What matters...JOHN KEELLS PLC

P. O. Box 76, Glennie Street, Colombo 02. Sri LankaJOHN KEELLS PLCANNUAL REPORT 2011/2012

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

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

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

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

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

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

John Keells PLC is an alliance of success – with core businesses in tea and rubber broking, and the warehousing of produce; whilst our real estate activities include the renting of of�ce space. Our pre-eminent position as Sri Lanka’s leading tea and rubber broker owning the largest state-of-the-art warehousing complex gives us effective leverage to go into the future.

As we go forward into the new �nancial year, we are con�dent of our leading position, strengthened by years of experience and the traditions of world-class quality we now represent.

Designed & Produced byPhotography by Studio TimesDigital Plates by Imageline (Pvt) LtdPrinted by Printage (Pvt) Ltd

Name of CompanyJohn Keells PLC

Company Registration NumberPQ 11

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

Name of Associate CompanyKeells Realtors Limited

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

Registered Of�ce P.O. Box 76, 130, Glennie Street, Colombo 2, Sri LankaTel: 2306000Telex: 21389 KEELLS CETelefax: 2446223E-mail: jkl@keells.com

Directors S C RatnayakeA D GunewardeneJ R F PeirisR S FernandoT de ZoysaK D W RatnayakaMs. Y A HansenMs. S T Ratwatte

Secretaries & RegistrarsKeells Consultants (Private) Limited130, Glennie Street, Colombo 2

AuditorsMessrs. Ernst & YoungChartered AccountantsP.O. Box 101, Colombo

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

Corporate Information

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ContentsFinancial Calendar 2Financial Highlights 3Group Structure 4Chairman’s Message 5Chief Executive Officer’s Report 7Board of Directors 11Senior Management Team 13Human Resources 14Corporate Social Reponsibility 15Corporate Governance 19Risk Management 30Audit Committee Report 33Historical Milestones 36Annual Report of the Board of Directors 38The Statement of Directors’ Responsibility 44Independent Auditors’ Report 45Balance Sheet 46Income Statement 47Statement of Changes in Equity 48Cash Flow Statement 49Notes to the Financial Statements 51Statement of Value Added 82Information to Shareholders and Investors 84Five Year Summary 86Key Ratios and Information 88Glossary of Financial Terminology 90Notice of Meeting 92Corporate Information Inner Back CoverForm of Proxy Loose leaf

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Financial Calendar

INTERIM REPORTS1st Quarter 22nd July 20112nd Quarter 8th November 20113rd Quarter 24th January 20124th Quarter 25th May 2012

ANNUAL REPORTS2011/12 1st June 20122010/11 3rd June 2011

MEETINGS65th Annual General Meeting 27th June 201264th Annual General Meeting 29th June 2011

DIVIDENDSFirst and Final Dividend of Rs.4.00 per share will be paid on 15th June 2012

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Financial Highlights GROUP COMPANY 2011/2012 2010/2011 Change % 2011/2012 2010/2011 Change %

Revenue (Rs.000’s) 891,499 1,057,863 (15.73) 492,077 489,609 0.50

Profit before Tax (Rs.000’s) 1,023,476 1,012,451 1.09 966,693 699,398 38.22

Profit after Tax (Rs.000’s) 888,018 814,936 8.97 901,982 623,423 44.68

Revenue to Government (Rs.000’s) 148,121 213,342 (30.57) 76,870 91,298 (15.80)

Profit before Tax on Turnover (%) 114.80 95.71 19.09 196.45 142.85 53.60

Return on Capital Employed (%) 36.33 48.53 (12.20) 37.02 43.51 (6.49)

Earnings per share (Rs.)** 14.12 12.59 12.14 14.84 10.25 44.59

Dividend per share (Rs.)** 2.50 2.50 - 2.50 2.50 -

Dividend Cover (Times) 5.65 5.04 12.05 5.93 4.10 44.73

Net Assets per Share (Rs.)** 42.08 30.46 38.14 37.25 24.91 49.54

No. of Employees 178 181 (1.66) 103 109 (5.50)

