfitGrowth of

162%

‘KZone’neighbourhood

mall



Consumer Foods Retail


Ceylon Cold Stores (CCS) – portfolio of leading products under the‘Elephant House’ brand with carbonated soft drinks and Wild Elephantenergy drinks (Beverages segment) and Elephant House ice creams(Frozen Confectionary segment)

Modern organised retailing through ‘KeellsSuper’ chain of supermarkets, operating47 stores spread across the country. Alsohas Nexus loyalty card network incollaboration with NTB

Keells Food Products (KFP) – portfolio of processed meat productsunder ‘Keells’ and ‘Krest’ ranges (Convenience Foods segment)

Operations of the ‘KZone’ mall inMoratuwa

Revenue and growth Rs. 8.11 billion – 20% growth driven by both CCS and KFP primarilyon the back of volume increases. In absolute terms, contribution of CCS to revenue is higher. Although not material, revenues from JKFILfell due to a change in the operating model in India

Rs. 10.25 billion – growth of 13% due togrowth in sales volumes through growth insame store sales and expansion of newoutlets in Matara and the KZone mall

EBIT and growth Rs. 641 million – growth of 54% driven by KFP and a significantreduction in losses in the Indian operations. EBIT of CCS was flat inspite of revenue growth due to lower margins as cost increases werenot fully passed onto consumers. Higher marketing and distributioncosts associated with the corporate brand revitalisation of theElephant House brand and costs associated with the launch of KIK Cola also impacted EBIT

Rs. 42 million – growth over 10-fold, off alow base, due to higher revenues andresultant contribution towards the dilutionof fixed costs. EBIT was also positivelyimpacted by an improvement in marginsdue to higher basket values and a changein the mix


• Elephant House brand underwent a corporate brand revitalisation

• KIK Cola was launched to cater to the previously untapped colasegment

• Enhanced production capabilities in Frozen Confectionary leading toan enhanced range in the impulse segment of the market

• Indian operations of Keells Foods witnessed a turnaround due to achange in the operating model

• Launch of the ‘KZone’ shopping mall inMoratuwa

• Launched its own Department Storeunder the brand name ‘Keko’

• Opened an outlet in Matara, expandingour reach in the south of the country

Key external/internal

variables affectingbusiness

• Improvement in economic conditions and the opening up of North

and East of the country have created opportunities to grow volumes• Growth in the hospitality trade driven by increased tourism and

domestic consumption

• Growth in per capita income and

disposable incomes will have a positiveimpact on modern retailing and alsooverall footfall

• Changes in lifestyles and consumersincreasingly opting for convenience

• Rapid increase in number of outlets inmodern trade format due to expansionplans of competitors

Outlook/action plans • Launch of new products in Beverages and Frozen Confectionarycatering to market needs and demands of consumers

• KFP will continue to expand its portfolio with particular focus on theRTE segment of the market which is expected to grow in themedium term

• Focus on opening larger format storesin key locations, providing a widerchoice for consumers

• Provide more value for money to ourcustomers with an extended portfolio of private label products and increased

choice in the fresh produce category

Note- JKFIL – John Keells Foods India; NTB – Nations Trust Bank; RTE – ready-to-eat; EBIT – earnings before interest and tax


In the backdrop of improved macro-economic conditions locally,

the Consumer Foods & Retail (CF&R) industry group witnessed

strong top line and bottom line growth. Revenues of the CF&R

industry group increased 16 per cent to Rs. 18.36 billion

[2009/10: Rs. 15.84 billion]. EBIT increased by 63 per cent to Rs.

683 million [2009/10: Rs. 420 million] driven largely by the

turnaround in the Indian operations of the Convenience Foods

segment coupled with an improved EBIT contribution from the

local operations.

The improvement in per capita GDP and an increase in

disposable incomes had a positive impact on overall

consumption levels in the country. Both sectors within the CF&R

group benefitted from this improvement. The Consumer Foods

sector was able to capitalise on the opportunities presented due

to the opening up of the North and East of the country, thereby

entering a market that previously only had limited access. The

growth in the hospitality industry due to increased tourist arrivals

also benefitted the Consumer Foods sector.

The ‘Elephant House’ brand underwent a corporate brand

revitalisation to reflect the diverse nature of the markets that our

products cater to and the need to adapt ourselves and the brand.

During the year, the Beverages segment increased its market

share, where we remain the market leader, despite heavy

competition from multinational giants. Revenues increased due

to improvement in overall volumes as price increases were limited

in spite of increased cost pressures due to key inputs such as

sugar increasingly significantly in price. CCS launched a cola



beverage branded as ‘KIK’ Cola to cater to the previously

untapped cola market. The cola market accounts for around 30

per cent of the overall carbonated soft drinks market. During theyear, CCS also installed new equipment to expand its impulse

range of products in the Frozen Confectionary segment which

lacked a wide range in its product portfolio. With the enhanced

production capabilities, we have doubled the range of stick and

other impulse products. Whilst price points are typically lower, the

impulse category offers significantly high volumes and also the

breadth in the product portfolio to expand our distribution reach

further.

As discussed briefly, the Indian operations of Keells Foods were

revamped under a new operating model with the appointment of

a master distributor who will handle all logistics aspects of the

business. As a result, the flexibility in our cost structures has

enabled the significant reduction in losses in the Indian operations.

Domestically, Keells Foods witnessed strong growth driven by

improved consumption patterns both in retail and the hospitality

segments. KFP launched a few canned products in the

ready-to-eat (RTE) segment of the market, where we will continue

to evaluate opportunities to expand the product range.

The Retail sector expanded its operations during the year and

ventured into a new concept with the launch of the ‘KZone’ mall

in Moratuwa. The mall consists of Keells Super as an anchor

tenant as well as our own department store ‘Keko’, and includes

outlets carrying many well-known brands in addition to a foodcourt, bank branch and ATMs. Initial indications on the operation

of the mall are positive and further steps will be taken to expand

our footprint with stores in this type of format. The establishment

of such stores and expansion of the current network is expected

to have a positive impact on profitability given the high fixed cost

nature of the business. During the ensuing year, we will look to

expand the ‘Keko’ clothing label which was launched last year.

The expansion of the product portfolio, extension of private label

and fresh produce as well as expectations for a change in basket

values are likely to positively impact margins.

• The ROCE increased to 12.5 per cent as against 9.9 per centin the previous year.

• The increase in ROCE was driven by the improvement in EBIT

margins to 3.7 per cent as against 2.6 per cent due to

improved EBIT margins in the Convenience Foods segment

and the Retail sector.


(Rs. million) 2010/11 2009/10 Chg % 2008/09

Turnover 18,358 15,843 15.9 14,130

EBIT 683 420 62.8 494

PBT 579 288 100.9 278

PAT 230 88 162.4 121

Total assets 10,259 7,025 46.0 7,057

Total equity 5,055 3,181 58.9 3,051

Total debt 1,919 816 135.0 1,408


Capital expenditure 1,266 270 369.4 479

No. of employees ,029 2,878 5.2 3,016

EBIT per Employee 0.2 0.1 54.7 0.2



The Financial Services industry group operates in the

following sectors-

• Insurance

• Banking & Leasing

• Stock Broking

The cluster of financial services companies offer a complete

range of financial solutions including commercial banking,

insurance, stock broking, debt trading, fund management

and leasing with the vision of becoming a leading player in

the financial services sector offering a total solutions

package to our customers.

FINANCIAL SERVICES

31

Launched‘Union

Challenger’

ROCE

20.5%





The Financial Services industry group revenues increased 23 per

cent to Rs. 6.48 billion [2009/10: Rs. 5.26 billion] driven by Union

Assurance (UA), the insurance arm of the Group. Revenue,

inclusive of associate company revenues, increased marginally by

1 per cent to Rs. 9.50 billion [2009/10: Rs. 9.43 billion] as a result

of the Group’s share of Nations Trust Bank (NTB ) revenues falling

as against the previous year. This fall was driven by the fall in

Insurance Banking & Leasing Stock Broking


Union Assurance (UA) offerscomprehensive insurance solutionsin general and life insurancesegments

Nations Trust Bank (NTB) which offerscomplete banking solutions through itsnetwork of branches for corporate,retail and SME clients and is thefranchise holder for American Expresscredit cards in Sri Lanka. The bank also has a leasing arm

One of the leading stockbrokingcompanies in Sri Lanka – JohnKeells Stock Brokers (JKSB). JKSBhas a trading tie up with CreditSuisse (Hong Kong) Limited

Revenue and growth Rs. 6.00 billion – growth of 21%driven by growth in both life andgeneral segments

Rs. 3.02 billion (share of associatecompany revenue from NTB) – 28%drop as a result of the fall in interestrates and hence interest income. Netinterest income was however higherduring the period since the interestexpense fell at a higher rate

Rs. 480 million – growth of 68%driven by significantly highervolumes on the Colombo Stock Exchange (CSE)

EBIT and growth Rs. 387 mill ion – 47% growth dueto higher investment income andcomparatively lower cost increasesas compared to revenue

Rs. 607 million – 47% growth due togrowth in net income and improvedrecoveries of bad and doubtful debts

Rs. 319 million – 85% growth due toan increase in revenues and thehigher contribution as a result of thevariability of cost structures


• Entered into a ‘bancassurance’partnership with CommercialBank

• Launch of the Union ‘Challenger’product targeting thepension/retirement segment

• Expanded ‘Union Pay Easy’scheme with an addition of 350premium collection points

• Acquired over 25,000 newcustomers in the retail bankingsegment, growing the deposit base

• Corporate loan growth of 61%

• Launched a focused SME strategygiven the growth prospects of thissector

• Continued to be one of the topbrokers in the country andwitnessed growth in line with themarket

• Growth of the CSE had a positiveimpact on retail participation

• Curtailment of credit granted bystock brokers, although this didnot have an impact on JKSB


• Insurance penetration in thecountry is low relative to its peers

• Ageing population requiring morehealthcare and an increase inaffluence would create furtheropportunities

• Treasury circular requiring allstate entities to insure with stateinsurance agencies limits thegrowth prospects of the privatesector

• Interest rates impact theinvestment income of both thelife and general insurancesegments

• Economic growth and growth incredit due to increased investmentsand consumption

• Access to low cost fund base byexpanding geographically althoughthis needs to be weighed withcapital allocation

• Reduction of corporate taxes from35% to 28% and financial VAT from20% to 12% effective from April2011

• Competition and regulatorydevelopments have resulted inlower net interest margins, placingan importance on fee based income

• Low interest rates have positivelyimpacted investment in equities. A rise in rates, could dampenequity investments

• New entrants into the market andthe reduction in mandatorybrokerage rates would impactrevenues

• Corporate earnings andvaluations drive the market andhence will dictate the direction of the market

• Lack of trained and qualified staff resulting in intense competition forskilled resources

Outlook/action plans • Insurance penetration levels setto increase while opening up of the north and east will createopportunities

• Continue to grow the lifeinsurance segment in a costeffective manner consolidatingon ‘bancassurance’ channels

• Use differentiated service and IT infrastructure to build a balancedportfolio in the general insurancesegment and maintain pricediscipline

• Increased focus on allocation of capital and return across customersegments, product areas andlocations given tightening interestmargins

• Expansion of SME portfolio andaccess points

• Capitalise on opportunities ininfrastructure development,commercial agriculture and tourism

• Relatively high valuationscompared to regional peers mayresult in lower foreign participation

• Strong pipeline of IPOs willencourage more accounts to beopened and also keep turnoverlevels buoyant

• Aggressively penetrate theinternet trading segment toexpand reach and grow volumes

Note – SME – small and medium enterprises; VAT – value added tax; IPO – initial public offering



interest income on account of lower interest rates. However, the

net income of NTB increased as the interest expense fell at a

higher rate than revenues. EBIT grew by 55 per cent to Rs. 1.31billion [2009/10: Rs. 848 million] with strong contributions from all

three sectors towards this growth.

The financial services industry experienced rapid growth on the

back of a vastly improved economic landscape in the country.

Interest rates declined during the year with minimal volatility, whilst

equity markets continued to show a strong performance. The

stable economic environment coupled with the Government’s

intention to drive growth saw a significant pick up in credit growth.

This pick up in credit growth had a positive impact on the Banking

sector, whilst the availability of liquidity also assisted in maintaining

the momentum on equity markets.

The improvement in the business climate had a positive impact

on the Insurance sector which saw fair topline growth driven by

growth in both life and general segments. In the Life segment, UA

launched a unit-linked product catering to the retired/pension

segment of the market, which will also cater to a more investment

savvy client segment. The relative under-penetration of insurance

in the country is likely to ensure continued growth momentum for

this business. However, the reduction in interest rates has also

necessitated insurance companies to re-evaluate pricing policies

to ensure achievement of underwriting profits. The opening up of

the North and East will expand volumes whilst the improvement

in per capita incomes will result in insurance becoming more

affordable.

The Banking sector saw remarkable growth on the back of the

improved business climate. The banking industry overall saw non-

performing assets falling significantly and an improvement in

recoveries, which was the same with NTB. Whilst the North and

East present tremendous opportunities for expansion, the bank

is conscious of the need to balance the capital allocation

requirements with profitability. Having recognised the potential for

the small and medium enterprise (SME) sector in the country, the

bank launched a focused SME strategy to capitalise on such

opportunities.

The Colombo Stock Exchange (CSE) continued to be one of the

best performing stock markets in the world. The continued rise

of the market had a positive impact on total volumes, thus having

a positive impact on the Stock Broking sector. Many new retail

accounts were opened driven by a number of initial public

offerings (IPOs) of companies entering the market. New high net-

worth individuals also were seen active in the market. The

restriction on broker credit by the regulator had a dampening

impact on the market but was seen to be a positive move to

ensure sustainability of the growth. During the year, the regulator

granted a few more broking licenses which will result in increased

competition. With the setting up of new broking houses, trainedexperienced staff were in high demand. Retention of staff was a

priority issue to ensure continuation of the strong performance of

the business.


• ROCE increased to 20.5 per cent as against 14.2 per cent in

the previous year.

• EBIT margin improved to 13.8 per cent from 9.0 per cent in

the prior year mainly as a result of an improvement in the EBIT

margin of the Banking sector. Insurance and Stock Broking

both saw improvements in EBIT margins.

• Asset turnover fell marginally to 0.42 times due to the fall in

revenues in banking as a result of the fall in interest income.

33

(Rs. million) 2010/11 2009/10 Chg % 2008/09

Turnover* 9,501 9,435 0.7 5,979

EBIT 1,313 848 54.8 486

PBT 1,333 868 53.5 486

PAT 860 530 62.3 339

Total assets 23,961 21,461 11.7 17,878

Total equity 6,287 6,270 0.3 5,570

Total debt 103 126 (17.8) 1

Capital employed** 6,390 6,396 (0.1) 5,571

Capital expenditure 172 80 115.2 0.3No. of employees 1,121 996 12.6 924

EBIT per employee*** 1.2 0.9 37.6 0.5


** For the associate company the capital employed is representative of the Group’s equity investment in this company

***EBIT per employee is calculated excluding the employees of associate company



The Information Technology industry group is organised in

to-

• IT Services

• Software Services

• Office Automation

• IT Enabled Services

The industry group has a vision of providing quality, world-

class information communication technology services from

BPO, software services and information integration to office

automation by offering end-to-end ICT services and

solutions. With a strong customer base in Sri Lanka, the

rest of South Asia, as well as the UK, Middle East,

Scandinavia and the Far East, we are at the forefront of

making Sri Lanka an ICT hub in South Asia.

INFORMATION TECHNOLOGY

Launch ofSamsungGalaxy Tab

Revenuegrowth of

63%



Note – JK BPO – John Keells Business Process Outsourcing; ISA – Information Systems Associates; EBIT – earnings before interest and tax

Office Automation IT Enabled Services


Operations of John KeellsComputer Services whichoffers software services to awide range of clients in SriLanka and overseas.Operations of ISA inpartnership with Air Arabia

Operations of John Keells Office Automation who are the agentsfor Toshiba office equipment inSri Lanka commanding a dominantmarket position

Business Process Outsourcing (BPO)operations, primarily in the Voice verticalthrough JK BPO and the Finance & Accounting (F&A) vertical through QF&A.Operates approximately 500 seats atpresent with operations in India andthe US

Core focus areas ondevelopment of aviationrelated software and hotelreservation managementsystems

National distributor for Samsungmobile phones and printers. Portfolioof other office automation productsincluding RISO duplicating solutions

Shared service function of the Group aswell as for external clientele underInfoMate in the F&A and payroll verticals

Revenue and growth Rs. 400 million – a marginalgrowth of 4% as a result of thelag effect of converting new

product developments intosales

Rs. 2.57 billion – growth of 147%through growth in Toshiba businessline and primarily through the

introduction of the Samsung mobilephone business

Rs. 1.26 billion (inclusive of associatecompany revenue) – growth of 8% drivenby the acquisition of new customers in

North America by JK BPO during the latterpart of the year

EBIT and growth Rs. 21 mill ion negative EBIT asagainst an EBIT of Rs. 2 millionlast year due to flat revenuesand costs associated with thedevelopment and launch of two new products

Rs. 211 million – growth of 93%primarily from Samsung and Toshibabusiness growth. EBIT growth not inline with revenue growth sinceSamsung business is a high turnoverand relatively low margin business

Rs. 68 million negative – reduced by 29%as a result of the one-off relocation andseverance costs and lower losses in theSri Lankan BPO operations which werediscontinued


• Launch of ‘Zhara’ hospitalitysuite for the regional leisureindustry

• New products to bedelivered on a SaaS(software as a service)model

• Recognised by Toshiba as one of the few markets worldwide withover 50% market share in copiers

• Successful launch of the Samsungmobile phone distributorship,reaching #2 position in the marketwithin a short span of time

• Launch of Samsung Galaxy Taband other products within a fewweeks of their global launch

• The AuxiCogent group which operatesin the Voice vertical has been re-branded as ‘John Keells BPO’

• The BPO operations in India shifted toits own facility and will operate with ateam of dedicated professionals

• The shared service unit increased itscustomer base and added an overseasclient


• Appreciation of Rupee hasaffected the pricecompetitiveness whenbidding for projects

• The continued growth in mobilephone handsets in Sri Lanka

• Replacement cycles of handsetsare relatively short, showcasingthe potential

• Adequate availability of requisite skillsfor BPO operations in India at thecurrent juncture, although skills maybein short supply within the next few years

• Slow but steady recovery of the UnitedStates will increase business volumesand opportunity

Outlook/action plans • Continue to developsoftware products deliveredon a cloud-based, softwareas a service model

• Recovery of global traveland aviation industry willhave a positive impact onthe software business

• Low duty regime could fuel growthof demand for mobile phones andoffice automation products

• Focus on managing working

capital given the high volumenature of the mobile phonebusiness

• With the Voice related BPO operationsmoving into its own facility, a ramp upof seats is expected

• The outlook in this vertical is increasingly

positive following the acquisition of newcustomers and significant progress onnegotiations with world renownedcompanies to sign up for contracts


The Information Technology (IT) industry group recorded a 116 per

cent growth in revenues to Rs. 3.11 billion [2009/10: Rs. 1.44 billion].

Revenue was driven largely by growth in sales of John Keells Office

Automation (JKOA) with the commencement of the Samsung mobile

phone distributorship. However, revenue, inclusive of associate

company revenue increased at a relatively lower rate of 63 per cent

to Rs. 4.23 billion [2009/10: Rs. 2.59 billion] since revenues of theassociate company operations in India fell marginally. EBIT of the

industry group increased 663 per cent, albeit off a small base, to Rs.

122 million [2009/10: Rs. 16 million]. EBIT growth was also driven

primarily by JKOA, which had the single largest contribution to EBIT

within the IT industry group.

During the year, JKOA commenced the distribution of the Samsung

range of mobile phones in the Sri Lankan market. Samsung mobile

phones enjoy a strong position globally, being the leader in key

markets in North America and Europe, having a wide range of

products that cater to different segments of the market. Whilst mobile

penetration in Sri Lanka is quite high, the replacement cycles for

mobile phones would still offer sizeable growth opportunities in this

industry. Given the relatively lower margins in the industry, ensuring

scale and volume growth is critical. The Toshiba range continued to

perform well with Toshiba being the market leader in the

photocopying segment of the business with a dominant market share

well above the regional average. The improved business climate is

expected to have a positive impact on the Toshiba business line.



John Keells Computer Services (JKCS) faced a challenging year due

to the lag between bringing products to market and generating

revenue to cover the costs already incurred in research, developmentand marketing of such products. JKCS’s most mature and

established product, the Evinta internet booking engine as well as

its UAE based JV company- ISA’s flagship product, the Accelaero

LCC reservation system secured several new customers in the

Middle East, Asia and the Africa regions. During the year, JKCS also

launched a new departure control system which has received

international accreditation as well. The economic conditions in

developed countries and low growth levels, impacted the decision

making process of airlines/airport operators in investing in such

departure control systems and airline reservation systems. With an

improved outlook, we anticipate the development efforts will pay off

in the coming years. Aviation software products used by recognised

carriers and deployed globally need to conform to international

industry standards. JKCS’s product initiatives fall into this categoryand the requisite investments have been made to secure acceptance

by globally recognised certifying authorities. This ensures these

products can be used by the largest players, resulting in significant

upside potential once these products mature and secure a wider

customer base. The ‘Zhara’ hospitality suite, which incorporates a

central reservation system, property management system and an

internet booking engine, was implemented across the hotels within

the Group. The product has been sold to external clients in Sri Lanka

and the Far East region. In the context of anticipated high

occupancies in Sri Lanka, the system would add value to hotel

operators in enhancing revenue yields.

The recovery of the global travel and tourism industry will help all

offerings in the JKCS portfolio. All of JKCS’s new offerings are built

to be delivered as cloud-based services and sold on a SaaS

(software as a service) model where revenues are chargeable on

volumes of the client. It is widely anticipated that this will be the

emerging scenario where most clients will prefer to buy their

computing capacity ‘on demand’ on a ‘pay as you go’ model similar

to utilities. JKCS will be well positioned as an early mover in this

space.

The operations of the IT Enabled sector in India were restructured

during the year. The BPO operations in the Voice vertical have shifted

to a state-of-the-art facility and will operate on its own with the

onboarding of key dedicated management personnel. The new

facility has the capacity to ramp up to 1,000 seats. With this move,the AuxiCogent group was re-branded as ‘John Keells BPO’. The

investment in the latest technology such as unified computing

systems (UCS boxes) will enable the JK BPO operations to function

at high efficiency levels leading to added value to our clients. During

the year, we were successful in adding to our portfolio of clients with

the addition of a number of flagship customers. Discussions are

underway with potential clients where negotiations are at an

advanced stage. The BPO industry is forecasted to continue its

growth trajectory and has attractive prospects. India continues to bea preferred location for BPO operations due to the availability of the

required infrastructure and the abundant availability of educated

graduates at relatively lower costs. The challenge, as with any BPO,

is to attract the right talent and being able to manage attrition. The

shared service unit InfoMate which primarily serves internal

requirements of the JKH Group, added a few more external clients

into its growing portfolio. This included the first client from Europe.

• ROCE increased to 7.7 per cent as against 1.1 per cent in the

previous year.

• EBIT margins increased to 2.9 per cent from 0.6 per cent in the

previous year on account of the increased profitability of JKOA.• ROCE was positively impacted by the increased asset utilisation

where asset turnover improved to 2.04 as against 1.46 in the

prior year primarily due to higher revenues in JKOA.


(Rs. million)

Turnover ,229 2,590 63.3 2,731

EBIT 122 16 662.6 (118)

PBT 114 14 740.7 (121)

PAT (22) 18 (225.6) (167)

Total assets 2,419 1,736 39.3 1,804

Total equity 1,651 1,360 21.3 1,417

Total debt 124 25 387.2 50



No. of employees 979 818 19.7 638

EBIT per employee 0.1 0.0 537.2 (0.2)


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

***EBIT per employee is calculated excluding the employees of associate companies



Other businesses in the JKH portfolio include -

• Plantation Services

• Tea and rubber broking

• Tea smallholder factories

• Other

Tea Smallholder Factories PLC is amongst the top

manufacturers of orthodox low grown teas and is also

recognised as the producer of the best CTC teas in

Sri Lanka. With over 140 years of experience in the tea

trade, John Keells PLC is one of the leading tea brokers in

the country. Our warehousing facility is the largest and one

of the best state-of-the-art complexes in the country for

pre-auction produce. Infusing international best practices

in the production and sale of ‘‘Ceylon Tea’’, John KeellsPLC has been a steadfast partner to Sri Lanka's top

income earning tea industry.

OTHER INCLUDING PLANTATION SERVICES

37

ROCE of19.4%




Plantation Services Other


Tea and rubber broking under John Keells PLC (JK PLC), one of the leading commodity broking firms inthe country. Also has a state of the art warehousingfacility for pre-auction produce

JKH and other ancillary businesses

Tea Smallholder Factories (TSF) has 8 factories inoperation and is amongst the top manufacturers of quality low grown teas in the country, specially theCTC variety

John Keells Capital (JK Capital) is the private equity (PE)arm of the Group having made a few PE investments in thelast few years. JK Capital also has an investment bankingunit with a primary focus on equity related structuring andadvice. IT consulting services carried out by the StrategicGroup Information Technology (SGIT) division

Revenue and growth Rs. 2.81 billion – remained flat primarily due to TSFwhere volume increases were offset by price declines

Revenue is negligible as there are no significant operatingbusinesses under this segment

EBIT and growth Rs. 439 million – drop of 9% primarily due toreduction in EBIT of TSF due to lower margins as aresult of higher bought leaf prices. This reduction inEBIT was partially offset by higher EBIT at JK PLCdue to a reduction in administrative expenses

Rs. 2.28 billion – growth of 21% due to capital gainsrecognised on the sale of AHPL and KHL shares


• The tea crop in the calendar year 2010 was at arecord high resulting in record export earningsfrom tea

• A levy of Rs. 3.50 per kilogram was imposed as atea promotional levy

• JKH realised capital gains through the sale of shares in AHPL and KHL

• JK Capital invested Rs. 502 million in ExpolankaHoldings Limited through a private sell down by itsexisting shareholders

• JK Capital – undertook many financial advisorymandates during the year, including mandatespertaining to the IPOs of Odel Limited, Free LankaCapital Holdings Limited and the private sell down of Expolanka Holdings Limited

• SGIT – undertook a few assignments on SAP relatedconsulting services for external clients, successfullycompleting a comprehensive implementation for amanufacturing and distribution client


• Being an agricultural commodity, weatherfluctuations have an impact on the yields

• The impending wage revision will have an impacton cost of production

• Global prices of food commodities which generallytend to have a high correlation, thus impacting teaprices

• General macro-economic conditions and equity marketscould have an impact on potential private equity styleinvestment opportunities for the Group

Outlook/action plans • TSF has embarked on an initiative servicing teasmallholders by knowledge transfer and financialsupport to re-plant with the objective of increasingproductivity and sustainability

• Continue to look for private equity style investmentopportunities, whereby JKH would have a portfolio of private equity investments


Plantation Services

Revenues of Plantation Services remained flat at Rs. 2.81 billion

[2009/10: Rs. 2.81 billion] due to the decline in tea prices,

although offset by an increase in volumes. Earnings before

interest and tax (EBIT) fell 9 per cent to Rs. 439 million [2009/10:

Rs. 482 million] on the back of a reduced contribution from TSF

due to lower margins and a reduction in the contribution to EBIT from the tea warehousing business. Although EBIT of JK PLC

increased, this increase was inadequate to compensate for the

drop in EBIT from the other segments.

Volumes in the tea industry increased during the year although

the national sales average (NSA) declined marginally from the

previous year’s high. The increased global output of tea in 2010

should however be viewed in conjunction with the shortfall of

approximately 70 million kilograms in the previous year. Between

June and November, the average price of tea was below the

levels of corresponding months of the previous year in line with

the fall in global prices of other food commodities. The increasingtea consumption from around the world, particularly India and

China is expected to positively impact prices which should

maintain its current levels. Given large domestic demand, the

Note – EBIT – earnings before interest and tax; AHPL – Asian Hotels & Properties; KHL – John Keells Hotels; IPO – initial public offering; SAP – System Analysis and Program Development; CTC - cut, tear and curl teas



quantum of tea exported from China and India is expected to be

relatively low, thus creating an opportunity for the tea industry in

Sri Lanka. The impending wage revision is expected to have anegative impact on the cost of production, although our broking

operations will remain unaffected unless overall volumes decline

due to other factors.

Other

The revenues of the other businesses are negligible in the context

of the Group as there are no significant operating companies. The

EBIT increased 21 per cent to Rs. 2.28 billion [2009/10: Rs. 1.88

billion] primarily due to the gain on the sale of shares of Asian

Hotels & Properties PLC (AHPL) and John Keells Hotels PLC

(KHL). Another significant contributor to EBIT was interest income,

which is treated as other income in the financial statements.

The investment in Central Hospital (Private) Limited (CHL) is held

as an associate company under the private equity arm of the

Group – John Keells Capital (JK Capital, a division of the holding

company). As expected, CHL recorded a negative EBIT during

the year since the hospital commenced operations during the

year. JK Capital also provides financial advisory, structuring and

capital raising solutions to external clients. The Group IT division

– SGIT – also provides consultancy services on SAP related

platforms leveraging on its knowledge in implementing and

maintaining the system for the JKH Group.


• ROCE of 19.4 per cent as against 16.9 per cent in the

previous year.

• EBIT margins increased to 87.1 per cent on account of the

capital gains on the sale of shares as discussed above.

39

(Rs. million) 2010/11 2009/10 Chg % 2008/09

Turnover* ,119 2,821 10.6 2,754

EBIT 2,716 2,359 15.1 3,628PBT 2,350 1,612 45.7 2,692

PAT 2,115 1,320 60.3 2,400

Total assets 15,085 14,081 7.1 16,466

Total equity 7,075 2,298 207.9 2,822

Total debt 7,025 10,133 (30.7) 12,595

Capital employed** 14,101 12,431 13.4 15,417


No. of employees 1,130 1,227 (7.9) 1,174

EBIT per Employee*** 2.4 1.9 25.0 3.1


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




With the country moving towards an unprecedented period of

development, active portfolio management will assist to identify and

invest in better performing sectors of the economy, while reducing

exposure to underperforming sectors. The JKH Group has followed

a strategy of actively managing and evaluating its business

portfolio. This has enabled the Group to focus on investment

strategies that have contributed towards the Group’s endeavours

to achieve a better balance of the portfolio of businesses and has

helped the Group consolidate its position as one of the premier

conglomerates in the country.

The process undertaken for this purpose is based on continuous

evaluation and review of the performance, potential and longer term

prospects of our industry groups, sectors and companies,

grounded on four filters -• ‘Financial filter’ – that has the JKH hurdle rate as its corner stone

• ‘Growth filter’ – which evaluates a business in terms of its

industry attractiveness

• ‘Strategic fit’ – that critiques the long term competitive

advantage of a business/industry by evaluating the strength of

competitive forces, specific industry/business risks, ability to

control value drivers and the competencies and critical success

factors already inherent in the Group company

• ‘Complexity filter’ – which considers factors such as senior

management time and the risk to brand, image and reputation

JKH’s hurdle rate (or required rate of return) is a function of the

weighted average cost of capital (WACC), derived from the Group’scost of equity, cost of debt, target leverage, tax rates and the value

creation premium required over and above the WACC. Strategic

business units are assessed for risk under headings such as

customer concentration, suppliers/JV partner dependence, risk of

international entrants, labour dependence, cyclicality, dependence

on the Sri Lankan economy and regulatory dependence. During

the year, considering the decline in interest rates and the outlook

of the long term interest rates, the Group revised its hurdle rates.

The new hurdle rates of 18 per cent for return on equity (ROE) and

15 per cent for return on capital employed (ROCE) are based on

current and future expectations. The rates have been derived

based on the methodology as discussed before.

The Transportation industry group recorded a strong performancein the financial year under review by achieving a 21.0 per cent

ROCE compared to 17.3 per cent achieved last year.

The Financial Services industry group achieved a ROCE of 20.5

per cent compared to 14.2 per cent recorded last year. All the three

businesses in the industry group namely Union Assurance, Nations

Trust Bank & John Keells Stock Brokers recorded a considerably

better EBIT compared to the previous year on the back of the

improving economic environment of the country and the surging

stock market.

The ROCE of the Consumer Foods & Retail industry group rose to

12.5 per cent compared to 9.9 per cent last year. The EBIT margin

of the industry group improved from 2.6 per cent to 3.7 per cent.

However, there was a significant increase in capital employed due

to the investments made for the outlet expansion of the Retail

sector and for the expansion of both the beverage and the frozen

confectionary product range. Ceylon Cold Stores also revalued its

land in Colombo and the resulting revaluation surplus contributedtowards increasing the capital employed of the industry group.

Although the Plantations Services sector achieved a ROCE of 34.8

per cent, this is marginally lower than the 37.9 per cent achieved

last year. The decrease in ROCE was mainly due to the decline of

the EBIT margin of Tea Smallholder Factories, which was affected

by higher raw material and production costs during the year.

The Property industry group achieved a ROCE of 12.3 per cent

compared to 6.7 per cent last year. The EBIT of the Property

Development sector increased due to the recognition of a higher

revenue contribution from ‘The Emperor’ apartment project, which

is nearing completion.

Buoyed by the growth in tourist arrivals to both Sri Lanka and the

Maldives, the Leisure industry group achieved a ROCE of 9.3 per

cent compared to 5.4 per cent last year. All sectors of the industry

group recorded noteworthy increases in EBIT. The hotels and

destination management sectors had increases in EBIT margins.

This was achieved despite several hotels being fully or partially

closed during the year for refurbishment. The City Hotels performed

exceptionally well which resulted in the ROCE of this sector

increasing from 4.3 percent to 10.8 per cent this year.

ROCE of the Information Technology industry group improved to

7.7 per cent compared to 1.1 per cent recorded last year. The EBIT

of the industry group increased from Rs. 16.0 million to Rs. 122.3

million due to better performance from the Office Automation sectorand the reduced losses from the BPO operations.

Given above is a graphical representation of the JKH portfolio

evaluation and the following page shows the portfolio movement.


PORTFOLIO MOVEMENT AND EVALUATION



Total number of shares in

issue as at 31/03/2011 629,692,367

Free Float 68.25%Stock Symbol JKH.N0000

Newswire Codes

Bloomberg JKH.SL

Dow Jones P.JKH

Reuters JKH.CM

The JKH Share

Continuing its growth momentum from last year, the Colombo

Stock Exchange (CSE) witnessed strong growth in the year under

review. The benchmark All Share Price Index (ASPI) recorded an

increase of 94 per cent while the Milanka Price Index (MPI)

recorded an increase of 61 per cent during the financial year

2010/11. The CSE was one of the best performing stock markets

globally in 2010 sustaining its performance from the previous year.

The market was driven by positive sentiment stemming from the

economic prospects for the country as well as the strong growth

in corporate earnings, albeit from a smaller base in 2009. The

market did witness some volatility and witnessed a slight

correction towards end December 2010, due to reduced foreign

interest and also some level of liquidity being pulled out of the

market due to fairly large private placements of some unlisted

companies and some initial public offerings.

The JKH share closed at Rs. 285.60 as at 31 March 2011 as

against Rs. 184.00 in the previous year – a growth of 55 per cent

during the year. The share traded between a high of Rs. 360.00

and a low of Rs. 177.00 in the year under review. The JKH share

underperformed against the ASPI whilst marginally

underperforming the MPI growth. In the previous year, the JKHshare grew by 193 per cent against a growth of 127 per cent in

the ASPI. During the year under review, the ASPI witnessed high

levels of volatility due to the sharp upward movement in some

illiquid counters, thus impacting the overall index.

The JKH share has continued to be resilient to the volatile trends

of the Colombo bourse which is reflected in the beta of 0.9 (the

beta was calculated on daily JKH share and market movements

as measured by the ASPI for the 5 year period from 1 April 2006

to 31 March 2011) for the current financial year. The JKH share

grew at a compound annual growth rate (CAGR) of 20.5 per cent

over the most recent five years, whilst the more liquid MPI grew

at a CAGR of 19 per cent. Within the same period, the ASPI grew

at a CAGR of 26 per cent. This is illustrated in the graph titled

‘JKH share performance vs ASPI and MPI’.

With most developed economies in the world still on the path of

recovery from the global financial crisis, the US and European

stock markets under performed their counterparts in Asia during

the financial year under review. Despite the comparatively lower

return from the Straits Times Index of Singapore (SGX’s STI), the

rest of the markets in the South East Asian region displayed

strong growth with the Jakarta Composite Index of Indonesia (JCI)

recording a growth of 30 per cent during the year ended 31 March

2011. Nevertheless, the attractiveness of the development

opportunities expected in Sri Lanka and the corresponding

earnings growth has resulted in the ASPI outperforming all themajor stock market indices including the Dow Jones Industry

Average (DJIA), FTSE 100, SENSEX Index of Mumbai, SGX’S STI

and the JCI in 2010/11 and over the last five years based on the

compound annual growth rate.

Issued Share Capital

The total number of shares in issue at the beginning of the

financial year was 619.5 million. During the financial year, 10.2

million shares were issued through the exercise of employee share

options (ESOPs), resulting in the number of shares in issue

increasing to 629.7 million by the year end. In addition to the

shares in issue, there are 22.3 million shares equivalent of

unexercised ESOPs as at 31 March 2011. These are eligible forimmediate exercise as at the date of this report.


SHARE INFORMATION



The balance of global depositary receipts (GDRs), in ordinary

share equivalents, decreased to 0.95 million as at the end of the

year due to conversions as against 0.98 million at the beginningof the year.

On 20 May 2011, the Board recommended for the consideration

and approval of the shareholders, at a General Meeting, that,

subject to the approval of the Colombo Stock Exchange, the

number of shares in issue be increased by way of a share sub-

division whereby three (3) existing shares will be sub-divided to

four (4).

Dividend

The dividend policy of JKH seeks to ensure a dividend payout

which correlates with the growth in profits, whilst ensuring that

the Company retains adequate funds to support investments,thereby facilitating the creation of sustainable shareholder value

in the short, medium and long term.

During the year, the Company declared, and paid, two interim

dividends of Rs. 1 per share. The Company also announced a

final dividend of Rs. 1 per share based on the profits of the

financial year 2010/11 for payment on 9 June 2011. Accordingly,

the dividend per share (DPS) in the current year remained at Rs.

3 per share.

The dividend payout ratio dropped to 32.2 per cent [2009/10:

39.3 per cent], primarily due to the increase in profits for the year

in comparison to last year. In absolute terms, the dividend paid

and payable out of 2010/11 profits will be Rs. 1.87 billion

[2009/10: Rs. 1.84 billion].

Market cap (Rs. Bn) 179.84 113.98 38.36

Enterprise value (Rs. Bn) 175.67 109.55 42.81

Market value added (Rs. Bn) 120.25 64.20 (7.14)

EV/EBITDA (times) 13.1 10.9 4.3

Diluted EPS (Rs.) 13.01 8.42 7.56

PER (diluted) 22.0 21.8 8.3

Price to book (times) .0 2.3 0.8

Price/cash earnings (times) 19.0 15.9 8.0

Dividend yield (%) .1 1.6 4.7

Dividend payout ratio (per cent) 32.2 39.3 42.0 TSR (%) 56.8 198.0 (44.7)

Earnings per share

The fully diluted earnings per share (EPS) for the period increased

54 per cent to Rs. 13.01 [2009/10: Rs. 8.42] as profit after taxattributable to the equity holders grew by 59 per cent. The items

affecting the bottom-line are discussed in the Management

Discussion & Analysis section of the Annual Report. The cash EPS

increased by 30 per cent to Rs.15.00 [2009/10: Rs. 11.54] in the

current year due to the increase in cash earnings of 33

per cent compared to last year.

Total shareholder return

The total shareholder return (TSR) of the share was 56.8 per cent

during the year, primarily owing to the appreciation of 55 per cent

in the JKH share price during the year. In comparison, the 1-year

treasury bill rate was at 9.47 per cent as at 01 April 2010.

Market capitalisation and enterprise value

Market capitalisation of the Company increased by 58 per cent

to Rs. 179.84 billion during the year [2009/10: Rs.113.98 billion].

The enterprise value as at 31 March 2011 increased 60 per cent

to Rs. 175.67 billion as a result of the increase in the market

capitalisation, offset by the reduction in debt levels across the

Group.

Price earnings ratio

The JKH share was trading at 22.0 times earnings as at 31 March

2011, almost similar to the 2009/10 trailing PER of 21.8. Although

earnings grew at a rapid pace of 59 per cent during the year,

appreciation of the JKH share by 55 per cent offset this impact.

As a result, the trailing PER of the JKH share remained in line with



Market information on ordinary shares of the Company

2010/11 Q4 Q3 Q2 Q1 2009/10

Share Information

High 360.00 301.00 360.00 330.00 207.00 188.00

Low 177.00 260.00 289.00 197.00 177.00 62.50

Close 285.60 285.60 298.40 329.50 205.00 184.00

Dividends paid (per share) .00 1.00 1.00 0.00 1.00 3.00

Trading Statistics

Number of transactions 27,107 4,489 10,010 7,654 4,954 36,367

Number of shares traded '000 221,701 19,799 66,286 69,882 65,734 296,176

% of total shares in issue 5.2 3.1 10.7 11.2 10.6 47.8

Value of all shares traded (Rs.million) 56,744 5,732 20,159 18,217 12,636 43,479

Average daily turnover (Rs.million) 237 97 330 289 226 182% of total market turnover 8.5 3.0 12.3 9.3 10.5 20.3

Market capitalisation (Rs. million) 179,840 179,840 185,485 204,806 126,968 113,983

% of total market capitalisation 7.4 7.4 8.7 8.9 8.4 9.4

Distribution of shareholders

31 March 2011 31 March 2010

Number of % Number of % Number of % Number of %

shareholders shares held shareholders shares held

Less than or equal to 1,000 5,791 60.1 1,636,699 0.3 4,893 58.5 1,261,545 0.2

1,001 to 10,000 2,632 27.3 9,445,792 1.5 2,317 27.7 8,371,031 1.3

10,001 to 100,000 922 9.6 26,676,841 4.2 882 10.6 25,170,515 4.1

100,001 to 1,000,000 215 2.2 69,682,337 11.1 187 2.2 65,538,729 10.6

Over 1,000,001 79 0.8 522,250,698 82.9 86 1.0 519,131,812 83.8Grand total 9,639 100.0 629,692,367 100.0 8,365 100.0 619,473,632 100.0

Composition of shareholders

31 March 2011 31 March 2010

Number of Number of % Number of Number of %

shareholders shares held shareholders shares held

Executive directors and spouses 4 8,452,015 1.3 4 7,723,529 1.2

Non executive directors and connected parties 1 4,136 0.0 1 4,136 0.0

Executives and connected parties 157 29,620,298 4.7 138 28,044,397 4.5

Public Resident

Institutions 694 149,983,231 23.8 532 126,431,935 20.4

Individuals 8,430 94,353,883 15.0 7,377 93,520,037 15.1

Public Non-Resident

Institutions 104 178,545,941 28.4 100 198,219,261 32.0Individuals 246 5,959,806 0.9 210 7,458,211 1.2

Global depositary reciepts 1 952,114 0.2 1 983,736 0.2

Shareholders holding more than 10% 2 161,820,943 25.7 2 157,088,390 25.4

Grand Total 9,639 629,692,367 100.0 8,365 619,473,632 100.0

SHARE INFORMATION

the previous year. The broad market PER of the CSE was 18.36

times as at the end of the year under review, while the PER for

JCI was 37.8 times (10/2010) and KLSE was 18 times (10/2010). The JKH share historically has always traded at a premium to the

market considering its free float and liquidity, coupled with the

consistent performance of the Company.

Price to book

As at 31 March 2011, the price to book ratio of the Group was

3.0 times [2009/10: 2.3 times]. The book value of the Group

increased by 20 per cent during the year under review.

Liquidity

During the year, 221.7 million shares changed hands, as against

the 296.2 million shares transacted in the previous year. The

average daily turnover of the JKH share was Rs. 237 million which

amounted to 8.5 per cent of the daily total market turnover.

Distribution and composition of shareholders

The total number of shareholders of JKH increased to 9,639 from

the 8,365 seen last year. Out of the total number of shareholders,

as at 31 March 2011, 68.3 per cent of the shares in issue were

held by the public, while 6.0 per cent of the shares were held by

the directors, executives and connected parties, and the balance

25.7 per cent by shareholders holding more than 10 per cent. In

terms of the domicility of shareholders, 60.2 per cent of shares

were held by residents and 39.8 per cent was held by non

residents. This compares to 44 per cent held by non residents at

the end of last year.