Turnover per Employee (Rs.000’s) 5,008 5,844 (14.30) 4,778 4,492 6.38

Profit per Employee (Rs.000’s) 5,750 5,594 2.79 9,385 6,417 46.26

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Group StructureCompany : John Keells PLC Principal Activities : Produce Broking and Real Estate Ownership

Subsidiary : John Keells Warehousing (Pvt) Ltd. Directors of The Company : Mr. S.C. Ratnayake (Chairman) Mr. A.D. Gunewardene, Mr R.S. FernandoYear of Incorporation : 2001 Principal Activities : Warehousing of Tea and Rubber

Capital Structure No. of Shareholders Issued Share Capital Holding Percentage (Rs.000’s) (%) 2012 2011 2012 2011 2012 2011 2 2 120,000 120,000 100 100

Operating Performance Gross Turnover Profit before Tax No. of Employees (Rs.000’s) (Rs.000’s) 2012 2011 2012 2011 2012 2011 97,069 85,799 41,474 27,273 42 40

Subsidiary : John Keells Stock Brokers (Pvt) Ltd. Directors of the Company : Mr. A.D. Gunewardene (Chairman) Mr. S.C. Ratnayake, Mr. K.N.J. BalendraYear of Incorporation : 1979 Principal Activities : Share Broking

Capital Structure No. of Shareholders Issued Share Capital Holding Percentage (Rs.000’s) (%) 2012 2011 2012 2011 2012 2011 5 5 7500 7500 76 76Operating Performance Gross Turnover Profit before Tax No. of Employees (Rs.000’s) (Rs.000’s) 2012 2011 2012 2011 2012 2011 313,130 492,911 171,441 320,975 33 31

Associate : Keells Realtors Ltd. Directors of the Company : Mr. S.C. Ratnayake (Chairman) Mr. A.D. Gunewardene, Mr. S. RajendraYear of Incorporation : 1966 Principal Activities : Property Development and Real Estate Operations

Capital Structure No. of Shareholders Issued Share Capital Holding Percentage (Rs.000’s) (%) 2012 2011 2012 2011 2012 2011 9 9 75,000 75,000 32 32Operating Performance Gross Turnover Profit before Tax No. of Employees (Rs.000’s) (Rs.000’s) 2012 2011 2012 2011 2012 2011 5,663 2,066 23,958 102,981 1 1

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Chairman,s MessageECONOMIC ENVIRONMENT Tea BrokingThe economy grew by 8.3 percent in 2011, the highest in Sri Lanka’s post independence history. The agricultural sector recorded a moderate growth of 1.5 percent due to the adverse weather conditions that prevailed in the first quarter of the year. Tea production recorded a marginal decline whilst Rubber production continued to perform well due to an increase of extent of land under Rubber and attractive prices. The Coconut sector recovered strongly in 2011.

2011 has been a challenging year for many in the Tea Trade. Prices were negatively impacted in the middle of the year mainly due to political turmoil in the Middle East. In the backdrop of a record year in 2010 where production / sale averages and exports recorded all time highs, Sri Lanka’s Tea production fell 0.9% to 328.37 Mkgs due to bad weather compared to previous year’s record of 331.43 Mkgs. The Medium Grown Sector reflected the highest negative variance with High and Low Grown recording marginal increases.

In the first six months of 2011, prices at the Colombo Auctions of Rs.370.80 per Kgs were the highest on record, exceeding the previous best of Rs.370.21 per Kgs recorded the previous year. However, due to the Middle East crisis and European debt crisis the Tea Market saw significant price declines in the second half, to end the year at Rs.359.89 which was 2.89% below the previous year.

Despite the drop in production and sale averages, the value of Tea Exports in 2011 was Rs.164.8 billion which is an all time high, compared to the previous best of 162.7 billion in 2010.