Twenty largest shareholders of the Company

31 March 2011 31 March 2010

Number % Number %of Shares of Shares

1 Mr S E Captain 96,918,843 15.4 92,186,290 14.9

2 Janus Overseas Fund 64,902,100 10.3 64,902,100 10.5

3 Employees Provident Fund 44,968,248 7.1 10,365,548 1.7

4 J P Morgan Clearing Corporation 28,317,277 4.5 - -

5 Paints & General Industries Limited 20,771,633 3.3 13,467,521 2.2

6 Deutsche Bank AG - London 18,603,279 3.0 16,331,000 2.6

7 Est. of Mr A A N De Fonseka 14,964,269 2.4 14,964,269 2.4

8 Aberdeen Global Asia Pacific Equity Fund 14,885,803 2.4 14,885,803 2.4

9 Arisaig India Fund Limited 14,431,575 2.3 14,431,575 2.3

10 Janus Aspen Series Overseas Portfolio 13,727,500 2.2 13,727,500 2.2

11 Sri Lanka Insurance Corporation Ltd - Life Fund 11,216,113 1.8 13,716,085 2.2

12 Rubber Investment Trust Limited A/C no.1 10,802,178 1.7 10,927,178 1.813 HSBC INTL NOM LTD-Bp2s London-Edinburgh Dragon Trust PLC 7,452,498 1.2 7,452,498 1.2

14 Ms L A Captain 7,381,489 1.2 7,433,789 1.2

15 Mr K Balendra 7,190,457 1.1 7,440,457 1.2

16 Aberdeen Asia Pacific Fund 6,805,672 1.1 6,805,672 1.1

17 Aberdeen Global Asian Smaller Companies Fund 5,727,113 0.9 7,102,113 1.1

18 Aberdeen Global Emerging Markets Smaller Companies Fund 5,141,364 0.8 - -

19 L V C Samarasinha 5,031,579 0.8 - -

20 Polypak Secco Ltd 4,871,075 0.8 4,871,075 0.8

Employee share option plan as at 31 March 2011

Date of Shares Expiry Option Shares* Exercised Lapsed/ Outstanding Current*

rant granted date grant adjusted cancelled price (Rs.)

price (Rs.)PLAN 3

Award 2 10.04.2006 6,645,575 09.04.2011 157.25 10,301,859 8,953,047 1,348,812 - 120.74

Award 3 28.05.2007 10,551,062 27.05.2012 146.00 10,551,062 1,606,493 1,137,970 7,806,599 146.00

PLAN 4

Award 1 25.03.2008 5,405,945 24.03.2013 120.00 5,405,945 894,575 233,350 4,278,020 120.00

PLAN 5

Award 1 17.12.2009 6,126,960 16.12.2014 160.25 6,126,960 551,337 19,460 5,556,163 160.25

PLAN 6

Award 1 09.12.2010 4,672,823 08.12.2015 292.00 4,672,823 9,800 3,200 4,659,823 292.00

Total 3,402,365 7,058,649 12,015,252 2,742,792 22,300,605

* Adjusted for bonus issues and rights issues

Directors' shareholding

1 March 11 31 March 10

S C Ratnayake ,434,928 3,403,909

A D Gunewardene ,279,992 3,903,830

J R F Peiris 737,095 415,790

E F G Amerasinghe 4,136 4,136

I Coomaraswamy Nil Nil

T Das Nil Nil

S Enderby Nil Nil

P D Rodrigo Nil Nil

S S Tiruchelvam Nil Nil

Options available under the

employee share option plan of John Keells Holdings PLC

S C Ratnayake ,658,609 1,778,099

A D Gunewardene ,451,308 1,554,882

J R F Peiris ,238,357 1,326,015

Employee share options**

Year ended 31 March Number of options exercised (million)

1997 0.02

1998 0.16

1999 0.27

2000 0.47

2001 0.02

2002 1.78

2003 2.30

2004 4.08

2005 1.53

2006 2.04

2007 3.672008 4.06

2009 0.86

2010 8.12

2011 10.23

** First exercised in FY1997



SHARE INFORMATION

Dividends since 1995/96

Year ended 31 March DPS Dividends

(Rs.) (Rs. ’000)1996 2.80 77,586

1997 3.00 92,050

1998 4.00 155,783

1999 4.00 151,343

2000 3.00 168,150

2001 2.00 353,128

2002 2.00 329,869

2003 2.00 342,203

2004 2.50 725,783

2005 3.00 1,027,497

2006 3.00 1,199,460

2007 3.00 1,412,306

2008 5.00 3,176,3022009 3.00 1,883,442

2010 3.00 1,843,642

2011 3.00 1,868,707

GDR history (in terms of ordinary shares, million)

Year ended 31 March Issued** Converted/ BalanceRepurchased

1995 - 0.21 4.291996 0.59 0.20 4.67

1997 0.27 2.80 2.14

1998 0.28 1.06 1.37

1999 - 0.75 0.63

2000 0.26 0.52 0.36

2001 0.72 0.23 0.85

2002 - 0.17 0.68

2003 - 0.16 0.52

2004 0.13 - 0.65

2005 0.06 - 0.71

2006 0.14 - 0.85

2007 0.12 - 0.97

2008 0.14 - 1.11

2009 1.11 0.12 0.99

2010 0.99 0.01 0.98

2011 0.98 0.03 0.95

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

of ordinary shares

Financial calendar 2010/11

Interim financial statements

Three months ended 30 June 2010 29 July 2010

Six months ended 30 September 2010 2 November 2010Nine months ended 31 December 2010 26 January 2011

First interim dividend paid on 1 December 2010

Second interim dividend paid on 16 March 2011

Final dividend proposed to be paid on 9 June 2011

Annual Report 30 May 2011

32nd Annual General Meeting 24 June 2011

2011/12

Interim financial statements

hree months ended on or before 28 July 2011

30 June 2011

Six months ended on or before 9 November 2011

30 September 2011

Nine months ended on or before 26 January 201231 December 2011

Annual Report 2011/12 on or before 5 June 2012

33rd Annual General Meeting 29 June 2012

Share capital since 1995/96

Year ended 31 March Number of shares

in issue (million)1996 28.00

1997 32.02

1998 40.21

1999 40.47

2000 61.18

2001 183.56

2002 185.35

2003 187.64

2004 300.08

2005 331.63

2006 400.00

2007 552.94

2008 635.992009 611.35

2010 619.47

2011 629.69

History of scrip issues and repurchases since 1995/96

Year ended 31 March Issue Basis Number of shares (million) Ex-date

1996 Bonus 1:7 3.50 20-Dec-95

1997 Bonus 1:7 4.00 20-Jan-97

1998 Bonus 1:4 8.02 9-Jan-98

2000 Bonus 1:5 8.09 15-Jun-99

2000 Bonus 1:4 12.14 5-Jan-00

2001 Bonus 2:1 122.36 27-Jul-00

2004 Bonus 1:4 46.94 10-Jun-03

2004 Private placement n/a 24.00 21-Oct-032004 Rights @ Rs. 75* 1:7 37.42 7-Nov-03

2005 Bonus 1:10 30.02 13-May-04

2006 Bonus 1:5 66.34 11-May-05

2007 Bonus 1:7 57.16 13-Jun-06

2007 Rights @ Rs. 140* 1:5 92.10 23-Jan-07

2007 Bonus 1:7 78.96 13-Mar-07

2009 Repurchase 1:25 25.50 11-Oct-08

* unadjusted prices



GOVERNANCE



Susantha Ratnayake

Chairman-CEO

Susantha Ratnayake was appointed asthe Chairman and CEO of John Keells

Holdings PLC in January 2006 and hasserved on the JKH Board since

1992/93. He is also the Chairman of many of the listed and un-listed

companies within the Group. He is acouncil member of the Employers’

Federation of Ceylon, serves on variousclusters of the National Council of

Economic Development (NCED) and isthe Vice Chairman of the Ceylon

Chamber of Commerce as well as theChairman of the Sri Lanka Tea Board.He has over 33 years of management

experience, all of which is within theJohn Keells Group.

Franklyn Amerasinghe

Appointed to the Board during 1999/00, Franklyn Amerasinghe is the former CEO and Director General of the

Employers’ Federation of Ceylon. He was thereafter attachedto the ILO as a senior specialist in the social dialogue sector

in charge of Employer’s Organisations in East Asia up toOctober 2002. A bachelor of law and a lawyer by profession,

he is currently a consultant and trainer in social dialogue,human resource management, corporate social responsibilityand industrial relations, both in Sri Lanka and abroad. He has

also authored books on a wide range of subjects andpublished papers in some international and local journals. Heis a founder trustee of the Association for Dialogue & Conflict

Resolution. He was also one of the founder directors of theSkills Development Fund.

Ronnie Peiris

Group Finance Director

Appointed to the John Keells Holdings PLC Boardduring 2002/03, Ronnie Peiris has overall responsibility

for the Group's Finance and Accounting including Taxation, the Information Technology function and Group

Initiatives. He was previously the Managing Director of Anglo American Corporation (Central Africa)

Limited in Zambia.

Ronnie has 40 years of finance and generalmanagement experience in Sri Lanka and abroad. He is

a Fellow of the Chartered Institute of Management Accountants, UK; Association of Chartered Certified

Accountants UK and the Society of CertifiedManagement Accountants, Sri Lanka and holds an MBA from the University of Cape Town, South Africa. He is a

member of the committee of the Ceylon Chamber of Commerce, Chairman of its Taxation Sub Committee

and also serves on its Economic, Fiscal and PolicyPlanning Sub Committee. He is the Vice President of the

Sri Lanka Institute of Directors.

Dr Indrajit Coomaraswamy

** Director

Dr Indrajit Coomaraswamy was appointed to the John KeellsHoldings PLC Board in February 2011.

Dr Coomaraswamy was an official in the Central Bank of SriLanka from 1974-1989. He worked in the Economic Research,Statistics and Bank Supervision Divisions. During this time hewas also seconded to the Ministry of Finance and Planning(1981-89).

He was employed by the Commonwealth Secretariat from1990-2008. During that time he held the positions, inter alia, of Director, Economic Affairs Division and Deputy-Director,Secretary-General's Office. He was subsequently Interim

Director, Social Transformation Programme Division,Commonwealth Secretariat (Jan-July 2010).

Dr Coomaraswamy completed his undergraduate degree atCambridge University and obtained his Doctorate at theUniversity of Sussex.

Ajit Gunewardene

Deputy Chairman

Ajit Gunewardene is the Deputy Chairmanof John Keells Holdings PLC and has beena member of their Board for over 18 years.He is a Director of many companies in theJohn Keells Group and is the Chairman of

Nations Trust Bank PLC and Union

Assurance PLC. He is a member of theboard of Nanco (Pvt) Ltd, a companyestablished for the development of

nanotechnology in Sri Lanka under theauspices of the Ministry of Science and Technology. He has also served as the

Chairman of the ColomboStock Exchange. Ajit has a degree in

Economics and bringsover 29 years of

management experience.



Tarun Das

** Director

Mr Das has spent his entire working career in industry associations, starting in November 1963with the predecessor body of Confederation of Indian Industry (CII) and was the DirectorGeneral and Chief Executive of CII from April 1967 to May 2004 and Chief Mentor from June2004 to October 2009.

He is Co-Chair of the Indo–US Strategic Dialogue (Track II) and of Indo-US-Japan Strategic

Dialogue (Track II). He is also a member of the India-Singapore Strategic Dialogue (Track II) andthe India-China Strategic Dialogue (Track II).

He is a Lifetime Trustee of The Aspen Inst itute, USA; Member, Board of Governors, East WestCentre, USA; Member, International Council, The Asia Society, USA; President, Aspen InstituteIndia; Managing Trustee, Indian Business Trust for HIV/AIDS; Vice President, World Wide Fund-India; Member of the Board of GIVE India Foundation; Member, Board of Trustees, PublicInterest Foundation; Member, Board of Governors, National Council of Applied EconomicResearch (NCAER).

He is a member of the Advisory Group for G-20, Ministry of Finance, Government of India. Heis also a member of the Expert Group set up by the Planning Commission on Government-Industry Consultations and member of the Expert Group to formulate a jobs plan for the Stateof J&K. Earlier, he chaired the Planning Commission Task Force on Skills Development.

He is non executive Chairman, Haldia Petrochemicals Ltd; Member of the Board of Directorsof West Bengal Industrial Development Corporation (WBIDC) and of John Keells Holdings PLC,Sri Lanka. He was a member of the Government-nominated Board of Satyam Computers in2009. He is also on the International Advisory Board of ACE Insurance, USA; Member, India Advisory Board of VOITH (Germany); JCB (UK).

* Senior Independent non executive ** Independent non executive

Steven Enderby

** Director

Appointed to the Board in 2005/06, Steven Enderby is currently based in

India where he is a partner in the leading emerging markets private equity

investor, Actis. His other directorships include SML Isuzu, Avtec, Tema

India, Halonix and Actis Advisers. Steven holds a BSc (Hons) in Economics

and Accounting from the Queens University of Belfast and is a member of the Chartered Institute of Management Accountants, UK.

Deshamanya Deva Rodrigo

* Director

Appointed to the Board in July 2006, Deva Rodrigo, a chartered accountant, had a career with theinternational accounting and consulting organisation PricewaterhouseCoopers, joining the firm inEast Africa in 1974 and serving in its London offices in 1980. He was a Founder Partner whenPricewaterhouseCoopers established its Sri Lankan firm in 1981, and held the position of SeniorPartner from 1992 to 30 June 2006, when he retired from the firm. He was the Chairman of theCeylon Chamber of Commerce from 2004 to 2006.

He has previously held public office as a director of People’s Bank and as a member of the Telecommunication Regulatory Commission. Deva was also a member of the Monetary Board of the Central Bank of Sri Lanka and a member of the National Council for Administration. He alsoserves as the Chairman Audit Committee and Non Executive Director of Ceylon Tobacco Co., PLCand Chevron Lubricants Lanka PLC.

Sithie Tiruchelvam

** Director

Appointed to the Board in January 2007, Sithie Tiruchelvam, is a lawyer of the Supreme Court

of Ceylon, and specialises in corporate law, intellectual property law and labour law. She has

obtained her LLB from the University of Ceylon in 1966, and was admitted to the Supreme

Court as an Advocate in 1968. She is a Founding Partner of the law firm Tiruchelvam

Associates. She has been listed as a leading lawyer in corporate and commercial matters byChamber Asia Pacific. She currently serves on the board of Central Corporate & Consultancy

Services (Pvt.) Limited and the Nadesan Centre for Human Rights through Law.



The Remuneration Committee met three times during the year.

The Committee interacted among themselves as well as with the

executive board members when the necessity arose. TheChairman also, from time to time, requested information from the

President in charge of Human Resources in order to facilitate the

work of the Committee.

A report from the Remuneration Committee continues to be a

standing agenda item at the quarterly board meetings. The

Chairman of the Committee reports any matters pertaining to the

Committee at each board meeting drawing attention to matters

where the Board consideration was required or where the Board

has to be updated. The Board was also kept advised of the work

of the Committee at times by electronic mail.

The Committee ensured that the board complied with the

Companies Act, particularly in relation to director remuneration

especially the requirements of section 216.

The ‘pay for performance’ scheme is carefully monitored and the

CEO briefs the Committee of the employee compensation and

how it compares with the market. The goal is for above average

performers to be at or above the 75th percentile of the market.

The executives have now realised that there is a balanced and

fair appraisal scheme. In general, the compensation scheme is

working admirably and producing the results which were

expected.

The Committee met to examine the performance of the Chief

Executive and his evaluation of the Executive Directors and

members of the Group Executive Committee (GEC). They wereevaluated on fixed and measurable criteria which had been

pre-agreed with them individually. The team performed well and

the results have been exceptional.

The Committee also met to consider a recommendation to the

Board in relation to a new employee share option plan ie. Plan 6,

and this was approved by the shareholders at an Extraordinary

General Meeting of the Company held on 6 December 2010.

In conclusion, I wish to thank my colleagues, Deshamanya Deva

Rodrigo and Mrs Sithie Tiruchelvam, for their valuable contribution

to the work of the committee and our secretary, Linda Starling.

Chairman

Remuneration Committee

20 May 2011

Members

S S Tiruchelvam, P D Rodrigo

COMMITTEE REPORTSREMUNERATION COMMITTEE REPORT

The Nominations Committee, as of 31 March 2011, consisted of

three independent directors and the Chairman-CEO of John

Keells Holdings PLC (JKH).

The mandate of the committee remains;-

• To recommend to the Board the process of selecting the

Chairman 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 once, with all

members in attendance.

The Committee continues to work closely with the Board in

reviewing, regularly, its skills needs based on the objectives and

strategies set forth for the Group for the coming years and other

emerging needs based on the dynamic local and global business

environments. Individual Directors also have the opportunity of

commenting on the skills needs of the Board when completing

an annual JKH Board evaluation.

During the year, the Committee recommended to the Board that

Dr. Indrajit Coomaraswamy be appointed to the Board as a Non

Executive Director. This recommendation was accepted by the

Board.

Tarun Das

Chairman

Nominations Committee

20 May 2011

Members

S Enderby, S S Tiruchelvam, S C Ratnayake

NOMINATIONS COMMITTEE REPORT



Role of the Committee

The responsibilities of the JKH Audit Committee flow from its

Charter approved and adopted by the Board. The terms of reference comply with and go beyond the requirements of the

Listing Rules of the Colombo Stock Exchange (CSE).

The Audit Committee has maintained its vigilance in exercising its

oversight role in respect of financial reporting, internal controls

and risk management.

The Committee has overall responsibility for recommending to the

Board, the financial statements for adoption and for reviewing the

Group’s financial reporting and accounting policies, including

formal announcements and trading statements relating to the

Company’s financial performance.

The Company’s management has the primary responsibility for

the financial statements, for maintaining effective internal control

over financial reporting, and for assessing the effectiveness of

such control systems. In fulfilling its oversight responsibilities over

financial reporting, the Committee reviewed the Company and

consolidated financial statements with the management,

examined the acceptability of the accounting principles; the

reasonableness of significant estimates and judgments, suitability

of assertions made and the adequacy of disclosures in the

financial statements.

It is also responsible for the relationship with the external auditors

and for assessing the role and effectiveness of the Company’s

Group Risk & Control Review (Group R&CR) Division.

The Committee reviews the Group’s procedures for detecting,

monitoring and managing the risk of fraud and compliance with

legal and regulatory requirements. The Committee keeps under

review the Group’s internal controls and systems for assessing

and mitigating financial and non-financial risks. It also reviews the

performance of the Company’s Group R&CR Division and the

reports of the independent outsourced internal audit firms

engaged to carry out the internal audits of Group entities.

The Committee has responsibility for recommending to the Board

the appointment of the external auditors and for reviewing the

results of the annual external audit. It also approves the audit feeand, on an annual basis, assesses the effectiveness and

independence of the external auditors. A resolution to reappoint

Ernst & Young, Chartered Accountants, as auditors for the

financial year ending 31 March 2012 and to authorise the

Directors to determine their remuneration will be proposed at the

next Annual General Meeting.

To maintain free and open communication between the

Committees, independent external auditors, the Group R&CR

Division and the outsourced internal audit firms performing the

JKH internal audit, the Committee held at least one closed door

meeting with the external auditors, with the outsourced internal

auditors and with the Group R&CR without the presence of any

executive directors and management, on whose stewardship theaudit firms and Group R&CR are required to report. It also had

more than one meeting with the management of the Company,

the external auditors and outsourced internal auditors to

determine that all parties are aware of their responsibilities, their

reports are considered and that risk management issues are

appropriately dealt with.

The key findings of the Audit Committee are communicated to

the Board of Directors, through formal minutes and an oral

presentation.

Composition of the Audit Committee

The Audit Committee consists exclusively of independent, non

executive directors. The committee continued to draw on the

expertise of members with backgrounds in finance, audit, law,

human resource management and regulatory institutions. In

keeping with the Guidelines for Best Practice on the ‘Role of

Auditors’ issued by the Securities and Exchange Commission of

Sri Lanka, the Chairman of the Committee is a Chartered

Accountant and former Senior Partner of PricewaterhouseCoopers, Sri Lanka. The Head of Group R&CR

serves as Secretary to the Audit Committee.

Meetings

Seven meetings of the committee were held during the year. The

Chief Executive Officer and the Chief Financial Officer, both

executive directors, together with the Group Financial Controller

attend most parts of these meetings by invitation. Other officials

of the Company attend meetings by invitation on a needs basis.

The external auditors and internal auditors are present at

meetings when matters pertaining to their functions come up for

consideration.

Report of the Committee’s activities

Appointment of Group lead / consolidation auditor

At the last Annual General Meeting held on 28 June 2010, the

shareholders approved the appointment of Ernst & Young as the

Lead/Consolidation Auditor of John Keells Group for the financial

year 2010/11. The Board, after evaluating proposals from nine

reputed audit firms in 2010, decided to retain Ernst & Young as

the Lead/Consolidation Auditor for the next three financial years,

subject to shareholder approval each year.

Oversight of Company and consolidated financials a emen s

The Committee reviewed with the independent external auditorswho are responsible for expressing an opinion on the truth and

fairness of the audited financial statements and their conformity

with Sri Lanka Accounting Standards (SLAS), their judgments as

to the quality, not just the acceptability of the accounting policies

of the Company and the Group and such other matters as are

required to be discussed with the Committee in compliance with

Sri Lanka Auditing Standard 260 - Communication of Audit

Matters with those charged with Governance.

The external auditors have direct communication channels with

the Audit Committee and have kept the committee informed of

matters of significance that arose during the course of their limited

review of financial statements for the nine months ended 31

December 2010 and financial year end audit.

The Audit Committee met with the external auditors on 13th and

19th May 2011 to review and approve the year end financial

statements before presentation to the Board for adoption.

AUDIT COMMITTEE REPORT

51



Quarterly compliance confirmations

The Committee obtained quarterly declarations from the industry

groups and sectors confirming financial, operational andsustainability reporting compliance with established Group

policies to determine that the policies and procedures provide

reasonable assurance that all relevant laws, rules and regulations

have been complied with.

Convergence to Sri Lanka Financial Reporting Standards(SLFRS) and Lanka Accounting Standards (LKAS)

The Committee also discussed the Company’s and Group’s

readiness for the pending convergence of the Sri Lanka

Accounting Standards (SLAS) to be in line with International

Financial Reporting Standards (IFRS) to be adopted locally from

January 2012 as Sri Lanka Financial Reporting Standards

(SLFRS) and LKAS and noted that the Group is in the process of carrying out, in consultation with external auditors, a gap analysis

to identify areas requiring action. John Keells Group IFRS

implementation teams have been appointed to migrate to SLFRS

and LKAS before the deadline. The Audit Committee is apprised

of on an ongoing basis, the progress of this project and the

implications of adopting SLFRS and LKAS.

Independent external auditors

The Committee held a special closed door meeting with the

Group lead/consolidation external auditors without the presence

of any executive directors or officials of the Group, to ensure that

no limitations had been placed on their examination and reporting

and that they received full co-operation from the management

and unhindered access to records and personnel.

Independence of external auditors

Both the Board and the external auditors have for many years had

safeguards in place to avoid the possibility that the auditors’

objectivity and independence could be compromised. The

Committee reviewed the external auditors’ independence and the

internal rules and guidelines followed by them to maintain their

independence. The Committee also ensured that any non audit

services provided by the auditors did not impair their

independence.

Our policy in respect of services provided by the external auditors

is as follows:

• Audit related services – the external auditors are invited to

provide services which, in their position as auditors, they must

or are best placed to undertake. These include reviewing

compliance with terms and conditions relating to borrowings,

shareholders’ and other circulars, other regulatory reports and

work in respect of acquisitions and disposals.

• Tax consulting – in cases where they are best suited, we use

the external auditors. In addition, the Committee has obtained

the services of outside independent tax and legal consultants

for other significant tax consulting work.

• General consulting – in recognition of public concern over the

effect of consulting services on auditors’ independence, ourpolicy is that the external auditors are not invited to tender for

general consulting work that could compromise their

independence and objectivity.

The split between audit and non-audit fees for the year ended

31March 2011 appears in the Notes to the accounts.

Operational business assurance

In September 2010, the Group R&CR Division, recommended to

the Audit Committee to shift the focus of Internal Audits from mere

financial reviews to a more operational business assurance review.

The new operating model has since been effectively implemented

across the Group.

Risk and Control Review – internal audit

The Audit Committee is assisted by the Group R&CR Division,

which manages the internal audit assignments of the Group.

Internal audits are outsourced to leading audit firms in line with

an agreed annual audit plan.

During the year, the Audit Committee reviewed the performance

of the internal audit function carried out by Group R&CR Division

and appointed outsourced internal auditors, the findings of the

audits completed during the year and the Division’s resource

requirements. The Committee also approved the internal audit

plan for the year ending 31 March 2012.

The internal audit, in addition to evaluating the efficacy of internal

controls, reviews the actions taken to control and mitigate

operational and business risks and monitors and reports on the

compliance of Group companies with statutory requirements and

Group accounting and operational policies.

The internal audit independently reviews the risks and control

processes operated by management and provides an overview

of the risk profile of the businesses reviewed. It carries out

independent audits in accordance with an internal audit plan

which is agreed with the Audit Committee and respective

business units before the start of the financial year. Group R&CR

also conducts special reviews as requested either by the Audit

Committee or by the management.

The plan provides a high degree of financial and geographical

coverage and devotes significant effort to the review of the risk

management framework surrounding the major business risks.

Internal audit reports include recommendations to improveinternal controls together with agreed management action plans

to resolve the issues raised. Group R&CR follows up the

implementation of recommendations and reports progress to

senior management and the Audit Committee.

The effectiveness of the Group R&CR function is reviewed and

discussed on an annual basis with the Head of Group R&CR.

Subsidiary company Audit Committees

Subsidiaries quoted on the CSE have their own audit committees

comprising non executive directors. Such audit committees are

independent of the Audit Committee of John Keells Holdings PLC

but maintain the standards agreed with John Keells Holdings PLC Audit Committee and make available to the JKH Audit Committee

the minutes of their meetings.

COMMITTEE REPORTS

AUDIT COMMITTEE REPORT



Audit Committee effectiveness self assessment

In January 2011, the Audit Committee undertook a self-

assessment of its own performance by each member of theCommittee, executive directors who attend Audit Committee

meetings, the external auditors and the outsourced internal

auditors. The results of the self-assessment have been presented

to the Board.

Conclusion

The Audit Committee wishes to acknowledge with thanks the

services rendered by the Group auditors, Ernst & Young and their

efforts to meet JKH requirements and expectations.

The contribution made by Mr Franklyn Amerasinghe, Mr Steven

Enderby and Ms Sithie Thiruchelvam as members of the

Committee is acknowledged with grateful appreciation. Theirprofessional expertise was invaluable in making the Audit

Committee function effective and useful.

Deva Rodrigo

Chairman

Audit Committee

20 May 2011

Members

F Amerasinghe, S Enderby, S S Thiruchelvam

53



Dilani AlagaratnamPresident

Dilani Alagaratnam, President, Group HR, Legal & Secretarial hasoverall responsibility for the Group Human Resources, Legal,

Secretarial and Corporate Communication functions of John

Keells Holdings PLC.

A Lawyer by profession, she has been with the Group for 19 years

and is a law graduate and a holder of a Masters Degree in Law.

She is the Chairperson of the Steering Committee on Human

Resources and Education of the Ceylon Chamber of Commerce,

member of the National Labour Advisory Committee and a

member of the Technical Advisory Committee of the Sri Lanka

Institute of Directors.

Krishan BalendraPresident

Krishan Balendra has responsibility for the Retail sector, John

Keells Stock Brokers, John Keells Capital and the Corporate

Finance & Strategy function of the Group. He started his

professional career at UBS Warburg, Hong Kong, in investment

banking, focusing primarily on equity capital markets. After a four

year stint in Hong Kong, he continued his career in corporate

finance at Aitken Spence & Co. PLC, 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 DavidPresident

Romesh David has been with the Group for 31 years during which

he has served in the Leisure, Domestic & International Trade, IT

and Transportation sectors of the Group. He is a member of the

National Council for Economic Development (Transport Cluster),

a member of the Economic Infrastructure sub-committee of the

Ceylon Chamber of Commerce and is currently a Vice Chairman

of the Chartered Institute of Logistics and Transport – Sri Lanka

chapter. He serves on the Executive Committee of the Council for

Business with Britain, the Advisory Council of the Sri Lanka Freight

Forwarders Association and the Executive Committee of the Indo-

Lanka Chamber of Commerce. He is a past Chairman of the Sri

Lanka Freight Forwarders’ Association and the Council for

Business with Britain.

Sanjeeva FernandoPresident

Sanjeeva Fernando has overall responsibility for the IT Industrygroup which includes Software operations, the Office Automation

business and the Group’s BPO businesses spanning across India,

Sri Lanka, Canada and the USA. He has over 24 years of

management experience, 17 of which have been with the John

Keells Group in diverse businesses and capacities. Joining the

Group in 1993 to head the Group’s Printing and Packaging

businesses he went on to take over Lanka Marine Services as its

CEO in 2002 at the time of its acquisition from the Government.

Prior to his current assignment he was the Sector Head of the

Transportation sector. A printer by profession, Sanjeeva qualified

from the London School of Printing and is a member of the

London Institute of Printing.

Jitendra GunaratnePresident

Jitendra Gunaratne is responsible for the Consumer Foods sector.

Prior to his appointment as President, he overlooked the

Plantations and Retail sectors. His 30 years of management

experience in the Group also covers Leisure and Property.

Jitendra holds a diploma in marketing and serves as a member

of the Advisory Committee on Consumer Affairs of the Ceylon

Chamber of Commerce.

Suresh RajendraPresident

Suresh Rajendra has overall responsibility for the Property industrygroup. He has over 19 years of experience in the fields of finance,

travel and tourism, and business development acquired both in

Sri Lanka and overseas. Prior to joining the Group, he was the

head of commercial and business development for NRMA

Motoring & Services in Sydney, Australia. Suresh is a Fellow of

the Chartered Institute of Management Accountants, UK.

Note : The Group Executive Committee is currently a nine member team

including the three executive directors and the above members.

GROUP EXECUTIVE COMMITTEE



Sujiva DewarajaExecutive Vice President

Sujiva Dewaraja heads the IT sector. Since passing out as aChartered Management Accountant in London in 1980, he

worked in corporate strategy at a diversified conglomerate and in

MIS for a Middle Eastern government. Moving to the USA in 1987,

he read for an MBA from the University of Pittsburgh,

Pennsylvania, earning a place on the Dean’s List. Since then, he

has held varied general management positions. He is a Fellow of

CIMA, UK and an Associate member of the Chartered Institute of

Bankers, London. Sujiva was founder Secretary of the Consumer

Electronics and Domestic Appliances Association and the Sri

Lanka Netherlands Association. He served on the committee of

the Ceylon Chamber of Commerce in 1997/98 and on the

ministerial advisory panel on ICT export since 2007. He was a

founding board member of the Lanka Software Foundation aswell as SLASSCOM (Sri Lanka Association of Software and

Services Co’s), of which he is currently Vice President.

Roshanie Jayasundera-MoraesExecutive Vice President

Roshanie Jayasundera-Moraes, Head of the Retail sector, has

been with the Group since 1991. She was with the Airlines sector

of the Transportation industry group, before being appointed as

head of the Group’s supermarket business in November 2003. A

holder of a diploma in marketing from the Chartered Institute of

Marketing (CIM), UK, Roshanie also holds an MBA from the Post-

Graduate Institute of Management of the University of Sri

Jayawardenepura, Sri Lanka.

Sanjeewa JayaweeraExecutive Vice President

Sanjeewa Jayaweera, Chief Financial Officer for the Consumer

Foods & Retail industry group, has been with the Group for 18

years, during which he served in the Resort Hotels sector of the

Leisure industry group and was the Sector Financial Controller for

Resort Hotels from 1998 to 2005. Prior to joining the Group,

Sanjeewa was based in the United Kingdom and worked for

several years as an audit manager.

Jayantissa KehelpannalaExecutive Vice President

Jayantissa Kehelpannala, Sector Head Resort Hotels, has over

29 years of experience in the leisure industry both in hoteliering

and inbound tourism. He is currently Chairman of the Hotels and

Tourism Employers Group of the Employers’ Federation of Ceylon

and represents them at the EFC Council Meetings and is a

member of the Wages Board for the Hotel & Catering trade. In

addition he is also the Vice President of The Tourist Hotels

Association of Sri Lanka (THASL) and represents the Association

at the Committee of Ceylon Chamber of Commerce.

He is a member of the Tourism Cluster of NCED (National Council

for Economic Development) under the purview of the Ministry of

Finance and Planning.

Vasantha LeelanandaExecutive Vice President

Vasantha Leelananda is Head of the Destination Managementsector and counts over 32 years in the leisure industry with the

John Keells Group. He served as the Managing Director of

Walkers Tours from 1997 to 2005 and heads the travel operations

in Sri Lanka and India. Vasantha holds an MBA from the University

of Leicester. He is a past President of the Sri Lanka Association

of Inbound Tour Operators (SLAITO), a board member of the Sri

Lanka Convention Bureau from 2003 to 2007 and served as a

board member of the Sri Lanka Institute of Tourism and Hotel

Management from 2007 to 2010. He is a board member of the

Responsible Tourism Partnership which is affiliated to the Travel

Foundation UK.

Chandrika PereraExecutive Vice President

Chandrika Perera was appointed as the Chief Financial Officer of

the Leisure industry group in March 2005. She has been with the

Group for 28 years. She held the position of Group Financial

Controller from 1999 to 2005. A Fellow of the Institute of

Chartered Accountants of Sri Lanka and the Society of Certified

Management Accountants, Sri Lanka, she holds an MBA (finance)

from the University of Southern Queensland. Chandrika serves as

a committee member of the Accounting Standards committee of

ICASL, and is a member of the Steering Committee on Income

Taxes.

Mano RajakariarExecutive Vice President

Mano Rajakariar, has been the Group Financial Controller since

April 2005. He has been with the Group for over 15 years in many

capacities including serving as the Sector Financial Controller of

the Plantations sector and heading the Shared Services

implementation within the Group. He has over 23 years of

experience in audit, finance and general management acquired

both in Sri Lanka and overseas. Mano is a Fellow member of the

Institute of Chartered Accountants of Sri Lanka (ICASL) and the

Chartered Institute of Management Accountants, UK. He currently

serves as a committee member of the Urgent Issues Task Force

(UITF) and of the financial reporting faculty of the ICASL.

Waruna RajapakseExecutive Vice President

Waruna Rajapakse, Head of New Business Development and

Group Initiatives, has over 24 years of experience in Sri Lanka and

in the UK, primarily in management consultancy and project

finance. Prior to joining the Group in 2002, he worked for the

Government at the Bureau of Infrastructure Investment,

Informatics International Ltd (UK) and at Ernst & Young. Waruna

is a Fellow member of the Chartered Institute of Management

Accountants, UK, and an Associate member of the Institute of

Chartered Accountants of Sri Lanka. He also holds an MBA from

City University Cass Business School, London, UK. He is a

member of the infrastructure steering committee of the Ceylon

Chamber of Commerce and a member of the Sri Lanka Board of the Chartered Institute of Management Accountants (CIMA) of UK

where he is also a member of the Technical and Employer

Relations Committees.

GROUP OPERATING COMMITTEE

55



Lallith RamanayakeExecutive Vice President

Lallith Ramanayake, Head of the Plantation Services sector andhead of the CSR initiative of JKH, has been with the Group for 39

years. He has also served as the Head of the Transportation

sector during the period from 2007 to 2009. He is a member of

the Chartered Institute of Marketing, UK with the chartered

marketer status and holds an MBA from the Postgraduate

Institute of Management, University of Sri Jayewardenepura.

Lallith has been the Chairman of the Colombo Brokers’

Association, a director of the Sri Lanka Tea Board, Deputy

Chairman of the Tea Association of Sri Lanka, and a member of

the plantation/tea cluster of the National Council for Economic

Development, where he chaired the sub committee which

developed the national 10 year plan for the tea industry. He has

served on the executive committee of the Ceylon Chamber of Commerce.

Sunimal SenanayakeExecutive Vice President

Sunimal Senanayake, Head of the Maldivian Resorts Sector, has

over 30 years of experience in the Leisure industry, both in hotels

and inbound tourism. He served as the Managing Director of

Walkers Tours Limited from 1991 – 1997. He is a past president

of the Sri Lanka Association of Inbound Tour Operators (SLAITO)

and has held many positions in travel trade related associations

and committees. He has also been a member of the Tourist

Hotels Classification Committee and a member of the Advisory

Board of the Sri Lanka Institute of Tourism & Hotel Management.

Ramesh ShanmuganathanExecutive Vice President

Ramesh Shanmuganathan is the Group’s Chief Information Officer

and member of the Group Management Committee for the

Information Technology industry group and has over 18 years of

experience in the ICT industry both in Sri Lanka and the USA, with

the last 11 years in C-level management. Prior to this, he has

served in the Group’s IT sector as the CEO of Keells Business

Systems Limited since 2001 and Head of Strategy/New Business

Initiatives of John Keells Computer Services Ltd since 2004 until

he assumed duties as the Group’s CIO. Ramesh is a Hayes-

Fulbright Scholar and holds to his credit a MSc (information

technology & computer science) with phi kappa phi honours from

Rochester Institute of Technology, MBA (general) from

Postgraduate Institute of Management, University of SriJayewardenepura, BSc.Eng. (electronics & telecommunications)

with first class honours from University of Moratuwa. He is a

chartered engineer, chartered IT professional and a Fellow of the

British Computer Society. He has active memberships in several

other professional institutions and is a visiting faculty member for

several post-graduate programmes. He is also the Chair of the

SLASSCOM CIO Council.

Devika WeerasingheExecutive Vice President

Devika Weerasinghe, Chief Financial Officer of the Transportation

industry group previously held the position of Sector Financial

Controller of the Transportation sector. She also served as theSector Financial Controller of the Airlines SBU of the

Transportation sector during the period 1998-2004. An Associate

member of the Chartered Institute of Management Accountants-

UK, Devika also holds a bachelors degree in Business

Administration, from the University of Sri Jayawardenepura.

Suran WijesingheExecutive Vice President

Suran Wijesinghe, joined the Group in January 2004 as the Sector

Financial Controller of the Financial Services industry group and

was appointed as the Chief Financial Officer for the same industry

group in July 2010. He has over 30 years of experience in the

fields of audit, financial and general management, which has been

acquired while serving in organisations both locally and overseas.

Suran is a Fellow member of both the Institute of Chartered

Accountants of Sri Lanka (ICASL) and the Chartered Institute of

Management Accountants of UK. He currently serves as a

committee member of the Urgent Issues Task Force (UITF) of the

ICASL.

Note: The Group Operating Committee is currently a 22 member team

consisting of the Group Executive Committee and the above members.

GROUP OPERATINGCOMMITTEE



JKH is committed to the highest standards of business integrity,

ethical values and professionalism in all its activities towards

rewarding all its stakeholders with greater creation of value, year-

on-year.

This philosophy has been institutionalised at all levels in the Group

through a strong set of corporate values and the written Code of

Conduct as given above, that all employees, senior management

and the Board of Directors are required to follow in the

performance of their official duties and in other situations thatcould affect the Group's image. The behaviors of JKH staff at

executive and above level, particularly the senior management are

monitored regularly including through an annual 360° feedback.

All the Group's recognition schemes insist, as a minimum, that all

nominees have lived the JKH values.

The Group's values are found in the ‘About Us’ section of the

Annual Report and are/have been constantly referred to by the

Chairman-CEO, Presidents, Sector Heads and Business Unit

Heads during employee, agent and other key stakeholder

engagement. The Group believes that the main source of its

competitive advantage is the trust that the stakeholders have

continued to place on the core values underlying its corporate

activities.

The Chairman of the Board affirms that there has not been any

material violation of any of the provisions of the aforementioned

Code of Conduct. In the instances where violations did take place,

or were alleged to have taken place, they were investigated and

handled through the Company’s well established procedures

which, among others, include direct and confidential access to

an independent, external ombudsperson.

The JKH corporate governance philosophy practiced is in full

compliance with the following and where necessary, any

deviations as allowed by the relevant rules and regulations have

been explained.• Companies Act of 2007

• Listing Rules of the Colombo Stock Exchange (CSE) and

subsequent revisions up to 1 April 2011

• The recommendations of the Combined Code of 2010 to the

extent that they are practicable in the context of the nature of

our diverse businesses and their risk profiles

• All provisions of the Code of Governance of the Institute of

Chartered Accountants of Sri Lanka.

JKH corporate governance framework

The framework expects the Board of Directors to:

• Act in the best interest of the Company and its stakeholders

in fulfilling its stewardship obligations

• Facilitate the optimisation of shareholder wealth-creation on a

sustainable basis while safeguarding the rights of multiple

stakeholders

• Ensure that no one person has unfettered powers of decision

making

• Recognise that the methods employed to achieve goals areas important as the goals themselves

• Maintain strong governance practices which present strong

commercial advantages especially through a lowering of cost

of capital as a result of the strengthened stakeholder

confidence, particularly the confidence of the investors, both

institutional and individual

• Opt, when practical, for early adoption of best practices

• Encourage proactive discussions with the relevant regulatory

bodies to facilitate the implementation of matters of

governance and other business reforms in Sri Lanka and other

jurisdictions where the Group has major business interests

• Make business decisions and resource allocations, in anefficient and timely manner, within a framework that ensures

transparent and ethical dealings which are compliant with the

laws of the country and the standards of governance our

stakeholders expect of us.

THE BOARD OF DIRECTORS

Board responsibilities and decision rights

The Board of Directors is accountable to the shareholders for the

governance of the Company. All directors share a responsibility

in ensuring the highest standards of disclosure and reporting,

ethics and integrity across the Group. Powers specifically

reserved for the Board include –

• Providing direction and guidance to the Company in theformulation of its strategies with emphasis on the medium and

long term in the pursuance of its operational and financial goals

• Approving annual budgets and strategic plans

• Reviewing HR processes with emphasis on top management

succession planning

• Appointing and reviewing the performance of the

Chairman-CEO

• Monitoring systems of governance and compliance

• Overseeing systems of internal control and risk management

• Determining any changes to the discretions/authorities

delegated from the Board to the executive levels

• Approving major acquisitions and disposals and capitalexpenditure

• Approving any changes to constitutional documents

• Approving the issue of JKH equity/debt securities

CORPORATE GOVERNANCE

57

J C uct

• Allegiance to the Company andthe Group

• Compliance with rules and regulationsapplying in the territories that the

Group operates in• Conduct of business in an ethical

manner at all times and in keeping withacceptable business practices

• Exercise of professionalism andintegrity

in all business and ‘public’

personal transactions



Board composition

As at 31 March 2011, the Board consists of 9 directors – 3

executive directors and 6 non executive independent directors. As at the last Annual General Meeting (AGM) of JKH, held on 28

June 2010, the Board consisted of 8 directors.

Board induction, supply of information and externalprofessional advice

Newly appointed non executive directors are apprised of:

• values and culture

• the operations of the Group and its strategies

• operating model

• policies, governance framework and processes

• responsibilities as a director in terms of prevailing legislation

• the Code of Conduct demanded by the Company.

All directors are fully briefed on important developments in the

various business activities of the Group. The directors have

access to:

• information as is necessary to carry out their duties and

responsibilities effectively and efficiently

• information updates from management on topical matters,

new regulations and best practices as relevant to the Group's

businesses

• external and internal auditors

• experts and other external professional advisory services

• the services of the company secretaries whose appointment

and/or removal is the responsibility of the Board• periodic performance reports

• senior managers under a structured arrangement

The Board seeks independent professional advice when and

where necessary. During the year under review, professional

advice was sought on various matters including:

• Impacts on JKH businesses arising out of current and future

economic, geo-political shifts

• A Group wide stakeholder engagement to meet the

requirements of the Global Reporting Initiative

• Employee satisfaction survey and employee compensation

and benefit survey to ensure that JKH is “more than just a

workplace”

• Legal, tax and accounting aspects, particularly where

independent external advice was deemed necessary in

ensuring the integrity of the subject decision

• Market surveys, architectural and engineering advisory

services as necessary for business operations

• Actuarial valuation of retirement benefits and valuation of

property including that of investment property

Non executive/independent directors and the board balance

• Collectively, the non executive directors bring a range of value

adding domestic and international experience, and expertise,

in specialised functions

• The Company is conscious of the need to maintain anappropriate mix of skills and experience on the board and to

refresh progressively its composition over time in line with

needs

The presence of the Senior Independent Director ensures that

governance within the Board is preserved and stakeholder

concerns are addressed

Report of the Senior Independent Director

This is the first report that is being furnished to shareholders and other stakeholders from the Senior Independent Director, a post

which was created in 2009. The purpose of this position is to ensure that there is a possible avenue for review of the CEO’s role and the effectiveness of the Board and especially its independent directors.

The Company appointed an Ombudsman in the year 2010 and the objective was to enable an independent person to examine complaints from employees in relation to the manner in which the personnel of the Company carry out their functions with particular emphasis on adherence to the Group’s Code of Conduct. This includes the work of the Group Executive Committee, the Executive Directors and the CEO. The function is independent of the disciplinary processes of the Company and the interaction of the Ombudsman has been direct with the Senior Independent

Director, the CEO and the auditors as well. The external auditors annually query the Ombudsman in relation to the issues investigated by him. There have been no frauds reported. The Ombudsman reports that he is satisfied that the employees who have made complaints to him have had their complaints adequately dealt with. The system appears to be working well and the Board is satisfied that the Company is well governed and the employees are acting in a responsible manner in the best interests of the Company.

The independent directors have adequate opportunity to interact as well as express any matters of concern to them. The independent directors continue to have their annual meeting exclusively where they evaluate their performance and what they

see as areas where they could contribute more. This is followed with a meeting with the CEO and the issues brought up in 2009 were adequately addressed by the Board in the current year.There have been two strategy sessions in which the independent directors actively participated. They have had the highest


t e n or e t

The terms of reference of the role of SeniorIndependent Director (SID) include:

• Meeting with the other non executive directors,without the presence of the Chairman-CEO, on at

least an annual basis and addressing any concernswith the Chairman-CEO or the Board as appropriate

• Acting as the point of contact for stakeholders withconcerns which have failed to be resolved

through the normal channels

• Acting as the point of contact for stakeholderswith concerns over the executive directors

• Acting as an alternative point of contactto the Chairman-CEO for

executive directors



consideration paid to their requests for information and are happy to report that the Board functions in a transparent and responsible

manner in safeguarding the interests of all stakeholders.

I have pleasure in declaring that the Company takes note of best practice in relation to governance and is eager to change whenever better ways of governance are advocated.

Franklyn AmerasingheSenior Independent Director

20 May 2011

Independent directors

Independence of the directors has been determined in

accordance with CSE Listing Rules and the 6 independent nonexecutive members have submitted signed confirmations of their

independence.

59

Non Executive/Independent Share Management Material Employed by Family member, Continously

Director (NED/ID) holding 1 /Director 2 business the company a director served for nine

relationship 3 or CEO 5 years 6

F Amerasinghe

I Coomaraswamy

T Das

S Enderby

D Rodrigo

S Tiruchelvam

• Compliant • Compliant with explanation

Definitions Explanation1 Shareholding carrying not less than 10 per cent of voting rights None of the individual EDs or NED/IDs shareholding exceeds 1 per cent

2 Director of another company* None of the NED/IDs are directors of another related partycompany as defined

3 Income/non cash benefit equivalent to 20 per cent of the NED/ID income/cash benefits are less than 20 per cent of individualdirector's income director income

4 Two years immediately preceding appointment as director None of the NED/IDs are employed or have been employed at JKH

5 Close family member who is a director or CEO No family members of any ED or NED/IDs is a director/CEO of arelated party company

6 Has served on the board continuously for a period exceeding nine years See note below

Note: All directors make a formal declaration of all their interests on an annual basis. Based on such declarations and notwithstanding that Franklyn Amerasinghe and Tarun Das have completed 9 consecutive years, the Board considers them 'independent' given their objective and unbiased approachto matters of the Board.

* Other companies in which a majority of the other directors of the listed company, are employed, or are directors or have a significant shareholding orhave a material business relationship

Conflicts of interest and independence

Each director has a continuing responsibility to determine whether he or she has a potential or actual conflict of interest arising from

external associations, interests in material matters and personal relationships which may influence his judgment. Such potential conflicts

are reviewed by the Board from time to time.

Details of companies in which board members hold board or board committee membership are available with the Company for inspection

by shareholders on request.



Time commitment of the Board of Directors

Every member of the board has dedicated

adequate time and effort in discharging their

duties as a JKH director. Allowing for non

executive director involvement in various board

committees and time spent by them in

considering various matters that requirediscussion and decision in between the formal

board meetings, the Company estimates that

non executive directors devoted around a

minimum 30 full time equivalent days each to the

Group during the year.

Board of Directors delegation of authority

The Board has delegated some of its functions

to board committees while retaining final

decision rights pertaining to matters under the

purview of these committees.

The Board has, subject to pre-defined limits,delegated its executive authority to the

Chairman-CEO who exercises this authority

through the Group Executive Committee (GEC),

which he heads and to which he provides

leadership and direction.

Board meetings and attendance

The Board of JKH meets once every quarter, in the least.


Attendance of Board meetings 2 April 22 July 25 October 4 January 20 January 20 May

2010 2010 2010 2011 2011 2011

S Ratnayake - Chairman-CEO √ √ √ √ √ √ A Gunewardene - Deputy Chairman √ √ √ √ √ √R Peiris √ √ √ √ √ √F Amerasinghe √ √ √ √ √ √I Coomaraswamy* N/A N/A N/A N/A N/A √ T Das - - -√ √ -

S Enderby √ √ - √ √ -

D Rodrigo √ √ √ √ √ √S Tiruchelvam √ √ - √ √ √

*Appointed on 7th February 2011

Note : Any absences are excused in advance and duly minuted. The absent members are immediately briefed on the discussions and actions taken

during the meeting.

Prior to

appointmentOnce

appointed During boardmeetings

Nominees are requested to makeknown their various interests thatcould potentially conflict with theinterest of the Company

Once appointed to the Board, alldirectors are expected to inform theboard and obtain board clearance priorto

• Accepting any new position

• Engaging in any transaction thatcould create a potential conflict of interest

All NEDs are required to notify the

Chairman-CEO of changes to theircurrent board representations orinterests

Directors who have an interest in amatter under discussion;

• Excuse themselves fromdeliberations on the subject matter

• Abstain from voting on the subjectmatter (abstentions, whereapplicable, from board decisions,are duly minuted)



Role of the Chairman-CEO

The Chairman-CEO had structured direct discussions with the

non executive directors during the year, subsequent to meetingsconvened by the SID with the NEDs. Issues arising from these

discussion have been actioned in consultation with the effected

persons.

Appropriateness of combining roles of Chairman and CEO

The appropriateness of combining the roles of Chairman and CEO

has been discussed regularly and in the minimum, once per year.

On the basis of such discussions and the ‘pros’ and ‘cons’ that

emerged from a review by the Boston Consulting Group, the

Board deems that combining the two roles is more appropriate

for the Group at present, in meeting stakeholder objectives in a

conglomerate setting.

As the head of the Group Executive Committee (GEC), the

Chairman-CEO provides the overall direction and policy/execution

framework for the board's decisions via this structure. Experiencehas proved that this structure has enabled him to effectively

balance his role as the Chairman of the board and the CEO of the

Company/Group.

An overview of the delegation of board functions and the

delegation of the executive authority is graphically illustrated

below.

Board of Directors delegation of authority



Board appointments and Nominations Committee

Board appointments follow a formal and transparent procedure.

Dr I Coomaraswamy was appointed to the Board as at 7th

February 2011 and an announcement was made to the CSE as

required.

The detailed Nominations Committee report is given in the Board

Committee reports section of the Annual Report.

Board tenure, retirement and re-election

• The EDs are appointed and recommended for re-election until

their prescribed company retirement age

• The NEDs are appointed for a term of three years, ideally up

to a maximum of three terms each, subject 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 by

rotation on the basis prescribed in the articles of the Company.

A director retiring by rotation, or a director who is subject to

election by shareholders at the first AGM after theirappointment are eligible for re-election by a shareholder

resolution at the AGM.

The resolutions for the AGM to be held on 24 June cover the re-

election of:

• Mr Tarun Das who retires in line with Section 210 of the

Companies Act 2007, upon reaching the age of 70

• Mr E F G Amerasinghe and Mr S Enderby who retire in terms

of Article 84 of the Articles of Association of the Company

• Dr I Coomaraswamy, who retires in terms of Article 91 of the

Articles of Association of the Company.

Board evaluation The Board continued with its annual board performance appraisal

in 2010/11. It is a formalised process of self appraisal, whereby

each member assesses, on an anonymous basis, the

performance of the Board under the headings of:

• role clarity and effective discharge of responsibilities (in relation

to the responsibilities highlighted earlier in this report)

• people mix and structures

• systems and procedures

• quality of participation

• board image.

The scoring, and open comments, were collated by the SID and

the results were analysed to give the Board an indication of its

effectiveness as well as areas that required addressing and/or

strengthening. Despite the original anonymity of the remarks, the

open and frank discussions that follow, including some directors

identifying themselves as the person making the remark, reflects

the keenness of the Board to make themselves more effective.

The evaluations for this year revealed that whilst areas previously

identified as weak had strengthened, there were others which

could be further improved.

Chairman-CEO’s appraisal

The Remuneration Committee appraises the performance of theChairman-CEO on the basis of pre-agreed objectives for the

Group set in consultation with the board as follows.

Group’s Group’s performance Soft aspects

performance

√ against plan √ against peers √ company image

• revenue growth √ customer orientation

• market share √ human resource

• profit growth management

• earnings per share √ societal trust

REMUNERATION

The remuneration policy for all levels at the Group and the

remuneration of the executive directors and the GEC are reviewed

and approved by the Remuneration Committee on an annual

basis.


Board committee meetings and attendance

As illustrated above, the Board has delegated some of its functions to board committees while retaining final decision rights pertaining

to matters under the purview of these committees. The committees meet during the financial year as required, chaired by an independentdirector and a summary of meetings attended is as follows:

Member attendance at committee meetings Nominations Remuneration Audit

Committee Committee Committeemeetings meetings meetings

HEA A HEA A HEA A

S Ratnayake - Chairman-CEO 1 1

F Amerasinghe - Chairman Remuneration Committee 3 3 7 7

T Das - Chairman Nominations Committee 1 1

S Enderby 1 1 7 7

D Rodrigo - Chairman Audit Committee 3 3 7 7

S Tiruchelvam 1 1 3 2 7 5

By InvitationChairman-CEO 7 7

Group Finance Director 7 7

HEA - Meetings held and eligible to attend

A - Attended



Board remuneration

Make-up of remuneration for executive directors

The remuneration of the Chairman-CEO and the executivedirectors is determined as per the remuneration principles of the

Group. At this higher level, the benchmark weightage between

individual and organisation performances in establishing

compensation is 20:80.

The remuneration of executive directors has a significant element

which is variable, such variability being linked to the peer adjusted

consolidated Group bottom-line and expected returns on

shareholder funds.

The remuneration of EDs in 2010/11 compared to that in 2009/10

shows a higher variable pay component reflecting the actual

performance of the Group against the targets set.

The executive directors, like other eligible employees, have

received employee share options based on role responsibility and

actual performance. The number of options so awarded was

recommended to the Board by the Remuneration Committee.

Such options were awarded at the closing market price on the

date of award. The last ESOP award was made on 9 December

2010.

The share options made available to each of the executive

directors for the year have been disclosed in the Annual Report

of the Board of Directors 2010/11. Disclosures have been also

been made to the Colombo Stock Exchange as and when

executive directors exercised their options or sold their shares.

Make-up of remuneration of non executive directors

Compensation of NEDs is determined in reference to fees paid to

other NEDs of comparable companies. The fees received by

NEDs are determined by the Board and reviewed annually.

NEDs receive a fee for devoting time and expertise for the benefit

of the Group in their capacity as Director and additional fees for

either chairing or being a member of a committee. NEDs do not

receive any performance/incentive payments and are not eligible

to participate in any of the Group's pension plans or share option

plans. Non executive fees are not time bound or defined by a

maximum/minimum number of hours committed to the Group perannum, and hence are not subject to additional/lower fees for

additional/lesser time devoted.

Value of total remuneration (cash) Rs. million

Executive directors (Company) 74.6 million

Non executive directors (Company) 11.9 million

‘Cash’ compensation highlighted above comprises salary,

pension contributions, short term incentive plans and other non-

share based benefits. In accordance with the guidelines of the

Securities & Exchange Commission of Sri Lanka, we have

disclosed the aggregate remuneration paid to executive and non

executive directors during the financial year 2010/11.

None of the executive directors or members of the GEC are

involved in influencing or determining their own compensation

packages.

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 provident fund and

employees trust fund contributions), unless otherwise qualified.

The detailed Remuneration Committee report is given in the Board

Committee reports section of the Annual Report. The key

principles of the JKH compensation policy are discussed in detail

in the Stakeholder-Employees at JKH section of the Annual

Report.

GROUP OPERATING STRUCTURE, SUCCESSIONPLANNING AND ACCOUNTABILITY

Organisational and operational control

The operating model currently in place clearly defines authority

limits, responsibilities and accountability facilitating operating

expediency, healthy debate and decision freedom. The delegation

of executive authority through a committee structure, as depicted

earlier, ensures that no one operating body or individual has

unfettered powers of decision making, and allows consensus to

as great an extent as practical. The Chairman-CEO, the

presidents, sector/functional heads and profit centre/function

managers, are accountable for the total Group, industry/ functions

groups, the sectors/functions and the business units/sub-

functions respectively.

The independence of the finance function is preserved through a

structure that has executive vice presidents-finance and sector

financial controllers having a direct functional reporting line to the

Group Finance Director in a setting that allows them to contribute

and add value to operations via their direct administrative

reporting links with industry group presidents and sector heads.

Group Executive Committee (GEC) and succession planning

As at 31 March 2011, the 9 member GEC consisted of the

Chairman-CEO, the Deputy Chairman, the Group Finance

Director and the presidents of each industry group.

The succession planning process by the GEC is well tested where

proactively a pool of potential successors for a number of keypositions are identified and earmarked for specific training and

development as is necessary.

63



A key feature of the JKH operating model is that the GEC

members, particularly the presidents, not only play a mentoring

role, but are totally accountable for the businesses and functionsunder them.

Group Operating Committee (GOC)

As at 31 March 2011, the 22 member GOC consisted of the

Chairman-CEO, the Deputy Chairman, the Group FinanceDirector, the presidents and the executive vice presidents.

The GOC provides a platform to share learning on issues that

cross industry groups, sectors, business units and functions. It is

also the forum to discuss Group strategy, Group initiatives and

Group best practices. Its main purpose is to act as a glue binding

the various businesses within the Group towards identifying and

extracting Group synergies in implementing them.

Group Management Committee (GMC) and other committeesand succession planning

The other key operating committees are the GMCs, the Sector

Committees and the Management Committees that focus on:• strategy

• performance monitoring

• career management and succession planning of employees

below assistant vice president level

• risk management and

• Group initiatives

for and at industry group, sector, strategic business unit and

business unit levels respectively.

Each industry group and key functions have GMCs, sector and

management committees as appropriate. Business and functionunits are encouraged to take responsibility and accountability to

the lowest possible level via suitably structured committees and

teams in a management by objectives setting.

The agendas of these committees are carefully structured to avoid

duplication of effort and ensure that discussions and debate are

complementary both in terms of a bottom-up and top-down flowof accountabilities and information. As stated earlier, the

responsibility and accountability lie with the Chairman-CEO, the

presidents, the sector/functional heads and the profit

centre/function managers as applicable.

The introduction of peer adjusted organisational ratings in

2007/08 in determining pay for performance has resulted in the

search by business units, sectors and industry groups for

productivity enhancements, process improvements and cost

efficiencies within a framework of better teamwork.

Operations planning, decision rights and monitoring

Responsibility for monitoring and achieving plans as well as

ensuring compliance with Group policies and guidelines rests with

the Presidents, Sector Heads, and the Chief Executive Officers of

each Group company and heads of functions at the corporate

centre at the business unit and function levels.

At the GMC level and above, the focus is more on headline

financial and non-financial indicators, strategic priorities, risk

management, use of IT as a tool of competitive advantage, new

business development, continuous process improvements and

human resource management.

Monitoring of financial data:

• Actual financials are compared against the original plan and/or

the reforecast on a monthly basis at GMC, Sector Committee,Management Committee and Departmental Committee levels

• Actual financials are reviewed at least quarterly by the GEC

• The presidents and executive vice presidents, the CEOs of

business units and managers of functions are able to view

online, the information relevant to their areas of responsibility

• The Chairman-CEO and the GEC are able to view key financial

information for all Group companies on a real time basis via

the Group ERP system

INVESTMENT APPRAISAL AND DECISION MAKINGPROCESS

Over the years, the Group has maintained a process of investment appraisal and investment decision which ensures the

involvement of all the relevant persons. In this manner, several

views, opinions and advice are obtained prior to the making of

the decision. JKH experience is that a holistic and well debated

view of the commercial viability and potential of any project

including operational, financial, funding, risk and tax implications

has most of the time culminated in a good result. All investment

decisions are made through a committee structure where no one

individual has unfettered decision making powers in investment

decisions.

A summary of the investment process is given as follows-

Project origination

A project could originate from an operating committee such as

the GEC, GOC, GMC etc, a BU, the Group's New Business

Development (NBD) or Corporate Finance (CF) functions or

alternatively a public advertisement, Request for Proposal (RFP)

or a call for an Expressions of Interest.




Feasibility study

If there is interest in principle, the president under whom the

project falls or a GEC appointed committee will engage the CF orNBD functions to work with other relevant persons in the Group

in preparing a detailed feasibility report covering key business

areas such as -

• industry overview and trends

• the potential operating and financial performance of the project

• key assumptions and sensitivities

• SWOT analysis

• HR and IT considerations

• funding costs and optimum structuring of the transaction

among others

• A comprehensive study of the tax regime that applies to the

project in order to determine tax incentives available as well as

to propose format of incorporation.

Review by the GEC

Following discussion at a GMC where applicable, the feasibility

report is then discussed by the GEC and, if found to meet the

Group's strategic and financial objectives will forward the report

to the Board (if the investment is beyond the authority limits of the

GEC) for approval in principle to proceed to detailed due diligence

and negotiation stage.

Performance of a due diligence

• Once approval in principle is obtained, the multi-disciplinedproject team will proceed to the next phase of investigation

which would focus on detailed operational, commercial,

financial and legal due diligence

• Discussions will also commence with regulatory and licensing

authorities, financial institutions and possible partners as

relevant and necessary. Social and environmental impacts will

also be considered in ensuring the sustainability of the

business and the communities touched by it

• Where the transaction involves the transfer or lease of land,

title searches would be conducted for both private and public

land. In the case of public land, every step would be taken to

ensure compliance with the rules and regulations. As

appropriate, written authority and approvals will be obtained• Where the project is part of a privatisation, the entire process

will be conducted in line with the directives of the relevant

administrative authority as communicated through Expressions

of Interest, RFPs, pre-bid meetings and official approvals and

correspondence

• Where necessary, the GEC and/or the Board will appoint a

person to lead the discussions with the relevant authorities on

behalf of the Company and in most instances this would be

the president of the subject industry group.

Final approval by the Board

Subject to the project satisfying all the criteria as highlighted

before, the final approval to proceed will be given by the Board.

As is apparent from the foregoing, all investment decisions are

made through a committee structure and no one individual has

unfettered decision making powers.

AUDIT FUNCTION, FINANCIAL REPORTING & COMPLIANCEAND GOING CONCERN

Integrity of systems processes and internal control The Board has taken necessary steps to ensure the integrity of

the Group's accounting and financial reporting systems and

internal control systems remain effective via the review and

monitoring of such systems on a periodic basis. What follows is

a brief description of some of the key systems.

Internal compliance

A quarterly self certification programme requires the chief financial

officers of industry groups, heads of finance of sectors and

finance managers of operating units to confirm compliance with

financial standards and regulations. The CEOs of business units

are required to confirm operational compliance with statutory and

other regulations and key control procedures, and also identifyany significant deviations from the expected norms.

Audit Committee

The Audit Committee report highlighting the key areas reviewed

during the financial year 2010/11 is found in the Committee

Report section of the Annual Report.

External auditors and independence

• Ernst & Young are the external auditors of the holding

company and many other Group companies and also audit

the consolidated financial statements.

• The individual Group companies employ KPMG Ford, Rhodes,

Thornton & Co, Pricewaterhouse Coopers, Deloitte and

Touché, India and Luthra and Luthra, India.

The audits have been distributed in a manner that gives adequate

coverage to the Group auditor. In addition to the normal audit

services, Ernst and Young and the other external auditors, also

provided certain non-audit services to the Group. However, the

lead/consolidator auditor would not engage in any services which

are in the restricted category as defined by the CSE for external

auditors. All such services have been provided with the full

knowledge of the respective audit committees and are assessed

to ensure that there is no compromise of external auditor

independence. The Board has agreed that, such non-audit

services should not exceed the value of the total audit feescharged by the subject auditor within the relevant geographic

territory. The external auditors also provide a certificate of

independence on an annual basis.

The audit and non-audit fees paid by the Company and Group to

its auditors are separately classified in the Notes to the Financial

Statements of the Annual Report.

Internal auditors

Care is taken to ensure that the internal audit function in Group

companies is not outsourced to the external auditor of that

company in a further attempt to ensure external auditor

independence.

The Auditors' report on the financial statements of the Company

for the year under review is found in the Financial Information

section of the Annual Report.

65



System of internal control

The Board has, through the involvement of the Group Risk and

Control Review function, taken steps to obtain assurance thatsystems designed to safeguard the Company's assets, maintain

proper accounting records and provide management information,

are in place and are functioning according to expectations. The

risk review programme covering the internal audit of the whole

Group is outsourced and the reports arising out of such audits

are, in the first instance, considered and discussed at the

business/ functional unit levels and after review by the sector head

and the president of the industry group are forwarded to the

relevant audit committee on a regular basis. Further, the audit

committees also assess the effectiveness of the risk review

process and systems of internal control on a regular basis. Follow-

ups on internal audits are done on a structured basis.

Risk management

The GEC has adopted a Group-wide risk management

programme, wider sustainability development, to identify, evaluate

and manage significant Group risks and stress-test for various

risk scenarios. The programme ensures that a multitude of risks,

arising as a result of the Group's diverse operations, are effectively

managed in creating and preserving shareholder and other

stakeholder wealth. The detailed Risk Management report of the

Annual Report describes the process of risk management as

adopted by the Group and the key risks to the achievement of

the Group's strategic business objectives.

Going concern, financial reporting and disclosure

The directors are satisfied that the Company has sufficientresources to continue in operation for the foreseeable future. In

the unlikely event that the net assets of the Company fall below a

half of shareholders funds, shareholders would be notified and an

extraordinary resolution passed on the proposed way forward.

The going concern principle has been adopted in preparing the

financial statements. All statutory and material declarations are

highlighted in the Annual Report of the Board of Directors in the

Annual Report. Financial statements are prepared in accordance

with the Sri Lanka Accounting Standards (SLAS), including all the

new standards introduced during the subject year, and

International Accounting Standards (IAS), as applicable.

Information in the financial statements of the Annual Report are

supplemented by a detailed ‘Management Discussion and

Analysis’ which explains to shareholders the strategic,

operational, investment and risk related aspects of the Company

that have translated into the reported financial performance and

are likely to influence future results.

The Statement of Directors' Responsibilities in relation to financial

reporting is given in the Financial Information section of the Annual

Report. The directors' interests in contracts of the Company are

addressed in the Annual Report of the Board of Directors.

The directors have taken all reasonable steps in ensuring the

accuracy and timeliness of published information and inpresenting an honest and balanced assessment of results in the

quarterly and annual financial statements. As discussed in the

shareholder relations section of this note, all price sensitive

information has been made known to the Colombo Stock

Exchange, shareholders and the press in a timely manner and in

keeping with the regulations.

International Financial Reporting Standards (IFRS)

The Group has a committee comprising of financial personnel

from within the Group working on the implementation of IFRS as

per the guidelines set by the ICASL. As per the given requirements

by the ICASL, IFRS is to be implemented by the start of the

2012/2013 financial year and JKH is in line to meet this

requirement.

Securities trading policy

The Group's securities trading policy prohibits all employees and

agents engaged by JKH who are aware of unpublished price

sensitive information from trading in JKH shares or the shares of

other companies in which the Group has a present businessinterest. The Board, GEC, GOC as well as certain identified

employees in senior executive roles who are privy to JKH's results

prior to their availability to the public are prohibited from trading

during periods leading up to the release of quarterly and annual

results, new investments, particularly mergers and acquisitions,

announcements of scrip issues and dividend payments.

Compliance

The Board, through the Group Legal division, the Group Finance

division and its other operating structures, strives to ensure that

the Company and all of its subsidiaries and associates comply

with the laws and regulations of the countries they operate in.

The Board of Directors has also taken all reasonable steps in

ensuring that all financial statements are prepared in accordance

with the Sri Lanka Accounting Standards and the requirements

of the Colombo Stock Exchange and other applicable authorities.

The Sri Lanka Accounting Standards, as set by the Institute of

Chartered Accountants of Sri Lanka, are those, which govern the

preparation of the financial statements. The International

Accounting Standard is used in the rare instance where a Sri

Lanka Accounting Standard does not exist. The Board is aware

of the growing importance of the disclosure of critical accounting

policies as a part of good governance and opine that there are

no instances where the use of such concept would have a

material impact on the Company's and the Group's financial

performance.

The Group has made every effort to comply with the requirements

of the Companies Act of 2007 and the new CSE Listing Rules as

revised in 2011.

Major transactions

All material and price sensitive information about the Company is

promptly communicated to the Colombo Stock Exchange, where

the shares of the Company are listed, and released to the press

and shareholders. The Group also publishes three months ended,

six months ended and nine months ended interim reports. The

interim and annual reports, contain a Chairman's message which

explains, at a high level, the performance, background and

rationale for all major transactions.




STAKEHOLDER COMMUNICATIONS

The JKH Board believes in maintaining open-door policies for its

employees and key stakeholders and this is promoted at all levelsof the Group.

Employee relations

The HR units are designed in a manner that enables high

accessibility by any employee to every level of management.

Constant dialogue and facilitation are also maintained, relating to

work-related issues as well as matters pertaining to general

interest that could affect employees and their families. The Group

has young fora that meet with the Chairman, Deputy Chairman

and the Group Finance Director in an informal setting to discuss

issues of hard and soft matters relating to the Group. The Group

also has skip level meetings where an employee can discuss

matters of concern with superiors who are at a level higher thantheir own immediate supervisor in an open but confidential

environment. In addition, the Group has a whistle blower policy

in place and an Ombudsperson who an employee or a group of

employees can complain to, of alleged violations of the published

Code of Conduct if an alleged violation has not been addressed

satisfactorily using the available/existing procedures and

processes. Each of these processes are described in detail in the

Stakeholder-Employees at JKH section of the Annual Report.

Constructive use of AGM

Shareholders have the opportunity at the JKH AGM, to put

forward questions to the board and to the Chairman-CEO of JKHand the chairmen of the various committees to have better

familiarity with the Group’s business and operational workings.

The contents of this Annual Report will enable existing and

prospective stakeholders to make better informed decisions in

their dealings with the Company.

In general, all steps are taken to facilitate the exercise of

shareholder rights at AGMs, including the receipt of notice of the

AGM and related documents within the specified period, voting

for the election of new directors, new long term incentive schemes

or any other issue of materiality that requires a shareholder

resolution.

Dialogue with shareholders The Company has a well-developed investor relations programme

to address the information needs of investment institutions and

analysts regarding the Company, its strategy, performance and

competitive position. Given the wide geographic distribution of

the Company's current and potential shareholders, this

programme includes regular roadshows to Asia Pacific, Europe

and the USA conducted by the Deputy Chairman and the Head

of Investor Relations. Matters discussed, and issues raised, at

these meetings are brought to the attention of the GEC and/or

the board, as appropriate, and addressed.

The Company, through its Investor Relations division maintains

an active dialogue with shareholders, potential investors,

investment banks, stock brokers and other interested parties. Anyconcerns raised by a shareholder are addressed promptly at the

department level and are forwarded, when necessary, to the GEC

for consideration and advice. Analysts reports are circulated

among the GEC, as and when available, and its contents

debated.

The SID is available to meet and or discuss with shareholders

regarding any concerns/conflicts that arise during the course of

the financial year. In the current year, there were instances where

the SID had such correspondence with major shareholders.

Other stakeholders: Corporate social responsibility andsustainability

The Group recognises that it exists not only to maximise long term

shareholder value but also to look after the rights and appropriate

claims of many non-shareholder groups such as employees,

consumers, clients, suppliers, lenders, environmentalists, host

communities and governments. The John Keells Foundation, the

vehicle used by the Group in developing and implementing the

Group's involvement in 'the community' has geared itself to

ensure that the social programmes of the Group are consistent

with the principles of sustainable development.

JKH released its Sustainability Report which achieved the

‘application level check’ of B+ of the GRI requirements in line with

GRI-G3 guidelines for the current financial year ending 31 March

2011. Further details regarding corporate sustainability at JKHcan be found in the separately enclosed Sustainability Report.

THE FUTURE

JKH is committed to conducting its affairs with integrity, efficiency

and fairness to all stakeholders. Our approach to governance is

of introspection, critical review, continued benchmarking and

improvement. This, we believe, is not a choice as much as it is

essential, as the global investor witnesses a change in the manner

in which investments are structured and evaluated. As we seek

to remain a preferred choice for investment, our key areas of focus

will remain as follows-

• Creating robust operating structures that are able to evolve to

face the challenges of our strategic plans and continuousreinvention of our portfolio

• Maintaining sound internal controls and a robust framework of

risk management and mitigation

• Developing the depth and reach of our external stakeholder

relationships, improving transparency and efficiency in

information flows and promoting partnership and mutual

understanding between management and external

stakeholders

• Taking a ‘closer look’ at the internal processes, benchmarking

against international best practices and adopting those that

provide for a sustainable value addition to the Group and its

stakeholders.

67



CORPORATE GOVERNANCE CHECK LIST



More than just a workplace – an equal opportunity employer

The John Keells Group considers its employees as its greatest

asset. In recognition of the same, policies, processes andsystems are in place to ensure effective recruitment, development

and retention as the Group is committed to hiring, developing and

promoting individuals who possess the required competencies,

skills and experience in carrying out their duties and have the

potential for growth.

The Group provides a safe, secure and conducive environment

for its employees, allows freedom of association and collective

bargaining, prohibits child labour, forced or compulsory labour

and any discrimination based on gender, race or religion, and

promotes workplaces which are free from physical, verbal or

sexual harassment.

At JKH, employee relations are designed to enable, and facilitate,

high accessibility by all employees to every level of management.

Informal and formal dialogue on matters relating to work, as well

as of general interest, are encouraged. The several channels of

communication which have been established for varying purposes

include the following:

• Practice of an 'open door' policy by management

• Feedback in the form of 360 degree evaluations for

employees at assistant vice president and above

• Continuous feedback on the Company and its management

from different perspectives by holding regular skip levelmeetings at assistant manager and above levels

Innovative ideas

• Availability of an online forum to forward new suggestions for

business opportunities

• Facilitation of a knowledge sharing blog and the existence of

a ‘bright idea’ channel

Grievance process

• Availability of a direct email address to the Chairman for

employees to bring to his notice any transgression of Group

values when other established avenues have not yielded

results• Availability of an ‘independent’ Ombudsperson for employees

to meet if they fail to obtain satisfactory results via established

channels in matters relating to Group values and sexual

harassment

• Practice of exit interviews for all employees at executive level

and above where all such reports are forwarded to the

respective Presidents and Executive Vice Presidents for

comment. Comments are also discussed by the Group

Executive Committee

The strength of the JKH family

The total staffing of JKH for the year is at 11,389. Given below is

the functional level spread given as a percentage of total staff.

The spread between JKH staff in Sri Lanka and overseas is given

below:

JKH staffing Sri Lanka vs overseas*

Sri Lanka Overseas

Transportation 522 50

Leisure 3,873 586

Property 99 0

CF&R 3,029 0

Financial Services 1,121 0

IT 942 37

Other 1,129 1

Total 10,715 674

* Excludes employees of associate companies

Pay for performance

At JKH, the employees are rewarded with a customised ‘pay forperformance’ scheme based on the following:

• Manager and above level: Performance is measured annually

on well defined individual and organisation objectives and

metrics which reflect, and are positively correlated to, the

company's objectives, thereby aligning employee,

management and stakeholder interests

• Assistant manager and executive level: individual performance

rating only.

The rationale for the exclusion of organisational rating at assistant

manager and executive levels was that individuals at those levels

had little direct influence on the bottom line of their organisations.Organisational ratings are determined using the annual plan as

the yardstick with adjustments made, as relevant, for the

organisation’s performance relative to its peers

The rating system which was introduced in 2006/07 has led to

increased productivity and better performance, greater employee

recognition and, consequently, reward and the alignment of

employee, management and stakeholder interests

The pay for performance system has, as its bedrock, the

performance management system (PMS) and the detailed

remuneration surveys which the Group conducts on a regular

basis. A comprehensive review of the PMS was made during the

year with a view to determining whether the PMS lead to

employee behaviour in line with what was expected when it was

introduced. Any shortcomings identified were addressed.

STAKEHOLDER-EMPLOYEES AT JKH

69



Additionally, the Group also engages in ongoing reviews of

remuneration obtained via the participation in other corporate

surveys which are relevant to the Group. In 2010/11, the Groupalso conducted a climate survey titled ‘Great Place to Work’

(GPTW) during the year to better understand the varying needs

of the staff. The GPTW survey benchmarked the Group against

the top 25 companies in India and the Fortune 100 companies in

employee satisfaction aspects including credibility, management

competency and employee engagement.

Key principles of the compensation policy

The Group believes in a Compensation Policy based on equal pay

for equal roles, irrespective of gender.

The key principles underlying the Group's remuneration policy

are-

• All Assistant Vice President (AVP) and above roles are banded

by an independent third party on the basis of the relative

worth of jobs, thereby enabling internal equity

• Fixed compensation is set at competitive levels to enable the

recruitment and the retention of high calibre executives in the

identified career levels/job bands - using the median, 65th

percentile and 75th percentile of the best comparator set of

companies (from Sri Lanka and the region, where relevant) as

a guide

• Compensation, comprising of fixed (base) payments, short

term incentives and long term incentives are based on ‘pay

for performance’ as described earlier

• The more senior the level of management, the higher the

proportion of the incentive component, and thereby lower the

proportion of the fixed (base) component in the total target

compensation

• As the decision influencing capability of a role increases, the

individual performance holds lesser weightage than the

organisational performance in determining total compensation

and incentives

• Long term incentives have, up to now, taken the form of

Employee Share Options (ESOP). They have been offered to

employees, in defined career levels, based on pre-determined

criteria which are uniformly applied across the eligible levels.

Such options are offered at market prices prevailing on thedate of the offer. The last ESOP award was made on 9

December 2010

• All remuneration policies are ultimately based on

considerations of affordability and sustainability

• Clear communication, and the transparency, of current and

proposed policies are deemed a must

The process mentioned above is reviewed regularly for any

shortcomings and steps are taken to address any issues

identified.

Employee involvement and empowerment

Top management and other senior staff are mandated to involve,as appropriate, all levels of staff in formulating goals, strategies

and plans. Decision rights are defined for each level in order to

inculcate a sense of ownership, reduce bureaucracy and speed-

up the decision-making. Annual and five year plans are formulated

on a bottom-up basis using futuristic scenarios developed by theGEC and GMCs and macro economic factors developed by the

corporate centre.

Employee communication

Whilst great strides have been taken in improving both the formal

and informal communication within the Group, it is yet to take the

form, and be in the extent, that is desired. The importance of

communication, top-down, bottom-up and lateral in gaining

employee commitment to organisational goals has been

conveyed, extensively, and intensively, through various

communiqués issued by the Chairman-CEO and other senior

managers. The tone from the top in this respect has been, and

is, unrelenting. The Group continues to have an innovative mindset when making future plans and encourages all employees at

all levels to be innovative when addressing the emerging needs

of the consumer.

Skip level meetings

Skip level meetings were, once again, conducted throughout the

Group companies in 2010/11 for assistant manager and above

levels. Whilst this enabled employees to interact and discuss, with

superiors who are at a level higher than their own immediate

supervisor, the sincerity, and the openness, of the process

resulted in the subject employees participating in the meetings

with more enthusiasm and purpose. This enabled to have a first-

hand feedback on the aspirations of all levels of employees. The

feed-back so obtained will be used in structuring new employee

processes and/or revising existing employee processes.

Young forum

With a view to broadening the top level communication with the

rest of the Group employees, young fora consisting of the 7

youngest ladies and gentlemen at various levels within the Group

were introduced starting this year. The goal of this forum is for

these young representatives to meet with the Chairman, Deputy

Chairman and the Group Finance Director, in an informal setting,

to discuss both hard and soft issues relating to the Group

operations. One suggestion made by one such group was to

establish an on-line forum, through the JKH intranet, which would

enable the employees to share knowledge not only on ‘work’matters but also on ‘life’ matters such as health, wealth and other

important topics that could enhance their lives, outside of work.

This latest addition to the communication tools at JKH also has

been productive in gaining trust amongst the employees that their

suggestions for new businesses or process improvements are

heard by the senior management as they too contribute to the

forum.

Whistleblower policy

The employees can report to the Chairman through a

communication link named ‘Chairman Direct’, concerns about

unethical behaviour and any violation of Group values. Employees

reporting such incidents are guaranteed complete confidentialityand such complaints are investigated and addressed via a select

committee under the direction of the Chairman.

STAKEHOLDER-EMPLOYEES AT JKH



Ombudsperson

The Ombudsperson is to entertain complaints, from an employee

or a group of employees, of alleged violations of the publishedCode of Conduct, when that employee or group of employees

feel that an alleged violation has not been addressed satisfactorily

using the available/existing procedures and processes.

The findings of the Ombudsperson and recommendations arising

there from shall be confidential and be communicated to the

Chairman/CEO or the Senior Independent Director, as applicable,

and thereupon the Ombudsperson’s duty ceases.

The Chairman/CEO or the Senior Independent Director, as the

case may be, will place before the Board-

I. the decision and the recommendations

II. action taken based on the recommendations

III. where the Chairman/CEO or the Senior Independent Director

disagrees with any or all of the findings and or the

recommendations thereon, the areas of disagreement and the

reasons therefore.

In situation (iii) the board is required to consider the areas

of disagreement and decide on the way forward. The

Chairman/CEO or the Senior Independent Director is expected to

take such steps as are necessary to ensure that the complainant

is not victimised for having invoked this process.

Corporate communications

The corporate communications (Corp Coms) team plays anintegral role in keeping all employees informed of Group

happenings and milestones. One of its main aims is to enhance

and safeguard the ‘John Keells’ corporate brand. Accordingly, it

engages in activities to build the brand amongst its employees,

potential employees and the public in general. The main

communication channels used are the Group’s Intranet myPortal,

the quarterly newsletter JK Puwath, the corporate website, the

media and participation at brand building events. Corp Coms

works very closely with the John Keells Foundation to create

awareness and secure the voluntary participation of Group

employees and other stakeholders in programmes which promise

sustainable development.

71



Risk management is an integral part of ‘Sustainabil ity’ at JKH and

has enabled the Group to identify and manage risks, harness

opportunities, adapt to the changing environment and adopt longterm and short term strategies which link well with the overall

objectives of the Group.

The identification of risk categories is founded on the success

factors which are critical for the implementation and attainment

of Group objectives. The Group has identified external

environment, business strategies and policies, organisation and

people, business processes and technology and data as the main

risk categories that could have an impact on the Group. These

main categories of risks are further analysed into sub components

using a universal risk register, which has been adapted by the

Group, over the years, to cater to the Group's specific needs.

Each risk event is analysed by a simple formula that identifies

possible occurrence, the likelihood of occurrence (probability) and

outcome (severity). Risk review is a continuous process in the

Group companies. Internal risk management is complemented by

a Group-wide Stakeholder engagement process. Risk issues

identified during the Stakeholder engagement process are

considered and addressed through the selection of a relevant

indicator found in the Global Reporting Initiative (GRI) framework.

Some of the issues which are not directly addressed by the

indicators are monitored through the relevant risk matrix. The risks

matrices are reviewed quarterly with the emphasis on the

outcome of either mitigation, transfer, avoidance or acceptance

of the risk based on the risk appetite.

The continuous updating of the risk documentation is coordinated

centrally giving GEC/ Management Committees of the businesses

virtual access to an overall picture of the risk status at business

unit, sector, industry group and overall Group level through thedocumented reporting channels.

CURRENT STATUS - MODERATE AND ABOVE MODERATERISKS

For the financial year ending 31 March 2011 the sub categoriesconsidered to be of moderate to ultra high risk were

macro-economic conditions, the legal and regulatory compliance

structures in the jurisdictions the Group operates in and

stakeholders particularly employees including human resources

management and customers.

Macro-economic conditions

Financial year 2010/11 2009/10 2008/09 2007/08

Risk rating Moderate Moderate Ultra High Ultra High

Status and action plan

Since the end of hostilities in mid 2009, the Government of Sri Lanka has been aggressively developing the infrastructure of

the country such as roads, bridges, power plants, ports, airports

etc. which has enabled the lowering of the risk ratings from ultra

high in 2007/08 to a Moderate in 2010/11. However, the

increased activity in tourism and the significant increase

anticipated in per capita income and growth in the economy

demands an acceleration of the infrastructure development

progress. The Group has made various overtures to the

authorities in encouraging private public partnership projects in

this regard. The Group will continue to support and encourage

the government in this respect, directly as well as through

chambers, trade associations and other lobby groups.

Legal and regulatory uncertainties

Financial year 2010/11 2009/10 2008/09 2007/08

Risk rating Moderate High Ultra high High


There has been considerable progress made in this area with the

introduction of guidelines and regulations relating to the conduct

of business and other investment activities by the authorities.

RISK MANAGEMENT



However more work needs to be done. Internal processes are in

place to identify changes to legislation and possible changes to

legislation in a timely manner allowing the Group to adapt asappropriate. The Group is also working with various fora such as

industry associations and chambers in urging the government to

strengthen clarity and consistency in this area.

Stakeholder – Employees and human resourcesmanagement

Financial year 2010/11 2009/10 2008/09 2007/08

Risk rating High Moderate Moderate Moderate


High calibre employees are attracted to the Group companies due

to many factors such as working environment, performance

recognition, career development and reward and benefit plans.

Whilst Group companies have many programmes in place to

retain good employees such as short term incentives and long

term incentives in the form of employee share option plans, there

is yet a risk of losing them due to migration and to the market.

The Group is actively carrying out many brand awareness

programmes amongst current and potential employees in order

to attract and retain skilled staff. The Group also conducted an

employee survey titled ‘Great Place to Work’ (GPTW) during the

year to better understand the needs of the staff and to proactively

address them. Although the GPTW survey conducted recently

showed improvement from the results obtained in 2005, it is

recognised that there are some areas where the Group needs toimprove, in order to make JKH a truly a great place to work, not

just in the local environment but also from a global context. Focus

groups have been enlisted to address the areas of concerns.

Stakeholder-Employees at JKH section outlined in the Annual

Report summarises the steps taken by the Group in mitigating

the above described risks.

Stakeholder - Customers

Financial year 2010/11 2009/10 2008/09 2007/08

Risk rating Ultra high Moderate Moderate Moderate


Many globally renowned business organisations are looking at Sri

Lanka as a possible investment destination. Some of them have

already taken steps to establish themselves in the country. In this

light, it is essential that the Group sharpens its ability to serve

customer needs. The failure to do so will invariably result in loss

of market share and competitor advantage. The Group has

already taken steps by tying up with internationally reputed

organisations in areas of training and development. Further, the

Group will enhance its research and development capabilities and

will continuously scan the external environment with a view to

establishing best practice benchmarks.

CURRENT STATUS - LOW RISKS

As Risk mitigation and control are considered key for the growth

of Group companies, the Group has taken active steps to reduce

risks identified over the years and, as indicated below, have been

successful in lowering the risks that were identified as high to

medium risks in the past. Though some risks were lowered due

to the current improvement in the country situation most othershave been lowered due to internal processes that have been

implemented and proactive measures taken.

Political & economic confidence

Financial year 2010/11 2009/10 2008/09 2007/08

Risk rating Low Moderate High Ultra High

The structural visibility and the linkages between national

economic objectives and the institutions that facilitate and

implement them have improved over time and therefore the

political and economic status of the country has significantly

improved in the last year and subsequently, an increased investor

interest in Sri Lanka due to the investment potential offered.

JKH too has been working with international partners in projecting

Sri Lanka’s potential in this regard and has experienced a positive

response. JKH being a member of key bodies such as Chamber

of Commerce, National Council for Economic Development

(NCED) and other various trade associations, will continue to work

with the relevant authorities in creating a better economic

environment for all.

Brand control and protection threats

Financial year 2010/11 2009/10 2008/09 2007/08

Risk rating Low Moderate Moderate Moderate

The pursuit of ‘sustainable development’, particularly in the last

three years, has resulted in the enhancement of the JKH brand

through media exposure received on the Group’s financial

performance, governance structure and CSR activities. Efforts are

monitored through triple bottom line reporting via sustainability

indicators. Senior management’s participation at various fora, and

the imparting of their knowledge and skills to the society at large

have also contributed immensely towards brand building.

Environmental health and safety concerns

Financial year 2010/11 2009/10 2008/09 2007/08


By encompassing the sustainability initiatives which include GRI

indicators, the Group has set up formal processes for establishing

policies and for monitoring performance periodically regarding the

risk associated with Group’s environmental, health and safety

(EHS) concerns. These concerns are addressed through a system

of reports which confirm compliance with applicable laws and

regulations, company performance standards, and other external

requirements. In the event of an emergency, relevant procedures

and trained personnel are in place to ensure that all risks are

minimised or mitigated. Sessions were also conducted on the

proper usage of Personal Protective Equipments (PPE) in mainly

factory and hotel environments and tsunami evacuation

procedures are periodically tested involving both guests andassociates especially in the hotels. The Group EHS task force has

successfully implemented OHSAS 18000 in many of the Group

companies that are not operating in an office or IT environment

and work is in progress in others.

73



Financial exposures

Financial year 2010/11 2009/10 2008/09 2007/08


The centralised treasury and finance functions of the JKH Group

are responsible for the management of the Group’s financial risks

together with its liquidity and financing requirements. Treasury

and finance operations are conducted within a framework of

policies and guidelines approved and monitored by the GEC. The

finance and treasury framework is reviewed regularly and are fine

tuned to meet the Group’s current and anticipated operating

needs. This framework also facilitates the execution of board

approved strategies for interest rates, currency and liquidity

management.

Information technology dependencyFinancial year 2010/11 2009/10 2008/09 2007/08


JKH operations are reliant on information technology. The

increased centralisation of IT systems allows more disciplined and

uniform enforcement of security measures across the Group.

JKH Group companies and the centralised IT function comply

with a strict IT security policy and appropriate security safeguards

have been implemented and are continuously monitored to

ensure the security, privacy and confidentiality of the IT systems,

especially in order to mitigate the risks when operating under a

centralised system. Planning for worse-case scenarios, such as

complete system failures, by having disaster recovery proceduresin place, have enabled the Group to focus on the methods and

speed of recovery required which are imperative in such

instances. Business continuity plans have been or are being

implemented Group wide in order to mitigate the identified risks.

Internal operational process efficiencies

Financial year 2010/11 2009/10 2008/09 2007/08


This is an area where much work has been performed over the

years. Cross functional teams comprising of employees and

consultants that are subject matter experts have reviewed and

strengthened the Company’s information systems and business

processes in keeping with the latest regulatory requirements.

Environments so implemented enable business users to balance

between performance and control. Furthermore, the Group

provides the user the opportunity through these structured

processes to manage and mitigate risk, making John Keells

businesses more competitive in the market.

.

RISK MANAGEMENT



FINANCIAL INFORMATION



ANNUAL REPORT OF THE BOARD OF DIRECTORS

The directors have pleasure in presenting the 32nd annual report of

your company together with the audited financial statements of John

Keells Holdings PLC (JKH), and the audited consolidated financialstatements of the group for the year ended 31 March 2011.

PRINCIPAL ACTIVITIES

John Keells Holdings PLC, the group’s holding company, manages a

portfolio of holdings consisting of a range of diverse business

operations, which together constitute the John Keells group, and

provides function based services to its subsidiaries and associates.

The companies within the group and its business activities are

described in the group directory under the supplementary information

section of the annual report.

REVIEW OF BUSINESS SEGMENTS

A review of the financial and operational performance and futurebusiness developments of the group, sectors, and its business units

are described in the management discussion and analysis section of

the annual report. These reports together with the audited financial

statements reflect the state of the affairs of the company and the group.

Segment wise contribution to group revenue, results, assets and

liabilities is provided in note 32 to the financial statements.

In June 2010, Fitch Ratings affirmed the National long-term rating for

JKH at 'AAA(lka)'. Fitch also affirmed the National long-term rating on

JKH's senior unsecured notes at 'AAA(lka)'. JKH's rating reflected

the diversified nature of its businesses, the currently strong financial

profile driven in part by its high cash position, continued strong

operating cash generating ability and the dominant market share of its subsidiaries.

In August 2010, John Keells Holdings PLC, disposed of 11.62 million

shares held in Asian Hotels and Properties PLC, for a consideration

of Rs.1.98 billion.

In September 2010, JKH disposed of 37.5 million shares held in John

Keells Hotels PLC, for a consideration of Rs.787.5 million.

In March 2011, the company purchased a further 5,604,200 shares

of Union Assuarance PLC for a consideration of Rs.841million,

increasing its stake to 95.6%.