Rubber BrokingRubber production in Sri Lanka increased to 157,900 MT as reported by the Rubber Development Department, which is an increase of 2.5% when compared with the previous year’s production. There was increased demand for rubber from auto industries in China, U.S. and Japan during the first nine months of 2011. However, demand for rubber declined considerably during the last three months of the year.

In April 1X’s were selling at Rs.625.00 per kg and RSS.1’s at Rs.590.00 per kg. By December 1X’s declined to Rs.360.00 per kg, whilst RSS.1’s dropped to Rs.363.00 per kg. By the end of the financial year 1X’s & RSS.1’s had both moved up to Rs.475.00 per kg.

Warehousing The largest state-of-the-art tea warehousing complex in the country continues to offer a very high standard of service to all clients. Tea arrivals during the year were marginally lower than the previous year, due to lower Tea production in the country. The utilization of the Warehouse was 83%.

Stock Broking – Business EnvironmentThe ASPI declined by 25% over the last financial year while the Milanka Index declined by 30.4% with the market reversing some of the gains made post war and settling down to more realistic valuations. This followed a speculative frenzy in the market that witnessed significantly higher trading volumes and active retail participation during the first half of the financial year. Average daily market turnover levels declined by 32% compared to the previous financial year resulting in John Keells Stock Brokers reporting lower turnover and profitability. The company however recorded a healthy improvement in market share with strong growth in the foreign segment. The company’s distribution in the foreign segment was further strengthened in early 2012 with a tie-up with CIMB. CIMB is a leading financial services group in the South East Asian region with an enhanced regional foot print following its acquisition of a significant portion of the cash equities business of the Royal Bank of Scotland in Asia.

0 50 100 150 200 250 300 350

Sri Lanka Tea Crop/ExportMn. Kgs. (2007-2011)

Crop

Exports

20072008200920102011

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Chairman,s Message

Financial PerformanceFor the year ended March 31 st March 2012, the Group achieved revenues of Rs.891 million (Rs 1,060 million in 2011) with a net profit after tax and minority interest of Rs 858 million (Rs.766 million 2011), amounting to a decrease of 16% and an increase of 12% respectively. The profit includes a gain from the change in fair value of investment property of Rs 581 million.

ConclusionI would like to thank all categories of Staff for their excellent effort, as well as all other Stakeholders for their support during the year. I would like to thank Lallith Ramanayake who retired from the Board with effect from 30th December 2011 for his valuable contribution during his tenure. I am also grateful to the Members of the Board for their guidance and support.

S C RatnayakeChairman25th May, 2012

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INTRODUCTION2011 was one of the most challenging years for the tea industry with increasing costs. Global economic conditions, recession and the civil unrest in the Middle East impacted negatively on our Tea Industry. Further more, Sri Lanka’s 140 year old Tea Industry is fighting a long drawn battle with the highest production cost, Globally. Tea prices at the Colombo Auctions declined for the first time since 2000.

Sustainability of the tea industry has always been an issue with ever increasing cost and wages. The tea industry’s ability to sustain itself and re-invest in future development and growth has been called into question following the recent increase in wages by a staggering 28% in April 2011.

As in any other plantation industry, the profitability of the Sri Lankan Tea Industry rests heavily in the movement of global prices, demand and cost of production .

The total revenue realized on Tea Exports during the year 2011 of Rs.164.8 Billion was an All Time High. It surpassed a previous best of Rs.162.8 Billion realized in 2010 by Rs.2.0 Billion. However, the volume of exports declined by 1.8 Mkgs to 322.5 Mkgs in 2011. This was due to a higher volume of packeted teas being exported during the year. The tea industry continues to occupy a pivotal position in terms of foreign exchange earnings and employment. It also generates 65% of total export agriculture revenue and contributes 2% to the country’s GDP.

During the year, many plantations were awarded Rain Forest Alliance Certificates for sustainable production by serving biodiversity and ensuring sustainable livelihoods by transforming land used practices, business practices, consumer and behaviour.

As per the FAO predictions the world tea prices are set to be firm in the coming year on the back of robust black tea demand exceeding production.