In March 2011, the company acquired 4.2 million shares of Nations

Trust Bank PLC through the conversion of warrants with aninvestment of Rs.146.8 million, thereby maintaining its percentage

stake in the bank.

REVENUE

Revenue generated by the company amounted to Rs.554 million (2010 -

Rs.544 million), whilst group revenue amounted to Rs.60,500 million (2010

- Rs.47,980 million). Contribution to group revenue, from the different

business segments is provided in note 23, to the financial statements.

RESULTS AND APPROPRIATIONS

The profit after tax of the holding company was Rs.5,963 million

(2010 - Rs.4,661 million) whilst the group profit attributable to equity

holders of the parent for the year was Rs.8,246 million (2010 -Rs.5,201 million).

Results of the company and of the group are given in the income

statement.

The final dividend of Rs.1.00 per share for the financial year 2009/10

(2009 – Rs.1.00) was paid on 10 June 2010. First interim dividend of

Rs.1.00 per share for the year 2010/11 (2010 – Rs.1.00) was paidon 1 December 2010. A second interim dividend for 2010/11 of

Rs.1.00 per share was paid on 16 March 2011 (2010 – Rs.1.00). This

results in a total dividend pay-out of Rs.3.00 per share (2010 –

Rs.3.00) amounting to Rs.1,869 mn (2010 - Rs.1,844 mn).

Dividend per share has been computed based on the amount of

dividends recognised as distribution to the equity holders during the

period.

As required by Section 56 (2) of the Companies Act No 7 of 2007,

the Board of directors has confirmed that the company satisfies the

solvency test in accordance with Section 57 of the Companies Act

No 7 of 2007, and has obtained a certificate from the auditors, prior

to declaring a final dividend of Rs.1.00 per share for this year. Thefinal dividend will be paid on 9 June 2011 to those shareholders on

the register as on 30 May 2011.

Detailed description of the results and appropriations are given below;

For the year ended 31 March 2011 2010

In Rs.'000s

Profit earned before interest, after

providing for all known liabilities, bad

and doubtful debts and depreciation

on property, plant and equipment 6,521,291 5,237,068

Interest paid (796,074) (1,370,156)

5,725,217 3,866,912

Profit on sale of non-current investments 1,795,069 114,776Change in fair value of investment property 467,764 -

Profit accruing to the company

and subsidiaries 7,988,050 3,981,688

Share of results of associates 2,640,911 2,555,867

Profit before tax 10,628,961 6,537,555

Provision for taxation includingdeferred tax (1,565,801) (985,240)

Profit after tax 9,063,160 5,552,315

Profit attributable to minority shareholders (817,575) (350,824)

Amount available to the group's

shareholders 8,245,585 5,201,491

Other adjustments 101,258 3,785

Balance brought forward from theprevious year 12,768,823 9,415,309

Amount available for appropriation 21,115,666 14,620,585

1st interim dividend of Rs.1.00 per share

(2010 - Rs.1.00) paid out of

dividend received (623,037) (612,834)

2nd interim dividend of Rs.1.00 per share

(2010 - Rs.1.00) paid out of

dividend received (625,803) (619,455)

19,866,826 13,388,296

Final dividend declared of

Rs.1.00 per share (2010 – Rs.1.00)to be paid out of dividend received* (629,693) (619,473)

Balance to be carried forward next year 19,237,133 12,768,823

* The final dividend recommended for this financial year has not been

recognised as at the balance sheet date in compliance with SLAS 12

(Revised 2005) - Events after the Balance Sheet Date.



ACCOUNTING POLICIES

Details of accounting policies have been discussed in note 1 of the

financial statements. There have been no changes in the accountingpolicies adopted by the group during the year under review.

DONATIONS

Total donations made by the company and group during the year

amounted to Rs.6 million (2010 - Rs.10.4 million) and Rs.16 million

(2010 - Rs.19 million), respectively. Of these, the donations to

approved charities were Rs.5.6 million (2010 - Rs.10 million) at

company and Rs.13 million (2010 - Rs.15.3 mn) at group. These

amounts do not include contributions on account of corporate social

responsibility (CSR) initiatives.

The John Keells Foundation, which operates with funds contributed

by each of the companies in the group, handles most of the group’s

CSR initiatives and activities. The Foundation manages a range of

programmes that underpin its key principle of acting responsibly in all

areas of business to bring about sustainable development. The CSR

initiatives, including completed and on-going projects, are detailed in

the sustainability report in the annual report.

In quantifying the group’s contribution to charities, no account has

been taken of ’in-house’ costs or management time.

PROPERTY, PLANT AND EQUIPMENT

The book value of property, plant and equipment as at the balance

sheet date amounted to Rs.74 million (2010 - Rs.112 million) andRs.28,628 million (2010 - Rs.29,989 million) for the company and

group respectively.

Capital expenditure for the company and group amounted to Rs.4.8

mn (2010 - Rs.5.2 mn) and Rs.4,978 mn (2010 - Rs.1,782 mn),

respectively.

Details of property, plant and equipment and their movements are

given in note 2 to the financial statements.

MARKET VALUE OF PROPERTIES

All land and buildings owned by group companies were revalued in

financial year 2007/08, with the following exceptions;

Wirawila Walk Inn Ltd was revalued in financial year 2008/09.

Trinco Walk Inn Ltd, International Tourist and Hoteliers Ltd, Trinco

Holiday Resorts (Private) Ltd, Union Assurance PLC, were revalued

in the financial year 2009/10.

John Keells Holdings PLC, John Keells PLC, Mackinnons and Keells

Financial Services Ltd, Keells Realtors Ltd, Whittall Boustead Ltd, JK

Properties (Pvt) Ltd, Yala Village (Pvt) Ltd, Ceylon Cold Stores PLC

and Ceylon Holiday Resorts Ltd, were revalued in the financial year

2010/11.

Valuations were carried out by P B Kalugalgedera, Chartered

Valuation Surveyor, G J Sumanasena, Incorporated Valuer,

M/s A Y Daniel & Son, Incorporated Valuer, R G Wijesinghe,

Consultant Valuer and Assesor, Haleen Gouse, Incorporated Valuer

and J M J Fernando, Incorporated Valuer.

All properties classified as investment property were valued in

accordance with the requirements of SLAS 40 (2005). The

investment property carried by the company was re-valued at Rs.925

million (carrying value 2010 – Rs.899 million) and sold to John Keel ls

Residential Properties (Pvt) Ltd. The group revalued all its

investments properties as at 31 March 2011. The carrying value of

investment property of the group is Rs.5,386 million (2010 - Rs.2,334

million).

Investment properties of business units, when significantly occupied by

group companies, are classified as property, plant and equipment in the

consolidated financial statements in compliance with SLAS 40 (2005).

Details of the revaluation of property, plant and equipment and

investment property are provided in notes 2.5 and 4.1 to the financial

statements.

Details of group properties as at 31 March 2011 are disclosed in the

Group Real Estate Portfolio section of the annual report.

INVESTMENTS

Investments of the company and the group in subsidiaries,

associates, joint ventures and other external equity investments

amounted to Rs.33,321 million (2010 - Rs.30,962 million) and

Rs.58,206 million (2010 - Rs.50,978 million), respectively.

Detailed description of the long term investments held as at the

balance sheet date, are given in note 6 to the financial statements.

STATED CAPITAL

The authorised capital and par value concept in relation to share

capital were abolished by the Companies Act No 07 of 2007. The

total amounts received by the company in respect of the issue of

shares are now referred to as stated capital. The total stated

capital of the company as at 31 March 2011 was Rs.24,611million

(2010 - Rs.23,322 million) as given in note 12 to the financial

statements.

Options in respect of 10,218,735 shares (2010 – 8,120,636 shares)

were exercised during the year under the employee share

option plan, for a total consideration of Rs.1,289 million

(2009 - Rs.797 million).

SHARE INFORMATION

The distribution and composition of shareholders and the information

relating to earnings, dividend, net assets, market value per share and

share trading is given in the share information section of the annual

report.

Given below, as additional disclosure, are the John Keells Holding’s

Board of directors’ shareholdings in group companies as at 31 March

2011.





John Keells Holdings PLC (JKH)

S C Ratnayake - 3,434,928 (2010 – 3,403,909)

A D Gunewardene – 4,279,992 (2010 – 3,903,830)

J R F Peiris – 737,095 (2010 – 415,790)

E F G Amerasinghe - 4,136 (2010 – 4,136)

T Das - Nil (2010 - Nil)

S Enderby - Nil (2010 - Nil)

P D Rodrigo - Nil (2010 - Nil)

S S Tiruchelvam – Nil (2010 - Nil)

I Coomaraswamy – Nil (2010 – N/A)

Options available under the employee share option plan of JKHS C Ratnayake – 1,658,609 (2010 – 1,778,099)

A D Gunewardene – 1,451, 308 (2010 – 1,554,882)

J R F Peiris – 1,238,357 (2010 - 1,326,015)

Asian Hotels and Properties PLC

S C Ratnayake – 10,000 (2010 – 10,000)

Ceylon Cold Stores PLC

S C Ratnayake – 760 (2010 - 760)

A D Gunewardene – 7,000 (2010 - 7,000)

J R F Peiris - 150 (2010 - 150)

John Keells Hotels PLC

S C Ratnayake – 550,311 (2010 - 550,311)

A D Gunewardene – 74,806 (2010 - 74,806

Keells Food Products PLC

S C Ratnayake – 4,250 (2010 - 4,250)

Nations Trust Bank PLC

A D Gunewardene – 5,756,249 (2010 – 4,652,212)

Warrants held at Nations Trust Bank PLC

A D Gunewardene

Warrants 2011 – Nil (2010 – 1,057,627)

Trans Asia Hotels PLC

S C Ratnayake – 200 (2010 - 100)

A D Gunewardene - 200 (2010 - 100)

J R F Peiris - 200 (2010 - 100)

Union Assurance PLC

A D Gunewardene – 3,746 (2010 – 3,746)

MAJOR SHAREHOLDERS

Details of the twenty largest shareholders of the company and the

percentages held by each of them are disclosed in the shareinformation section of the annual report.

RESERVES

Total reserves as at 31 March 2011 for the company and group

amounted to Rs.13,439 million (2010 - Rs.9,345 million) and


The movement and composition of the capital and revenue reserves

is disclosed in the statement of changes in equity.

DIRECTORS

The Board of directors of the company as at 31 March 2011 and their

brief profiles are given in the Board of directors section of the annualreport.

In accordance with Article 84 of the Articles of Association of the

company, E F G Amerasinghe and S Enderby retire by rotation and

being eligible offer themselves for re-election.

The company has also received notice of the resolution to propose

the re-election of T Das who is over 70 years of age and who retires

in terms of section 210 of the Companies Act. The resolution

proposes that the age limit stipulated in Section 210 of the

Companies Act No 7 of 2007 shall not apply to T Das who is over 70

years and that he be re-elected a director of the company.

On 7 February 2011 Dr Indrajit Coomaraswamy was appointed to the

board as an independent director.

In accordance with Article 91 of the Articles of Association of the

company, Dr Indrajit Coomaraswamy retires by rotation and being

eligible offer himself for re-election.

The group directory details the names of persons holding office as

directors of the company and all its subsidiary and associate

companies, as at 31 March 2011 and the names of persons who

were appointed or who ceased to hold office as directors during the

period.

BOARD COMMITTEES

The following members serve on the Board, Audit, Remuneration and

Nomination Committees;

Audit Committee

P D Rodrigo - Chairman

E F G Amerasinghe

S Enderby

S S Tiruchelvam

The report of the audit committee is given under the Board committeereports section of the annual report.



Remuneration Committee

E F G Amerasinghe - Chairman

P D Rodrigo

S S Tiruchelvam

The report of the remuneration committee is given under the Board

committee reports section of the annual report and the remuneration

policy is given in the corporate governance report.

Nominations Committee

T Das - Chairman

S Enderby

S C Ratnayake

S S Tiruchelvam

The report of the nominations committee is given under the Board

committee reports section of the annual report.

INTERESTS REGISTER

The company has maintained an interests register as contemplated

by the Companies Act No 7 of 2007.

In compliance with the requirements of the Companies Act No. 7 of

2007, this annual report also contains particulars of entries made in

the interests registers of subsidiaries which are public companies orprivate companies which have not dispensed with the requirement

to maintain an interests register as permitted by Section 30 of the

Companies Act No 7 of 2007.

Particulars of entries in the JKH interests register

Interests in contracts

The directors have all made a general disclosure to the Board of

directors as permitted by Section 192 (2) of the Companies Act No

7 of 2007 and no additional interests have been disclosed by any

director.

a) Share dealings:

NAME OF DIRECTOR NATURE OF SHARE DEALING

S C Ratnayake Sale of 400,000 shares and 431,019

share options exercised under ESOP

A D Gunewardene 376,162 share options exercised

under ESOP

J R F Peiris 321,305 share options exercised

under ESOP

b) Indemnities and remuneration

1. 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,

and J R F Peiris, Group Finance Director for the period 1 April

2010 to 31 March 2011 comprising of;

• an increment from 1st July 2010 based on the individual

performance rating obtained by the executive directors in

terms of the performance management system of the John

Keells group

• short term variable incentive based on individual

performance, organization performance and role

responsibility based on the results of the financial year

2009/2010 paid in July 2010; and

• long term Incentive in the nature of ESOP in John Keells

Holdings PLC dependant on the aforesaid performance rating,

organizational rating and role responsibility granted in

December 2010

as recommended by the remuneration committee having conducted

market surveys, spoken to experts and having taken into consideration

the specific management complexities associated with the John Keells

group and in keeping with the group remuneration policy.

2. Further to the appointment of Dr I Coomaraswamy as a non

executive director of John Keells Holdings PLC from 7th February

2011, the Board approved the payment to Dr I Coomaraswamy

of the standard Non Executive fees approved by the Board for

Non Executive Directors, which are commensurate with the

market complexities of the company.

Particulars of entries in interests register of subsidiaries

Asian Hotels & Properties PLC

Indemnities and remuneration

The Board approved the payment to R J Karunarajah and

Mr S Rajendra, executive directors of the company, of remuneration,

comprising of;


performance rating obtained by the executive directors in terms

of the performance management system of the John Keells

group; and

• short term variable incentive based on individual performance,

organization performance and role responsibility based on the

results of the financial year 2009/2010, paid in July 2010; and

• long term Incentive in the nature of ESOP in John Keells Holdings

PLC dependant on the aforesaid performance rating,

organizational rating and role responsibility granted in December

2010

as recommended by the remuneration committee of John Keells

Holdings PLC the holding company of Asian Hotels & Properties PLC

in keeping with the group remuneration policy.



Ceylon Cold Stores PLC


The Board approved the payment to the executive director of the

company J R Gunaratne of remuneration, comprising of;




group;



results of the financial year 2009/2010, paid in July 2010; and


PLC dependant on the aforesaid performance rating,organizational rating and role responsibility granted in December

2010


Holdings PLC the holding company of Ceylon Cold Stores PLC in

keeping with the group remuneration policy.

Keells Hotel Management Services Ltd.


The Board approved the payment to the executive director of the

company J E P Kehelpannala of remuneration, comprising of;

• an increment from 1st July 2010 based on the individualperformance rating obtained by the executive directors in terms

of the performance management system of the John Keells group



results of the financial year 2009/2010 paid in July 2010; and




2010.

as recommended by the remuneration committee of John KeellsHoldings PLC the holding company of Keells Hotel Management

Services Limited in keeping with the group remuneration policy.

Trans Asia Hotels PLC

Share dealings

N L Gooneratne Purchase of 84,300 shares

and Sale of 400 shares

John Keells Hotels PLC

Share dealings:

NAME OF DIRECTOR NATURE OF SHARE DEALING

Mr. M A Omar Purchase of 2,800,000 shares by

Phoenix Ventures (Pvt) Limited

Walkers Tours Ltd.


The Board approved payment to the executive director of the

company V Leelananda of remuneration, comprising of;




group



results of the financial year 2009/2010 paid in July 2010; and




2010


Holdings PLC the holding company of Walkers Tours Limited in

keeping with the group remuneration policy.

John Keells PLC


The Board approved payment to the executive director of the

company L D Ramanayake of remuneration, comprising of;




group


organization performance and role responsibility based on theresults of the financial year 2009/2010 paid in July 2010; and




2010


Holdings PLC the holding company of John Keells PLC in keeping

with the group remuneration pol icy.





EMPLOYEE SHARE OPTION PLAN (ESOP)

EMPLOYEE SHARE OPTION PLAN (ESOP) AS AT 31ST MARCH 2011

Date of Shares Expiry Option Shares * Exercised Lapsed / Outstanding Current

grant granted date grant adjusted cancelled price *

price

PLAN 3

Award 2 10.04.2006 6,645,575 09.04.2011 157.25 10,301,859 8,953,047 1,348,812 - 120.74

Award 3 28.05.2007 10,551,062 27.05.2012 146.00 10,551,062 1,606,493 1,137,970 7,806,599 146.00

17,196,637 20,852,921 10,559,540 2,486,782 7,806,599

PLAN 4 25.03.2008 5,405,945 24.03.2013 120.00 5,405,945 894,575 233,350 4,278,020 120.00

PLAN 5 17.12.2009 6,126,960 16.12.2014 160.25 6,126,960 551,337 19,460 5,556,163 160.25

PLAN 6 09.12.2010 4,672,823 08.12.2015 292.00 4,672,823 9,800 3,200 4,659,823 292.00

Total 33,402,365 37,058,649 12,015,252 2,742,792 22,300,605

* Adjusted for bonus issues and right issues

DIRECTORS’ REMUNERATION

Details of the remuneration and other benefits received by the

directors are set out in note 28 of the financial statements. The keyprinciples of the group’s compensation policy appears in thegovernance section of the annual report.

EMPLOYEE SHARE OPTION PLAN

At the beginning of the year, the employee share option plan

consisted of the third, fourth and fifth plans approved by the

shareholders on 28 June 2004, 13 December 2007 and 2 December

2009 respectively.

Under the third plan, the company was authorised to issue up to 5%

of the issued share capital within an annual limit of up to 2% of non-

transferable call share options and the options granted under this

plan have to be exercised within five years of such grant. Under the

fourth plan, the company was authorised to issue non-transferable

call share options, not exceeding in aggregate 0.85% of the shares

in issue of the company as at the date of granting the award and

have to be exercised within five years of such grant. On 2 December

2009, the shareholders approved a fifth plan, whereby the company

could issue non-transferable call share options, not exceeding 1%

of the shares in issue of the company as at the date of granting the

award and have to be exercised within five years of such grant. On

6 December 2010, shareholders approved a sixth plan, whereby the

company could issue non-transferable call share options, not

exceeding in aggregate 0.75% of shares in issue of the company as

at the date of granting the award and have to be exercised within

five years of such grant.

The options outstanding under the 3rd award of plan 3 and under

plan 4, 5 and 6 were valid for exercise as at 31 March 2011.

The highest, lowest and the closing prices of the share recorded

during the year were Rs.360.00, Rs.177.00 and Rs.285.60

respectively.

Company has not granted any funding to employees to exercise

options.

Details of the options granted, options exercised, the grant price and

the options cancelled or lapsed and outstanding as at the date of

the directors' report have been tabulated below.


Directors’ declarations

The directors declare that having considered all information and

explanations made available to them that;

a) the company complied with all applicable laws and regulations

in conducting its business.

b) the directors have declared all material interests in contracts

involving the company and refrained from voting on matters

in which they were materially interested.

c) the company has made all endeavours to ensure the equitable

treatment of shareholders.



d) the business is a going concern with supporting assumptions

or qualifications as necessary, and

e) have conducted a review of internal controls covering financial,

operational and compliance controls and risk management

and have obtained a reasonable assurance of their

effectiveness and successful adherence herewith.

The corporate governance report is given under the governance

section of the annual report.

SUSTAINABILITY

The group pursues its business goals under a stakeholder model of

business governance. As per this model, the group has taken

specific steps, particularly, in ensuring the conservation of its natural

resources and environment. These steps have been encapsulatedin a group-wide sustainability programme which was launched in

2008/2009 and has since progressed significantly. The separate

Sustainability Report details such progress. Det Norske Veritas AS

(DNV) has confirmed that the sustainability report meets the general

content and quality requirements of the Global Reporting Initiative

(GRI) G3 and that it has met the Application Level B+ of the GRI

requirements. The 2010/11 sustainability report has also received a

“GRI application level check of B+” and this reaffirms the report’s

compliance with the GRI guidelines.

EMPLOYMENT

The group has an equal opportunity policy and these principles are

enshrined in specific selection, training, development and promotion

policies, ensuring that all decisions are based on merit. The group

practices equality of opportunity for all employees irrespective of

ethnic origin, religion, political opinion, gender, marital status or

physical disability. Employee ownership in the company is facilitated

through the employee share option plan.

Details of the group’s human resource initiatives are detailed in the

employees’ section of the sustainability report.

The number of persons employed by the company and group as at

31 March 2011 was 127 (2010 - 139) and 11,389 (2010 – 10,885),

respectively.

There have been no material issues pertaining to employees and

industrial relations of the company.

SUPPLIER POLICY

The group applies an overall policy of agreeing and clearly

communicating terms of payment as part of the commercial

agreements negotiated with suppliers, and endeavors to pay for all

items properly charged in accordance with these agreed terms. As

at 31 March 2011 the trade and other payables of the company and

group amounted to Rs.221 million (2010 - Rs.343 million) and


ENVIRONMENTAL PROTECTION

The group complies with the relevant environmental laws, regulations

and endeavors to comply with best practices applicable in thecountry of operation. A summary of selected group activities in the

above area is contained in the sustainability Report.

RESEARCH AND DEVELOPMENT

The group has an active approach to research and development and

recognises the contribution that it can make to the group’s

operations. Significant expenditure has taken place over the years

and substantial efforts will continue to be made to introduce new

products and processes and develop existing products and

processes to improve operational efficiency.

STATUTORY PAYMENTS The directors confirm that to the best of their knowledge, all taxes,

duties and levies payable by the company and its subsidiaries, all

contributions, levies and taxes payable on behalf of, and in respect

of the employees of the company and its subsidiaries, and all other

known statutory dues as were due and payable by the company and

its subsidiaries as at the balance sheet date have been paid or, where

relevant provided for, except as specified in note 34 to the financial

statements, covering contingent liabilities.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board confirms that there is an ongoing process for identifying,

evaluating and managing any significant risks faced by the group.

Risk assessment and evaluation for each business unit takes place

as an integral part of the annual strategic planning cycle and the

principle risks and mitigating actions in place are reviewed regularly

by the Board and the audit committee. The Board, through the

involvement of the risk review and control department takes steps

to gain assurance on the effectiveness of control systems in place.

The audit committee receives reports on the results of internal control

reviews and the head of the group risk review and control

department has direct access to the chairman of the audit

committee.

The risk management report is given under the governance section

of the annual report.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

There have been no events subsequent to the balance sheet date,

which would have any material effect on the company or on the

group other than those disclosed in note 38 to the financial

statements.

GOING CONCERN

The directors are satisfied that the company, its subsidiaries and

associates, have adequate resources to continue in operational

existence for the foreseeable future, to justify adopting the going

concern basis in preparing these financial statements.





AUDITORS

Messrs Ernst & Young, Chartered Accountants, are willing to

continue 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 the

annual report.

The audit committee reviews the appointment of the auditor, its

effectiveness, 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 4 firms of Chartered Accountants across the

group, namely, Ernst & Young, KPMG Ford Rhodes Thornton and

Co, PricewaterhouseCoopers, and Deloitte Haskins & Sells. Details

of audit fees are set out in note 28 of the financial statements. Theauditors do not have any relationship (other than that of an auditor)

with the company or any of its subsidiaries.

Further details on the work of the auditor and the audit committee

are set out in the audit committee report.

ANNUAL REPORT

The Board of directors approved the consolidated financial

statements on 20 May 2011. The appropriate number of copies of

this report will be submitted to the Colombo Stock Exchange and to

the Sri Lanka Accounting and Auditing Standards Monitoring Board

on 30 May 2011.

ANNUAL GENERAL MEETING

The annual general meeting will be held at the Institute of Chartered

Accountants of Sri Lanka, 30, Malalasekera Mawatha, Colombo 7,

on Friday, 24 June 2011 at 10.00 a.m. The notice of meeting

appears in the supplementary information section of the

comprehensive annual report.

This annual report is signed for and on behalf of the Board of

directors.

By Order of the Board

Director Director

Keells Consultants (Pvt) Ltd.

Secretaries

20 May 2011




The responsibility of the Directors in relation to the financial statements is

set out in the following statement. The responsibility of the auditors, in

relation to the financial statements prepared in accordance with theprovisions of the Companies Act No 7 of 2007, is set 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 the

financial year; and

• an income statement of the company and its subsidiaries, which

presents a true and fair view of the profit and loss of the company

and its subsidiaries for the financial year.

The directors are required to confirm that the financial statements have

been prepared;

• using appropriate accounting polices which have been selected

and applied in a consistent manner, and material departures, if any,

have been disclosed and explained; and

• presented in accordance with the Sri Lanka Accounting

Standards; and that

• reasonable and prudent judgements and estimates have been

made so that the form and substance of transactions are properly

reflected; and

• provides the information required by and otherwise comply with

the Companies Act and the Listing Rules of the Colombo Stock

Exchange.

The directors are also required to ensure that the company has adequate

resources to continue in operation to justify applying the going concern

basis in preparing these financial statements.

Further, the directors have a responsibility to ensure that the company

maintains sufficient accounting records to disclose, with reasonable

accuracy the financial position of the company and of the group.

The directors are also responsible for taking reasonable steps to

safeguard the assets of the company and of the group and in this regard

to give proper consideration to the establishment of appropriate internalcontrol systems with a view to preventing and detecting fraud and other

irregularities

The directors are required to prepare the financial statements and to

provide the auditors with every opportunity to take whatever steps and

undertake whatever inspections that may be considered being

appropriate to enable them to give their audit opinion.

Further, as required by Section 56 (2) of the Companies Act No 7 of 2007,

the Board of directors have confirmed that the company, based on the

information available, satisfies the solvency test immediately after the

distribution, in accordance with Section 57 of the Companies Act no 7 of

2007, and have obtained a certificate from the auditors, prior to declaring

a final dividend of Rs 1.00 per share for this year, to be paid on 9 June

2011.

The directors are of the view that they have discharged their

responsibilities as set out in this statement.

Compliance Report

The directors confirm that to the best of their knowledge, all taxes, duties

and levies payable by the company and its subsidiaries, all contributions,

levies and taxes payable on behalf of and in respect of the employees of

the company and its subsidiaries, and all other known statutory dues as

were due and payable by the company and its subsidiaries as at the

balance sheet date have been paid, or where relevant provided for, except

as specified in Note 34 to the financial statements covering contingentliabilities.

By Order of the Board

Keells Consultants (Pvt) Ltd

Secretaries

20 May 2011

THE STATEMENT OF DIRECTORS’ RESPONSIBILITY




INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF JOHN KEELLS HOLDINGS PLC

Report on the Financial Statements

We have audited the accompanying financial statements of John Keells

Holdings PLC (“Company”), the consolidated financial statements of the

Company and its subsidiaries which comprise the balance sheets as at

31 March 2011, and the income statements, statements of changes in

equity and cash flow statements for the year then ended, and a summary

of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of

these financial statements in accordance with Sri Lanka Accounting

Standards. This responsibility includes: designing, implementing andmaintaining internal control relevant to the preparation and fair

presentation of financial statements that are free from material

misstatement, whether due to fraud or error; selecting and applying

appropriate accounting policies; and making accounting estimates that

are reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these financial statements

based on our audit. We conducted our audit in accordance with Sri Lanka

Auditing Standards. Those standards require that we plan and perform

the audit to obtain reasonable assurance whether the financial statements

are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An audit also

includes assessing the accounting policies used and significant estimates

made by management, as well as evaluating the overall financial

statement presentation.

We have obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

We therefore believe that our audit provides a reasonable basis for our

opinion.

Opinion

In our opinion, so far as appears from our examination, the Company

maintained proper accounting records for the year ended 31 March 2011

and the financial statements give a true and fair view of the Company’s

state of affairs as at 31 March 2011 and its profit and cash flows for the

year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a true and fair

view of the state of affairs as at 31 March 2011 and the profit and cash

flows for the year then ended, in accordance with Sri Lanka Accounting

Standards, of the Company and its subsidiaries dealt with thereby, so far

as concerns the shareholders of the Company.

Report on Other Legal and Regulatory Requirements

In our opinion, these financial statements also comply with the

requirements of Sections 151(2) and 153(2) to 153(7) of the Companies

Act No. 07 of 2007.

20 May 2011

Colombo.

REPORT OF THE AUDITORS




BALANCE SHEET

Group Company As at 31st March Note 2011 2010 2011 2010

In Rs.'000s

ASSETSNon-current assetsProperty, plant and equipment 2 28,627,982 29,988,664 73,543 111,615Leasehold property 3 9,515,621 4,576,687 - -Investment property 4 5,386,166 2,334,475 - 899,000Intangible assets 5 2,631,950 2,556,145 43,724 37,450Investments in subsidiaries and joint ventures 6 5,115 5,115 23,482,112 21,772,182Investments in associates 6 14,670,235 14,309,186 9,257,569 9,110,819Other investments 6 11,792,453 8,415,216 581,806 79,507Deferred tax assets 7 202,850 182,252 54,198 -Other non-current assets 8 3,231,401 1,724,717 258,539 60,079

76,063,773 64,092,457 33,751,491 32,070,652

Current assetsInventories 9 3,143,630 2,295,066 760 778

Trade and other receivables 10 12,072,147 9,933,777 589,015 848,223

Amounts due from related parties 33 18,520 22,889 612,073 532,884Short term investments 11 16,881,036 19,300,956 10,071,249 10,177,965Cash in hand and at bank 2,112,626 3,013,164 19,382 82,154

34,227,959 34,565,852 11,292,479 11,642,004

Total assets 110,291,732 98,658,309 45,043,970 43,712,656

EQUITY AND LIABILITIESEquity attributable to equity holders of the parent

Stated capital 12 24,611,507 23,322,400 24,611,507 23,322,400Capital reserves 13 9,560,417 7,573,612 - -Revenue reserves 14 25,414,789 18,936,259 13,439,260 9,345,064

59,586,713 49,832,271 38,050,767 32,667,464

Minority interest 7,608,220 6,429,512 - -

Total equity 67,194,933 56,261,783 38,050,767 32,667,464

Non-current liabilitiesInsurance provisions 15 12,662,500 10,236,117 - -Non-interest bearing borrowings 16 18,000 18,000 - -Interest bearing borrowings 17 8,352,587 10,539,450 5,520,000 6,840,000Deferred tax liabilities 7 647,960 781,742 - -Employee benefit liabilities 18 1,215,597 1,041,395 104,752 92,630Other deferred liabilities 19 4,143 4,655 - -Other non-current liabilities 746,938 216,401 - -

23,647,725 22,837,760 5,624,752 6,932,630

Current liabilities Trade and other payables 20 12,379,589 11,576,537 220,667 343,426 Amounts due to related parties 33 2,237 13,163 9,274 3,001Income tax liabilities 21 796,714 454,292 - -Short term borrowings 22 232,000 150,000 - -Current portion of interest bearing borrowings 17 2,134,418 4,168,976 1,104,000 3,135,493Dividend payable - 619,455 - 619,455Bank overdrafts 3,904,116 2,576,343 34,510 11,187

19,449,074 19,558,766 1,368,451 4,112,562

Total equity and liabilities 110,291,732 98,658,309 45,043,970 43,712,656

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 Ratna ake J R F PeirisChairman Group Finance Director

The accounting policies and notes as set out in pages 92 to 138 form an integral part of these financial statements.

20 May 2011



Group CompanyFor the year ended 31st March Note 2011 2010 2011 2010

In Rs.'000s

Revenue 23 60,500,068 47,980,004 554,627 544,193

Cost of sales (46,856,982) (36,914,007) (232,598) (230,156)

Gross profit 13,643,086 11,065,997 322,029 314,037

Dividend income 24 62,599 43,951 3,500,955 3,573,576

Other operating income 25 6,114,821 5,020,745 3,188,221 2,205,081

Distribution expenses (2,410,865) (2,066,691) - -

Administrative expenses (7,442,017) (7,218,294) (603,524) (654,211)

Other operating expenses 26 (1,651,264) (1,493,864) (42,870) (44,187)

Finance expenses 27 (796,074) (1,370,156) (379,499) (716,629)

Change in fair value of investment property 4 467,764 - - -

Share of results of associates 2,640,911 2,555,867 - -

Profit before tax 28 10,628,961 6,537,555 5,985,312 4,677,667

Tax expense 29(1,565,801) (985,240) (22,409) (16,608)

Profit for the year 9,063,160 5,552,315 5,962,903 4,661,059

Attributable to:

Equity holders of the parent 8,245,585 5,201,491

Minority interest 817,575 350,824

9,063,160 5,552,315

Rs. Rs.

Earnings per share

Basic 30 13.24 8.48

Diluted 30 13.01 8.42

Dividend per share 31 3.00 3.00

Figures in brackets indicate deductions.


20 May 2011

INCOME STATEMENT



CASH FLOW STATEMENT


Group CompanyFor the year ended 31st March Note 2011 2010 2011 2010

In Rs.'000s

CASH FLOWS FROM OPERATING ACTIVITIESProfit before working capital changes A 5,601,971 3,339,240 (255,719) (231,287)

(Increase) / decrease in inventories (869,848) (40,763) 18 32(Increase) / decrease in receivables and prepayments (1,915,530) (775,277) 155,635 (531,046)(Increase) / decrease in other non-current assets (952,598) (85,051) (198,460) 24,660Increase / (decrease) in creditors and accruals 1,255,259 2,437,778 (116,589) (50,284)Increase in insurance provision 2,426,383 1,708,052 - -

Cash generated from operations 5,545,637 6,583,979 (415,115) (787,925)

Interest received 2,747,650 2,946,331 757,847 1,206,484Finance expenses paid (796,074) (1,370,156) (379,499) (716,629)Dividend received 2,244,783 2,399,690 3,500,955 3,573,576

Tax paid (1,170,569) (966,869) (54,216) (62,239)

Gratuity paid (70,150) (107,904) (3,598) (19,442)Net cash flow from operating activities 8,501,277 9,485,071 3,406,374 3,193,825

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIESPurchase and construction of property, plant and equipment (4,977,752) (1,781,594) (4,764) (5,216)

Addition to intangible assets (114,754) (70,986) (17,444) (30,603) Addition to lease rights (317,654) - - - Addition to investment property (1,732) (5,460) - - Acquisition of associates - (1,000,000) - -Increase in interest in subsidiaries (844,217) (83,853) (1,360,795) (2,124,946)Increase in interest in associates (441,192) (376,100) (146,750) (1,151,572)Proceeds from sale of property, plant and equipment 441,747 184,702 1,459 6,270Proceeds from sale of non-current investments 2,754,030 - 2,748,505 46,483Proceeds from sale of rights in subsidiaries - 750,975 - 750,975Proceeds from sale of investments held for sale - 84,632 - 72,404Proceeds from sale of quoted investments held for sale 396,639 19,201 - -

Acquisition of quoted investments held for sale (650,719) (211,958) - -Proceeds from insurance claim on property, plant and equipment - 30,000 - -Proceeds from / (purchase of) short term investments (net) 2,664,055 (3,801,998) (663,010) -(Purchase) / disposal of other investments (net) (3,377,237) 438,943 (502,299) 947,727

Net cash flow from (used in) investing activities (4,468,786) (5,823,496) 54,902 (1,488,478)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIESProceeds from issue of shares 1,289,107 797,292 1,289,107 797,292Proceeds from minority on issue of rights in subsidiaries 3,176 1,692,237 - -Direct cost on issue of shares (24,557) (33,674) - -Dividend paid to equity holders of parent (2,488,162) (1,224,187) (2,488,162) (1,224,187)Dividend paid to minority shareholders (281,323) (240,094) - -Proceeds from long term borrowings 227,330 684,000 - -Repayment of long term borrowings (5,598,409) (2,371,809) (3,118,042) (1,172,000)Proceeds from short term borrowings (net) 82,000 60,000 - -

Net cash flow used in financing activities (6,790,838) (636,235) (4,317,097) (1,598,895)

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (2,758,347) 3,025,340 (855,821) 106,452

CASH AND CASH EQUIVALENTS AT THE BEGINNING 14,775,191 11,713,071 10,248,932 10,142,480

CASH AND CASH EQUIVALENTS AT THE END 12,016,844 14,738,411 9,393,111 10,248,932

ANALYSIS OF CASH AND CASH EQUIVALENTSFavourable balancesShort term investments 11 13,808,334 14,301,590 9,408,239 10,177,965Cash in hand and at bank 2,112,626 3,013,164 19,382 82,154Unfavourable balances Bank overdrafts (3,904,116) (2,576,343) (34,510) (11,187)

Total cash and cash equivalents as previously reported 12,016,844 14,738,411 9,393,111 10,248,932Effect of exchange rate changes - 36,780 - -

Cash and cash equivalents restated 12,016,844 14,775,191 9,393,111 10,248,932

Figures in brackets indicate deductions. The accounting policies and notes as set out in pages 92 to 138 form an integral part of these financial statements.



Group CompanyFor the year ended 31st March 2011 2010 2011 2010

In Rs.'000s

A Profit before working capital changesProfit before tax 10,628,961 6,537,555 5,985,312 4,677,667

Adjustments for:Interest income (2,747,650) (2,946,331) (757,847) (1,206,484)Dividend income (62,599) (43,951) (3,500,955) (3,573,576)Finance expenses 796,074 1,370,156 379,499 716,629Change in fair value of investment property (467,764) - - -Share of results of associates (2,640,911) (2,555,867) - -Profit on sale of non-current investments (1,795,069) (105,667) (2,172,441) (102,536)Depreciation of property, plant and equipment 1,700,095 1,736,853 42,391 102,742Derecognition / impairment losses onproperty, plant and equipment and non-current assets 49,689 20,955 - 3,018

(Profit) / loss on sale of property, plant and equipment 57,929 (25,053) (1,014) (101)Profit on sale of investment property - - (26,200) -

Gain on sale of rights in subsidiaries - (946,515) - (750,975)Profit on sale of investments held for sale - (9,109) - (19,508)

Amortisation / depreciation of leaseholdproperty and other non-current assets 375,171 314,303 - -

Amortisation / impairment of intangible assets 234,023 226,849 11,170 5,719 Amortisation of other deferred liabilities (512) (512) - -Gratuity provision and related costs 244,668 191,695 15,720 19,714Gain on disposal of quoted investments held for sale (297,268) (9,992) - -Increase in market value of quoted investments held for sale (186,042) (208,642) - -Unrealised (gain) / loss on foreign exchange (net) (286,925) (132,393) (231,354) (103,596)Proceeds from insurance claim on property, plant and equipment - (30,000) - -Unrealised profits 101 (4,981) - -Negative goodwill on acquisitions - (40,113) - -

5,601,971 3,339,240 (255,719) (231,287)



A t t r i b u t a

b l e t o e q u i t y h o l d e r s o f p a r e n t

G R O U P

S t a t e d

R e v a l u a t i o n

E x c h a n g e

O t h e r

O t h e r

A c c u m u l a t e d

T o t a l

M i n o r i t y

T o t a l

I n R s . ' 0

0 0 s

c a p i t a l

r e s e r v e

t r a n s l a t i o n

c a p i t a l

r e v e n u e

p

r o f i t

i n t e r e s t

e q u i t y

r e s e r v e

r e s e r v e s

r e s e r v e s

A s a t 1 A p r i l 2 0

0 9

2 2 , 5

2 5 , 1

0 8

5 , 5

1 7 , 7

3 6

1 , 4

9 3 , 2 2 2

4 2 5 , 7

6 5

5 , 5

1 7 , 9

6 3

1 0 , 0

2 6 , 6

6 2

4 5 , 5

0 6 , 4

5 6

4 , 9

6 0 , 3

0 9

5 0 , 4 6 6 , 7

6 5

S h a r e o p t i o n s e

x e r c i s e d

7 9 7 , 2

9 2

-

-

-

-

-

7 9 7 , 2

9 2

-

7 9 7 , 2

9 2

D i r e c t c o s t o n i s s u e o f s h a r e s

-

-

-

-

-

( 2 7 , 9

1 6 )

( 2 7 , 9

1 6 )

( 5 , 7

5 8 )

( 3 3 , 6

7 4 )

C u r r e n c y t r a n s l a t i o n d i f f e r e n c e s

-

-

( 4 2 , 6 7 2

)

-

-

-

( 4 2 , 6

7 2 )

( 4 , 9

1 7 )

( 4 7 , 5

8 9 )

R e s e r v e d d u r i n g t h e y e a r

-

-

-

-

3 0 , 0

0 0

( 3 0 , 0

0 0 )

-

-

-

N e t g a i n / ( l o s s ) r e c o g n i s e d d i r e c t l y i n e q u i t y

S u r p l u s o n r e v

a l u a t i o n

-

2 7 6 , 7

1 8

-

-

-

-

2 7 6 , 7

1 8

3 8 , 8

9 8

3 1 5 , 6

1 6

A c q u i s i t i o n s , d

i s p o s a l s a n d c h a n g e s i n h o l d i n g

-

-

-

-

-

( 1 1 )

( 1 1 )

1 , 3

5 6 , 0

0 9

1 , 3 5 5 , 9

9 8

A s s o c i a t e c o m

p a n y s h a r e o f n e t a s s e t s

-

-

( 3 2 , 6 2 9

)

2 , 6

0 0

-

( 7 , 5

0 2 )

( 3 7 , 5

3 1 )

-

( 3 7 , 5

3 1 )

W r i t e o f f / t r a n

s f e r s

-

( 6 7 , 1

2 8 )

-

-

-

4 5 , 5

0 8

( 2 1 , 6

2 0 )

( 2 , 0

5 3 )

( 2 3 , 6

7 3 )

P r o f i t f o r t h e y e a r

-

-

-

-

-

5 , 2

0 1 , 4

9 1

5 , 2

0 1 , 4

9 1

3 5 0 , 8

2 4

5 , 5 5 2 , 3

1 5

F i n a l d i v i d e n d p

a i d - 2 0 0 8 / 0 9

-

-

-

-

-

( 6 1 1 , 3

5 3 )

( 6 1 1 , 3

5 3 )

-

( 6 1 1 , 3

5 3 )

I n t e r i m d i v i d e n d

p a i d - 2 0 0 9 / 1 0

-

-

-

-

-

( 1 , 2

3 2 , 2

8 9 )

( 1 , 2

3 2 , 2

8 9 )

-

( 1 , 2 3 2 , 2

8 9 )

S u b s i d i a r y d i v i d

e n d t o m i n o r i t y s h a r e h o l d e r s

-

-

-

-

-

2 3 , 7

0 6

2 3 , 7

0 6

( 2 6 3 , 8

0 0 )

( 2 4 0 , 0

9 4 )

A s a t 3 1 M a r c h

2 0 1 0

2 3 , 3

2 2 , 4

0 0

5 , 7

2 7 , 3

2 6

1 , 4

1 7 , 9 2 1

4 2 8 , 3

6 5

5 , 5

4 7 , 9

6 3

1 3 , 3

8 8 , 2

9 6

4 9 , 8

3 2 , 2

7 1

6 , 4

2 9 , 5

1 2

5 6 , 2 6 1 , 7

8 3

S h a r e o p t i o n s e

x e r c i s e d

1 , 2

8 9 , 1

0 7

-

-

-

-

-

1 , 2

8 9 , 1

0 7

-

1 , 2 8 9 , 1

0 7

D i r e c t c o s t o n i s s u e o f s h a r e s

-

-

-

-

-

( 2 0 , 8

6 1 )

( 2 0 , 8

6 1 )

( 3 , 6

9 6 )

( 2 4 , 5

5 7 )

C u r r e n c y t r a n s l a t i o n d i f f e r e n c e s

-

-

( 1 7 1 , 3 3 9

)

-

-

-

( 1 7 1 , 3

3 9 )

( 3 3 , 4

1 2 )

( 2 0 4 , 7

5 1 )

N e t g a i n / ( l o s s ) r e c o g n i s e d d i r e c t l y i n e q u i t y

S u r p l u s o n r e v a l u a t i o n

-

2 , 4

4 5 , 6

6 0

-

-

-

-

2 , 4

4 5 , 6

6 0

4 2 1 , 3

3 7

2 , 8 6 6 , 9

9 7

A c q u i s i t i o n s , d i s p o s a l s a n d c h a n g e s i n h o l d i n g

-

-

-

-

-

-

-

3 0 6 , 9

3 4

3 0 6 , 9

3 4

A s s o c i a t e c o m

p a n y s h a r e o f n e t a s s e t s

-

-

( 2 2 5 , 5 2 1

)

-

-

( 2 2 5 , 5

2 1 )

-

( 2 2 5 , 5

2 1 )

W r i t e o f f / t r a n

s f e r s

-

( 1 0 6 , 1

0 1 )

-

-

-

6 1 , 2

0 9

( 4 4 , 8

9 2 )

( 8 0 0 )

( 4 5 , 6

9 2 )

D e f e r r e d t a x i m

p a c t d u e t o r e d u c t i o n i n t a x r a t e

-

4 4 , 1

0 6

-

-

-

-

4 4 , 1

0 6

1 3 , 3

9 7

5 7 , 5

0 3

P r o f i t f o r t h e y e a r

-

-

-

-

-

8 , 2

4 5 , 5

8 5

8 , 2

4 5 , 5

8 5

8 1 7 , 5

7 5

9 , 0 6 3 , 1

6 0

F i n a l d i v i d e n d p

a i d - 2 0 0 9 / 1 0

-

-

-

-

-

( 6 1 9 , 8

6 7 )

( 6 1 9 , 8

6 7 )

-

( 6 1 9 , 8

6 7 )

I n t e r i m d i v i d e n d

- 2 0 1 0 / 1 1

-

-

-

-

-

( 1 , 2

4 8 , 8

4 0 )

( 1 , 2

4 8 , 8

4 0 )

-

( 1 , 2 4 8 , 8

4 0 )

S u b s i d i a r y d i v i d

e n d t o m i n o r i t y s h a r e h o l d e r s

-

-

-

-

-

6 1 , 3

0 4

6 1 , 3

0 4

( 3 4 2 , 6

2 7 )

( 2 8 1 , 3

2 3 )

A s a t 3 1 M a r c h

2 0 1 1

2 4 , 6

1 1 , 5

0 7

8 , 1

1 0 , 9

9 1

1 , 0

2 1 , 0 6 1

4 2 8 , 3

6 5

5 , 5

4 7 , 9

6 3

1 9 , 8

6 6 , 8

2 6

5 9 , 5

8 6 , 7

1 3

7 , 6

0 8 , 2

2 0

6 7 , 1 9 4 , 9

3 3

D e t a i l s o f o t h e r

r e v e n u e r e s e r v e s h a v e b e e n d i s c l o s e d i n N o t e 1 4 .

F i g u r e s i n b r a c k e t s i n d i c a t e d e d u c t i o n s .

T h e a c c o u n t i n g

p o l i c i e s a n d n o t e s a s s e t o u t i n p a g e s 9 2 t o

1 3 8 f o r m a n i n t e g r a l p a r t o f t h e s e f i n a n c i a l s t a

t e m e n t s .

STATEMENT OF CHANGES IN EQUITY




COMPANY Stated General Accumulated Total

capital reserve profit equity

In Rs.'000s

As at 1 April 2009 22,525,108 4,194,322 2,333,325 29,052,755

Share options exercised 797,292 - - 797,292

Profit for the year - - 4,661,059 4,661,059

Final dividend paid - 2008/09 - - (611,353) (611,353)

Interim dividend paid - 2009/10 - - (1,232,289) (1,232,289)

As at 31 March 2010 23,322,400 4,194,322 5,150,742 32,667,464

Share options exercised 1,289,107 - - 1,289,107

Profit for the year - - 5,962,903 5,962,903

Final dividend paid - 2009/10 - - (619,867) (619,867)

Interim dividend - 2010/11 - - (1,248,840) (1,248,840)

As at 31 March 2011 24,611,507 4,194,322 9,244,938 38,050,767

Figures in brackets indicate deductions.




1. CORPORATE INFORMATION

John Keells Holdings PLC. is a public limited liability company

incorporated and domiciled in Sri Lanka and listed on theColombo Stock Exchange. The registered office and principal

place of business of the company is located at 130, Glennie

Street, Colombo 2.

Ordinary shares of the company are listed on the Colombo Stock

Exchange. Global depository receipts (GDRs) of John Keells

Holdings PLC. are listed on the Luxembourg Stock Exchange.

In the annual report of the Board of directors and in the financial

statements, “the company” refers to John Keells Holdings PLC.

as the holding company and “the group” refers to the companies

whose accounts have been consolidated therein. The financial

statements for the year ended 31 March 2011 were authorised forissue by the directors on 20 May 2011.

John Keells Holdings PLC became the holding company of the

group during the financial year ended 31 March 1986. The

principal activities of the group are stated in the annual report of

the Board of directors.

1.2. BASIS OF PREPARATION

The consolidated financial statements have been prepared on an

accrual basis and under the historical cost convention unless

stated otherwise.

The consolidated financial statements are presented in Sri Lankan

Rupees, which is the group’s functional and presentation currency

and all values are rounded to the nearest rupees thousand

(Rs.’000) except when otherwise indicated.

The significant accounting policies are discussed in note 1.3

below.

Statement of compliance

The balance sheet, statement of income, statement of changes in

equity and the cash flow statement, together with the accounting

policies and notes (the ”financial statements”) have been prepared

in compliance with the Sri Lanka Accounting Standards (SLAS)

issued by the Institute of Chartered Accountants of Sri Lanka and

the requirement of the Companies Act No. 7 of 2007.

Basis of consolidation

The consolidated financial statements comprise the financial

statements of the company and its subsidiaries as at 31st March

2011. The financial statements of the subsidiaries are prepared in

compliance with the group’s accounting policies unless stated

otherwise.

All intra group balances, income and expenses and unrealised

gains and losses and dividends resulting from Intra group

transactions are eliminated in full.

Subsidiaries are fully consolidated from the date of acquisition orincorporation, being the date on which the group obtains control

and continue to be consolidated until the date that such control

ceases.

The financial statements of the subsidiaries are prepared for the

same reporting period as the parent company, which is 12 months

ending 31 March, using consistent accounting policies.

Subsidiaries

Subsidiaries are those enterprises controlled by the parent. Control

exists when the parent holds more than 50% of the voting rights

or otherwise has a controlling interest.

Subsidiaries consolidated have been listed in the group directory.

The following companies, with equity control less than 50%, have

been consolidated as subsidiaries based on the power to govern

the financial and operating policies of those entities.

DHL Keells (Pvt) Limited 50.00 Trans-ware Logistics (Pvt) Limited 50.00

Mack Air Services Maldives (Pte) Limited 49.00

Tea Smallholder Factories PLC 37.62

The following subsidiaries have been incorporated outside Sri

Lanka:

Country of

Incorporation Name

India John Keells Air Services India (Pvt) Ltd

John Keells Foods India (Pvt) Ltd

John Keells Logistics India (Pvt) Ltd

Serene Holidays (Pvt) Ltd

Mauritius Auxicogent Alpha (Pvt) Ltd

Auxicogent Holdings (Pvt) Ltd

Auxicogent International (Pvt) Ltd

Auxicogent Investments Mauritius (Pvt) Ltd

John Keells Hotels Mauritius (Pvt) Ltd

John Keells Holdings Mauritius (Pvt) Ltd

Keells Food Products Mauritius (Pvt) Ltd

Republic of

Maldives Fantasea World Investments (Pte) Ltd

John Keells Maldivian Resorts (Pte) Ltd

Mack Air Services Maldives (Pte) Ltd Tranquility (Pte) Ltd

Travel Club (Pte) Ltd

Singapore John Keells Singapore (Pte) Ltd

United Kingdom John Keells Computer Services (UK) Ltd

USA Auxicogent International US Inc.

Canada Auxicogent International Canada Inc.

The total profits and losses for the year of the company and of itssubsidiaries included in consolidation and all assets and liabilities

of the company and of its subsidiaries included in consolidation

are shown in the consolidated income statement and balance

sheet respectively.

NOTES TO THE FINANCIAL STATEMENTS




Minority interest which represents the portion of profit or loss and

net assets not held by the group, are shown as a component of

profit for the year in the income statement and as a componentof equity in the consolidated balance sheet, separately from

parent’s shareholders’ equity.

The consolidated cash flow statement includes the cash flows of

the company and its subsidiaries.

1.3. ACCOUNTING POLICIES

1.3.1 CHANGES IN ACCOUNTING POLICIES

The accounting policies adopted are consistent with those of the

previous financial year.

Comparative informationPrevious year’s figures and phrases have been re-arranged,

wherever necessary, to conform to the current year’s presentation.

1.3.2 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND

ASSUMPTIONS

The preparation of the financial statements of the group require

the management to make judgements, estimates and

assumptions, which may affect the amounts of income,

expenditure, assets, liabilities and the disclosure of contingent

liabilities, at the end of the reporting period. In the process of

applying the group’s accounting policies the key assumptions

made relating to the future and the sources of estimation at the

reporting date together with the related judgements that have asignificant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year are

discussed below.

Revaluation of property, plant and equipment and investment

properties

The group measures land and buildings at revalued amounts with

changes in fair value being recognised in the statement of equity.

In addition, it carries its investment properties at fair value, with

changes in fair value being recognised in the income statement.

The group engaged independent valuation specialists to determine

fair value of investment properties and certain identified land and

buildings as at 31 March 2011.

The valuer has used valuation techniques such as market values

and discounted cash flow methods where there was lack of

comparable market data available based on the nature of the

property.

The determined fair values of investment properties, using

investment method, are most sensitive to the estimated yield as

well as the long term occupancy rate. The methods used to

determine the fair value of the investment properties, are further

explained in Note 4.

Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash

generating unit exceeds its recoverable amount, which is the

higher of its fair value less costs to sell and its value in use (VIU).

The fair value less costs to sell calculation is based on available

data from an active market, in an arm’s length transaction, of

similar assets or observable market prices less incremental costs

for disposing of the asset. The value in use calculation is basedon a discounted cash flow model. The cash flows are derived from

the budget for the next five years and do not include restructuring

activities that the group is not yet committed to or significant future

investments that will enhance the asset’s performance of the cash

generating unit being tested. The recoverable amount is most

sensitive to the discount rate used for the discounted cash flow

model as well as the expected future cash inflows and the growth

rate used for extrapolation purposes. The key assumptions used

to determine the recoverable amount for the different cash

generating units, are further explained in Note 5.

Taxes

Uncertainties exist with respect to the interpretation of complextax regulations and the amount and timing of future taxable

income. Given the wide range of business relationships and the

long-term nature and complexity of existing contractual

agreements, differences arising between the actual results and the

assumptions made, or future changes to such assumptions, could

necessitate future adjustments to tax income and expense already

recorded. Accordingly based on such reasonable estimates the

group establishes the provisions to be made during the financial

year.

Deferred tax assets are recognised for all unused tax losses to the

extent that it is probable that taxable profit will be available against

which the losses can be utilised. Significant management

judgement is required to determine the amount of deferred taxassets that can be recognised, based upon the likely timing and

the level of future taxable profits together with future tax planning

strategies.

The group has tax losses carry forward amounting to Rs.5,287

million (2010 - Rs.5,287 million). These losses relate to subsidiaries

that have a history of losses that do not expire and may not be

used to offset other tax liabilities and where the subsidiary has no

taxable temporary differences nor any tax planning opportunities

available that could partly support the recognition of these losses

as deferred tax assets.

Further details on taxes are disclosed in Note 29.

Deferred tax for tax holiday companies

For group companies under BOI tax holidays, deferred tax during

the tax holiday period has been recognised for temporary

differences, when reversals of such differences extend beyond the

tax exemption period, taking into account the requirements of

SLAS 14 and The Institute of Chartered Accountants of Sri Lanka

(ICASL) council ruling on deferred tax.

Employee benefit liability

The employee benefit liability of listed companies with more than

100 employees and Jaykay Marketing Services (Pvt) Ltd. is based

on the actuarial valuation carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries. The actuarial

valuations involve making assumptions about discount rates and

future salary increases. The complexity of the valuation, the

underlying assumptions and its long term nature, a defined benefit




obligation are highly sensitive to changes in these assumptions.

The employee benefit liability of all other companies in the group

is based on the gratuity formula in Appendix E of SLAS 16 -Employee Benefits. All assumptions are reviewed at each reporting

date. Details of the key assumptions used in the estimates are

contained in Note 18 on page 123.

Valuation of insurance contract liabilities and investment contract

liabilities – Union Assurance PLC

Life insurance contracts

The liability for life insurance contracts is based on current

assumptions or on assumptions established at inception of the

contract, incorporating regulator recommended minimum

requirements.

The main assumptions used relate to mortality, morbidity,investment returns and discount rates.

Industry and company experience on mortality and morbidity is

considered, adjusted when appropriate to reflect the product

characteristics, target markets and own claims severity and

frequency experiences.

Discount rates are based on current and historical rates, adjusted

for regulator recommended basis.

The carrying value at the balance sheet date of life insurance

contract liabilities is Rs.12.66 billion (2010 – Rs.10.24 billion).

Non-life insurance (which comprises general insurance and

healthcare) contract liabilities

For non-life insurance contracts, estimates have to be made for

the expected ultimate cost of claims reported at the balance sheet

date and consequently for the expected ultimate cost of claims

incurred but not yet reported at the balance sheet date (IBNR). It

can take a significant period of time before the reported values

near the ultimate claims cost, and so for some type of policies,

IBNR claims form the majority of the balance sheet liability.

The ultimate cost of outstanding claims is estimated by using a

range of standard actuarial claims projection techniques, such as

the Chain Ladder and Bornheutter-Ferguson methods.

The main assumption underlying these techniques is that a

company’s past claims development experience is representative

of the projected future claims development and hence the ultimate

claims costs. As such, these methods extrapolate the

development of paid and reported losses, average costs per claim

and numbers of claims based on the observed development of

earlier years and expected loss ratios. Historical claims

development is analysed by accident years, for each significant

business line and claim type. Large claims are usually separately

addressed, either by being reserved based on the loss adjuster

estimates or separately projected in order to reflect their future

development. In most cases, no explicit assumptions are made

regarding future rates of claims inflation or loss ratios, instead, theassumptions used are those implicit in the historical claims

development data on which the projections are based. Additional

qualitative judgement is used to assess the extent to which past

trends may not apply in future, (for example to reflect one-off

occurrences, changes in external or market factors such as public

attitudes to claiming, economic conditions, levels of claimsinflation, judicial decisions and legislation, as well as internal factors

such as portfolio mix, policy features and claims handling

procedures). This judgement is used in order to arrive at the

estimated ultimate cost of claims that presents the likely outcome

from the range of possible outcomes, taking account of all the

uncertainties involved.

The carrying value at the balance sheet date of non-life insurance

contract liabilities is Rs.2.82 billion (2010 – Rs.2.71 billion).

1.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.4.1. Buiness combinations & goodwill

Acquisitions of subsidiaries are accounted for using the purchase

method of accounting. The purchase method of accounting

involves allocating the cost of the business combination to the fair

value of the assets acquired and liabilities and contingent liabilities

assumed at the date of acquisition.

When the group acquires a business, it assesses the financial

assets and liabilities assumed for appropriate classification and

designation in accordance with the contractual terms, economic

circumstances and pertinent conditions as at the acquisition date.

Goodwill is initially measured at cost being the excess of the

consideration transferred over the group’s net identifiable assets

acquired and liabilities assumed. If this consideration is lower than

the fair value of the net assets of the subsidiary acquired, the

difference is recognised in the income statement as negative

goodwill.

After initial recognition, goodwill is measured at cost less any

accumulated impairment losses. Goodwill is reviewed for

impairment, annually or more frequently if events or changes in

circumstances indicate that the carrying value maybe be impaired.

For the purpose of impairment testing, goodwill acquired in a

business combination is, from the acquisition date, allocated to

each of the group’s cash generating units that are expected to

benefit from the combination, irrespective of whether other assetsor liabilities of the acquiree are assigned to those units.

Impairment is determined by assessing the recoverable amount

of the cash-generating unit to which the goodwill relates. Where

the recoverable amount of the cash generating unit is less than

the carrying amount, an impairment loss is recognised. The

impairment loss is allocated first to reduce the carrying amount of

any goodwill allocated to the unit and then to the other assets pro-

rata to the carrying amount of each asset in the unit.

Goodwill and fair value adjustments arising on the acquisition of a

foreign operation are treated as assets and liabili ties of the foreign

operation and translated at the closing rate.

Where goodwill forms part of a cash-generating unit and part of

the operation within that unit is disposed of, the goodwill

associated with the operation disposed of is included in the

NOTES TOTHE FINANCIAL STATEMENTS




carrying amount of the operation when determining the gain or

loss on disposal of the operation. Goodwill disposed of in this

circumstance is measured based on the relative values of theoperation disposed of and the portion of the cash-generating unit

retained.

1.4.2 Interest in Joint venture

A joint venture is a jointly controlled entity, whereby the group and

other parties have a contractual arrangement that establishes joint

control over the economic activities of the entity.

The group recognises its interest in the joint venture using the

proportionate consolidation method until the date on which the

group ceases to have joint control. The group’s share of each of

the assets, liabilities, income and expenses of the joint venture are

combined with similar items, line by line, in the consolidatedfinancial statements. The financial statements of the joint venture

are aligned to the group accounting policies.

The gains or losses arising from transactions between group and

the joint venture are recognised based on the substance of the

transactions. The group’s share of unrealised gain on asset

purchases is not recognised until such assets are resold to a third

party.

Information Systems Associates (a joint venture) has been

incorporated in United Arab Emirates.

Financial statements of joint ventures are proportionately

consolidated using their respective 12 month financial reporting

period.

In the case of joint ventures where the reporting dates are different

to group reporting dates, adjustments are made for any significant

transactions or events upto 31 March.

1.4.3. Investment in an associate

Associates are those investments over which the group has

significant influence and holds 20% to 50% of the equity and

which are neither subsidiaries nor joint ventures of the group.

The group ceases to use the equity method of accounting on the

date from which it no longer has significant influence in theassociate.

Associate companies of the group which have been accounted

for under the equity method of accounting are;

Maersk Lanka (Pvt) Ltd.

Nations Trust Bank PLC.

South Asia Gateway Terminals (Pvt) Ltd.

AuxiCogent BPO Solutions (Pvt) Limited (Previously known as

Quatrro Business Support Services (Pvt) Ltd).

Quatrro FPO Solutions (Pvt) Limited (Previously known as Quatrro

Finance & Accounting Solutions (Pvt) Ltd).

Central Hospital (Private) Ltd.

All associates are incorporated in Sri Lanka, except for AuxiCogent

BPO Solutions (Pvt) Limited and Quatrro FPO Solutions (Pvt) Ltd.

which are incorporated in India.

The investments in associates are carried in the balance sheet at

cost plus post acquisition changes in the group’s share of net

assets of the associates. Goodwill relating to an associate isincluded in the carrying amount of the investment and is neither

amortised nor individually tested for impairment. After application

of the equity method, the group determines whether it is necessary

to recognise any additional impairment loss with respect to the

group’s net investment in the associate. The group determines at

each reporting date whether there is any objective evidence that

the investment in the associate is impaired. If this is the case the

group calculates the amount of impairment as the difference

between the recoverable amount of the associate and its carrying

value and recognises the amount in the income statement.

The income statement reflects the share of the results of

operations of the associate. Changes, if any, recognised directly

in the equity of the associate, the group recognises its share and

discloses this, when applicable in the statement of changes in

equity. Unrealised gains and losses resulting from transactions

between the group and the associate are eliminated to the extent

of the interest in the associate.

The group ceases to recognise further losses when the group’s

share of losses in an associate equals or exceeds the interest in

the undertaking, unless it has incurred obligations or made

payments on behalf of the entity.

The accounting policies of associate companies conform to those

used for similar transactions of the group. Accounting policies that

are specific to the business of associate companies are discussedin note 1.5.

Equity method of accounting has been applied for associate

financial statements using their respective 12 month financial

period.

In the case of associates, where the reporting dates are different

to group reporting dates, adjustments are made for any significant

transactions or events upto 31 March.

1.4.4 Foreign currency translation

Foreign currency transactions and balances

The consolidated financial statements are presented in Sri Lankarupees, which is the company’s functional and presentation

currency.

The functional currency is the currency of the primary economic

environment in which the entities of the group operate.

All foreign exchange transactions are converted to functional

currency, at the rates of exchange prevailing at the time the

transactions are effected.

Monetary assets and liabilities denominated in foreign currency are

retranslated to functional currency equivalents at the exchange

rate prevailing at the balance sheet date. Non-monetary assetsand liabilities are translated using exchange rates that existed

when the values were determined. The resulting gains and losses

are accounted for in the income statement.




Foreign operations

The balance sheet and income statement of overseas subsidiaries

and joint ventures which are deemed to be foreign operations aretranslated to Sri Lanka rupees at the rate of exchange prevailing

as at the balance sheet date and at the average annual rate of

exchange for the period respectively.

The exchange differences arising on the translation are taken

directly to a separate component of equity. On disposal of a foreign

entity, the deferred cumulative amount recognised in equity relating

to that particular foreign operation is recognised in the income

statement.

The exchange rates applicable during the period were as follows:

Balance Sheet Income StatementAverage rate

2010/11 2009/10 2010/11 2009/10

Rs. Rs. Rs. Rs.

Singapore dollar 87.54 81.32 84.21 80.60

Pound sterling 177.83 171.89 174.39 183.56

US dollar 110.40 114.00 112.13 115.02

Canadian dollar 113.67 111.87 110.30 105.62

Indian rupee 2.48 2.52 2.47 2.43

UAE dhiram 30.06 31.04 30.53 31.32

1.4.5 Tax

Current tax

Current tax assets and liabilities for the current and prior periodsare measured at the amount expected to be recovered from or

paid to the taxation authorities. The tax rates and tax laws used

to compute the amount are those that are enacted or substantively

enacted by the balance sheet date in the countries where the

group operates and generates taxable income.

Deferred tax

Deferred tax is provided using the liability method on temporary

differences at the balance sheet date between the tax bases of

assets and liabilities and their carrying amounts for financial

reporting purposes.

Deferred tax liabilities are recognised for all taxable temporarydifferences, except;

• where the deferred tax liability arises from the initial recognition

of goodwill or of an asset or liability in a transaction that is not a

business combination and, at the time of the transaction, affects

neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with

investments in subsidiaries, associates and interests in joint

ventures, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the

temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporarydifferences, and unused tax credits and tax losses carried forward,

to the extent that it is probable that taxable profit will be available

against which the deductible temporary differences and the unused

tax credits and tax losses carried forward can be utilised except;

• where the deferred income tax asset relating to the deductible

temporary difference arises from the initial recognition of an

asset or liability in a transaction that is not a businesscombination and, at the time of the transaction, affects neither

the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with

investments in subsidiaries, associates and interests in joint

ventures, deferred tax assets are recognised only to the extent

that it is probable that the temporary differences will reverse in

the foreseeable future and taxable profit will be available

against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each

balance sheet date and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow all

or part of the deferred tax asset to be utilised. Unrecognised

deferred tax assets are reassessed at each balance sheet date

and are recognised to the extent that it has become probable that

future taxable profit will allow the deferred tax asset to be

recovered.

Deferred tax assets and liabilities are measured at tax rates that

are expected to apply to the year when the asset is realised or

liability is settled, based on the tax rates and tax laws that have

been enacted or substantively enacted as at the balance sheet

date.

Income tax relating to items recognised directly in equity is

recognised in equity and not in the income statement.

Deferred tax assets and deferred tax liabilities are offset, if a legally

enforceable right exists to set off current tax assets against current

tax liabilities and when the deferred taxes relate to the same

taxable entity and the same taxation authority.

Sales tax

Revenues, expenses and assets are recognised net of the amount

of sales tax except:

• where the sales tax incurred on a purchase of a assets or

services is not recoverable from the taxation authority, in which

case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as

applicable; and

• receivables and payables that are stated with the amount of

sales tax included.

The net amount of sales tax recoverable from, or payable to, the

taxation authority is included as part of receivables or payables in

the balance sheet.

1.4.6 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated

depreciation and any accumulated impairment loss.

Land and buildings are measured at fair value less depreciation on

buildings and impairment charged subsequent to the date of the

revaluation.





The carrying values of property plant and equipment are reviewed

for impairment when events or changes in circumstances indicate

that the carrying value may not be recoverable.

Where land and buildings are subsequently revalued, the entire

class of such assets are revalued at fair value on the date of

revaluation. The group has adopted a policy of revaluing assets

every 5 years, except for properties held for rental and occupied

mainly by group companies, which are revalued every 3 years.

When an asset is revalued, any increase in the carrying amount

is credited directly to a revaluation reserve included in the equity

section of the balance sheet, except to the extent that it reverses

a revaluation decrease of the same asset previously recognised

in the income statement, in which case the increase is

recognised in the income statement. Any revaluation deficit that

offsets a previous surplus in the same asset is directly offset

against the surplus in the revaluation reserve and any excess

recognised as an expense. Upon disposal, any revaluation

reserve relating to the particular asset being sold is transferred

to retained earnings.

Accumulated depreciation as at the revaluation date is eliminated

against the gross carrying amount of the asset and the net amount

is restated to the revalued amount of the asset.

Item of property, plant and equipment are derecognised upon

replacement, disposal or when no future economic benefits are

expected from its use. Any gain or loss arising on derecognition

of the asset is included in the income statement in the year theasset is derecognised.

Bottle depreciation of Ceylon Cold Stores PLC.

Returnable glass bottles are reflected at cost less accumulated

depreciation and any impairment loses. Depreciation is

provided over its useful life. The bottle breakages during the

financial year are written off to the income statement at written

down value.

Upon termination of dealership the weighted average cost of

bottles not returned less the deposit is written off to the income

statement.

Depreciation

Depreciation is calculated by using a straight-line method on the

cost or valuation of all property, plant and equipment, other than

freehold land, in order to write off such amounts over the estimated

useful economic life of such assets.

The estimated useful life of assets is as follows;

Assets Years

Buildings (other than hotels) 50

Hotel buildings upto 75

Plant and machinery 10 - 20

Equipment 3 - 8

Furniture and fittings 2 - 15Motor vehicles 4 – 10

Laboratory equipment 10

Returnable containers 5

The asset’s residual values and useful lives are reviewed, and

adjusted if appropriate, at each financial year end.

Upon major inspection, the cost is recognised in the carrying

amount of the plant and equipment if the recognition criteria are

satisfied.

1.4.7 Leases

Finance lease

Property, plant and equipment on finance leases, which effectively

transfer to the group substantially all the risk and benefits incidental

to ownership of the leased items, are capitalised and disclosed as

finance leases at their cash price and depreciated over the period

the group is expected to benefit from the use of the leased assets.

The corresponding principal amount payable to the lessor isshown as a liability. Lease payments are apportioned between the

finance charges and reduction of the lease liability so as to achieve

a constant rate of interest on the outstanding balance of the

liability. The interest payable over the period of the lease is

transferred to an interest in suspense account. The interest

element of the rental obligations pertaining to each financial year

is charged to the income statement over the period of lease.

The cost of improvements to buildings on leasehold land is

capitalised, disclosed as leasehold improvements, and

depreciated over the unexpired period of the lease or the

estimated useful life of the improvements, whichever is shorter.

Operating leases

Leases, where the lessor effectively retains substantially all of the

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 income

statement on a straight-line basis over the term of the lease.

1.4.8 Leasehold property

Prepaid operating lease rentals paid to acquire land use rights are

amortised over the lease term in accordance with the pattern of

benefits provided.

1.4.9 Investment properties

Investment properties are measured initially at cost. The carrying

value of an investment property includes the cost of replacing part

of an existing investment property, at the time that cost is incurred

if the recognition criteria are met, and excludes the costs of day

to day servicing of the investment property. Subsequent to initial

recognition, the investment properties are stated at fair values,

which reflect market conditions at the balance sheet date.

Gains or losses arising from changes in fair value are included in

the income statement in the year in which they arise.

Investment properties are derecognised when disposed, or

permanently withdrawn from use because no future economic

benefits are expected. Any gains or losses on retirement or

disposal are recognised in the income statement in the year of

retirement or disposal.




Transfers are made to or from investment property only when there

is a change in use. For a transfer from investment property to owner

occupied property or inventory (WIP), the deemed cost forsubsequent accounting is the fair value at the date of change in

use. If owner occupied property becomes an investment property

or inventory (WIP) the group accounts for such property in

accordance with the policy stated under property, plant and

equipment up to the date of change in use.

Where group companies occupy a significant portion of the

investment property of a subsidiary, such investment properties

are treated as property, plant and equipment in the consolidated

financial statements, and accounted using group accounting

policy for property, plant and equipment.

1.4.10 Intangible assets

Intangible assets acquired separately are measured on initial

recognition at cost. The cost of intangible assets acquired in a

business combination is the fair value as at the date of acquisition.

Following initial recognition, intangible assets are carried at cost

less any accumulated amortisation and any accumulated

impairment losses.

Internally generated intangible assets, excluding capitalised

development costs, are not capitalised, and expenditure is

charged against income statement in the year in which the

expenditure is incurred.

The useful lives of intangible assets are assessed as either finite

or indefinite lives. Intangible assets with finite lives are amortised

over the useful economic life and assessed for impairment

whenever there is an indication that the intangible asset may be

impaired. The amortisation period and the amortisation method

for an intangible asset with a finite useful life is reviewed at least at

each financial year-end and such changes are treated as

accounting estimates. The amortisation expense on intangible

assets with finite lives is recognised in the income statement.

Intangible assets with indefinite useful lives are not amortised but

tested for impairment annually, or more frequently when an

indication of impairment exists either individually or at the cash-

generating unit level. The useful life of an intangible asset with anindefinite life is reviewed annually to determine whether indefinite

life assessment continues to be supportable. If not, the change in

the useful life assessment from indefinite to finite is made on a

prospective basis.

Present value of acquired in-force business (PVIB)

The present value of future profits on a portfolio of long term life

insurance contracts as at the acquisition date is recognised as an

intangible asset based on a valuation carried out by an

independent actuary. Subsequent to initial recognition, the

intangible asset is carried at cost less accumulated amortisation

and accumulated impairment losses.

The PVIB is amortised over the average useful life of the related

contracts in the portfolio. The amortisation charge and any

impairment losses would be recognised in the consolidated

income statement as an expense.

Purchased software

Purchased software is recognised as intangible assets and is

amortised on a straight line basis over its estimated useful life.

Software license

Software licenses cost is recognised as an intangible asset and

amortised over the period of expected future usage of related ERP

systems.

Research & development costs

Research costs are expensed as incurred. An intangible asset

arising from development expenditure on an individual project is

recognised of as an intangible asset when the group can

demonstate:

• the technical feasibility of completing the intangible asset so

that it will be available for use or sale,

• its intention to complete and its ability to use or sell the asset,

• how the asset will generate future economic benefits,

• the availability of resources to complete the asset,

• the ability to measure reliably the expenditure during

development.

Following initial recognition of the development expenditure of an

asset, the cost model is applied requiring the asset to be carried

at cost less any accumulated amortisation and accumulated

impairment losses

Amortisation of the asset begins when development is complete

and the asset is available for use. It is amortised over the periodof expected future benefit from the use or expected future sales

from the related project. During the period of development, the

asset is tested for impairment annually.

A summary of the policies applied to the group’s intangible assets

is as follows;

life Internally testing

enerated

Present Value 12 Acquired When indicators

of Inforce of impairment

Business arise. The

(PVIB) amortisationmethod is

Purchased 05 Acquired reviewed

Software at each financial

Software 05 Acquired year end.

License

Developed 05 Internally Annually for assets

Software generated not yet in use

and more frequently

when indicators of

impairment arise. The

amortisation method

is reviewed at each

financial year end.

Gains or losses arising from derecognition of an intangible asset

are measured as the difference between the net disposal proceeds

and the carrying amount of the asset and are recognised in the

income statement when the asset is derecognised.





1.4.11Equity investments

All quoted and unquoted securities, which are held as non-current

investments, are valued at cost. All quoted equities held as shortterm investments are stated at market values with the resultant

gain or loss recognised in the income statement. The cost of

investment is the cost of acquisition inclusive of brokerage and

costs of transaction. The carrying amounts of long term

investments are reduced to recognise a decline which is

considered other than temporary, in the value of investments,

determined on an individual investment basis.

In the company’s financial statements, investments in subsidiaries,

joint ventures and associate companies have been accounted for

at cost, net of any impairment losses which are charged to the

income statement. Income from these investments are recognised

only to the extent of dividends received.

1.4.12 Impairment of assets

The group assesses at each reporting date whether there is an

indication that an asset may be impaired. If any such indication

exists, or when annual impairment testing for an asset is required,

the group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash

generating unit’s fair value less costs to sell and its value in use

and is determined for an individual asset, unless the asset does

not generate cash inflows that are largely independent of those

from other assets or groups of assets. Where the carrying amount

of an asset exceeds its recoverable amount, the asset is

considered impaired and is written down to its recoverable

amount. In assessing value in use, the estimated future cash flows

are discounted to their present value using a pre-tax discount rate

that reflects current market assessments of the time value of

money and the risks specific to the asset.

Impairment losses are recognised in the income statement, except

that, impairment losses in respect of property, plant and

equipment are recognised against the revaluation reserve to the

extent that it reverses a previous revaluation surplus.

An assessment is made at each reporting date as to whether there

is any indication that previously recognised impairment losses may

no longer exist or may have decreased. If such indication exists,

the recoverable amount is estimated. A previously recognisedimpairment loss is reversed only if there has been a change in the

estimates used to determine the asset’s recoverable amount since

the last impairment loss was recognised. If that is the case the

carrying amount of the asset is increased to its recoverable

amount. That increased amount cannot exceed the carrying

amount that would have been determined, net of depreciation,

had no impairment loss been recognised for the asset in prior

years. Such reversal is recognised in the income statement unless

the asset is carried at revalued amount, in which case the reversal

is treated as a revaluation increase. After such a reversal the

depreciation charge is adjusted in future periods to allocate the

asset’s revised carrying amount, less any residual value, on a

systematic basis over its remaining useful life. Impairment loss on

goodwill is not reversed.

1.4.13 Inventories

Inventories are valued at the lower of cost and net realisable value.

Net realisable value is the estimated selling price less estimatedcosts of completion and the estimated costs necessary to make

the sale.

The costs incurred in bringing inventories to its present location

and condition, are accounted for as follows;

Raw materials - On a weighted average basis

Finished goods and - At the cost of direct materials, direct

Work-in-progress labour and an appropriate proportion

of fixed production overheads based

on normal operating capacity

Produce inventories - At since realised price

Other inventories - At actual cost

1.4.14 Trade and other receivables

Trade and other receivables are stated at the amounts they are

estimated to realise, net of provisions for bad and doubtful

receivables.

A provision for doubtful debts is made when the debt exceeds 180

days, and collection of the full amount is no longer probable. Bad

debts are written off when identified.

Reinsurance receivable

Reinsurance assets include the balances due from both insuranceand reinsurance companies for paid and unpaid losses and loss

adjustment expenses. Amounts recoverable from reinsurers are

estimated in a manner consistent with the claim liability associated

with the reinsured policy. Reinsurance is recorded gross in the

consolidated balance sheet unless a right to offset exists.

If a reinsurance asset is impaired, the company reduces the

carrying amount accordingly and recognises a loss in the

statement of income. A reinsurance asset is impaired if there is

objective evidence, as a result of an event that occurred after the

initial recognition of the reinsurance asset, that the company may

not receive all amounts due to it under the terms of the contract,

and the event has a reliably measurable impact on the amount

that the company will receive from the reinsurer.

Premiums receivable

Collectability of premiums and other debts are reviewed on an

ongoing basis. Policies issued on debt basis and that are known

to be uncollectible are cancelled and respective gross written

premium is reversed. A provision for doubtful debts is raised when

some doubt as to collection exists.

1.4.15 Short-term investments

Treasury bills and other interest bearing securities held for resale

in the near future to benefit from short-term market movements

are accounted for at cost plus the relevant proportion of the

discounts or premiums.




1.4.16 Cash and cash equivalents

Cash and cash equivalents in the cash flow statement comprise

cash at bank and in hand and short term deposits with a maturityof 3 months or less, net of outstanding bank overdrafts.

1.4.17 Defined benefit plan - gratuity

The liability recognised in the balance sheet is the present value

of the defined benefit obligation at the balance sheet date using

the projected unit credit method. Any actuarial gains or losses

arising are recognised immediately in the income statement.

1.4.18 Defined contribution plan - Employees’ Provident Fund and

Employees’ Trust Fund

Employees are eligible for Employees’ Provident Fund

contributions and Employees’ Trust Fund contributions in line with

respective statutes and regulations. The companies contribute thedefined percentages of gross emoluments of employees to an

approved Employees’ Provident Fund and to the Employees’ Trust

Fund respectively, which are externally funded.

1.4.19 Insurance provision - life

The directors agree to the long term and unit link insurance

business provisions on the recommendation of the actuary

following annual valuation of the life insurance business.

The actuarial valuation takes into account all liabilities including

contingent liabilities and is based on assumptions recommended

by the independent external actuary.

1.4.20 Insurance - general

Insurance provision comprises of reserve for the net unearned

premium, reserve or the deferred acquisition cost (net), reserve for

gross outstanding claims and the incurred but not reported (IBNR)

provision.

Unearned premium, deferred acquisition cost and the reserve for

gross outstanding claims are stated according to the industry

practices where as the IBNR reserve is decided by an independent

external actuary to estimate the outstanding liabilities as of

reporting date.

1.4.21 Government grantsGovernment grants are recognised only when they are received

and all attaching conditions are complied with. When the grant

relates to an expense item, it is recognised as income over the

period necessary to match to the costs, that it is intended to

compensate. Where the grant relates to an asset, the fair value is

credited to a deferred income account and is released to the

income statement over the expected useful life of the relevant

asset by equal annual installments.

1.4.22 Provisions, contingent assets and contingent liabilities

Provisions are recognised when the group has a present obligation

(legal or constructive) as a result of a past event, i t is probable that

an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be

made of the amount of the obligation. Where the group expects

some or all of a provision to be reimbursed, for example under an

insurance contract, the reimbursement is recognised as a separate

asset but only when the reimbursement is virtually certain. Theexpense relating to any provision is presented in the income

statement net of any reimbursement. If the effect of the time value

of money is material, provisions are discounted using a current

pre-tax rate that reflects, where appropriate, the risks specific to

the liability. Where discounting is used, the increase in the provision

due to the passage of time is recognised as a finance cost.

All contingent liabilities are disclosed as a note to the financial

statements unless the outflow of resources is remote.

Contingent assets are disclosed, where inflow of economic benefit

is probable.

1.4.23 Revenue recognition

Revenue is recognised to the extent that it is probable that the

economic benefits will flow to the group, and the revenue and

associated costs incurred or to be incurred can be reliably

measured. Revenue is measured at the fair value of the

consideration received or receivable, net of trade discounts and

value added taxes, after eliminating sales within the group.

The following specific criteria are used for recognition of revenue:

Sale of goods

Revenue from the sale of goods is recognised when the significant

risk and rewards of ownership of the goods have passed to the

buyer with the group retaining neither a continuing managerial

involvement to the degree usually associated with ownership, nor

an effective control over the goods sold.

Rendering of services

Revenue from rendering of services is recognised by reference to

the stage of completion.

General insurance business - Gross written premium

Gross written premium is generally recognised as written upon

inception of the policy. Upon inception of the contract, premiums

are recorded as written and are earned primarily on a pro-rata

basis over the term of the related policy coverage. However, forthose contracts for which the period of risk differs significantly from

the contract period, premiums are earned over the period of risk

in proportion to the amount of insurance protection provided.

Life insurance business - Gross written premium

Premiums from traditional life insurance contracts, including

participating contracts and non participating contracts, are

recognised as revenue when cash is received from the policy

holder.

Turnover based taxes

Turnover based taxes include value added tax, economic service

charge, turnover tax and tourism development levy. Companies inthe group pay such taxes in accordance with the respective

statutes.





Dividend

Dividend income is recognised on a cash basis.

Interest income

Interest income is recognised as interest accrues.

Rental income

Rental income is recognised on an accrual basis over the term of

the lease.

Gains and losses

Net gains and losses of a revenue nature arising from the disposal

of property, plant and equipment and other non-current assets,

including investments, are accounted for in the income statement,

after deducting from the proceeds on disposal, the carrying

amount of such assets and the related selling expenses.

Gains and losses arising from activities incidental to the main

revenue generating activities and those arising from a group of

similar transactions, which are not material are aggregated,

reported and presented on a net basis.

Any losses arising from guaranteed rentals are accounted for in

the year of incurring the same. A provision is recognised if the

projection indicates a loss.

Other income

Other income is recognised on an accrual basis.

1.4.24 Expenditure recognition

Expenses are recognised in the income statement on the basis of

a direct association between the cost incurred and the earning of

specific items of income. All expenditure incurred in the running of

the business and in maintaining the property, plant and equipment

in a state of efficiency has been charged to the income statement.

For the purpose of presentation of the income statement, the

“function of expenses” method has been adopted, on the basis

that it presents fairly the elements of the company and group’s

performance.

Borrowing costs

Borrowing costs are recognised as an expense in the period in

which they are incurred, unless they are incurred in respect of

qualifying assets in which case it is capitalised.

1.5 SIGNIFICANT ACCOUNTING POLICIES THAT ARE SPECIFIC TO

THE BUSINESS OF ASSOCIATE COMPANIES

1.5.1 Nations Trust Bank PLC

Revenue recognition

Interest income from customer advances

In terms of the provisions of the Sri Lanka Accounting Standard

No. 23 on Revenue Recognition and Disclosures in the financialstatements of banks and the guidelines issued by the Central Bank

of Sri Lanka, interest receivable is recognised on an accrual basis.

Interest ceases to be taken into revenue when loans and advances

are classified as non-performing, as specific provisions for possible

loan losses are made on the basis of a continuous review of all

advances to customers, including consumer advances and credit

cards. Thereafter, interest income on these loans and advancesare recognised on cash basis. Interest falling due on non-

performing advances is credited to interest suspense account

which is netted in the balance sheet.

Interest accrued until such advances being classified as non-

performing are also eliminated from interest income and

transferred to interest in suspense. The interest income on non-

performing advances is recognised on a cash basis.

Income on discounting of bills of exchange

Income from discounting of bills of exchange is recognised on a

cash basis.

Income from government and securities purchased under resale

agreements and other securities

Discounts/premium on treasury bills, treasury bonds are amortised

over the period to reflect a constant periodic rate of return. The

coupon interest on treasury bonds is recognised on an accrual

basis. The interest income on securities purchased under resale

agreement and other securities are recognised in the income

statement on a straight-line basis.

Fees and commission income

Fees and commission income comprise mainly of fees receivable

from customers for guarantees, factoring, credit cards and other

services provided by the bank together with foreign and domestictariff. Such income is recognised as revenue as the services are

provided.

Profit or loss on sale of securities

Profit or loss arising from the sale of marketable securities is

accounted for on the date of transaction.

Lease income

The bank follows the finance method of accounting for lease

income.

1.5.2 South Asia Gateway Terminals (Pvt) Ltd

Revenue recognition

Stevedoring revenue is recognised on the berthing time of the

vessel. Storage revenue is recognised on the issue of delivery

advice.

1.6 EMPLOYEE SHARE OPTION PLAN

On 28 June 2004, shareholders approved a third plan, whereby

the company could issue annually nontransferable call share

options, not exceeding in aggregate 2% of the total issued capital

of the company as at the date of granting every award under this

plan, to a total of 5% of the total issued share capital as at the

date of the last award. Approvals of the CSE and SEC have been

obtained for this plan. As at 31 March 2011, the total number of

options granted under this plan, after allowing for bonus issuesand rights issues, was 30,599,744 of which 19,635,972 had been

exercised, 3,157,173 had lapsed and 7,806,599 remain

unexercised.




On 13 December 2007, shareholders approved a fourth plan,

whereby the company could issue non-transferable call share

options, not exceeding in aggregate 0.85% of the shares in issueof the company as at the date of granting the award. Approvals of

the CSE and SEC have been obtained for this plan. As at 31

March 2011, the total number of options granted under this plan,

was 5,405,945 of which 894,575 had been exercised, 233,350

had lapsed and 4,278,020 remain unexercised.

On 2 December 2009, shareholders approved a fifth plan,


options, not exceeding in aggregate 1% of shares in issue of the

company as at the date of granting the award. Approvals of the

CSE and SEC have been obtained for this plan. As at 31 March

2011, the total number of options granted under this plan was

6,126,960 of which 551,337 had been exercised, 19,460 had

lapsed and 5,556,163 remains unexercised.

On 6 December 2010, shareholders approved a sixth plan,


options, not exceeding in aggregate 0.75% of shares in issue of

the company as at the date of granting the award. Approvals of

the CSE and SEC have been obtained for this plan. As at 31

March 2011, the total number of options granted under this plan

was 4,672,823 of which 9,800 had been exercised, 3,200 had

lapsed and 4,659,823 remains unexercised.

Of the 22,300,605 options unexercised and outstanding as at 31

March 2011 (2010 – 27,996,532), 7,806,599 are exercisable

before 27 May 2012, 4,278,020 are exercisable before 24 March2013, 5,556,163 are exercisable before 16 December 2014 and

4,659,823 are exercisable before 8 December 2015.

1.7 EFFECT OF SRI LANKA ACCOUNTING STANDARDS (SLAS)

ISSUED BUT NOT YET EFFECTIVE

The following standards have been issued by the Institute of

Chartered Accountants of Sri Lanka.

a) Sri Lanka Accounting Standard 44 Financial Instruments;

Presentation (SLAS 44)

b) Sri Lanka Accounting Standard 45 Financial Instruments;

Recognition and Measurement (SLAS 45)

c) Sri Lanka Accounting Standard 39 Share Based Payments (SLAS

39)

The effective date of SLAS 44, 45 and 39 was changed during the

year to be effective for financial periods beginning on or after 01

January 2012. These three standards have been amended and

forms a part of the new set of financial reporting standards

mentioned below.

Subsequent to the proposed convergence of Sri Lanka

Accounting Standards with the International Financial Reporting

Standards, the Council of the Institute of Chartered Accountants

of Sri Lanka has adopted a new set of financial reporting standards

that would apply for financial periods beginning on or after 01

January 2012. The application of these financial reporting

standards is substantially different to the prevailing standards.

1.8 SEGMENT INFORMATION

Reporting segments

The group’s internal organisation and management is structured

based on individual products and services which are similar in

nature and process and where the risk and return are similar. The

primary segments represent this business structure.

The secondary segments are determined based on the group’s

geographical spread of operations. The geographical analysis of

turnover and profits are based on location of customers and

assets respectively.

The activities of each of the reported business segments of the

group are detailed in the group directory.

Segment information

Segment information has been prepared in conformity with the

accounting policies adopted for preparing and presenting the

consolidated financial statements of the group.