China remained the world’s largest tea producing country with an output of 1.55 M tons and a 33% share of the world’s total produce. World Black Tea production is estimated to grow at 1.87% annually in the next 10 years, slower than the 1.99% growth pace over the previous decade, to reach 3.28 M tons by 2021.

GLOBAL TRENDSTEASri Lanka’s tea production in 2011 was 328.4 M which was 3.1 M kgs lower than the record figure established in 2010 of 331.4 M kgs. The most significant decrease was in the Medium Grown Sector which declined by 6.4% whilst the Low Growns and High Growns maintained 2010 levels .

Kenya, the world’s leading tea exporter’s production of 377.9 M kgs decreased by almost 21 M kgs compared to the previous year. Amongst the major tea producers, Sri Lanka, Indonesia and Malawi reported lower production, whilst India, China, Argentina and Vietnam registered higher production in 2011.

Sri Lanka’s total tea sale average declined to Rs.359.89 from an All Time High of Rs.370.61 established in the year 2010. High Growns, Medium Growns and Low Growns eased by 2.2%, 2.9% and 3.0% respectively.

Colombo continued to be the largest Auction Centre for single origin teas.

0 50 100 150 200

Tea Production 2010 - 2011Mn. Kgs.

2010

2011

HighGrown

MediumGrowLow

Grown

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LOCAL TRENDSThe total quantity of tea exports for the year 2011 amounted to 322.6 M kgs which is a decrease of 1.8 M kgs when compared with 2010. However, with the increase in FOB prices from Rs.494.59 to Rs.500.64 per kg, the total export value for the period showed a marginal increase.

Russia and Iran were the two largest export destinations for Ceylon Tea. Syria was placed 3rd with Iraq and UAE occupying the 4th and 5th positions respectively.

OPERATIONAL REVIEWTea BrokingYour Company continued to be one of the largest broking companies in Sri Lanka and once again established the highest number of Top Prices and Record Prices amongst brokers. It also handled the largest quantity of Low Grown teas at the Colombo Auctions. Weekly price averages of the Company reflected an attractive premium over the national average. The Company continue to offer high end services to producers and export clients.

Yearly Elevation Averages (Per Kg)

High Grown

Medium Grown

Low Grown

Total

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

2007 252.46 2.27 242.35 2.18 298.66 2.69 279.44 2.52

2008 273.83 2.52 270.13 2.49 336.38 3.10 310.81 2.86

2009 319.73 2.78 316.06 2.74 387.70 3.37 360.45 3.13

2010 337.82 2.99 330.88 2.93 393.40 3.48 370.61 3.28

2011 329.95 2.94 319.77 2.85 381.27 3.40 359.89 3.21

Rubber BrokingStrong demand from auto industries in China, U.S. and Japan pushed up rubber prices during the first nine months of 2011 and resulted in achieving record prices. However, during the last three months of the year, the demand for rubber declined considerably, as global rubber prices dropped sharply, mainly due to the debt crisis in Europe and as concerns grew that

Chief Executive Officer’s Report

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Quantity Sold at World Auction CentresMn. Kgs.

2007

2008

2009

2010

2001

ColomboCalcuttaGuwahattiSiliguriCoonoorCoimbatoreCochinChittagongMombasa

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Colombo Auction AveragesIn. Rs.

20102011

WesternHigh Grown

High Grown

Uva Medium

WesternMedium

MediumGrown

LowGrown

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200

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600

800

AP

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Colombo Rubber Auction Averages from April 2011 to March 2012

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global economies could go in to a recession. The slowing down of the Chinese economy also contributed to the drop in rubber prices.

Latex Crepe 1X which was selling around Rs.625.00 per kg during the month of April’11 dropped to Rs.360.00 per kg by December’11. RSS.1 dropped to Rs.360.00 per kg from Rs.590.00 per kg in April’11.

Real EstateThe revenue and PBT of the real estate arm increased during the year when compared with the previous year. The PBT increased by 47% during the current year, mainly due to the increase in fair value of investment property, which was Rs.581.1 Mn.