L a n d a n d

B u i l d i n g s o n

P l a n t a n d

E q u i p m e n t ,

M o t o r v e h i c l e s

R e t u r n a b l e

O t h e r s

C a p i t a l

T o t a l

T o t a l

b u i l d i n g s

l e a s e h o l d

m a c h i n e r y

f u r n i t u r e

F r e

e h o l d

L e a s e h o l d

c o n t a i n e r s

w o r k i n

2 0 1 1

2 0 1 0

I n R s . ' 0

0 0 s

l a n d

a n d f i t t i n g s

p r o g r e s s

2

P R O P E R T Y ,

P L A N T A N D E Q U I P M E N T

2 . 1

G r o u p

C o s t o r

v a l u a t i o n

A t t h e b e g i n n i n g o f t h e y e a r

1 5 , 6

0 7 , 4

2 9

9 , 1 7

3 , 4

9 5

4 , 7

4 3 , 9

9 4

5 , 8

4 8 , 0

4 0

5 5

1 , 0

3 6

3 0 , 8

1 4

-

2 , 5

4 3 , 9

2 9

4 1 7 , 8

1 5

3 8 , 9

1 6 , 5

5 2

3 7 , 6

1 4 , 0

5 1

A d d i t i o n

s

5 6 7 , 0

9 2

7 1 7 , 8

5 1

4 9 9 , 4

6 8

8 5 9 , 0

4 4

7

9 , 9

8 6

-

1 6 8 , 8

2 1

4

7 1 , 5

3 7

1 , 6

1 3 , 9

5 3

4 , 9

7 7 , 7

5 2

1 , 7

8 1 , 5

9 4

D i s p o s a

l s

( 5 7 , 2

4 6 )

( 7 6 , 7

2 7 )

( 9 0 , 5

6 4 )

( 3 0 5 , 9

3 8 )

( 2

7 , 9

8 3 )

-

( 5 4 , 9

1 7 )

( 1

5 9 , 4

9 1 )

( 2 6 5 , 3

7 5 )

( 1 , 0

3 8 , 2

4 1 )

( 5 6 3 , 7

8 6 )

R e v a l u a t i o n s

2 , 6

7 6 , 8

4 2

1 0 9 , 0

1 7

-

-

-

-

-

-

-

2 , 7

8 5 , 8

5 9

3 1 0 , 1

6 7

D e r e c o g

n i t i o n

( 1 , 1

8 2 )

( 1 6 , 5

2 1 )

-

( 1 , 4

0 2 )

-

-

-

( 2 , 5

7 7 )

-

( 2 1 , 6

8 2 )

( 4 3 , 7

5 2 )

T r a n s f e r s t o i n v e s t m e n t

p r o p e r t y / o t h e r s

( 2 , 9

4 1 , 6

6 3 )

( 3 , 7 4

2 , 6

2 2 )

( 2 0 4 , 9

9 8 )

3 5 , 5

3 4

( 5

4 , 7

7 3 )

-

4 6 7 , 1

3 4

1

6 1 , 5

7 8

( 1 , 1

6 5 , 7

9 7 )

( 7 , 4

4 5 , 6

0 7 )

( 9 2 , 3

3 7 )

E x c h a n g

e t r a n s l a t i o n

d i f f e r e n

c e

-

( 1 0 5 , 0

5 8 )

( 1 0 , 4

6 4 )

( 2 2 , 5

2 3 )

( 2 , 4

2 2 )

-

-

1 , 4

4 7

-

( 1 3 9 , 0

2 0 )

( 8 9 , 3

8 5 )

A t t h e e n d o f t h e y e a r

1 5 , 8

5 1 , 2

7 2

6 , 0 5

9 , 4

3 5

4 , 9

3 7 , 4

3 6

6 , 4

1 2 , 7

5 5

5 4

5 , 8

4 4

3 0 , 8

1 4

5 8 1 , 0

3 8

3 , 0

1 6 , 4

2 3

6 0 0 , 5

9 6

3 8 , 0

3 5 , 6

1 3

3 8 , 9

1 6 , 5

5 2

A c c u m u

l a t e d d e p r e c i a t i o n

a n d i m

p a i r m e n t

A t t h e b e g i n n i n g o f t h e y e a r

( 2 0 0 , 5

1 0 )

( 1 , 0 2

3 , 3

7 8 )

( 2 , 1

8 1 , 5

6 3 )

( 3 , 4

1 1 , 4

2 6 )

( 3 4

4 , 2

9 6 )

( 1 6 , 0

2 9 )

-

( 1 , 7

5 0 , 6

8 6 )

-

( 8 , 9

2 7 , 8

8 8 )

( 7 , 6

4 8 , 6

2 9 )

C h a r g e f o r t h e y e a r

( 1 3 1 , 0

9 1 )

( 2 6 3 , 2

0 5 )

( 3 2 1 , 5

6 2 )

( 6 0 0 , 0

7 4 )

( 4

9 , 6

0 1 )

( 5 , 5

5 2 )

( 5 0 , 1

4 7 )

( 2

7 8 , 8

6 3 )

-

( 1 , 7

0 0 , 0

9 5 )

( 1 , 7

3 6 , 8

5 3 )

D i s p o s a

l s

2 2

2 1 , 8

5 1

6 8 , 5

2 0

2 5 9 , 2

8 0

2

5 , 1

1 5

-

2 5 , 2

5 1

1

3 8 , 5

2 7

-

5 3 8 , 5

6 6

4 0 4 , 1

3 8

R e v a l u a t i o n s

2 1 , 1

0 2

4 6 , 2

9 3

-

-

-

-

-

-

-

6 7 , 3

9 5

9 , 7

9 9

I m p a i r m

e n t / d e r e c o g n i t i o n

-

1 0 6

-

7 3 3

-

-

-

3 1 6

-

1 , 1

5 5

2 , 2

3 4

T r a n s f e r s t o i n v e s t m e n t

p r o p e r t y / o t h e r s

( 1 0 , 7

1 5 )

4 5 9 , 8

0 2

8 8 , 0

8 1

1 5 7 , 1

6 8

3

2 , 9

5 0

-

( 1 5 8 , 4

8 1 )

2 3 , 7

9 0

-

5 9 2 , 5

9 5

3 1 , 7

6 9

E x c h a n g

e t r a n s l a t i o n

d i f f e r e n

c e

-

1 4 , 0

2 0

2 , 4

3 5

4 , 6

9 0

1 , 2

9 9

-

-

( 1 , 8

0 3 )

-

2 0 , 6

4 1

9 , 6

5 4

A t t h e e n d o f t h e y e a r

( 3 2 1 , 1

9 2 )

( 7 4 4 , 5

1 1 )

( 2 , 3

4 4 , 0

8 9 )

( 3 , 5

8 9 , 6

2 9 )

( 3 3

4 , 5

3 3 )

( 2 1 , 5

8 1 )

( 1 8 3 , 3

7 7 )

( 1 , 8

6 8 , 7

1 9 )

-

( 9 , 4

0 7 , 6

3 1 )

( 8 , 9

2 7 , 8

8 8 )

C a r r y i n g

v a l u e

A s a t 3 1

M a r c h 2 0 1 1

1 5 , 5

3 0 , 0

8 0

5 , 3 1

4 , 9

2 4

2 , 5

9 3 , 3

4 7

2 , 8

2 3 , 1

2 6

2 1

1 , 3

1 1

9 , 2

3 3

3 9 7 , 6

6 1

1 , 1

4 7 , 7

0 4

6 0 0 , 5

9 6

2 8 , 6

2 7 , 9

8 2

A s a t 3 1

M a r c h 2 0 1 0

1 5 , 4

0 6 , 9

1 9

8 , 1 5

0 , 1

1 7

2 , 5

6 2 , 4

3 1

2 , 4

3 6 , 6

1 4

2 0

6 , 7

4 0

1 4 , 7

8 5

-

7

9 3 , 2

4 3

4 1 7 , 8

1 5

2 9 , 9

8 8 , 6

6 4





Plant and Equipment, Motor Total Total

machinery furniture vehicles 2011 2010

In Rs.'000s and fittings

2.2 Company

Cost

At the beginning of the year 32,495 593,554 57,161 683,210 708,843

Additions - 4,764 -4,764 5,216

Disposals (1,139) (53,414) - (54,553) (9,905)

Transferred to intangible assets - - - - (20,944)

At the end of the year 31,356 544,904 57,161 633,421 683,210

Accumulated depreciation and impairment

At the beginning of the year (25,351) (529,287) (16,957) (571,595) (480,966)

Charge for the year (1,443) (33,284) (7,664) (42,391) (102,742)

Disposals 1,104 53,004 - 54,108 3,735

Transferred to intangible assets - - - - 8,378

At the end of the year (25,690) (509,567) (24,621) (559,878) (571,595)

Carrying value

As at 31 March 2011 5,666 35,337 32,540 73,543

As at 31 March 2010 7,144 64,267 40,204 111,615

Group Company

As at 31st March 2011 2010 2011 2010

In Rs'000s

2.3 Land and building At cost 3,279,507 2,862,024 - -

At valuation 17,565,497 20,695,012 - -

20,845,004 23,557,036 - -

2.4 Carrying value

At cost 11,002,149 9,083,238 73,543 111,615

At valuation 17,616,600 20,890,639 - -

On finance lease 9,233 14,787 - -

28,627,982 29,988,664 73,543 111,615



Property Method of Effective date Property

valuation of valuation valuer

Details of group’s land, building and other properties stated at valuation are indicated below;

Buildings on leasehold land and other properties of Open market value 04 May 2007 Haleen Gouse,

Tranquility (Pte) Ltd. method Incorporated Valuer

Land and building of Open market value 31 March 2008 P B Kalugalagedara,

Whittall Boustead (Pvt) Ltd. method Chartered Valuation

Keells Food Products PLC. Surveyor

Ceylon Cold Stores PLC.

Land of Land and building 31 March 2008 R G Wijesinghe,

Resort Hotels Ltd. method Consultant Valuer

and Assessor

Land and building of Land and building 31 March 2008 R G Wijesinghe,

Kandy Walk Inn Ltd. method Consultant Valuer

Transware Logistics (Pvt) Ltd. and Assessor

Buildings on leasehold land of Land and building 31 March 2008 R G Wijesinghe,

Ceylon Holiday Resorts Ltd. - Bentota Beach Hotel method Consultant Valuer

Habarana Lodge Ltd. and Assessor

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 test Tea 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

Land and building of Contractors (cost) 31 March 2008 A Y Daniel & Son,

Asian Hotels and Properties PLC. Summation basis Incorporated Valuer

Land and building of Land and building 31 March 2009 R G Wijesinghe,

Wirawila Walk Inn Ltd. method Consultant Valuer

and Assessor

Land of Open market value 31 Dec 2009 P B Kalugalagedara,

International Tourists & Hoteliers Ltd. method Chartered Valuation

Surveyor

Land and building of Land and building 31 Dec 2009 R G Wijesinghe,

Trinco Holiday Resorts (Pvt) Ltd. method Consultant Valuer

Trinco walk Inn Ltd. and Assessor

Land and building of Investment method 31 Dec 2009 P B Kalugalagedara,

Union Assurance PLC. Chartered Valuation

Surveyor

Buildings on leasehold land of Land and building 10 June 2010 J M J Fernando,

Ceylon Holiday Resorts Ltd. - Coral Gardens Hotel method Incorporated Valuer



Group

As at 31st March 2011 2010

In Rs.'000s

The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows;

Cost 12,184,417 11,684,192 Accumulated depreciation (2,272,805) (1,658,914)

Carrying value 9,911,612 10,025,278

2.5 Group land and buildings with a carrying value of Rs.639 mn (2010 - Rs.592 mn) have been pledged as security for term loans obtained, details

of which are disclosed in Note 17.3.

2.6 Group property, plant and equipment with a cost of Rs.3,550 mn (2010 - Rs.3,570 mn) have been fully depreciated and continue to be in use

by the group. The cost of fully depreciated assets of the company amounts to Rs.482 mn (2010 - Rs.436 mn).

Group


In Rs.'000s

3 LEASEHOLD PROPERTY

At the beginning of the year 4,576,687 4,775,712

Additions 5,535,669 -

Amortisation for the year (373,922) (150,876)

Exchange gain / (loss) (222,813) (48,149)

At the end of the year 9,515,621 4,576,687

Prepaid lease rentals paid to acquire land use rights have been classified as leasehold property and are amortised over the lease term in accordance

with the pattern of benefits provided.

Land and building of Open market value 31 March 2011 P B Kalugalagedara,

John Keells PLC. method Chartered Valuation

Mackinnons and Keells Financial Services Ltd. Surveyor

Keells Realtors Ltd.

Whittall Boustead Ltd.

JK Properties (Pvt) Ltd.

Buildings on leasehold land of Open market value 31 March 2011 A Y Daniel & Son,

Yala Village (Pvt) Ltd. method Incorporated Valuer

Land of Open market value 31 March 2011 P B Kalugalagedara,

Ceylon Cold Stores PLC.* method Chartered Valuation

Surveyor

* The freehold land of Ceylon Cold Stores PLC at Glennie Street & Justice Akbar Mawatha were revalued as at 31 March 2011 by

Messrs P B Kalugalagedara & Associates - Chartered valuation surveyors. The lands were valued at their open market values, and the surplus

arising from the revaluation was transferred to the revaluation reserve and due to the change in the nature of use, the total freehold land value

was reclassified as invesment property.



Property Method of Effective date Property

valuation of valuation valuer



Property Land extent Lease period Amount

In Rs.'000s (in acres) 2011 2010

3.1 Details of leasehold Property

John Keells Maldivian Resorts (Pte) Ltd.

Chaaya Island Dhonveli, Republic of Maldives - - - 2,194,020

John Keells Warehousing (Pvt) Ltd.

Muthurajawela 6.00 50 years from 19-09-2001 43,468 43,468

Rajawella Hotels Ltd. 10.00 95 years and 10 months from

02-02-2000 35,006 35,420

Tea Smallholder Factories PLC.

Karawita Tea Factory 4.98 50 years from 15-08-1997 10,800 11,091

Tranquility (Pte) Ltd.

Chaaya Island Dhonveli, Republic of Maldives 18.62 18 years from 26-08-2010 7,257,887 -

(Previously owned by John Keells Maldivian Resorts (Pte) Ltd.)

Trans Asia Hotels PLC.

Colombo 7.65 99 years from 07-08-1981 855,876 868,280

Travel Club (Pte) Ltd.

Chaaya Reef Ellaidhoo, Republic of Maldives 13.75 19 years from 03-08-2006 1,235,990 1,344,820

Yala Village (Pvt) Ltd. 10.00 30 years from 27-11-1997 76,594 79,588

9,515,621 4,576,687




Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

4 INVESTMENT PROPERTY

At the beginning of the year 2,334,475 2,329,015 899,000 899,000

Additions / transfers 2,583,927 5,460 - -

Change in fair value during the year 467,764 - - -

Disposals - - (899,000) -

At the end of the year 5,386,166 2,334,475 - 899,000

Freehold property 4,016,475 1,194,460 - 899,000

Leasehold property 1,369,691 1,140,015 - -

5,386,166 2,334,475 - 899,000

Property Method of valuation Valuer

4.1 Valuation details of investment property

Investment properties of the group were valued by a qualified professional valuer as at 31-03-2011, Details of which are as follows;

Freehold property

Asian Hotels and Properties PLC. Investment method P B Kalugalagedera, Chartered Valuation Surveyor

Crescat Boulevard, Colombo 3

Ceylon Cold Stores PLC. - -

Slave Island Complex, Colombo 2*

Tea Smallholder Factories PLC. Open market value P B Kalugalagedera, Chartered Valuation Surveyor

Stores Complex, Peliyagoda

Leasehold property

Trans Asia Hotels PLC. Open market value P B Kalugalagedera, Chartered Valuation Surveyor

Commercial Centre, Colombo 2

* The freehold land of Ceylon Cold Stores PLC at Glennie Street & Justice Akbar Mawatha were revalued as at 31 March 2011 by

Messrs. P B Kalugalagedara & Associates - Chartered valuation surveyors. The lands were valued at their open market values, and the surplus

arising from the revaluation was transferred to the revaluation reserve and due to the change in the nature of use the total freehold land value

was reclassified as invesment property.

Rental income earned from investment property by the group and company amounts to Rs.233 mn (2010 - Rs.236 mn) and Rs.32 mn.

(2010 - Rs.45 mn) respectively. Direct operating expenses incurred by the group and company amounted to Rs.65 mn (2010 - Rs.61 mn) and

Rs.13 mn (2010 - Rs.7 mn) respectively.





G r o u p T o t a l

C o m p a

n y

S

o f t w a r e

2 0 1 1

2 0 1 0

2 0 1 1

2 0 1 0

I n R s . ' 0 0

0 s

D e v e l o p e d

P u r c h a s e d

l i c e n s e s

W I P

P V I B

G o o d w i l l

O t h e r

S o f t w a r e l i c

e n s e s

5

I N T A N G I B L E A S S E T S

C o s t / c a r r y i n g v a l u e

A t t h e b e

g i n n i n g o f t h e y e a r

6 2 , 7

8 4

7 1

, 3 9 4

5 1 , 5

4 7

-

2 , 2 4 9

, 0 0 0

3 1 6 , 5

9 7

4 9 , 5

0 0

2 , 8 0

0 , 8

2 2

2 , 6

6 7 , 6

5 1

5 1 , 5

4 7

-

A d d i t i o n s / t r a n s f e r s

2 3 , 6

3 7

2

, 5 1 5

7 7 , 8

2 6

1 7 , 2

2 6

-

-

-

1 2

1 , 2

0 4

1 6 7 , 8

6 3

1 7 , 4

4 4

5 1 , 5

4 7

I n c r e a s e

i n i n t e r e s t i n s u b s i d i a r i e s

-

-

-

-

-

1 9 4 , 3

4 1

-

1 9

4 , 3

4 1

-

-

-

A d j u s t m e n t d u e t o s a l e o f

n o n - c u r r e n t i n v e s t m e n t s

-

-

-

-

-

( 5 , 3

2 7 )

-

( 5 , 3

2 7 )

( 2 1 , 2

7 2 )

-

-

E x c h a n g e t r a n s l a t i o n d i f f e r e n c e

( 6 8 5 )

-

-

-

-

-

-

( 6 8 5 )

6 7 0

-

-

A t t h e e n

d o f t h e y e a r

8 5 , 7

3 6

7 3

, 9 0 9

1 2 9 , 3

7 3

1 7 , 2

2 6

2 , 2 4 9

, 0 0 0

5 0 5 , 6

1 1

4 9 , 5

0 0

3 , 1 1

0 , 3

5 5

2 , 8

1 4 , 9

1 2

6 8 , 9

9 1

5 1 , 5

4 7

A c c u m u l a t e d a m o r t i s a t i o n

a n d i m p

a i r m e n t

A t t h e b e

g i n n i n g o f t h e y e a r

( 5 , 4

9 3 )

( 3 7

, 6 7 1 )

( 1 4 , 0

9 7 )

-

( 1 8 7

, 4 1 6 )

-

-

( 2 4

4 , 6

7 7 )

( 1 4 9 )

( 1 4 , 0

9 7 )

-

A m o r t i s a

t i o n

( 1 6 , 6

4 3 )

( 1 5

, 9 4 6 )

( 1 4 , 0

1 8 )

-

( 1 8 7

, 4 1 6 )

-

-

( 2 3 4 , 0

2 3 )

( 2 2 6 , 8

4 9 )

( 1 1 , 1

7 0 )

( 5 , 7

1 9 )

T r a n s f e r s

-

-

-

-

-

-

-

-

( 3 1 , 7

6 9 )

-

( 8 , 3

7 8 )

E x c h a n g e t r a n s l a t i o n d i f f e r e n c e

2 9 5

-

-

-

-

-

-

2 9 5

-

-

-

A t t h e e n

d o f t h e y e a r

( 2 1 , 8

4 1 )

( 5 3

, 6 1 7 )

( 2 8 , 1

1 5 )

-

( 3 7 4

, 8 3 2 )

-

-

( 4 7

8 , 4

0 5 )

( 2 5 8 , 7

6 7 )

( 2 5 , 2

6 7 )

( 1 4 , 0

9 7 )

C a r r y i n g

v a l u e

A s a t 3 1

M a r c h 2 0 1 1

6 3 , 8

9 5

2 0

, 2 9 2

1 0 1 , 2

5 8

1 7 , 2

2 6

1 , 8 7 4

, 1 6 8

5 0 5 , 6

1 1

4 9 , 5

0 0

2 , 6 3

1 , 9

5 0

4 3 , 7

2 4

A s a t 3 1

M a r c h 2 0 1 0

5 7 , 2

9 1

3 3

, 7 2 3

3 7 , 4

5 0

-

2 , 0 6 1

, 5 8 4

3 1 6 , 5

9 7

4 9 , 5

0 0

2 , 5 5

6 , 1

4 5

3 7 , 4

5 0



5.1 Present value of acquired in-force business (PVIB)

In compliance with SLAS 25 - Business Combinations, upon acquiring a controlling stake in Union Assurance PLC (UA), the group has recognised

in the consolidated financial statements an intangible asset representing the present value of future profits on UA’s portfolio of long term lifeinsurance contracts, known as the present value of acquired in-force business (PVIB) at the acquisition date. Further, PVIB recognised at the

acquisition date will be amortised over the life of the business acquired and reviewed annually for any impairment in value.

In Rs.'000s Net carrying value of goodwill

5.2 Goodwill

Goodwill acquired through business combinations have been allocated to 6 cash generating units (CGU’s) for impairment testing as follows;

Airlines 5,054

Chaaya Hotels and Resorts 131,485

Cinnamon Hotels and Resorts 34,763

Consumer Foods and Retail 57,025

Financial Services 265,358

Logistics, Ports and Shipping 11,926

505,611

The recoverable amount of all CGUs have been determined based on the fair value less cost to sell or the value in use (VIU) calculation.

Key assumptions used in the VIU calculations

Gross margins

The basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceeding the budgeted

year adjusted for projected market conditions.

Discount rates

The discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium.

Inflation

The basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected economic conditions.

Volume growth

Volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of one to four years immediately

subsequent to the budgeted year based on Industry growth rates. Cash flows beyond the five year period are extrapolated using 0% growth rate.





Group Company

As at 31st March Note 2011 2010 2011 2010

In Rs.'000s

6 INVESTMENTS

6.1 Carrying value

Investments in subsidiaries

Investments consolidated

Quoted 6.2 - - 17,649,155 17,379,441

Unquoted 6.3 - - 5,827,842 4,387,626

Investments not consolidated

Unquoted 6.4 5,115 5,115 5,115 5,115

5,115 5,115 23,482,112 21,772,182

Investmets in joint ventures 6.5 - - - -

Investments in associates 6.6 14,670,235 14,309,186 9,257,569 9,110,819

Other investments

Other equity investments

Quoted 6.8 13 13 - -

Unquoted 6.9 609,466 107,167 581,806 79,507

609,479 107,180 581,806 79,507

Other non equity investments 6.11 11,182,974 8,308,036 - -

11,792,453 8,415,216 581,806 79,507

26,467,803 22,729,517 33,321,487 30,962,508

Group Company

As at 31st March Number of 2011 2010 Number of 2011 2010

In Rs.'000s shares shares

6.2 Group quoted investments

Asian Hotels and Properties PLC. 173,912,095 5,216,368 5,564,807 173,912,095 5,216,367 5,564,807Ceylon Cold Stores PLC. 17,381,649 788,478 788,476 15,060,722 775,440 775,440


- Preference shares 118 1 1 118 1 1

John Keells Hotels PLC. 1,169,598,478 7,102,140 7,329,765 1,169,598,478 7,102,140 7,329,765

John Keells PLC. 26,417,392 394,830 394,830 26,417,392 394,830 394,830

Keells Food Products PLC. 7,180,063 248,439 248,438 5,581,307 202,397 202,397

Tea Smallholder Factories PLC. 5,643,000 63,466 63,466 5,643,000 63,466 63,466

Trans Asia Hotels PLC. 92,053,642 2,254,710 2,254,710 48,642,128 1,594,665 1,594,665

Union Assurance PLC. 35,870,242 2,334,522 1,488,744 31,847,765 2,299,849 1,454,070

18,402,954 18,133,237 17,649,155 17,379,441

The market value of quoted investments amounts to Rs.96,878 mn (2010 - 64,889 mn) and Rs.85,714 mn (2010 - 60,136 mn) for the group and

company respectively, the details of which are as follows;

Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

Market value

Group quoted investments

Asian Hotels and Properties PLC. 32,678,083 24,397,275 32,678,083 24,397,275

Ceylon Cold Stores PLC. 13,046,666 2,989,664 11,304,578 2,590,464

John Keells Hotels PLC. 20,117,094 22,331,322 20,117,094 22,331,322

John Keells PLC. 4,892,501 2,569,091 4,892,501 2,569,091

Keells Food Products PLC. 1,077,009 495,424 837,196 385,110

Tea Smallholder Factories PLC. 959,310 846,450 959,310 846,450

Trans Asia Hotels PLC. 18,024,103 8,112,227 9,524,129 4,286,588Union Assurance PLC. 6,083,593 3,147,668 5,401,381 2,729,331

96,878,359 64,889,121 85,714,272 60,135,631




Group Company

Number of Number of

As at 31st March shares 2011 2010 shares 2011 2010In Rs.'000s

6.3 Group unquoted investments

Auxicogent Alpha (Pvt) Ltd. 7,350 792 792 - - -

Auxicogent Alpha (Pvt) Ltd. - Preference A 57,200,000 615,358 615,358 - - -

Auxicogent Holdings (Pvt) Ltd. 18,000,000 1,878,693 1,543,353 - - -

Auxicogent International Canada Inc. 5,000 542 - - - -

Auxicogent International (Pvt) Ltd. 1,500,000,000 1,615,203 1,615,203 - - -

Auxicogent International Lanka (Pvt) Ltd. 32,843,578 - 323,674 - - -

Auxicogent International US Inc. 5,000 538 538 - - -

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. 12,119,739 1,052,011 566,570 - - -

Beruwala Holiday Resorts (Pvt) Ltd. 98,800,000 988,000 166,000 - - -

DHL Keells (Pvt) Ltd. 1,000,000 10,000 10,000 1,000,000 10,000 10,000

Elephant House Farms Ltd. 400,000 - 4,000 - - -

Facets (Pvt) Ltd. 15,000 - - 15,000 - -

Fantasea World Investments (Pte) Ltd. 7,299 433,708 433,708 - - -

Habarana Lodge Ltd. 12,981,548 695,083 695,083 - - -

Habarana Walk Inn Ltd. 4,321,381 311,851 311,851 - - -

Hikkaduwa Holidaty Resorts (Pvt) Ltd. 81,263,544 812,635 - - - -

InfoMate (Pvt) Ltd. 2,000,000 20,000 20,000 2,000,000 20,000 20,000

International Tourists and Hoteliers Ltd. 22,998,223 1,194,741 247,495 - - -

J K Packaging (Pvt) Ltd. 1,450,000 - - 1,450,000 - -

J K Properties (Pvt) Ltd. 24,000,000 192,169 192,169 24,000,000 192,169 192,169

Jaykay 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 650,000 - 14,815 - - -

John Keells Computer Services (Pvt) Ltd. 9,650,000 96,500 96,500 9,650,000 96,500 96,500

John Keells Computer Services (UK) Ltd. 98 9 9 98 9 9

John Keells Foods India (Pvt) Ltd. 9,000,000 6,132 89,000 - - -

John Keells Holdings Mauritius (Pvt) Ltd. 1,977,225 222,313 107,756 1,977,225 222,312 107,756

John Keells Hotels Mauritius (Pvt) Ltd. 34,100 3,832 980 - - -

John Keells International (Pvt) Ltd. 188,034,000 1,880,340 1,545,000 188,034,000 1,880,340 1,545,000

John Keells Logistics (Pvt) Ltd. 20,000,000 200,000 200,000 20,000,000 200,000 200,000

John Keells Logistics India (Pvt) Ltd. 6,731,371 128,037 14,546 627,999 - -

John Keells Logistics India (Pvt) Ltd.

- Redeemable non voting preference shares 4,600,000 113,359 113,359 2,600,000 41,097 41,097

John Keells Logistics Lanka (Pvt) Ltd. 13,000,000 105,069 40,069 13,000,000 105,069 40,069

John Keells Maldivian Resorts (Pte) Ltd. 49,044,238 4,739,853 3,172,350 - - -

John Keells Office Automation (Pvt) Ltd. 500,000 5,000 5,000 500,000 5,000 5,000John Keells Residential Properties (Pvt) Ltd. 92,520,000 925,200 - 92,520,000 925,200 -

John Keells Singapore (Pte) Ltd. 160,000 4,209 4,209 160,000 4,209 4,209

John Keells Software Technologies (Pvt) Ltd. 800,000 - - 800,000 - -

John Keells Stock Brokers (Pvt) Ltd. 750,000 500 500 180,000 120 120

John Keells Teas Ltd. 12,000 120 120 12,000 120 120

John Keells Warehousing (Pvt) Ltd. 12,000,000 120,000 120,000 - - -

Keells Consultants (Pvt) Ltd. 16,000 1,419 1,299 16,000 1,419 1,299

Keells Food Products Mauritius (Pvt) Ltd. 9,850 - 2,214 - - -

Keells Hotel Management Services Ltd. 1,000,000 19,055 19,055 1,000,000 19,055 19,055

Keells Realtors Ltd. 7,500,000 75,000 75,000 3,000,000 30,000 30,000

Keells Shipping (Pvt) Ltd. 50,000 502 502 50,000 502 502

Kandy Walk Inn Ltd. 6,165,484 409,128 409,128 - - -

Lanka Marine Services (Pvt) Ltd. 34,805,470 1,325,218 1,325,218 34,805,470 1,325,218 1,325,218

Mack Air (Pvt) Ltd. 500,000 7,563 7,563 500,000 7,563 7,563Mack Air Services Maldives (Pvt) Ltd. 4,900 2,035 2,035 4,700 2,021 2,021

Mackinnon & Keells Financial Services Ltd. 1,080,000 12,806 12,806 972,000 11,912 11,912

Mackinnon Mackenzie and Company (Shipping) Ltd. 500,000 14,200 14,200 - - -

Mackinnon Mackenzie and Company of (Ceylon) Ltd. 9,000 - - 6,600 - -





Group Company

Number of Number of


6.3 Group unquoted investments

Mackinnons Travels (Pvt) Ltd. 500,000 13,901 13,901 500,000 13,901 13,901

Mortlake (Pvt) Ltd. 300 327,240 327,240 300 327,240 327,240

Nexus Networks (Pvt) Ltd. 10,000 100 100 10,000 100 100

Rajawella Hotels Company Ltd. 2,000,000 20,000 20,000 - - -

Resort Hotels Ltd. 75,007 750 750 - - -

Serene Holidays (Pvt) Ltd. 800,000 34,153 34,153 - - -

Tranquility (Pte) Ltd. 637,500 1,106,270 1,106,270 - - -

Trans-ware Logistics (Pvt) Ltd. 11,000,000 111,100 111,100 11,000,000 111,100 111,100

Travel Club (Pte) Ltd. 29,059 302,640 302,640 - - -

Trinco Holiday Resort (Pvt) Ltd 8,120,005 357,000 357,000 - - -

Trinco Walk Inn Ltd. 3,000,000 95,940 95,940 - - -Walkers Tours Ltd. 4,925,577 128,141 128,141 4,925,577 128,141 128,141

Whittall Boustead (Travel) Ltd. 750,000 40,985 40,985 675,000 40,935 40,935

Whittall Boustead (Pvt) Ltd. 9,918,880 133,383 133,383 7,258,264 106,590 106,590

Wirawila Walk Inn Ltd. 1,500,000 21,885 21,885 - - -

Yala Village (Pvt) Ltd. 28,268,000 300,678 300,678 - - -

Yala Vil lage (Pvt) Ltd.- Non vot ing preference shares 10,000,000 100,000 100,000 - - -

24,472,723 18,376,298 5,827,842 4,387,626

Directors’ valuation of unquoted investments amount to Rs.24,473 mn (2010 - Rs.18,376 mn) and Rs.5,828 mn (2010 - Rs.4,388 mn) for the

group and company respectively.

Group Company

Number of Number of

As at 31st March shares 2011 2010 shares 2011 2010

In Rs.'000s

6.4 Investments in subsidiaries not consolidated

Keells Systems Integrators Ltd. 500,000 5,115 5,115 500,000 5,115 5,115

5,115 5,115 5,115 5,115

The directors’ valuation of investments in subsidiaries not consolidated amount to Rs.5 mn (2010 - Rs.5 mn) for the group and company.

Keells System Integrators Ltd is a non-operating subsidiary, currently under liquidation, with a net asset value that equals the book value of

investments.

Group

Number of

As at 31st March shares 2011 2010

In Rs.'000s

6.5 Investments in joint ventures

Information Systems Associates 73 46,482 46,482

46,482 46,482

The directors’ valuation of the investment in the joint venture amounts to Rs.46 mn (2010 - Rs.46 mn).

The group has a 49% of interest in Information Systems Associates (ISA), a jointly controlled entity which is involved in the software development

services in United Arab Emirates. The summarised financial information of ISA is given in Note 6.7.



Group Company

Number of Number of


6.6 Investments in associates

Quoted

Nations Trust Bank PLC. 68,951,695 1,561,355 1,341,963 46,121,532 1,011,052 864,302

Unquoted

Central Hospitals (Pvt) Ltd. 58,823,529 1,000,000 1,000,000 52,941,176 900,000 900,000

Maersk Lanka (Pvt) Ltd. 30,000 150 150 30,000 150 150

South Asia Gateway Terminals (Pvt) Ltd. 159,826,750 7,375,263 7,375,263 159,826,750 7,346,367 7,346,367

Auxicogent BPO Solutions (Pvt) Ltd. 49,000 12,689 12,689 - - -

(formerly known as Quatrro Business

Support Services (Pvt) Ltd.)

- Preference A 20,654,506 544,620 544,620 - - -

- Pending share issue - 221,800 - - - -

Quatrro FPO Solutions (Pvt) Ltd. 77,326,071 615,358 615,358 - - -

(formerly known as Quatrro Finance &

Accounting Solutions (Pvt) Ltd.)

Cumulative profit accruing to the group net of dividend 2,792,879 2,750,711

Cumulative adjustment on account of associate company

share of net assets 546,121 668,432

14,670,235 14,309,186 9,257,569 9,110,819

Market Value

Quoted

Nations Trust Bank PLC. 5,261,014 2,193,918 3,519,073 1,467,5035,261,014 2,193,918 3,519,073 1,467,503

The directors’ valuation of unquoted associate investments amount to Rs.12,391 mn (2010 Rs.12,479 mn) and Rs.8,247 mn

(2010 Rs.8,247 mn) for the group and company respectively.

Refer group directory in the supplementary section of the annual report for effective holding percentages of group investments.

Associates Joint ventures

As at 31st March 2011 2010 2011 2010

In Rs.'000s

6.7 Summarised financial information of associates/joint ventures

Group share of;

Revenue 9,323,780 10,005,881 89,573 77,122

Operating expenses (6,570,073) (7,402,806) (85,156) (70,067)

Finance expenses (112,796) (47,208) - -

Profit for the year 2,640,911 2,555,867 4,417 7,055

Group share of;

Total assets 35,454,638 31,108,125 60,697 71,948

Total liabilities (25,909,272) (21,923,909) (23,272) (37,508)

Net assets 9,545,366 9,184,216 37,425 34,440

Goodwill 5,125,324 5,125,324 - -

Unrealised profits (455) (354) - -

14,670,235 14,309,186 37,425 34,440

Contingent liabilities 19,379,479 15,403,161 - -Capital and other commitments 104,586 161,109 - -

The group and the company have neither contingent liabilities nor capital and other commitments in respect of its associates and joint venture.





Group

Cost Market value

Number of As at 31st March shares 2011 2010 2011 2010

In Rs.'000s

6.8 Other quoted equity investments

Ceylon Hotels Corporation PLC. 500 13 13 13 13

13 13 13 13

Group Company

Number of Number of

As at 31st March shares 2011 2010 shares 2011 2010

In Rs.'000s

6.9 Other unquoted equity investments

ACW Insurance Co. Ltd. 450,000 1,269 1,269 - - -

Asia Power (Pvt) Ltd. 777,055 79,507 79,507 777,055 79,507 79,507

Expo Lanka (Pvt) Ltd. 83,300,000 502,299 - 83,300,000 502,299 -

Fitch Rating Lanka Limited. 62,500 625 625 - - -

Pyramid Unit Trust. 310,000 - - - - -

Rainforest Ecolodge (Pvt) Ltd. 2,500,000 25,000 25,000 - - -

SLFFA Cargo Services Ltd. 64,642 715 715 - - -

Sri Lanka Hotel Tourism Training Institute. 15,004 50 50 - - -

The York Company Ltd. 100 1 1 - - -

609,466 107,167 581,806 79,507

The director’s valuation of other unquoted equity investments amount to Rs.609 mn (2010 - Rs.107 mn) and Rs.582 mn (2010 - Rs.80 mn) for

the group and company respectively.

Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

6.10 Movement in equity investments

At the beginning of the year 14,421,481 13,112,801 30,962,507 27,739,388

Additions 943,491 376,100 2,935,044 2,376,519

New acquisitions - 1,000,000 - 900,000

Disposals and transfers - (17,400) (576,064) (50,382)

Net movement in fall in value of investments / impairment - (3,110) - (3,018)

Adjustment on account of associate company share of net assets (122,311) (103,663) - -

Share of results of associates net of dividend 42,168 56,753 - -

At the end of the year 15,284,829 14,421,481 33,321,487 30,962,507

Total value of investments including subsidiaries 58,206,988 50,977,498 33,321,487 30,962,507

Group investments (42,922,159) (36,556,017) - -

Total value of investments 15,284,829 14,421,481 33,321,487 30,962,507

Group


In Rs.'000s

6.11 Other non equity investments

Bank deposits 300,000 100,000

Debentures 1,229,300 1,130,000

Government securities 9,653,674 7,078,036

11,182,974 8,308,036



Group Company

Assets Liabilities Assets

As at 31st March 2011 2010 2011 2010 2011 2010In Rs.'000s

7 DEFERRED TAX

At the beginning of the year 182,252 147,846 781,742 777,236 - -

Charge and release 50,812 34,289 8,527 4,442 54,198 -

Charge and release on rate differential (33,343) - (145,246) - - -

Transfers / exchange translation difference 3,129 117 2,937 64 - -

At the end of the year 202,850 182,252 647,960 781,742 54,198 -

The closing deferred tax asset and

liability balances relate to the following;

Revaluation of land and building to fair value (11,706) (10,813) 240,131 298,743 - -

Revaluation of investment property to fair value - - 35,507 43,617 - -

Accelerated depreciation for tax purposes (166,866) (147,413) 458,769 577,665 (24,746) -

Employee benefit liability 85,490 60,638 (141,154) (137,434) 29,330 -

Losses available for offset against future taxable income 290,513 271,105 (31,382) (54,433) 49,614 -

Others 5,419 8,735 86,089 53,584 - -

202,850 182,252 647,960 781,742 54,198 -

7.1 The group has tax losses amounting to Rs.5,287 mn (2010 - Rs.5,286 mn) that are available indefinitely for offset against future taxable profits of

the companies in which the tax losses arose.

7.2 Deferred tax assets amounting to Rs.53 mn (2010 - Rs.172 mn) for the group and Rs.Nil (2010 - Rs.54 mn) for the company have not been

recognised for the year since the companies do not expect these assets to reverse in the forseeable future.

7.3 Deferred tax for tax holiday companies

For group companies under BOI tax holidays, deferred tax during the tax holiday period has been recognised for temporary differences, whenreversals of such differences extend beyond the tax exemption period, taking into account the the requirements of SLAS 14 and the ICASL council

ruling on deferred tax.

Group Company


In Rs.'000s

8 OTHER NON-CURRENT ASSETS

Bottle stocks - 308,654 - -

Loans to executives 8.1 704,423 585,045 50,898 42,079

Loans to life policy holders 239,420 226,862 - -

Loans to subsidiaries 33.3 - - 207,641 18,000

Work-in-progress of apartments 2,265,985 596,156 - -

Others 21,573 8,000 - -

3,231,401 1,724,717 258,539 60,079

Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

8.1 Loans to executives

At the beginning of the year 732,441 775,392 60,098 82,912

Loans granted / transfered 481,986 261,733 36,260 3,694

Recoveries (334,934) (304,684) (25,138) (26,508)

At the end of the year 879,493 732,441 71,220 60,098

Receivable within one year 175,070 147,396 20,322 18,019Receivable between one and five years 704,423 585,045 50,898 42,079

879,493 732,441 71,220 60,098





Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

9 INVENTORIES

Raw materials 260,263 183,032 - -

Finished goods 2,120,337 1,492,315 - -

Produce stocks 254,814 153,580 - -

Other stocks 508,216 466,139 760 778

3,143,630 2,295,066 760 778

Group Company


In Rs.'000s

10 TRADE AND OTHER RECEIVABLES

Trade and other receivables 8,327,209 6,407,160 554,552 816,063

Reinsurance receivables 10.1 656,901 901,315 - -

Premium receivable 10.2 992,092 810,734 - -

Tax refunds 1,920,875 1,667,172 14,141 14,141

Loans to executives 8.1 175,070 147,396 20,322 18,019

12,072,147 9,933,777 589,015 848,223

Group


In Rs.'000s

10.1 Reinsurance receivables

Reinsurance receivables on outstanding claims 522,172 849,604

Reinsurance receivables on settled claims net of dues 136,430 53,398Less: Provision for bad debts (1,701) (1,687)

656,901 901,315

10.2 Premium receivable

Premium receivable 1,000,123 818,765

Less: Provision for bad debts (8,031) (8,031)

992,092 810,734

Group Company


In Rs.'000s

11 SHORT TERM INVESTMENTS

Quoted equities at market value 11.1 1,199,292 461,901 - -

Debentures - 265,000 - -

Asset backed securities - 61,000 - -

Investments - unit linked 11,027 - - -

Bank deposits (more than 3 months and less than 1year) 684,510 2,036,500 663,010 -

Government securities (more than 3 months and less than 1year) 1,177,873 2,174,965 - -

3,072,702 4,999,366 663,010 -

Bank deposits (less than 3 months) 5,463,864 4,277,435 4,657,255 4,778,785

Government securities (less than 3 months) 8,344,470 10,024,155 4,750,984 5,399,180

Reported for cash flow 13,808,334 14,301,590 9,408,239 10,177,965

16,881,036 19,300,956 10,071,249 10,177,965




Group Group

Cost Market value

As at 31st March Number of shares 2011 2010 2011 2010In Rs.'000s

11.1 Quoted equities at market value

Aitken Spence Hotel Holdings PLC. 100,000 - 12,424 - 38,500

Aitken Spence PLC. 64,000 - 21,849 - 87,920

Asian Hotels and Properties PLC.* 47,500 9,063 - 8,925 -

AVIVA NDB Insurance PLC. 69,000 19,710 - 20,638 -

Brown and Company PLC.* 15,700 3,889 - 4,549 -

Central Finance Company PLC. 109,900 41,480 14,255 139,980 22,308

Chemical Industries Colombo PLC.* 15,500 2,211 - 2,403 -

Chevron Lubricants Lanka PLC.* 205,400 24,921 10,004 32,896 23,120

Colombo Dockyard PLC. 178,900 38,193 31,168 45,637 42,826

Commercial Bank of Ceylon PLC.* 76,689 19,910 15,280 20,384 20,175

Commercial Bank of Ceylon PLC. (Non voting) 221,163 17,015 20,394 36,625 28,829

DFCC Bank PLC.* 56,800 11,312 - 9,758 -

Dialog Axiata PLC.* 6,946,800 58,215 15,559 72,941 18,900

Diesel and Motor Engineering PLC. 43,100 66,436 - 63,991 -

Distilleries Company of Sri Lanka PLC.* 300,600 43,592 9,975 54,108 13,570

Environmental Resources Investments PLC.* 67,900 5,787 - 5,249 -

Galadari Hotels Lanka PLC.* 39,000 1,454 - 1,264 -

Hatton National Bank PLC.* (Non voting) 339,800 44,971 34,445 79,464 53,340

Hemas Holdings PLC.* 517,450 11,954 6,708 23,803 9,738

HNB Assurance PLC. 294,233 21,018 - 23,539 -

Janashakthi Insurance PLC.* 78,600 1,262 - 1,297 -

John Keells Holdings PLC.* 129,500 38,439 - 36,985 -

John Keells Hotels PLC.* 317,600 6,341 - 5,463 -

Lanka Tiles PLC. 469,700 63,217 - 61,578 -LB Finance PLC.* 14,000 1,977 - 2,451 -

Merchant Bank of Srilanka PLC.* 30,100 1,391 - 1,391 -

National Development Bank PLC.* 17,700 6,311 - 6,025 -

Nations Trust Bank PLC.* 45,500 3,775 - 3,472 -

Nawaloka Hospitals PLC.* 305,600 1,226 - 1,222 -

Overseas Reality Ceylon PLC.* 178,800 2,882 - 2,682 -

Pan Asia Banking Corporation PLC.* 31,600 1,666 - 1,621 -

Piramal Glass PLC. 1,874,100 16,585 - 20,803 -

Richard Pieris and Company PLC.* 417,100 4,819 - 5,673 -

Royal Ceremics Lanka PLC. 780,900 46,806 23,448 122,601 40,409

Sampath Bank PLC.* 231,620 28,083 28,671 66,772 35,342

Seylan Bank PLC.* 26,400 2,514 - 1,985 -

Sri Lanka Telecom PLC. 520,200 24,933 - 29,651 -

Tokyo Cement Company (Lanka) PLC. 654,325 9,878 7,817 38,577 14,499

Tokyo Cement Company (Lanka) PLC. (Non voting) 2,866,500 55,515 9,389 95,326 12,425

United Motors Lanka PLC. 312,500 53,978 - 47,563 -

812,729 261,386 1,199,292 461,901

* Investments made by Union Assurance PLC under the unit linked equity tracker fund, which invests in the 25 Companies that comprise the

Milanka Price Index.






Number of shares Value of shares Number of shares Value of shares

In '000s Rs. Rs.

12 STATED CAPITAL

Fully paid ordinary shares

At the beginning of the year 619,474 23,322,400 611,352 22,525,108

Share options exercised 10,219 1,289,107 8,122 797,292

At the end of the year 629,693 24,611,507 619,474 23,322,400

The number of shares in issue as at 31-03-2011, include global depository receipts (GDRs) of 952,114 (2010- 983,736), whereby 31,622 GDRs

(in terms of ordinary shares) were converted during the year into ordinary shares. Further information on the composition of shares in issue is

given under the share information section of the annual report.

22,300,605 shares (2010 - 27,996,532) have been reserved to be issued under the employee share option plan as at 31 March 2011.

Group

As at 31st March Note 2011 2010

In Rs.'000s

13 CAPITAL RESERVES

Revaluation reserve 13.1 8,110,991 5,727,326

Exchange translation reserve 13.2 1,021,061 1,417,921

Other capital reserves 428,365 428,365

9,560,417 7,573,612

13.1 Revaluation reserve consists of the net surplus on the revaluation of property, plant and equipment and present value of acquired in-force business

(PVIB).

13.2 Exchange translation reserve comprises the net exchange movement arising on the translation of net equity investments of overseas subsidiaries,

joint venture and associates into Sri Lankan rupees.

Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

14 REVENUE RESERVES

General reserves 5,547,963 5,547,963 4,194,322 4,194,322

Accumulated profit 19,866,826 13,388,296 9,244,938 5,150,742

25,414,789 18,936,259 13,439,260 9,345,064

Group


In Rs.'000s

15 INSURANCE PROVISION

Provision - life 12,475,589 10,080,394

Unclaimed benefits 186,911 155,723

12,662,500 10,236,117

Long duration contract liabilities included in the life insurance fund, result primarily from traditional participating and non participating l ife insurance

products. Short duration contract liabilities are primarily group term, accident and health insurance products.

The actuarial reserves 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 policy holder dividend to be paid is determined annually by the company. The dividend includes life policy holders’ share of netincome 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 Acturial & Management Consultants (Pvt) Ltd, as at

31 December 2010.




Group


In Rs.'000s

16 NON-INTEREST BEARING BORROWINGS

At the beginning of the year 18,000 21,000

Repayments - (3,000)

At the end of the year 18,000 18,000

Repayable within one year - -

Repayable between one and five years 18,000 18,000

18,000 18,000

Non-interest bearing borrowings represent loans received by Transware logistics (Pvt) Limited (TWL), a subsidiary of the group, from MISC

Enterprises Holdings SDN BHD and Keppel Logistics (Pvt) Ltd, joint venture partners of TWL.

Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

17 INTEREST BEARING BORROWINGS

17.1 Movement

At the beginning of the year 14,708,426 16,556,652 9,975,493 11,260,243

Additions / transfers 1,731,979 684,000 - -

Repayments (5,598,409) (2,368,809) (3,118,042) (1,172,000)

Adjustments / exchange difference (354,991) (163,417) (233,451) (112,750)

At the end of the year 10,487,005 14,708,426 6,624,000 9,975,493

Repayable within one year 2,134,418 4,168,976 1,104,000 3,135,493

Repayable after one year

Repayable between one and five years 7,248,442 9,399,305 5,520,000 5,700,000

Repayable after five years 1,104,145 1,140,145 - 1,140,000

8,352,587 10,539,450 5,520,000 6,840,000

10,487,005 14,708,426 6,624,000 9,975,493

Group interest bearing borrowings include finance lease obligations amounting to Rs.6 mn (2010 - Rs.21 mn), details of which are disclosed in

note 17.2.

Group


In Rs.'000s

17.2 Finance leases


Repayments (7,583) (8,616)

Adjustments / transfers (7,162) -


Finance lease obligations repayable within one year

Gross liability 6,697 10,885

Finance charges (1,391) (2,270)

Net lease obligation 5,306 8,615

Finance lease obligations repayable between one and five years

Gross liability 495 13,082

Finance charges (9) (1,160)

Net lease obligation 486 11,922





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Group Company

As at 31st March 2011 2010 2011 2010

In Rs.'000s

18 EMPLOYEE BENEFIT LIABILITIES

At the beginning of the year 1,041,395 956,917 92,630 92,358

Current service cost 148,093 106,450 7,074 7,049

Transfers - - 1,245 (2,087)

Interest cost on benefit obligation 104,140 95,692 9,262 9,236

Payments (70,150) (107,904) (4,843) (17,355)

(Gain) / loss arising from changes in assumptions or

due to (over) / under provision in the previous year (7,565) (10,447) (616) 3,429

Exchange translation difference (316) 687 - -

At the end of the year 1,215,597 1,041,395 104,752 92,630

The expenses are recognised in the income statement in the following line items;

Cost of sales 104,956 87,861 6,797 4,244

Distribution expenses 126,373 89,116 - -

Administrative expenses 13,339 14,718 8,923 15,470

244,668 191,695 15,720 19,714

The employee benefit liability of listed companies (with more than 100 employees) and of Jaykay Marketing (Pvt) Ltd is based on the actuarial

valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries. The employee benefit liability of all other 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%

Group As at 31st March 2011 2010

In Rs.'000s

19 OTHER DEFERRED LIABILITIES


Amortisation (512) (512)


Amounts expected to be amortised within one year 512 512

Amounts expected to be amortised after one year 3,631 4,143

4,143 4,655

Basis of

amortisation


Sri Lanka Tea Board subsidy 10% p.a. 1,895 2,082

Yala Village (Pvt) Ltd.

Ceylon Chamber of Commerce grant 10% p.a. 2,248 2,573

4,143 4,655




Group Company


In Rs.'000s

20 TRADE AND OTHER PAYABLES

Trade payables 4,436,189 2,986,127 - -

Reinsurance payables 458,520 391,210 - -

Insurance provision - general 20.1 2,822,274 2,709,459 - -

Obligation to repurchase securities - 534,243 - -

Advances and deposits 370,242 1,616,370 - -

Sundry creditors including accrued expenses 3,849,894 2,877,638 220,667 343,426

Other payables 442,470 461,490 - -

12,379,589 11,576,537 220,667 343,426

Group


In Rs.'000s

20.1 Insurance provision - general

Reserve for net unearned premiums 1,781,488 1,330,245

Reserve for net deferred acquisition cost (48,862) (23,574)

Reserve for gross outstanding claims 1,089,648 1,402,788

2,822,274 2,709,459

Group Company


In Rs.'000s

21 INCOME TAX LIABILITIES

At the beginning of the year 454,292 514,362 - -

Charge for the year 29.1 1,207,940 706,317 76,457 16,608

Payments and set off against refunds (865,293) (766,410) (76,457) (16,608)

Exchange translation difference (225) 23 - -

At the end of the year 796,714 454,292 - -

Group


In Rs.'000s

22 SHORT TERM BORROWINGS

Loans 232,000 150,000

232,000 150,000

Group Company

For the year ended 31st March 2011 2010 2011 2010

In Rs.'000s

23 REVENUE

23.1 Revenue

Gross revenue 60,862,206 48,390,217 554,627 544,193

Turnover tax (362,138) (410,213) - -

Net revenue 60,500,068 47,980,004 554,627 544,193





For the year ended 31st March 2011 2010

Sale of Rendering of Total Sale of Rendering of Total

goods services revenue goods services revenueIn Rs.'000s

23.2 Business segment analysis

Transportation 11,391,682 2,034,078 13,425,760 7,810,649 1,684,003 9,494,652

Leisure - 13,809,589 13,809,589 - 11,499,732 11,499,732

Property - 2,493,634 2,493,634 - 1,620,030 1,620,030

Consumer Foods & Retail 8,106,401 10,251,975 18,358,376 6,743,614 9,099,873 15,843,487

Financial Services - 6,483,587 6,483,587 - 5,262,251 5,262,251

Information Technology 2,276,576 829,959 3,106,535 923,254 515,777 1,439,031

Others - 2,822,587 2,822,587 - 2,820,821 2,820,821

Group revenue 21,774,659 38,725,409 60,500,068 15,477,517 32,502,487 47,980,004

Group


In Rs.'000s

23.3 Geographical segment analysis (by location of customers)

Sri Lanka 52,615,665 40,249,444

Asia (excluding Sri Lanka) 5,042,812 5,560,447

Europe 2,358,770 1,912,349

Others 482,821 257,764

Total group external revenue 60,500,068 47,980,004

Group Company


In Rs.'000s

24 DIVIDEND INCOME

Income from investments in related parties - - 3,458,217 3,533,941

Income from other investments 62,599 43,951 42,738 39,635

62,599 43,951 3,500,955 3,573,576

Group Company


In Rs.'000s

25 OTHER OPERATING INCOME

Interest income 2,747,650 2,946,331 757,847 1,206,484

Negative goodwill on acquisitions - 40,113 - -

Gain on disposal of rights in subsidiaries - 946,515 - 750,975

Gain on disposal of quoted investments held for sale 297,268 9,992 - -

Increase in market value of quoted investments held for sale 186,042 208,642 - -

Exchange gain 299,893 112,512 102,348 11,401

Insurance claims - 198,317 - -

Profit on sale of property, plant and equipment - 25,053 1,014 101

Profit on sale of non-current investments 1,795,069 114,776 2,172,441 122,044

Profit on sale of investment property - - 26,200 -

Promotional income from consumer foods and retail group 178,419 168,253 - -

Income from commercial projects 124,486 34,240 124,486 34,240

Sundry income 485,994 216,001 3,885 79,836

6,114,821 5,020,745 3,188,221 2,205,081

26 OTHER OPERATING EXPENSES

Other operating expenses consists mainly of power and energy costs, repairs and maintenance expenditure of the group.




Group Company


In Rs.'000s

27 FINANCE EXPENSES

Interest expense on borrowings

Long term 595,174 991,625 376,623 676,289

Short term 200,900 378,531 2,876 40,340

796,074 1,370,156 379,499 716,629

Group Company


In Rs.'000s

28 PROFIT BEFORE TAX

Profit before tax is stated after charging all expenses including the following;

Remuneration to executive directors 177,255 153,213 74,611 61,510

Remuneration to non executive directors 27,877 24,430 11,910 9,120

Auditors’ remuneration

Audit 30,711 29,631 5,113 4,622

Non-audit 9,802 6,334 903 244

Costs of defined employee benefits

Defined benefit plan cost 244,668 191,695 15,720 19,714

Defined contribution plan cost - EPF and ETF 514,221 435,721 42,243 40,673

Staff expenses 6,018,930 5,394,355 312,125 294,852

Depreciation of property, plant and equipment 1,700,095 1,736,853 42,391 102,742

Amortisation / impairment of intangible assets 234,023 226,849 11,170 5,719

Derecognition / impairment losses on

property, plant and equipment and other non-current assets 49,689 20,955 - 3,018Operating lease payments 905,413 1,136,837 - -

Loss on sale of property, plant and equipment 57,929 - - -

Donations 15,734 19,168 6,127 10,418

Group Company

For the year ended 31st March Note 2011 2010 2011 2010

In Rs.'000s

29 TAX EXPENSE

Current income tax

Current tax charge 1,355,993 999,960 10,159 -

Under provision of current tax of previous years 100,312 21,174 66,448 16,608

Economic service charge 29.2 22,681 8,763 - -

10% Withholding tax on inter company dividends 97,382 93,234 - -

Deferred income tax

Relating to origination and reversal of temporary differences 29.3 (10,567) (137,891) (54,198) -

1,565,801 985,240 22,409 16,608





Group Company


In Rs.'000s

29.1 Reconciliation between tax expense and the product of accounting profit

Profit before tax 10,628,961 6,537,555 5,985,312 4,677,667

Dividend income from group companies 3,874,419 3,869,665 - -

Share of results of associates (2,640,911) (2,555,867) - -

Other consolidation adjustments 880,471 (247,660) - -

12,742,940 7,603,693 5,985,312 4,677,667

Exempt profits (1,855,005) (1,355,765) (193,990) (467,044)

Profits not charged to income tax (2,558,077) (1,188,918) (2,172,440) (770,483)

Resident dividend (3,694,297) (3,725,751) (3,500,955) (3,573,576)

Accounting profit / (loss) chargeable to income taxes 4,635,561 1,333,259 117,927 (133,436)

Tax effect on chargeable profits 1,394,449 428,127 41,274 (46,703)

Tax effect on non deductible expenses 214,547 197,664 19,880 20,762

Tax effect on deductions claimed (418,005) (70,125) (12,904) (27,835)

Net tax effect of unrecognised deferred tax assets for the year 53,014 171,938 - 53,776

Net tax effect of unrecognised deferred tax assets for prior years (211,976) (69,290) (92,439) -

Tax effect on rate differentials (5,418) (7,368) - -

Under provision for previous years 100,312 21,174 66,448 16,608

Other income based taxes

Economic service charge 22,681 8,763 - -

Social responsibility levy 16,265 11,133 150 -

Fringe benefit tax (indian companies) - 20 - -

10% WHT on inter company dividends 97,382 93,234 - -

Current and deferred tax share of associates 302,550 199,970 - -

1,565,801 985,240 22,409 16,608

Income tax charged at

Standard rate 35% 909,310 642,999 10,009 -

Concessionary rate of 15% 196,463 40,339 - -

Off-Shore dividend 10% - 1,805 - -

Off-Shore profits at varying rates 1,855 - - -

Under provision for previous years 100,312 21,174 66,448 16,608

Charge for the year 1,207,940 706,317 76,457 16,608

Deferred tax reversal (81,017) (34,197) (54,198) -

Other income based taxes

Economic service charge 22,681 8,763 - -

Social responsibility levy 16,265 11,133 150 -

Fringe benefit tax (indian companies) - 20 - -

10% WHT on inter company dividends 97,382 93,234 - -

Current and deferred tax share of associates 302,550 199,970 - -

Total income tax expense 1,565,801 985,240 22,409 16,608

Group tax expense is based on the taxable profit of individual companies within the group. At present the tax laws of Sri Lanka do not provide for

group taxation.

Group


In Rs.'000s

29.2 Economic service charge (ESC)

ESC written-off 22,681 8,763

22,681 8,763




Group Company


In Rs.'000s

29.3 Deferred tax expense

Income statement

Deferred tax expense arising from;

Accelerated depreciation for tax purposes (96,303) 26,483 24,746 -

Revaluation of investment property to fair value 728 - - -

Employee benefit liabilities (26,136) (23,278) (29,330) -

Benefit arising from tax losses 5,462 (64,963) (49,614) -

Others 35,232 27,561 - -

(81,017) (34,197) (54,198) -

Share of associate company deferred tax 70,450 (103,694) - -

Deferred tax charge (10,567) (137,891) (54,198) -

Statement of changes in equity

Deferred tax expense arising from;

Revaluation of land and building to fair value (73,386) 4,350 - -

Total deferred tax charge (83,953) (133,541) (54,198) -

Deferred tax has been computed at 28% for all standard rate companies (including listed companies), and at 12% for leisure group companies

and at rates as disclosed in note 29.6 and 29.7.

Temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not been

recognised, amounts to Rs.1,145 mn (2010 Rs.1,110 mn). The deferred tax effect on undistributed reserves of subsidiaries has not been

recognised since the parent can control the timing of the reversal of these temporary differences. The deferred tax liability on temporary differences

relating to undistributed profits of associates has not been recognised as there is no current intention of distributing retained earnings to the

holding company.

However, the group has recognised the deferred tax impact pertaining to the current year on declared dividends of subsidiaries and associate

companies amounting to Rs.100mn.

Group Company


In Rs.'000s

29.4 Tax losses carried forward

Tax losses brought forward 5,286,093 3,328,734 1,258,794 1,124,662

Adjustments on finalisation of liability (45,729) 45,953 452 31,284

Tax losses arising during the year 423,923 778,012 - 102,848

Utilisation of tax losses (377,383) (235,160) (29,337) -

Adjustments due to acquisitions / mergers / disposals - 1,368,553 - -

5,286,904 5,286,092 1,229,909 1,258,794

Year of Cost of Relief Liability to

investment approved claimed on additional

investment investment tax on

disposal of

Investment

29.5 Details of investment relief

Company 1999/2000 579,036 284,051 -

The company is eligible for qualifing payment relief granted under Section 31(2)(s) of the Inland Revenue Act No 28 of 1979 and the transitional

povisions at Section 218 of the Inland Revenue Act No 10 of 2006. The company has carried forward the unclaimed investment relief for set off

in future years.







Country of incorporation Company Rate

29.7 Income tax rates of off-shore subsidiaries (Contd.)Republic of Maldives Fantasea World Investments (Pte) Ltd. Nil

Tranquility (Pte) Ltd. Nil

Travel Club (Pte) Ltd. Nil

John Keells Maldivian Resorts (Pte) Ltd. Nil

Mack Air Services Maldives (Pte) Ltd. Nil

Singapore John Keells Singapore (Pte) Ltd. 17% (Max)

United Arab Emirates Information System Associates. Nil

United Kingdom John Keells Computer Services (UK) Ltd. 30%

USA Auxicogent International US Inc. 35%(Max)

Canada Auxicogent International Canada Inc. 28%

Group

For the year ended 31st March Note 2011 2010

In '000s

30 EARNINGS PER SHARE

30.1 Basic earnings per share

Profit attributable to equity holders of the parent 8,245,585 5,201,491

Weighted average number of ordinary shares 30.3 622,627 613,164

Basic earnings per share 13.24 8.48

30.2 Diluted earnings per share

Profit attributable to equity holders of the parent 8,245,585 5,201,491

Adjusted weighted average number of ordinary shares 30.3 633,927 617,662

Diluted earnings per share 13.01 8.42

30.3 Amount used as denominator

Ordinary shares at the beginning of the year 619,474 611,353

Effect of share options exercised 3,153 1,811

Weighted average number of ordinary shares in issue before dilution 622,627 613,164

Number of shares outstanding under the share option scheme 26,318 30,488

Number of shares that would have been issued at fair value (15,018) (25,990)

Adjusted weighted average number of ordinary shares 633,927 617,662

For the year ended 31st March Rs. 2011 Rs. 2010

In Rs.'000s

31 DIVIDEND PER SHAREEquity dividend on ordinary shares

Declared and paid during the year

Final dividend* 1.00 619,867 1.00 611,353

Interim dividend 2.00 1,248,840 2.00 1,232,289

Total dividend 3.00 1,868,707 3.00 1,843,642

*Previous years’ final dividend paid in the current year.



Sri Lanka Asia (excluding Sri Lanka) Others Group Total

2011 2010 2011 2010 2011 2010 2011 2010

In Rs.’000s

32.3 Secondary segments

(geographical segments, based on the location of assets)

Segment assets 84,318,439 74,127,216 20,548,758 15,693,458 875,190 1,003,468 105,742,387 90,824,142

Segment liabilities 39,094,439 37,648,986 14,533,330 11,589,915 657,088 864,586 54,284,857 50,103,487

Investment in associates 13,646,088 13,399,230 1,024,147 909,956 - - 14,670,235 14,309,186

Segment revenue 55,076,252 43,881,158 6,649,939 5,263,382 229,351 96,682 61,955,542 49,241,222

Segment results 4,730,717 2,587,801 1,195,937 350,445 6,536 6,166 5,933,190 2,944,412

Purchase and construction of

property, plant and equipment 4,507,453 1,652,371 467,360 124,070 2,939 5,153 4,977,752 1,781,594

Purchase and construction of

intangible assets 102,955 62,264 - - 11,799 8,722 114,754 70,986Depreciation of property,

plant and equipment 1,385,954 1,308,397 312,749 424,243 1,392 4,213 1,700,095 1,736,853

Amortisation of intangible assets 222,168 221,504 - - 11,855 5,345 234,023 226,849

Amortisation / depreciation

of leasehold property and other

non-current assets 17,192 180,619 357,979 133,684 - - 375,171 314,303

Gratuity provision and

related costs 243,045 189,239 1,209 (13) 414 2,469 244,668 191,695

Impairment losses / reversal

of impairment losses 46,905 16,178 2,784 4,777 - - 49,689 20,955

Amortisation of other

deferred liabilities 512 512 - - - - 512 512

Group Company As at 31st March Note 2011 2010 2011 2010

In Rs.’000s

33 RELATED PARTY TRANSACTIONS

The company carried out transactions in the ordinary course of business with the following related entities. The list of directors at each of the

subsidiary, joint venture and associate companies have been disclosed in the group directory.

33.1 Amounts due from related parties

Subsidiaries 33.3 - - 611,884 531,686

Joint ventures 7,564 21,096 - -

Associates 10,956 1,793 189 1,198

Key management personnel (KMP) - - - -

Post employment benefit plan - - - -18,520 22,889 612,073 532,884

33.2 Amounts due to related parties

Subsidiaries 33.3 - - 9,274 3,001

Joint ventures - - - -

Associates 2,237 13,163 - -

Key management personnel - - - -

Post employment benefit plan - - - -

2,237 13,163 9,274 3,001




Company

Amounts due from Amounts due to

As at 31st March 2011 2010 2011 2010In Rs.’000s

33.3 Subsidiaries

Asian Hotels and Properties PLC. 2,235 3,172 - -

Auxicogent International Lanka (Pvt) Ltd. 352 2,435 - -

Beruwala Holiday Resorts (Pvt) Ltd. 81 - - -

Ceylon Cold Stores PLC. 4,353 5,445 - -

Ceylon Holiday Resorts Ltd. 539 1,535 - -

DHL Keells (Pvt) Ltd. 21,919 11,429 - -

Fantasea World Investments (Pvt) Ltd. 30 39 - -

Habarana Lodge Ltd. 497 1,943 - -

Habarana Walk Inn Ltd. 452 1,234 - -

Hikkaduwa Holiday Resorts (Pvt) Ltd. 3,400 - - -

InfoMate (Pvt) Ltd. 5,399 6,420 - -

International Tourists & Hoteliers Ltd. - 5 - -

Jaykay Marketing Services (Pvt) Ltd. 20,038 6,648 - -

John Keells Air Services (Pvt) Ltd. 396 353 - -

John Keells Computer Services (Pvt) Ltd. - 409 303 -

John Keells Hotels PLC. 205 244 - -

John Keells International (Pvt) Ltd. 3,578 1,728 - -

John Keells Logistics (Pvt) Ltd. 976 479 - -

John Keells Logistics India (Pvt) Ltd. 4,692 3,230 - -

John Keells Logistics Lanka (Pvt) Ltd. 1,537 10,649 - -

John Keells Maldivian Resorts (Pte) Ltd. 146 6 - -

John Keells Office Automation (Pvt) Ltd. 1,729 3,444 - -

John Keells PLC. - - 5,570 2,942

John Keells Properties (Pvt) Ltd. 59 - - -John Keells Residential Properties (Pvt) Ltd. - - 3,094 3

John Keells Teas Ltd. 498 248 - -

John Keells Warehousing (Pvt) Ltd. 263 268 - -

Kandy Walk Inn Ltd. 419 1,263 - -

Keells Consultants (Pvt) Ltd. - - 307 56

Keells Food Products PLC. 2,238 5,360 - -

Keells Hotel Management Serivces Ltd. 1,406 2,491 - -

Keells Realtors Ltd. 221 229 - -

Lanka Marine Services Ltd. 2,857 1,562 - -

Mack Air (Pvt) Ltd. 1,763 1,845 - -

Mack Air Services Maldives(Pte) Ltd. 48 88 - -

Mackinnon & Keells Financial Services Ltd. 4,104 1,132 - -

Mackinnon Mackenzie and Company (Shipping) Ltd. 46 61 - -

Mackinnon Mackenzie and Company of Ceylon Ltd. 7 - - -

Mackinnons Travels (Pvt) Ltd. 207 535 - -

Nexus Networks (Pvt) Ltd. 15 214 - -

Serene Holidays (Pvt) Ltd. 362 915 - -

Tea Small Holder Factories PLC. 74 - - -

Trans Asia Hotels PLC. 1,917 3,437 - -

Transware Logistics (Pvt) Ltd. 35 15 - -

Tranquility Private Ltd. 52 36 - -

Travel Club (Pvt) Ltd. 72 14 - -

Trinco Holiday Resorts (Pvt) Ltd. 1,972 2,771 - -

Union Assurance PLC. 915 483 - -

Walkers Tours Ltd. 2,119 271 - -

Whittall Boustead (Pvt) Ltd. 1,225 469 - -

Whittall Boustead (Travel) Ltd. 13 44 - - Yala Village (Pvt) Ltd. 1,705 896 - -





Company

Amounts due from Amounts due to

As at 31st March 2011 2010 2011 2010In Rs.’000s

33.3 Subsidiaries (Contd.)

Loans - Current

JayKay Marketing Services (Pvt) Ltd. 164,164 164,164 - -

John Keells International (Pvt) Ltd. 15,000 15,000 - -

John Keells Properties (Pvt) Ltd. 3,003 - - -

Keells Food Products PLC. 81,902 45,000 - -

Mackinnon & Keells Financial Services Ltd. - 139,528 - -

Trinco Holiday Resorts (Pvt) Ltd. 82,500 82,500 - -

Whittall Boustead (Pvt) Ltd. 168,149 - - -

611,884 531,686 9,274 3,001

Loans - Non-current

Mackinnon & Keells Financial Services (Pvt) Ltd. 189,641 - - -

Transware Logistics (Pvt) Ltd. 18,000 18,000 - -

207,641 18,000 - -

Group Company

For the year ended 31st March Note 2011 2010 2011 2010

In Rs.'000s

33.4 Transactions with related parties

Subsidiaries

(Purchases) / Sales of goods - - (4,372) (2,537)

(Receiving) / Rendering of services 33.5 - - 412,761 431,948

Loans given 33.5 - - 391,995 454,028Interest received / (Interest paid) - - 42,970 469

Rent (taken) / Given - - (23,907) (16,001)

(Guarantees taken) / Guarantees given - - 690 716

Joint Ventures

(Receiving) / Rendering of services 14,010 21,294 - -

Associates

(Purchases) / Sales of goods 3,788 7,839 - -

(Receiving) / Rendering of services 33,346 22,645 (2,972) (3,048)

Interest received / (Interest paid) 33.6 356,387 402,404 369,371 363,229

Loans taken - - - -

Leases taken (2,921) - - -

Key management personnel

(Receiving) / Rendering of services - 10,420 - -

Close family members of KMP

(Receiving) / Rendering of services - 18 - -

Post employment benefit plan

Contributions to the provident fund 182,258 161,209 35,877 34,551




Company


In Rs.'000s

33.5 Transactions with related parties - Subsidiaries

(Receiving) / Rendering of services

Asian Hotels & Properties PLC. 17,875 18,301

Ceylon Cold Stores PLC. 31,291 38,231

DHL Keells (Pvt) Ltd. 112,449 96,258

Infomate (Pvt) Ltd. 12,693 13,726

Jaykay Marketing Services (Pvt) Ltd. 41,983 40,762

John Keells Office Automation (Pvt) Ltd. 11,803 11,912

John Keells PLC. 14,460 18,204

Keells Food Products PLC. 14,548 17,625

Keells Hotel Management Services Ltd. 49,305 51,496

Trans Asia Hotels PLC. 14,021 13,631

Walker Tours Ltd. 15,813 17,404

Other subsidiaries 76,520 94,398

412,761 431,948

Loans given

Jaykay Marketing Services (Pvt) Ltd. - 150,000

John Keells Office Automation (Pvt) Ltd. - 12,000

John Keells Properties (Pvt) Ltd. 3,003 -

Keells Food Products PLC. 36,902 45,000

Mackinnon & Keells Financial Services Ltd. 72,641 124,528

Trans Asia Hotels PLC. - 40,000

Trinco Holiday Resorts. - 82,500

Whittall Boustead (Pvt) Ltd. 279,449 -

391,995 454,028

Group Company


In Rs.'000s

33.6 Transactions with related parties - Associates

Interest received / (Interest paid)

Nations Trust Bank PLC. 356,387 402,404 369,371 363,229

The company and group held interest bearing deposits of Rs.1,850mn and 2,081mn respectively, at Nations Trust Bank PLC as at

31 March 2011.

33.7 Terms and conditions of transactions with related parties

Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at year end are

unsecured, interest free and settlement occurs in cash. Interest bearing borrowings are at pre-determined interest rates and terms.

33.8 Compensation of key management personnel

Key management personnel include members of the Board of directors of John Keells Holdings PLC and its subsidiary companies.

Group Company


In Rs.'000s

Short-term employee benefits 205,132 177,643 86,521 70,630

Post employment benefits - - - -

Other long-term benefits - - - -

Termination benefits - 15,840 - 15,840

Share based payments - - - -205,132 193,483 86,521 86,470





Directors’ interest in the employee share option plan of the company

As at 31 March 2011, the executive members of the Board of directors held options to purchase ordinary shares under the employee share option

plan as follows;

1,128,486 Ordinary shares at a price of Rs.120.74 each, exercisable before 09-4-2011




817,764 Ordinary shares at a price of Rs.292.00 each, exercisable before 08-12-2015

No share options have been granted to the non-executive members of the Board of directors under the employee share option plan.

34 CONTINGENT LIABILITIES

34.1 JOHN KEELLS HOLDINGS PLC (JKH)

The contingent liability of JKH as at 31 March 2011, relates to the following;

• GST & VAT Assessments for the year of assessment 2002/03 -

The company has filed appeals against these assessments and these are currently pending with the Board of Review of the Department of

Inland Revenue and Court of Appeal respectively.

• Income tax assessment for the year of assessment 2006/07 -

The company has filed an appeal against this assessment and is currently pending with the Board of Review of Department of Inland Revenue.

Having discussed with independent legal and tax experts and based on information available, the contingent liability as at 31 March 2011 is

estimated at Rs.123 mn.

34.2 LANKA MARINE SERVICES (PVT) LIMITED (LMS)

The contingent liability of LMS as at 31 March 2011, relates to the following;

• Post privatisation turnover tax levied by the Western Provincial Council -

The company has disputed this on the basis that its business activity is that of an export. An appeal has been made by the company to the

Western Provincial Council.

• Income tax assessment relating to year of assessment 2001/02 -

Assessment was received by the company based on normal tax rates. The company has appealed against this assessment on the grounds

that the sale of bunker to foreign ships is an export, which attracts concessionary rates of taxes, but this has been disputed by the Department

of Inland Revenue. The appeal made by the company is currently with the Court of Appeal of Sri Lanka.

• Income tax assessments relating to years of assessments 2005/06, 2006/07 and 2007/08 -

Assessments were received in August 2008 and October 2009, consequent to the Supreme Court judgement, whereby the original BOI

concessions granted were annulled. Although the assessments were based on normal tax rates the company computed and paid income

taxes at concessionary rates of taxes, based on opinions from independent legal counsel and tax consultants, that the supply of bunkers to

foreign vessels is an export and therefore eligible to concessionary rates of taxes as provided in the Inland Revenue Act. Appeals have been

lodged against the balance taxes assessed and penalties charged by the Inland Revenue. The appeals made by the company have beenreferred to the Board of Review.

• Income tax assessments relating to years of assessments 2002/03, 2003/04 and 2004/05 –

Assessments were received in January 2009, once again based on normal tax rates. It is the view of the company, based on opinions from

independent legal counsel and tax consultants, that the subject years were statutorily time barred as provided in the Inland Revenue Act.

The appeal made by the company is currently before the Commissioner General of Inland Revenue for determination.

Having discussed with independent legal and tax experts and based on information available, the contingent liability as at 31 March 2011 is

estimated at Rs.700mn.




35 CAPITAL AND OTHER COMMITMENTS

Capital commitments approved and contracted as at the balance sheet date, but not provided for in the financial statements amounted to

Rs.4,391 mn (2010 Rs. 2,652 mn) and Rs. 451 mn (2010 Rs. Nil) for the group and company respectively.

Other commitments for the group relating to guarantees and forward exchange contracts amounted to Rs. 1,231 mn (2010 Rs. 589 mn).

Group


In Rs.'000s

36 LEASE COMMITMENTS

Lease rentals due on non-cancellable operating leases:

Within one year 313,263 986,977

Between one and five years 1,254,877 4,182,394

After five years 1,954,333 13,965,519

3,522,473 19,134,890

Company Lessor Leased properties

36.1 Details of leases

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

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.

Jaykay Marketing Services (Pvt) Ltd. R.J. S. Exports (Pvt) Ltd/Mr. Ramesh Abeywardena Land occupied.

John Keells PLC. Colombo Divisional Secretariat Land occupied. Travel Club (Pte) Ltd. Government of Maldives and a sub lease with Land occupied.

Ellaidhoo Investments (Pte) Ltd.

Tranquility (Pte) Ltd. Government of Maldives Land occupied.

Yala Village (Pvt) Ltd. Sri Lanka Tourist board Land occupied.

36.2 Extent of lease hold land is given in the group real estate portfolio in the supplementary section of the annual report.

37 ASSETS PLEDGED

Assets pledged for facilities obtained is given in note 17.3 to the financial statements.

38 POST BALANCE SHEET EVENTS

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 2011. As required

by section 56 (2) of the Companies Act no 07 of 2007, the board of directors has confirmed that the company satisfies the solvency test in

accordance with section 57 of the companies Act No.07 of 2007,and has obtained a certificate from auditors, prior to declaring a final dividend

which is to be paid on the 9 June 2011.

In accordance with the Sri Lanka Accounting Standard 12 (Revised 2005), Events after the balance sheet date, the final dividned has not been

recognised as a liability in the financial statements as at 31 March 2011.

The board of directors of the company also resolved to recommend the increase in the number of shares in issue by way of a share sub-division,

whereby three (3) existing shares will be sub-divided into four (4). The proposed sub-division is subject to the approval of the Colombo Stock

Exchange and the shareholders of the company at a general meeting.





ECONOMIC VALUE STATEMENT


T r a n s p o r t a t i o n

L e i s u r e

P r o p e r t y

C o n s u m e r

F i n a n c i a l

I n f o r m a t i o n

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T o t a l

E l i m i n a t i o n s /

G r o u p T o t a l

F o r t h e y e a r e n d e

d

F o o d s & R e t a i l

S e r v i c e s

T e c h n o l o g y

A d j u s t m e n t s

3 1 M a r c h

2 0 1 1

2 0 1 0

2 0 1 1

2 0 1 0

2 0 1 1

2 0 1 0

2 0 1 1

2 0 1 0

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2 0 1 0

2 0 1 1

2 0 1 0

2 0 1 1

2 0 1 0

2 0 1 1

2 0 1 0

2 0 1 1

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%

2 0

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i l l i o n s

D i r e c t e c o n o m i c v a l u e g e n e r a t e d

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1 3 , 7

7 5

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1 5 , 2

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1 2 , 5

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2 , 7 0 7

1 , 8

2 1

1 8 , 8

6 8

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6 , 5

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1870

The foundation was laid for the corporate journey of John Keells

Holdings, when two English brothers, George and Edwin John set upE. John & Co., a firm of produce and exchange brokers.

1948

The firm merged with two London based tea brokers, William Jas andHy Thompson & Co., and GeoWhite & Co., thereby evolving into aprivate liability company in the name of E. John, Thompson,White & Company Ltd.

1960

Ever 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 Keell Thompson White Ltd.

1973

The company acquired a controlling stake in Walkers Tours and Travels (Ceylon) Ltd., one of the country’s leading inbound touroperators.

1974

The firm became a rupee quoted public company and took the nameof John Keells Ltd.

1986

A newly incorporated John Keells Holdings Ltd. (JKH) acquired acontrolling stake in John Keells Limited and obtained a quotation onthe Colombo Stock Exchange (CSE) amidst a heavily over-subscribedpublic share issue.

1991

JKH was involved in the biggest ever deal at the time, when Whittalls

group of companies was acquired thus gaining controlling stakes inCeylon Cold Stores (CCS) (the country’s leading producer of carbonated soft drinks and ice cream), Ceylon Holiday Resorts (ownerof Bentota Beach Hotel and Coral Gardens Hotel) and a stake inUnion Assurance (UA).

1994

JKH became the first Sri Lankan company to obtain a listing abroad,and issued Global Depository Receipts (GDRs) that were quoted onthe Luxembourg Stock Exchange.

1996

Velidhu Resort Hotel, an 80 roomed island resort in the Maldives, wasacquired making it JKH’s first major overseas investment.

1999

Nations Trust Bank (NTB) was established in a joint venture with theIFC and Central Finance Co. Ltd. Fortune magazine named JKH “Oneof the ten best Asian stocks to buy”. South Asia Gateway Terminals(SAGT) the largest private sector investment in Sri Lanka at that timecommenced operations to own, operate and develop the QueenElizabeth Quay at the port of Colombo.

2000

JKH 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 Rating Ltd. JKH wasadmitted as a full member of the World Economic Forum.

DECADE AT A GLANCE2002 - 2003

JKH acquired Lanka Marine Services (LMS), the bunkering facility atthe port of Colombo. Nations Trust Bank acquired the local operationsof American Express.

2003 - 2004

In the largest ever transaction on the CSE at that time, JKH acquired Asian Hotels & Properties, an acquisition that brought with it 40 percent of the five star room capacity in Colombo. The Group sold its 50per cent stake in RPK Management Services (Pvt) Ltd (its Plantationsmanagement company).

2004 - 2005

John Keells Hotels Limited (KHL) was created as a holding companyfor all Group resorts. JKH acquired a controlling stake in MercantileLeasing Limited (MLL). The John Keells Social ResponsibilityFoundation, the Group’s CSR arm, was established as a charitable

company and registered as a voluntary social service organisation.

2005 - 2006

The Group entered into a MOU to develop a third resort in theMaldives on Alidhoo Island. JKH acquired 80 per cent of Yala VillageHotel. With the sale of Keells Plantations, the Group exited from theownership of plantations. JKH entered into the BPO space through a joint venture with Raman Roy Associates. The Group also launchedits new hotel brands ’Cinnamon Hotels & Resorts’ and ’ChaayaHotels & Resorts’. NTB merged with Mercantile Leasing Limited.

2006 - 2007

The Group acquired a lease on Dhonveli Beach and Spa andEllaidhoo Tourist Resort in the Maldives. Furthermore, JKH acquired20 per cent of Associated Motorways PLC (AMW). JKH increased itsstake in SAGT by 7.5 per cent to 33.75 per cent. The Group exited

its restaurant businesses with the sale of majority stakes in KeellsRestaurants (Pvt) Limited and Crescat Restaurants (Pvt) Limited. JohnKeells Holdings Ltd was renamed as John Keells Holdings PLC.

2007 - 2008

The Group’s first ’Cinnamon’ resort in the Maldives, ’Cinnamon Island Alidhoo’, commenced operations. The lease held by the Group in the Velidhu Island of the Maldives, expired. The International FinanceCorporation (IFC), a member of the World Bank group, signed a longterm funding arrangement amounting to USD 75 million to supportthe Group’s expansion plans. 74 per cent stake Keells BusinessSystems Ltd was divested.

2008 - 2009

JKH acquired a further 8.44 per cent in SAGT and also increasedstakes in UA, CCS, John Keells PLC and Keells Food Products PLC.

The privatisation of LMS was declared null and void as per judgementdelivered by the Supreme Court. The stake in AMW was divested. Acquired a 44 per cent stake in Quatrro Finance & AccountingSolutions.

2009 - 2010

The market capitalization exceeded USD 1 billion. JKH increased itseffective stake of UA to 80.6 per cent. JKH purchased a 24.6 percent stake in Central Hospital (Private) Limited. At the conclusion of the KHL 1:3 rights issue, JKH owned 82.9 per cent of KHL. JKH wasranked first by the Business Today magazine’s ’Top 10’ award. TransAsia Hotel was re-branded and re-launched as CinnamonLakeside Colombo. The group released its first stand aloneSustainability Report for 2008/09 in adherence to the GlobalReporting Initiative (GRI-G3) framework.

2010-2011

Please refer ’Operating highlights and significant events’ section.

HISTORY OF THE JOHN KEELLS GROUP




31st March 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

In Rs.millions

OPERATING RESULTS

Group revenue 60,500 47,980 41,023 41,805 32,855 29,463 23,232 22,285 16,784 11,777

EBIT 11,425 7,908 7,986 8,197 6,115 4,850 3,569 3,458 1,311 1,206

Finance expenses (796) (1,370) (1,695) (1,618) (1,314) (525) (404) (458) (329) (324)

Share of results of associates 2,641 2,556 2,340 2,243 1,701 958 833 703 451 322

Profit before tax 10,629 6,538 6,291 6,579 4,801 4,325 3,165 2,393 937 882

Tax expense (1,566) (986) (1,326) (1,054) (852) (819) (645) (286) (316) (290)

Profit after tax 9,063 5,552 4,965 5,525 3,949 3,506 2,520 2,107 621 592

Extra-ordinary item - - - - - - 185 - - -

Profit for the year 9,063 5,552 4,965 5,525 3,949 3,506 2,705 2,107 621 592

Attributable to:

Equity holders of the parent 8,245 5,201 4,733 5,119 3,540 3,064 2,291 1,905 452 543

Minority interest 818 351 232 406 409 442 414 202 169 49

9,063 5,552 4,965 5,525 3,949 3,506 2,705 2,107 621 592

CAPITAL EMPLOYED

Stated capital 24,612 23,322 22,525 22,464 22,246 9,205 9,095 9,005 2,794 2,691

Capital reserves 9,560 7,574 7,437 6,019 3,137 2,815 2,115 1,892 1,938 1,632

Revenue reserves 25,415 18,936 15,545 14,914 13,087 10,011 6,686 5,545 4,281 4,028

59,587 49,832 45,507 43,397 38,470 22,031 17,896 16,442 9,013 8,351

Minority interest 7,608 6,430 4,960 4,770 3,696 3,630 3,712 4,936 2,057 1,802

Total equity 67,195 56,262 50,467 48,167 42,166 25,661 21,608 21,378 11,070 10,153

Total debt 14,641 17,453 21,596 12,667 15,363 5,327 9,105 4,056 4,121 3,568

81,836 73,715 72,063 60,834 57,529 30,988 30,713 25,434 15,191 13,721

ASSETS EMPLOYED

Property, plant and equipment (PP&E) 28,628 29,989 29,965 28,381 19,688 18,423 19,299 18,103 9,444 8,928Non-current assets other than PP&E 47,436 34,104 33,456 19,128 17,730 8,850 6,033 3,649 3,719 3,039

Current assets 34,228 34,566 28,718 23,440 27,759 11,478 13,589 9,798 6,134 9,243

Liabilities net of debt (28,456) (24,944) (20,076) (10,115) (7,648) (7,763) (8,208) (6,116) (4,106) (7,489)

81,836 73,715 72,063 60,834 57,529 30,988 30,713 25,434 15,191 13,721

CASH FLOW

Net cash flows from

operating activities 8,501 9,485 4,146 6,914 2,523 2,664 4,620 3,138 1,891 1,149

Net cash flows from / (used in)

investing activities (4,469) (5,823) (3,972) (4,359) (10,088) (2,848) (4,482) (6,746) (2,002) (1,001)

Net cashflows from / (used in)

financing activities (6,791) (636) 2,332 (6,262) 18,422 (1,027) 271 5,414 (31) (330)

Net increase / (decrease) in

cash and cash equivalents (2,759) 3,026 2,506 (3,707) 10,857 (1,211) 409 1,806 (142) (182)

KEY INDICATORS

Basic earnings per share (Rs.) 13.2 8.5 7.6 8.1 6.2 5.4 4.1 3.7 0.9 1.1

Interest cover (no. of times) 14.0 5.8 4.7 5.1 4.7 9.2 8.8 7.6 4.0 3.7

Net assets per share* (Rs.) 95.0 80.4 74.4 68.2 69.6 57.0 46.9 57.4 52.3 45.4

Enterprise value 175,672 109,548 42,815 76,713 95,962 64,389 47,222 33,578 15,841 9,968

EV / EBITDA 13.1 10.9 4.3 7.8 13.0 10.7 10.0 9.1 5.5 5.1

Debt / equity ratio (%) 21.8 31.0 42.8 26.3 36.4 20.8 29.0 18.3 34.7 35.4

Dividend payout (Rs’millions) 1,869 1,844 1,883 3,176 1,412 1,197 1,075 726 342 330

Current ratio (no. of times) 1.8 1.8 2.1 1.8 1.9 1.2 1.2 1.6 1.2 1.1

Market price per share unadjusted (Rs.) 285.6 184.0 62.8 119.8 155.0 157.8 137.5 111.0 70.8 58.0

Market price per share diluted (Rs.) 285.6 184.0 62.8 118.8 153.7 113.5 82.5 60.5 29.1 23.8

* Net assets per share has been calculated based on the net assets of the group and number of shares in issue as at the end of each year.

DECADE AT A GLANCE




Balance sheet

For information purposes only

Group Company

As at 31st March 2011 2010 2011 2010

In USD'000s

ASSETS

Non-current assets

Property, plant and equipment 259,310 263,058 666 979

Leasehold property 86,192 40,146 - -

Investment property 48,788 20,478 - 7,886

Intangible assets 23,840 22,422 396 329

Investments in subsidiaries and joint ventures 46 45 212,700 190,984

Investments in associates 132,883 125,519 83,855 79,919

Other investments 106,816 73,818 5,270 697

Deferred tax assets 1,837 1,599 491 -

Other non-current assets 29,270 15,130 2,342 527

688,982 562,215 305,720 281,321

Current assets

Inventories 28,475 20,132 7 7

Trade and other receivables 109,349 87,138 5,335 7,441

Amounts due from related parties 168 201 5,544 4,674

Short term investments 152,908 169,307 91,225 89,280

Cash in hand and at bank 19,136 26,431 176 721

310,036 303,209 102,287 102,123

Total assets 999,018 865,424 408,007 383,444

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parentStated capital 222,930 204,582 222,930 204,582

Capital reserves 86,598 66,435 - -

Revenue reserves 230,206 166,108 121,732 81,974

539,734 437,125 344,662 286,556

Minority interest 68,915 56,399 - -

Total equity 608,649 493,524 344,662 286,556

Non-current liabilities

Insurance provisions 114,697 89,791 - -

Non-interest bearing borrowings 163 158 - -

Interest bearing borrowings 75,657 92,451 50,000 60,000

Deferred tax liabilities 5,869 6,857 - -

Employee benefit liabilities 11,011 9,135 949 813

Other deferred liabilities 38 41 - -

Other non-current liabilities 6,766 1,898 - -

214,201 200,331 50,949 60,813

Current liabilities

Trade and other payables 112,134 101,549 1,999 3,013

Amounts due to related parties 20 115 84 26

Income tax liabilities 7,217 3,985 - -

Short term borrowings 2,101 1,316 - -

Current portion of interest bearing borrowings 19,333 36,570 10,000 27,504

Dividend payable - 5,434 - 5,434

Bank overdrafts 35,363 22,600 313 98

176,168 171,569 12,396 36,075 Total equity and liabilities 999,018 865,424 408,007 383,444

Exchange rate 110.40 114.00 110.40 114.00

INDICATIVE US DOLLAR FINANCIAL STATEMENTS




Income statement

For information purposes only

Group Company


In USD'000s

Revenue 548,008 420,877 5,024 4,774

Cost of sales (424,429) (323,807) (2,107) (2,019)

Gross profit 123,579 97,070 2,917 2,755

Dividend income 567 386 31,711 31,347

Other operating income 55,388 44,042 28,879 19,343

Distribution expenses (21,838) (18,129) - -

Administrative expenses (67,410) (63,318) (5,467) (5,739)

Other operating expenses (14,957) (13,104) (388) (388)

Finance expenses (7,211) (12,019) (3,437) (6,286)

Change in fair value of investment property 4,237 - - -

Share of results of associates 23,921 22,420 - -

Profit before tax 96,276 57,348 54,215 41,032

Tax expense (14,183) (8,642) (203) (146)

Profit for the year 82,093 48,706 54,012 40,886

Attributable to:

Equity holders of the parent 74,687 45,629

Minority interest 7,406 3,077

82,093 48,706

Exchange rate 110.40 114.00 110.40 114.00

This information does not constitute a full set of financial statements in compliance with SLAS. The above should be read together with the Auditors’

opinion and the notes to the financial statements. Exchange rates prevailing at each year end have been used to convert the income statement and

balance sheet.