Performance of Associate CompanyKeells Realtors (Pvt) Ltd. (32% Holding)Keells Realtors Limited, an associate Company of John Keells PLC that owns real estate, recorded a Profit Before Tax of Rs.23.9 Mn as against a profit of Rs.102.9 Mn in the previous year. The current year’s profit included Rs.19.4 Mn increase in Fair Valuation of Investment Property whereas Rs.105.1 Mn was included in the previous years profit.

However, revenue and profitability growth recorded 174% and 311% respectively from the previous year, excluding the change of Fair Valuation of Investment Property.

Performance of SubsidiariesJohn Keells Stock Brokers (Pvt) Ltd (76% Holdings)John Keells Stock Brokers recorded a notable improvement in market share over the last year with significantly higher contribution from the foreign segment and consistent growth in the HNWI and local institutional segments. The company however posted a lower contribution to Group turnover and profits stemming from a 32% decline in average daily market turnover levels to Rs.1.83 bn from Rs.2.69 bn during the previous financial year. The signing of a strategic collaboration with CIMB in early 2012 as the latest foreign trade execution partner for JKSB will further strengthen the company’s foreign distribution and also involves the distribution of co-branded research to the CIMB clientele.

John Keells Warehousing (Pvt) Ltd.(100% Holding)Tea arrivals during the year were lower than the previous year. Warehouse utilization was around 83%. Rubber arrivals increased in the last 05 months of the year under review, as there was no Sole Crepe or Forward Contracts.

Best Corporate ReportsWe are pleased to inform you that your company received the Sliver Award for Diversified Holdings (Groups upto 5 Subsidiaries) Sector at the Chartered Accountants Annual Report Awards 2011. This competition is conducted annually by the Institute of Chartered Accountants of Sri Lanka.

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Chief Executive Officer’s Report

Sustainability Reporting John Keells PLC is committed to better integrating sustainability throughout its value chain with its strategic outlook based on the ‘triple bottom line’ (TBL) of economic, environmental and social performance. The Group has understood the importance of identifying and engaging with all relevant stakeholders. The paraent company John keells Holding PLC is further supported through adherence to the Global Reporting Initiative (GRI-G3) framework. The organisation is also a member of the United Nations Global Compact (UNGC) and supports the Millennium Development Goals, further reiterating the Group’s commitment towards sustainable development

Risk ManagementThe company and its subsidiaries adopt the group’s Risk Management Programme which focuses on wider sustainability development, to identify, evaluate and manage significant Group risks and to stress-test various risk scenarios. The programme ensures that a multitude of risks 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 company and the identified key risks to the achievement of the company’s strategic business objectives.

Employee Relations Staff Welfare and Employee DevelopmentThe JKPLC Human Resource Unit is designed to enable easy accessibility by an employee to every level of Management. It ensures that talent, skills and knowledge are suitably rewarded and recognized, while individual team members who show commitment and go the ‘extra mile’ are also rewarded. Staff with a record of long service are also recognized and rewarded. Our volunteer staff members conduct HIV/Aids workplace education programs for the staff and as a community development project to various communities. Internship training is given to University undergraduates to

develop soft skills. The learning and development function is supported at every level to build required competency.

OmbudsmanAll employees of the Company have recourse to an Ombudsman appointed by our parent Company John Keells Holdings PLC (JKH). This is an appointment to further strengthen the governance structure and to encourage and facilitate all employees to live by the John Keells values.

In conclusion, I wish to thank the Chairman and the Board of Directors, for their direction and guidance, My staff who have worked with commitment and dedication and to our valued Clients for their loyalty and support.

Sudath MunasingheChief Executive Officer25th May, 2012

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Board of DirectorsSusantha RatnayakeNon Independent Non Executive Chairman Susantha Ratnayake was appointed as the Chairman and CEO of John Keells Holdings PLC in January 2006 and has served 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 a council member of the Employers’ Federation of Ceylon, serves on various clusters of the National Council of Economic Development (NCED) and is the Chairman of the Ceylon Chamber of Commerce. He has over 34 years of management experience, all of which is within the John Keells Group.

Ajit GunewardeneNon Independent Non Executive Director Ajit Gunewardene is the Deputy Chairman of John Keells Holdings PLC and has been a member of their Board for over 19 years. He is a Director of many companies in the John Keells Group and is the Chairman of Union Assurance PLC. He is a member of the board of SLINTEC, a company established for the development of nanotechnology in Sri Lanka under the auspices of the Ministry of Science and Technology. He has also served as the Chairman of the Colombo Stock Exchange. Ajit has a degree in Economics and brings over 30 years of management experience.

Ronnie PeirisNon Independent Non Executive Director Appointed to the John Keells Holdings PLC Board during 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 over 40 years of finance and general management experience in Sri Lanka and abroad. He is a Fellow of the Chartered Institute of Management Accountants, UK; Association of Chartered Certified Accountants UK and the Society of Certified Management Accountants, Sri Lanka and holds an MBA from the University of Cape Town, South Africa. He is a member of the committee of the Ceylon Chamber of Commerce, Chairman of its Taxation

Sub Committee and also serves on its Economic, Fiscal and Policy Planning Sub Committee. He is a Director of several companies in the John Keells Group, is Chairman of Nations Trust Bank PLC and is currently the President of the Sri Lanka Institute of Directors.

Sanjeeva FernandoNon Independent Non Executive DirectorSanjeeva Fernando has overall responsibility for the Plantations Sector & the IT Industry group of the John Keells Group. He has over 25 years of management experience, 18 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.

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

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

He is President of the Associated Motorways Group of Companies, Chairman of Carson Cumberbatch PLC, Amaya Hotels and Resorts, New York, USA , HelpAge International UK, Helpage Sri Lanka, Jetwing Zinc Journeys Lanka Pvt Ltd and other listed companies, such as, John Keells PLC., Taj Lanka Hotels Ltd., Lanka Walltiles PLC., and Nawaloka Hospitals PLC. Tilak de Zoysa is the Honorary Consul for Croatia in Sri Lanka since 1999 and a Past Chairman of the Ceylon Chamber of Commerce, National Chamber of Commerce of Sri Lanka and the Plastics and Rubber Institute. Mr.De Zoysa also served as a Member of the Monetary Board from 2003-2009.

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Kavan Ratnayaka Independent Non Executive DirectorKavan Ratnayaka was appointed as a Independent Non Executive Director to the Board of John Keells PLC in July 2005. He is the Group Chief Corporate Officer of Dialog Axiata PLC, leading the group functions responsible for Human Resources, Legal & Regulatory, Corporate Communications and Corporate Sustainability. He also serves on the Councils of the Employer’s Federation of Ceylon (EFC) and of the Sri Lanka Institute of Directors (SLID).

Kavan holds a Bachelor of Science (Physics) from the University of California, and has 24 years experience in the field of Information and Communication Technologies. Prior to joining Dialog, he served as IBM’s Country General Manager for Sri Lanka. He has served in the past, on the Boards of the Arthur C. Clarke Institute for Modern Technologies, The Young Entrepreneurs of Sri Lanka (YESL) and The Sri Lanka Institute of Information Technology (SLIIT) and is a past President of the American Chamber of Commerce, Sri Lanka.

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

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

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

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

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Senior Management TeamMr. Sudath MunasingheVice President/Chief Executive Officer

Mr. Romesh Walpola Assistant Vice President/Head of Operations - Tea

Mr. Ashok JayewickremeAssistant Vice President/Head of Operations - Warehousing

Ms. Tishani De AlwisAssistant Vice President/Financial Controller

Mr. Dasarath DassanayakaHead of Manufacturing - High Grown

Mr. Sanjay KarunaratneManager, Tea

Ms. Kushani DaluwatteManager, Tea

Mr. Hishantha De MelManager, Tea

Mr. Shane IngramManager, Finance

Mr. Ravin VannitambyManager, Tea

Mr. Shehan MeegamaManager, Rubber

Mr. Nalin RajapakseManager, Manufacture

Mr Ravi KotalawelaConsultant

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Human ResourcesCategory Company Subsidiary Total