Net book value

Buildings Land in acres 2011 2010

Owning company and location in (Sq. Ft) Freehold Leasehold Rs.'000s Rs.'000s

PROPERTIES IN COLOMBO


Slave Island Complex, Colombo 2. 26,910 4.61 3.72 2,611,792 928,962

John Keells Holdings PLC.

320, Union Place, Colombo 2. 81,920 1.94 - - 882,510

John Keells PLC.

130, Glennie Street, Colombo 2. 122,368 1.78 0.58 1,011,500 615,746

56/1, 58, 58 1/1 Kirulapone Avenue, Colombo 5. - 0.08 - 1,250 1,250

John Keells Properties (Pvt) Ltd.

125, Glennie Street, Colombo 2. 27,050 0.49 - 283,425 197,412

Keells Realtors Ltd.

427 & 429, Ferguson Road, Colombo 15. 27,750 1.22 - 232,600 123,320

Mackinnon & Keells Financial Services Ltd.

Leyden Bastian Road, York Street, Colombo 01. 31,656 0.45 - 333,000 270,308

Union Assurance PLC.

No 20, St. Michaels’ Road, Colombo 03. 57,916 0.33 - 654,560 661,440

Whittall Boustead (Pvt) Ltd.

No.199,Union Place, Colombo 2. 14,014 0.50 - 247,000 -

148, Vauxhall Street, Colombo 2. 62,818 3.06 - 1,285,750 939,883

452,402 14.46 4.30 6,660,877 4,620,831

PROPERTIES OUTSIDE COLOMBO


Kaduwela. 243,039 26.81 - 537,194 512,947

Trincomalee. 24,905 1.14 - 29,671 30,021

Jaykay Marketing Services (Pvt) Ltd.385, Negombo Road, Wattala. 12,820 - 0.30 6,849 8,202

Liberty Plaza, Colombo 3. 10,000 - - - -

388, Galle Road, Mount Lavinia. 6,000 - 0.24 4,709 6,163

John Keells PLC.

17/1, Temple Road, Ekala, Ja-Ela. - 2.64 - 74,000 59,000

John Keells Warehousing (Pvt) Ltd.

Muthurajawela. 141,276 - 6.00 143,675 146,037

Keells Food India (Pvt) Ltd.

M 56/A, Greater Kailash Market Part II, New Delhi. - - 0.04 - 190

Keells Food Products PLC.

41, Temple Road, Ekala, Ja-Ela. 50,199 3.00 3.26 124,357 125,403


Broadlands. 58,063 4.14 - 39,937 40,992

Halwitigala. 56,686 9.60 - 29,182 29,930

Hindul Oya. 10,500 0.88 - 1,697 1,738

Hingalgoda. 56,796 18.27 - 35,692 34,921

Karawita. 75,745 - 4.98 86,892 89,240

Kurupanawa. 62,401 12.26 - 37,972 38,791

Neluwa. 46,708 4.72 - 32,132 31,436

New Panawenna. 41,772 10.59 - 29,373 30,082

Pasgoda. 40,354 5.41 - 20,653 21,176

Peliyagoda. 31,633 - 0.99 102,000 79,000

Raxawa. 24,623 1.22 - 11,025 11,297

GROUP REAL ESTATE PORTFOLIO




Net book value

Buildings Land in acres 2011 2010

Owning company and location in (Sq. Ft) Freehold Leasehold Rs.'000s Rs.'000s

PROPERTIES OUTSIDE COLOMBO

Transware-Logistics (Pvt) Ltd.

Tudella, Ja-Ela. 63,670 18.67 - 363,209 365,556

Union Assurance PLC.

No 06,Rajapihilla Road, Kurunegala. 27,904 0.20 - 130,442 132,490

Whittall Boustead Ltd. -

150, Badulla Road, Nuwara Eliya. 4,346 0.46 - 69,711 69,808

1,089,440 120.01 15.81 1,910,372 1,864,420

HOTEL PROPERTIES

Asian Hotels and Properties PLC.

Cinnamon Grand Premises, Colombo 2. 648,813 7.82 - 8,170,167 8,105,075

Crescat Boulevard, Colombo 2. 145,196 - - 1,332,280 1,115,460

Beruwala Holiday Resorts (Pvt) Ltd.

Hotel Bayroo, Beruwela. - 6.55 - 230,879 -

Beruwala. - 4.72 - 231,801 231,801

Ceylon Holiday Resorts Ltd.

Bentota Beach Hotel & Club Intersport, Bentota. 220,414 0.70 11.02 479,470 412,106

Coral Gardens Hotel, Hikkaduwa. - - - - 161,343

Central Laundary. Warahena. 16,110 1.38 - 27,834 28,580

Fantasea World Investments (Pte) Ltd.

Chaaya Lagoon Hakuraa Huraa, Republic of Maldives. 150,412 - 13.42 708,624 520,586

Habarana Lodge Ltd.

The Lodge, Habarana. 194,606 - 25.47 673,382 463,020

Habarana Walk Inn Ltd.

Chaaya Village, Habarana. 162,323 - 9.34 190,461 192,883

Hikkaduwa Holiday Resort (Pvt) Ltd.Coral Gardens Hotel, Hikkaduwa. 190,862 - 4.36 319,340 -

International Tourists and Hoteliers Ltd.

Hotel Bayroo, Beruwela. - - - - 223,182

John Keells Maldivian Resorts (Pte) Ltd.

Chaaya Island Dhonveli, Republic of Maldives. - - - - 2,497,548

Kandy Walk Inn Ltd.

The Chaaya Citadel, Kandy. 116,725 5.79 - 314,989 316,504

Resort Hotels Ltd.

Nilaveli. 4,485 44.37 - 107,900 107,900

Rajawella Hotels Company Ltd.

Mahaberiatenna, Kandy. 3,700 - 10.00 35,585 36,009

Trans Asia Hotels PLC.

Cinnamon Lake Side, Colombo 2. 426,933 - 7.65 4,058,392 3,817,688

Tranquility (Pte) Ltd.

Chaaya Island Dhonveli, Republic of Maldives. 246,358 18.62 7,550,432 -

Cinnamon Island Alidhoo, Republic of Maldives. - - - - 3,296,174

Travel Club (Pte) Ltd.

Chaaya Reef Ellaidhoo, Republic of Maldives. 179,876 - 13.75 1,708,618 1,887,671

Trinco Holiday Resorts (Pvt) Ltd.

Chaaya Blu, Trincomalee. 108,442 13.24 - 510,640 187,068

Trinco Walk Inn Ltd.

Club Oceanic, Trincomalee. 89,960 14.64 - 250,586 115,591

Wirawila Walk Inn Ltd.

Randunukelle Estate, Wirawila. - 25.15 - 32,568 32,568

Yala Village (Pvt) Ltd.

The Village, Yala. 67,330 - 10.00 241,594 234,190

2,972,545 124.36 123.63 27,175,542 23,982,947

Consolidated Value of Land and Buildings 4,514,387 258.83 143.74 35,746,791 30,468,198




TRANSPORTATION

Ports and Shipping

Keells Shipping (Pvt) Ltd (100%)Shipping agency representation & logistics services

No. 11, York Street, Colombo 1

(2475200

Directors: S C Ratnayake - Chairman

J R F Peiris, R M David

Stated capital: Rs.500,000

Mackinnon Mackenzie & Co (Shipping) Ltd (100%)

Shipping agency representation & logistics services

4, Leyden Bastian Road, Colombo 1

(2307526



Stated capital: Rs.5,000,000

Maersk Lanka (Pvt) Ltd (30%)

Shipping agency representation & freight forwarding services

No. 36, D. R W ijewardene Mawatha, Colombo 10

(0112423700

Directors: W T Ellawala, Dinesh Lal, R M David

Robert Janvan Trooijen, Rizwan Sultan Ali


South Asia Gateway Terminals (Pvt) Ltd (42.19%

Ports & shipping services

Port of Colombo, P.O. Box 141, Colombo 1.

(2457500Directors: S C Ratnayake - Chairman

A D Gunewardene, J R F Peiris, R M David,

C Kuo Cheng, H O Madsen, H M Jepsen,

H G Wieske, Dr S Senerath, D C Alagarathnam,

Capt N Keppetipola, K N J Balendra, C Menkhorst

Stated capital: Rs.3,788,485,900

Logistics

DHL Keells (Pvt) Ltd (50% )

Express courier services

No. 148, Vauxhall Street, Colombo 2.

(2304304 / 4798600


R M David (Alt. J R F Peiris),

M A Monteiro, S P C Ong


John Keells Logistics (Pvt) Ltd (100%)

Integrated supply chain & third party logistics solutions


(2475200


J R F Peiris, A D Gunawardene,

R M David


John Keells Logistics India (Pvt) Ltd (100%)

Shipping agency representation & freight forwarding & logistics services

No.22, 4th Floor, Oxford Palazzo,

Rustambagh Main Road, Off Airport Road,

Bangalore - 560017, India

(+91(080)42040004, 42040005


J R F Peiris, R M David, R S Fernando,

C Hewamallika


John Keells Logistics Lanka (Pvt) Ltd (100%)

International freight forwarding and clearing & forwarding


(2475200

Directors: S C Ratnayake - ChairmanJ R F Peiris, R M David


Lanka Marine Services (Pvt) Ltd (99.44%)

Importer & supplier of heavy marine fuel oils & lubricants

4, Leyden Bastian Road, Colombo 1

(2475410-421


A D Gunewardene, J R F Peiris,

R M David, R S Fernando


Mackinnon Mackenzie & Co. of Ceylon Ltd (100%)

Foreign recruitment agents & consultants


(2475200




Trans-ware Logistics (Pvt) Ltd (50% )Integrated container depot. operations & logisticsservices provider

No.150,150/1, Pamunugama Road, Tudella, Ja-Ela

(2475508/2475538

Directors: S C Ratnayake- Chairman

(Alt. A D Gunawardene),

J R F Peiris, R M David,

Z M Gui (appointed w.e.f. 04.08.2010)

A A Miskon (appointed w.e.f. 30.08.2010)

Z M Amin (resigned w.e.f. 30.08.2010)


Whittall Boustead (Pvt) Ltd - Cargo Division (100%)

International freight forwarder & logistics services

No.148, Vauxhall Street, Colombo 2

(2475299



R M David, S Rajendra


Air Lines

John Keells Air Services India (Pvt) Ltd (100%)

(Formaly known as Matheson Keells Air Services (Pvt) Ltd)General sales agents for airlines in India.

No.22, 4th Floor, Oxford Palazzo,

Rustambagh Main Road, Off Airport Road,

Bangalore - 560017, India

(+91(080)42040004, 42040005


J R F Peiris, R M David, R S Fernando,

C Hewamallika


Mack Air (Pvt) Ltd (100%)

General sales agents for airlines in Sri Lanka

No. 11 A, York Street, Colombo 1

(2475375/2475335


J R F Peiris, R M David, C N Lawrence


Mackinnons Travels (Pvt) Ltd (100%)

IATA accredited travel agent and travel related servicesCeylon Cold Stores Building

No. 1 Justice Akbar Mawatha, Colombo 2

(2318600


(Alt. A D Gunawardene)



Mack Air Services Maldives (Pte) Ltd (49%)

General sales agents for airlines in the Maldives

4th Floor, STO Aifaanu Building,

Boduthakurufaanu Magu, Male 20-05

Republic of Maldives

(+9603334708 - 09


J R F Peiris, R M David, S Hameed, A Shihab


LEISURE

Hotel Management

Keells Hotel Management Services Ltd (100%Manager & marketer of resort hotels

No.130, Glennie Street, Colombo 2.

(2306600, 2421101-8

Directors: S C Ratnayake – Chairman

A D Gunewardene, J R F Peiris, J E P Kehelpannala


John Keells Maldivian Resorts (Pte) Ltd (80.32%)

Hotel holding company in the Maldives

2nd Floor, H. Maizan Building,

Sosun Magu, Male, Republic of Maldives

(00960 3329083 / 00960 3304601 / 00960 3313738



J E P Kehelpannala (resigned w.e.f.14.10.2010)

B J S A M Senanayake (appointed w.e.f. 14.10.2010)

S A S Perera (appointed w.e.f. 14.10.2010)


GROUP DIRECTORY




John Keells Hotels PLC (80.32%)

Holding company of group resort hotel companiesin Sri Lanka & Maldives


(2306600



J E P Kehelpannala, M A Omar,

R T Wijesinha, D A Cabraal,

N B Weerasekera (appointed w.e.f. 01.11.2010)


John Keells Hotels Mauritius (Pvt) Ltd (80.32%)

Hotel holding company in the Mauritius

IFS Court, Twenty Eight, Cybercity, Ebene, Mauritius

((230) 467 3000

Directors: K D Joory - Chairman

A D Gunewardene, J R F Peiris, F Soreefan


City Hotels

Asian Hotels and Properties PLC-Cinnamon Grand (78.56%)

Owner & operator of the five star city hotel "Cinnamon Grand"

77, Galle Road, Colombo 3

(2437437 /2497442


A D Gunewardene - Managing Director

J R F Peiris, R J Karunarajah,

S Rajendra, A R Gunasekara,

S K G Senanayake, S A Jayasekara

B M Amarasekera (resigned w.e.f. 28.06.2010)

I Samarawickrama (resigned w.e.f. 28.06.2010)


Trans Asia Hotels PLC (82.74%)

Owner & operator of the five star city hotel"Cinnamon Lakeside".

No. 115,Sir Chittampalam A. Gardiner

Mawatha, Colombo 2.

(2491000


A D Gunewardene, J R F Peiris, D S J Pelpola,

N L Gooneratne, R L Nanayakkara,

A R Gunasekara


Resort Hotels - Sri Lanka

Beruwala Holiday Resorts (Pvt) Ltd (79.45%)

Owner of real estate


(2306600, 2421101-8



J E P Kehelpannala (appointed w.e.f. 06.11.2010)

Stated Capital: Rs.988,000,000

Ceylon Holiday Resorts Ltd-Bentota Beach Hotel (79.25%

Owner & operator of "Bentota Beach Hotel" in Bentota

Galle Road, Bentota(034 2275176 / 034 2275266



J E P Kehelpannala


Hikkaduwa Holiday Resorts (Pvt) Limited (79.25%)

Owner & will operate "Chaaya Tranz" in Hikkaduwa

130, Glennie Street, Colombo 2

(2306600, 2421101-8


(appointed w.e.f. 06.10.2010),

A D Gunewardene (appointed w.e.f. 06.10.2010),

J R F Peiris (appointed w.e.f. 06.10.2010),



Habarana Lodge Ltd (78.99%)

Owner & operator of "The Cinnamon Lodge" in Habarana

P.O Box 2, Habarana

(066 2270011-2/ 066 2270072



J E P Kehelpannala,


Habarana Walk Inn Ltd (79.34%)Owner & operator of "Chaaya Village Habarana"

P.O Box 1, Habarana

(066 2270046-7/ 066 2270077



J E P Kehelpannala


International Tourists and Hoteliers Ltd (79.45%)



(2306600, 2421101-8



J E P Kehelpannala, W M S Fernando,

D C Alagaratnam,

H G Arrawawala (resigned w.e.f. 05.08.2010)


Kandy Walk Inn Ltd (79.03%)

Owner & operator of "The Chaaya Citadel" in Kandy

No.124, Srimath Kuda Ratwatte Mawatha, Kandy

(081 2234365-6/ 081 2237273-4



J E P Kehelpannala, R T Molligoda


Rajawella Hotels Ltd (80.32%)


No.130, Glennie Street, Colombo 2.(2306780, 2421101-8


A D Gunewardene, J R F Peiris


Resort Hotels Ltd (79.25%



(2306780, 2421101-8




Trinco Holiday Resorts (Pvt) Ltd (80.32%)

Owner & operator of "Chaaya Blu" in Trincomalee

Alles Garden, Uppuvelli, Sampathiv Post

(2421101-8





Trinco Walk Inn Ltd (80.32%)


Alles Garden, Uppuveli,Sampathiv Post,

Trincomalee

(026 112421101-8, 2306600Directors: S C Ratnayake – Chairman


J E P Kehelpannala


Wirawila Walk Inn Ltd (80.32%)



(2306780, 2421101-8




Yala Village (Pvt) Ltd (75.33%)

Owner and operator of "Yala Village" in Yala

P.O Box 1,Kirinda, Tissamaharama

(047 2239449-52

Directors: M A Perera - Chairman

S C Ratnayake - Deputy Chairman


J A Davis, J E P Kehelpannala





Resort Hotels - Maldives

Fantasea World Investments (Pte) Ltd (80.32%)

Owner & operator of "Chaaya Lagoon Hakuraa Huraa"in Maldives

2nd Floor, H.Maizan Building,


(00960 6720014 / 00960 6720064 / 00960 6720065



B J S A M Senanayake





John Keells Maldivian Resorts (Pte) Ltd (80.32%)

Hotel holding company in the Maldives2nd Floor, H.Maizan Building,


(00960 3329083 / 00960 3304601 / 00960 3313738




(appointed w.e.f 14.10.2010),




Tranquility (Pte) Ltd (80.32% )

Owner and operator of "Chaaya Island Dhoinveli" in Maldives

2nd Floor, H.Maizan Building,


(00960 6640055 / 00960 6640012





S A S Perera (appointed w.e.f. 14.10.2010),



Travel Club (Pte) Ltd (80.32%

Operator of "Chaaya Reef Ellaidhoo" in Maldives

2nd Floor, H.Maizan Building,Sosun Magu, Male, Republic of Maldives

(00960 6660839 / 00960 6660663 / 00960 6660664





S A S Perera (appointed w.e.f. 14.10.2010),



Destination Management

Serene Holidays (Pvt) Ltd (98.74%)

Tour operators421,Midas, Shar Plaza, JB Cpitals Nagar,

Andheri, Kurla Road, Andheri (East),

Mumbai 400 059, India

(091-2240053036-8

Directors: A D Gunewardene, V Leelananda


Walkers Tours Ltd (98.51%)

Inbound tour operators


(2306000


A D Gunewardene, J R F Peiris,V Leelananda


Whittall Boustead (Travel) Ltd (100%)

Inbound tour operators


(2306000


A D Gunewardene, J R F Peiris,V Leelananda


PROPERTY

Property Development

Asian Hotels and Properties PLC - Crescat (78.56%)

Boulevard, The Monarch, The Emperor developer andmanager of integrated properties

No.77, Galle Road, Colombo 3

(5540404



R J Karunarajah, S Rajendra,

A R Gunasekara, S K G Senanayake,

S A Jayasekara,

B M Amarasekera (resigned w.e.f. 28.06.2010),

I Samarawickrama (resigned w.e.f. 28.06.2010)


John Keells Residential Properties (Pvt) Limited (100%)

Developer of "OnThree20" projectNo. 130, Glennie Street,Colombo 2.

(2300065


(appointed w.e.f. 20.10.2010)

A D Gunewardene (appointed w.e.f. 20.10.2010),

J R F Peiris (appointed w.e.f. 20.10.2010),

S Rajendra (appointed w.e.f. 28.10.2010)


Real estate

J K Properties (Pvt) Ltd (100%)

Renting of office spaceNo.130, Glennie Street, Colombo 2.

(2306000 /2397263


A D Gunewardene, J R F Peiris, S Rajendra


Keells Realtors Ltd (95.57%)

Owner of real estates


(2306000 /2397263


A D Gunewardene, J R F Peiris, S Rajendra


Whittall Boustead (Pvt) Ltd - Real Estate Division-(100%)

Renting of office space


(2397263 /2327805



R M David, S Rajendra


CONSUMER FOODS AND RETAIL

Consumer Foods

Ceylon Cold Stores PLC (80.47%)

Beverages, frozen confectionery, processed meats, diaryproducts and holding company of Jaykay MarketingServices (Pvt) Ltd.

No. 1, Justice Akbar Mawatha, Colombo 2

(2328221/7, 2318777


A D Gunewardene, J R F Peiris, J R Gunaratne,

U P Liyanage, P S Jayawardena, A R Rasiah


Keells Food Products PLC (83.18%)

Manufacturer and distributor of branded meat andconvenience food products.

P.O Box 10,No.16, Minuwangoda Road, Ekala, Ja-Ela

(2236317/ 2236364


A D Gunewardene, J R F Peiris, J R Gunaratne,

R Pieris, S H Amarasekera, A D E I Perera,

M P Jayawardena


GROUP DIRECTORY




John Keells Foods India (Pvt) Ltd (83.18%)

Manufacturer and distributor of branded meatand convenience food products.

M-56/A Greater Kailash Market Part II

New Delhi -110048

(0091 47600300 - 31


J R F Peiris, J R Gunaratne,

Sanjeewa Fernando (appointed w.e.f 8.10.2010)


Retail

Jaykay Marketing Services (Pvt) Ltd (80.47%)

Operator of "Keells Super" chain of supermarkets

No.125, Glennie Street, Colombo 2

(2316800

Directors: S C Ratnayake- ChairmanJ R F Peiris, M R N Jayasundera-Moraes,

K N J Balendra


FINANCIAL SERVICES

John Keells Stock Brokers (Pvt) Ltd (90.04%)

Share broking services


(2446694-5 /2338066 / 4710721-4, 0112306250

Directors: A D Gunewardene - Chairman

S C Ratnayake, J R F Peiris, K N J Balendra


Nations Trust Bank PLC (29.90%)

Commercial banking and leasing operations

No. 242, Union Place, Colombo 2.

(4313131


J R F Peiris, A K Gunaratne, E H Wijenaike,

C H S K Piyaratna, A R Rasiah, D Weerakoon,

M E Wickremesinghe, K N J Balendra,

S G Rajakaruna,

Murtaza Jafferjee (appointed w.e.f. 15.12.2010),

Kemal de Soysa (appointed w.e.f. 21.01.2011)

Stated capital as at Rs.5,101,369,000

Union Assurance PLC (95.60%)Life and general insurance underwriters

No.20, St. Michaels' Road, Colombo 3

(2428428


J R F Peiris, K N J Balendra, A K Gunaratne,

A S De Zoysa, G F C De Saram,

M A Tharmaratnam (resinged w.e.f. 31.12.2010)


INFORMATION TECHNOLOGY

IT Services

Information Systems Associates (49%)Software development services

P.O Box. 132, Sajaah, UAE

(97165088810

Directors: A Ali, P Suckling (appointed w.e.f. 23.9.2010),

A Hamdany, J R F Peiris,

D Hubbard (resigned w.e.f. 23.9.2010),

G S Dewaraja, R S Fernando


John Keells Computer Services (UK) Ltd (100%)

Software development services

268, Bath Road, Slough, SLI 4DX, United Kingdom

(441753725283


G S Dewaraja, R S Fernando


John Keells Computer Services (Pvt) Ltd (100%)

Software services

No. 148, Vauxhall Street,Colombo 2.

(2300770-77


S C Ratnayake, J R F Peiris, G S Dewaraja,

R S Fernando


John Keells Softw are Technologies (Pvt) Ltd (100%)Marketer of software packages

No. 148, Vauxhall Street,Colombo 2.

(2300770-77


J R F Peiris, G S Dewaraja, R S Fernando


Office Automation

John Keells Office Automation (Pvt) Ltd (100%)

Distributor/reseller and services provider in office automation(OA), retail automation (RA) and mobile devices

Corporate Office: 90, Union Place, Colombo - 2

Technical Services:148, Vauxhall Street, Colombo - 2

(2313000, 2431576, 4702611


J R F Peiris, G S Dewaraja, R S Fernando


IT Enabled Services

AuxiCogent Alpha Private Limited (100%)

Investment holding company

IFS Court, 28, Cybercity, Ebene, Mauritius

((230) 467 3000

Directors: S C Ratnayake, A D Gunewardene, J R F Peiris,

R S Fernando, K N J Balendra, K D Joory,

A F Soreefan


AuxiCogent Holdings Private Limited (100%)

Holding company of AuxiCogent group companies

IFS Court, 28, Cybercity, Ebene, Mauritius((230) 467 3000



AF Soreefan,


AuxiCogent International (Pvt) Ltd (100%)



((230) 467 3000



A F Soreefan,

R Dutta (resigned w.e.f 4.10.2010),

R Roy (resigned w.e.f 4.10.2010)


AuxiCogent International Lanka (Pvt) Limited (100%)

BPO operations in Sri Lanka

No.4, Leyden Bastian Road, Colombo 1

((94) 112479709


R S Fernando, R M David


AuxiCogent International US Inc. (100%)

Provides sales & marketing support for AuxiCogent inNorth America

9225, Ulmerton Road, Suite H, Largo, Florida 33771, USA

(+1 727 518 0000

Director: Mithila Prasanna Gunaratna

(appointed w.e.f. 23.2.2011)

Edward Quintero (resigned w.e.f. 23.2.2011)


AuxiCogent International Canada Inc. (100%)

BPO operation in Canada

1900, 736-6th Avenue S.W., Calgary,

Alberta T2P 3T7, Canada

Directors: Deepak Kumar Malik (appointed w.e.f 26.7.2010),

J R F Peiris (appointed w.e.f. 26.7.2010),K N J Balendra (appointed w.e.f. 26.7.2010),

R S Fernando (appointed w.e.f. 26.7.2010)


AuxiCogent Investments Mauritius Private Limited (100%)



((230) 467 3000

Directors: SC Ratnayake, A D Gunewardene, J R F Peiris,

R S Fernando, K N J Balendra, R Roy, R Dutta,

K D Joory, A F Soreefan,





InfoMate (Pvt) Ltd (100%)

IT enabled services

No.4, Leyden Bastian Road, Colombo 1(2318224 /2318240


J R F Peiris, M J S Rajakariar,

R S Fernando


AuxiCogent BPO Solutions Private Limited (49%)

BPO operations in India (Formally known as QuatrroBusiness Support Services (Pvt) Ltd)

Basement-24, C Block, Community Centre, Janakpuri,

New Delhi

(+91 124 4561000

Directors: JRF Peiris - Chairman

Sunil Rawal, R S Fernando, K N J BalendraUpendra Singh (resigned w.e.f. 4.10.2010)


Quatrro FPO Solutions Private Limited (44%)

IT based services, electronic remote processingservices, e services

Basement-24, C Block, Community Centre, Janakpuri,

New Delhi

(+91 124 4561000

Directors: V Srinivasan, V Balakrishnan, R S Fernando,

K N J Balendra

Cesar Soriano (Resigned w.e.f 10.07.2010),

Suresh Subramaniam (Resigned w.e.f. 7.05.2010)


OTHERS

Plantation Services

John Keells PLC (86.90 %)

Produce broking and real estate ownership


(2306000


A D Gunewardene, J R F Peiris, L D Ramanayake,

T de Zoysa, K D W Ratnayaka,Y A Hansen,

S T Ratwatte


John Keells (Teas) Ltd (100%

Manager eight bought leaf tea factories


(2306518


J R F Peiris, L D Ramanayake


John Keells Warehousing (Pvt) Ltd (86.90%)

Warehousing of tea and rubber

No.93,1st Lane, Kerawalapitiya, Wattala,

Muturajawela.

(4819560


J R F Peiris, L D Ramanayake


Tea Smallholder Factories PLC (37.62%)

Owner and operator of bought leaf factories

No. 4, Leyden Bastian Road, Colombo 1(2335880 / 2149994



E H Wijenaike, R Seevaratnam, R E Rambukwella,

A S Jayatilleke, J S Ratwatte, L D Ramanayake


Centre & Others

Central Hospital (Pvt) Ltd (27.21%)

Providers of healthcare services

114, Norris Canal Road, Colombo 10

(4666000, 4665500, 4665544

Directors: A K Pathirage, S Selliah, D S Rajapakse,

D Wimalasundera, K M P Karunaratne,

S D Nimalasuriya, S A B Rajapaksa,

A D Gunewardene, K N J Balendra,

H D I Hettiarachchi, G L H Premaratne


Facets (Pvt) Ltd (100%)



(2306000


J R F Peiris,


John Keells Holdings PLC

Group holding company & function based services


(2306000 /2421101-9



E F G Amerasinghe, Steven Enderby,

P D Rodrigo, T Das, S S Thiruchelvam,

Dr I Coomaraswamy (appointed w.e.f. 07.02.2011)


John Keells Holdings Mauritius (Pvt) Ltd (100%)

Holding company in the Mauritius


(2304673000


A F Soreefan, A D Gunewardene, J R F Peiris,

K D Joory


John Keells International (Pvt) Ltd (100%)

Regional holding company providing administrative & function based services


(2306000 /2421101-9




J K Packaging (Pvt) Ltd (100%)

Printing and packaging services providerfor the export market


(2475308


R M David, R S Fernando


John Keells Singapore (Pte) Ltd (80%)

International trading services

No.3, Raffles Place, #07-01,

Bharat Building, Singapore - 048617

(65 67329636


J R F Peiris, R M David, R Ponnampalam


Keells Consultants (Pvt) Ltd (100%)

Company secretarial services to the group


(2421101-9



D C Alagaratnam


Mackinnon and Keells Financial Services Ltd (100%)

Rental of office space

No. 4, Layden Bastian Road, Colombo 1

(2475102-3


A.D Gunewardene, J R F Peiris, S Rajendra


Mortlake Ltd (100%)

Investment company


(2475308



D C Alagaratnam


Nexus Networks (Pvt) Ltd (99.99%)

Operator of a loyalty card programme

No. 125, Glennie Street, Colombo 2.

(2343792 / 2343794-98


J R F Peiris, M R N Jayasundera-Moraes,

K N J Balendra


GROUP DIRECTORY




SRI LANKAN ECONOMY


The economy bounced back strongly in 2010 reflecting post-war investoroptimism, favourable domestic macroeconomic conditions and globaleconomic recovery. It recorded a gross domestic product (GDP) growth of 8% which was a rapid recovery from the GDP growth of 3.5% in 2009. Thiswas the second highest growth rate recorded since independence. As perthe Colombo Consumer Price Index (CCPI), inflation picked up to record a

YoY change of 6.9% in 2010 compared to 4.8% in 2009, but remained belowdouble digits and as such the Central Bank of Sri Lanka (CBSL) was able tocontinue its relaxed monetary policy stance.

The key economic benefits from the end of the 3 decade long civil war suchas the boost in investor confidence, increase in tourist arrivals, land

availability for the expansion of the agriculture sector, removal of restrictionson fishing and usage of abandoned natural resources in the affected Northand East areas has led to the strong performance in 2010. The CBSLbelieves that these benefits will provide the impetus for high growthprospects in the short to medium term and have thus projected a growthof 8.5% in 2011 while International agencies such as the InternationalMonetary Fund (IMF) and Asian Development Bank (ADB) have projected alower GDP growth of 6.95% and 8% respectively. Further, the CBSLbelieves that in order to maintain this growth, investments will graduallyhave to advance up to 35% of GDP from its current level of 28% whiledomestic savings is required to be brought up to 25% of GDP from itscurrent level of 19%. While the short to medium term outlook on theeconomy is positive, supported by the strengthening of the global economy,sustaining this growth momentum will prove to be a challenge with internaland external shocks and demand side pressures. Agency forecasts projectupward pressure on inflation for 2011 while the CBSL has shown concernand recently hiked the statutory reserve ratio stemming from the high

growth trajectory and continued increase in domestic credit flows. Thereforewe are most likely to see further policy rate hikes in 2011 to prevent thebuilp up of demand side pressures.

On the external front the BOP continued to record a surplus of US$ 921 millionin 2010. Both exports and imports recovered strongly with the upturn of domestic and global demand, while the widening of the trade account deficitwas largely mitigated by the increase in remittance inflows and tourismearnings reducing the pressure on the current account deficit. Although thefollowing years should see the current account expand as a result of increasingdemand pressures, the overall BOP may remain positive if strong inflowsthrough the capital and financial account continue.

Year that was

The 3 major sub sectors of GDP, agriculture, industry and services recordedgrowth rates of 7%, 8.4% and 8% respectively. Of these the industry andservice sectors recorded the highest ever growth since 2002.

The agriculture sector with a commendable growth of 7% compared to 3.2%in 2009 was driven by the increased production in paddy, tea and other minorexports as well as improved prices in the international market for agriculturalgoods. There was also a significant improvement in the fisheries industry whilethe coconut sub sector recorded a negative growth of 14.3% as a result of adverse weather conditions.

Growth in the industry sector was driven by the positive performance inindustries such as food and beverages, textiles and garments and constructiondue to the increase in domestic and external demand and increased investorand consumer confidence. The service sector which accounts for the largestshare in GDP bounced back in 2010 from its 3.3% growth in 2009. This growthwas led by the wholesale and retail and hotels and restaurants subsectors. Thewholesale and retail sub sector recorded an impressive growth of 7.5% from itsnegative growth in 2009 due to an increase in domestic and external tradingactivity while hotels and restaurants recorded a notable growth of 39.8% due tothe buoyant increase in tourist arrivals by 46%.

With the increase in economic activity, aggregate consumption and investment

in real terms have improved by 8.4% and 15.5% respectively from 3.6% and2.1% in 2009, while aggregate investment and domestic savings haveincreased as a percentage of GDP to 27.8% and 18.7% from 24.4% and17.9% in the previous year.

Inflation continued to be moderate throughout the first three quarters of 2010but with a slight pick up during the 4th quarter. Substantial demandpressures, improvement in domestic supply and reduction on import dutiesallowed the central bank to cut down its policy rates. The repurchase rate(Repo) in 2010 was cut by 25 basis points to 7.25% while the reverserepurchase rate (Re-Repo) was cut by 75 basis points to 9% during the year.

The average annual growth of the broad money supply (M2b) was 15.8% in2010 which was broadly in line with the target of 15%.

Export earnings increased by 17.25% led by agriculture and industrialproducts while imports increased by 32.38%. The trade balance increasedby 66.7% which led to the current account deficit widening by 562.6%. Thishowever was largely eased by the high growth of remittances by 23.6% and

increase in travel and tourism earnings to US$ 576 million from its previousUS$ 350 million. The BOP recorded a surplus of US$ 921 million following asurplus of US$ 2,725 million in the previous year due to the widening of thecurrent account deficit, however the surplus was generated by a continuedincrease of inflows to the capital and financial accounts due to the fasterdisbursement of foreign loans to finance infrastructure projects, the issuing of the 3rd international sovereign bond of US$ 1 billion and the continuation of the stand-by agreement with the IMF. The external reserves of the countryfurther improved to an all time high of US$ 8,035 million (equivalent to 7.1months of imports) from US$ 6,770 million by end 2010 with gross officialreserves (excluding ACU receipts) increasing up to US$ 6,610 million fromUS$ 5,097 million in 2009.

There was an improvement in the overall fiscal situation in the country withthe budget deficit reducing to 7.9% of GDP from 9.9% in 2009. Expenditureand net lending was in line with original budgetary targets as it was 22.9% of GDP. The government with its commitment for tax consolidation aims at

reducing its budget deficit further to 6.8% of GDP in 2011.Sri Lanka was graduated to a middle-income status country in the list of poverty reduction and growth trust (PRGT) in January 2010 by the IMF. In2010 per capita income in market prices increased by 16.6% to US$ 2,399while unemployment as a percentage of the labour force decreased to 4.9%from 5.8% in 2009 (excluding the Northern and Eastern provinces).

Summary Indicator Units 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GDP Growth Per cent (1.5) 4.0 5.9 5.4 6.2 7.7 6.8 6 3.5 8

GDP(current prices) Rs.Billion 1,410 1,582 1,822 2,091 2,453 2,939 3,578 4411 4,835 5,602GDP(current prices) USD Billion 15.77 16.53 18.88 20.66 24.41 28.27 32.34 40.72 42.07 49.55GDP per Capita (USD) Growth Per cent (6.5) 3.4 9.0 8.6 20.5 14.5 13.8 24.6 2.1 16.6GDP per capita (market prices) Rs.000 75.1 83.2 94.7 107.4 124.7 147.8 178.8 218.2 236.4 271.3GDP per capita (market prices) USD 841 870 948 1,030 1,241 1,421 1,617 2,014 2,057 2,399Inflation (CCPI- 100=2002) YoY Per cent 13.0 7.4 13.5 18.8 14.4 4.8 6.9Current Account Balance USD Billion (0.2) (0.2) (0.07) (0.6) (0.7) (1.5) (1.4) (1.4) (0.2) (1.4)Current Account % of GDP Per cent (1.4) (1.4) (0.4) (3.1) (2.7) (5.3) (4.2) (9.5) (0.5) (2.9)Population Million 18.8 19.0 19.3 19.5 19.7 19.9 20.0 20.2 20.5 20.7Exchange Rate (Annual Average) Rs./USD 89.4 95.7 96.5 101.2 100.5 104.0 110.6 108.3 114.9 113.1Exchange Rate Change (Annual Average) Per cent 17.9 7.0 0.9 4.8 (0.7) 3.4 6.4 (2.1) 6.1 (1.6)12m T-Bill yield (yr-end) Per cent 13.7 9.9 8.0 7.7 10.4 13.0 20.0 19.12 9.33 7.55Prime Lending Rate (yr-end) Per cent 14.3 12.2 9.3 10.2 12.2 15.2 18.0 18.5 10.91 9.29M2b Money supply growth Per cent 13.6 13.4 15.3 19.6 19.1 17.8 16.6 8.5 18.6 15.8Exports USD Billion 4.8 4.7 5.1 5.8 6.3 6.7 7.7 8.1 7.1 8.3Imports USD Billion 6.0 6.1 6.7 8.0 8.9 10.3 11.3 14.1 10.2 13.5Balance of Payments (BOP) Per cent of GDP 1.3 2.0 2.7 (1.0) 2.1 0.7 1.6 (3.5) 6.5 1.9Budget Deficit Per cent of GDP (10.4) (8.5) (7.3) (7.5) (7.0) (7.0) (6.9) (7.0) (9.9) (7.9)Unemployment Rate Per cent 7.9 8.8 8.4 8.3 7.2 6.5 6.0 5.4 5.8 4.9

All Share Index (yr-end) Points 621 815 1,062 1,507 1,922 2,722 2,541 1503.0 3,386 6,636 Tourist Arrivals No.' 000 337 393 501 566 549 560 494 438.5 447.9 654.5



Accrual basisRecording revenues & expenses in the period in which they are

earned or incurred regardless of whether cash is received ordisbursed in that period.

BetaCo-variance 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 st ructure 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 aftertax.

Contingent liabilities A 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 occurrenceof 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

period adjusted for options granted but not exercised.

Dividend payout ratio

Dividend as a percentage of company profits adjusted for non cashgains items.

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 theperiod.

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 taxation Tax 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 themarket price at end of period.

Market value addedMarket capitalisation minus shareholder’s funds.

Net assets Total assets minus current liabilities minus long term liabilities minusminority interest.

Net assets per shareNet assets divided by the number of shares in issue.

Net debt (Cash) Total 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 turnover Turnover including share of associate company turnover divided byaverage total assets.

Share turn ratio

Total volume of shares traded during the year divided by averagenumber of shares in issue.

Shareholders funds

Total of stated capital, capital reserves and revenue reserves.

Total debt

Long term loans plus short term loans and overdrafts.

Total equity

Shareholders 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




Name of company

John Keells Holdings PLC

Legal form

Public Limited Liability CompanyIncorporated in Sri Lanka in 1979Ordinary shares listed on the Colombo Stock ExchangeGDRs listed on the Luxembourg Stock Exchange

Company registration No.PQ 14

DirectorsS C Ratnayake – Chairman

A D Gunewardene – Deputy Chairman

J R F PeirisE F G Amerasinghe

T DasS EnderbyP D RodrigoS S TiruchelvamI Coomaraswamy (appointed w.e.f. 7 February 2011)

Senior independent directorE F G Amerasinghe

Audit committeeP D Rodrigo – ChairmanE F G AmerasingheS EnderbyS S Tiruchelvam

Remuneration committeeE F G Amerasinghe – ChairmanP D RodrigoS S Tiruchelvam

Nominations committee T Das – ChairmanS EnderbyS C RatnayakeS S Tiruchelvam

BankersBank of CeylonCitibank N A Commercial Bank Deutsche Bank A GDFCC Bank DFCC Vardhana Bank Hatton National Bank Hongkong and Shanghai Banking CorporationICICI Bank Nations Trust Bank Pan Asia Banking CorporationPeople’s Bank Sampath Bank Seylan Bank Standard Chartered Bank

Depository for GDRsCitibank N A

New York

Registered office of the company130 Glennie StreetColombo 2Sri Lanka

Contact detailsP.O.Box 76130 Glennie StreetColombo 2Sri Lanka

Internet : www.keells.comEmail : [email protected]

Secretaries and registrarsKeells Consultants (Pvt) Ltd.130 Glennie StreetColombo 2Sri Lanka

Telephone : +(94) 11 230 6245Facsimile : +(94) 11 243 9037

Investor relationsJohn Keells Holdings PLC

P.O. Box 76130 Glennie StreetColombo 2Sri Lanka

Telephone : +(94) 11 230 6167+(94) 11 230 6000

Facsimile : +(94) 11 230 6160Internet : www.keells.comEmail : [email protected]

Contact for mediaCorporate Communications DivisionJohn Keells Holdings PLCP.O. Box 76130 Glennie StreetColombo 2Sri Lanka

Telephone : +(94) 11 230 6191Facsimile : +(94) 11 471 7706

AuditorsErnst & YoungChartered AccountantsP.O. Box 101Colombo

Sri Lanka

CORPORATE INFORMATION




Notice is hereby given that the Thirty Second Annual GeneralMeeting of John Keells Holdings PLC will be held on 24 June

2011 at 10 a.m. at The Auditorium, The Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha (LongdonPlace), 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 for the Financial Year ended 31st March 2011 withthe Report of the Auditors thereon.

• to re-elect as Director, Mr. E F G Amerasinghe, who retires interms of Article 84 of the Articles of Association of theCompany.

• to re-elect as Director, Mr. S Enderby, who retires in terms of Article 84 of the Articles of Association of the Company.

• to re-elect as a Director, Dr. I Coomaraswamy, who retires interms of Article 91 of the Articles of Association of theCompany.

• to re-elect as Director, Mr. T Das who is over the age of 70years and who retires in terms of section 210 of theCompanies Act No. 7 of 2007, for which notice of the followingordinary resolution has been given by a member:

“THAT the age limit stipulated in Section 210 of the Companies

Act No. 7 of 2007 shall not apply to Mr. T Das, who is 72 yearsand that 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 (Private) LimitedSecretaries

30 May 2011

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 Proxy Form enclosed.

iv. In order to be valid, the completed Proxy Form must be lodgedat the Registered Office of the Company not less than 48 hoursbefore the meeting.

NOTICE OF MEETING




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

………………………………………………………………..………..…………………………………………..................... being amember/s of John Keells Holdings PLC hereby appoint

…………………………………………………………………..………..…………………………………………......................... of

…………………………………………………………………………….………................................................ or failing him/her

MR. SUSANTHA CHAMINDA RATNAYAKE of Colombo, or failing him

MR. AJIT DAMON GUNEWARDENE of Colombo, or failing him

MR. JAMES RONNIE FELITUS PEIRIS of Colombo, or failing him

MR. EMMANUEL FRANKLYN GAMINI AMERASINGHE of Colombo, or failing him

MR. TARUN DAS of India, or failing him

MR. STEVEN ENDERBY of India, or failing him

MR. PARAKRAMA DEVASIRI RODRIGO of Colombo, or failing him

MRS. SITHIE SUBAHNIYA TIRUCHELVAM of Colombo, or failing her

DR. INDRAJIT COOMARASWAMY of Colombo

as my/our proxy to represent me/us and vote on my/our behalf at the Thirty Second Annual General Meeting of the Companyto be held on 24 June 2011 at 10.00 a.m. and at any adjournment thereof, and at every poll which may be taken in consequencethereof.

I/We, the undersigned, hereby direct my/our proxy to vote for me/us and on my/our behalf on the specified Resolution asindicated by the letter “X” in the appropriate cage:

FOR AGAINST

To re-elect as Director, Mr. E F G Amerasinghe, who retires in terms of Article 84 of the Articles of Association of the Company.

To re-elect as Director, Mr. S Enderby, who retires in terms of Article 84of the Articles of Association of the Company.

To re-elect as Director, Dr. I Coomaraswamy, who retires in terms of Article 91 of the Articles of Association of the Company

To re-elect as Director, Mr. T Das who is over the age of 70 years and whoretires in terms of section 210 of the Companies Act No. 7 of 2007

To authorise the Directors to determine and make donations.

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

remuneration.

Signed on this ………………… day of …………………… Two Thousand and Eleven.

…………………………….Signature/s of Shareholder/s

NOTE:

INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.

FORM OF PROXY




INSTRUCTIONS AS TO COMPLETION OF PROXY

1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing inthe space provided and filling in the date of signature.

2. The completed Form of Proxy should be deposited at the Registered Office of the Companyat No. 130, Glennie Street, Colombo 2, not later than 48 hours before the time appointedfor the holding of the Meeting.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney shouldaccompany the completed Form of Proxy for registration, if such Power of Attorney has notalready been registered with the Company.

4. If the appointer is a company or Corporation, the Form of Proxy should be executed underits Common Seal or by a duly authorised officer of the company or Corporation inaccordance with its Articles of Association or Constitution.

5. If this Form of Proxy is returned without any indication of how the person appointed as Proxyshall vote, then the Proxy shall exercise his/her discretion as to how he/she votes or, whetheror not he/she abstains from voting.

Please fill in the following details:

Name : ……………………………………………………………………………………

Address : ……………………………………………………………………………………

…………………………………………………………………………………….

…………………………………………………………………………………….

Jointly with : ……………………………………………………………………………………

Share Folio No. : ……………………………………………………………………………………


John Keells Holdings- Annual Report 2010

Documents

Transcript of John Keells Holdings- Annual Report 2010