President 01 - 01

EVP - 01 01

VP 01 01 02

AVP 03 01 04

Managers 07 04 11

Asst Managers 09 06 15

Executives 26 19 45

Clerical 06 01 07

Minor Staff 23 - 23

Total 76 33 109

Casual/Contract 27 42 69

103 75 178

Age Company Subsidiary Total

50 – 60 yrs 12 02 14

40 – 50 33 10 43

30 -40 14 06 20

20 -30 17 15 32

76 33 109

Years of Service Company Subsidiary Total

Over 20 years 25 3 28

15 – 20 16 7 23

10 – 15 11 - 11

05 – 10 11 7 18

00 – 05 13 16 29

76 33 109

President 0.56%EVP 0.56%VP 1.12%AVP 2.25%Managers 6.18%Asst. Managers 8.43%Executives 25.28%Clerical 3.93%Minor Staff 12.92%Casual/Contract 38.76%

Over 20 Years 25.69%15-20 21.10%10-15 10.09%5-10 16.51%00-5 26.61%

50-60 12.84%40-50 39.45%30-40 18.35%20-30 29.36%

Employees Strength

Age Analysis

Service Analysis

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“John Keells has stepped into preserve the

Slave Island Railway Station with its colonial

architectural value in order to maintain this

social and commercial treasure.”

Situated in the hub of commercial activity, the Slave Island Railway Station, better known as the Kompanna Vidiya Railway Station, stands strong as one of the oldest legacies of our British heritage. Since then, the area has evolved into a commercial locale with business establishments, hotels and shopping centres, making it a fitting central Railway Station location.

The station was and still is famed for its architectural worth, embedded with colonial and historical value. It remains an emblem of Victorian art, displaying stylish arches, intricate woodwork, neo-modern metal installations and the signature mixing of iron and stone, standing as a striking example of refined technology.

We undertook to refurbish and maintain the historic Slave Island Railway Station to retain this ‘social, economic and commercial treasure’, while preserving its colonial architectural value. The project is aimed at restoring the station to its original

splendor and introducing modern facilities to compliment the age-old architecture by refurbishing and modernizing the level crossing, bridge and other amenities within the station.

At John Keells we are committed to addressing the needs of the people who are part of our daily lives. Working on the basis that the Station should not be just another amenity to the people who pass by, but more - clean and user friendly, we have ensured the daily maintenance of the station as done in previous years.

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Other renovations for the year included painting and repairing the lobby area including the station masters office room, replacing of the windows and doors, additional roofing on the sides of the platform, painting of the middle island near the rail gate, painting of the toilets, replacing the lights along the arched platform and installing new speakers to enhance the Public Address System at the Station. The facilities and appearance of the Station have improved drastically as a result of this project. We hope to continue maintaining the Station at a high standard on a long-term basis since it is in close proximity to our Glennie Street Head Office premises and also since it is one of the oldest legacies of our British Heritage. Project work (including all repairs and routine maintenance of the building and service areas) is sponsored and implemented by John Keells PLC under the guidance of the John Keells Foundation.

Village Adoption Project in MangalagamaJohn Keells PLC supported John Keells Foundation’s Village Adoption Project in Mangalagama by contributing towards Phase I of the infrastructure development work undertaken in the AM/ Managalarama Maha Vidyalaya, Mangalagama.

Mangalagama in situated in the Ampara District of the Eastern Province of Sri Lanka and was selected taking into account the

need to develop what was previously a `border village’ affected by the long-drawn ethnic conflict.

Following a preliminary assessment carried out by the John Keells Foundation, it was decided at the request of village representatives to prioritize infrastructure development under different phases and Phase I commenced with the augmenting the facilities available at the village school.

The development work undertaken in AM/Managalarama Maha Vidyalaya, Mangalagama under Phase I comprised of the construction of a new foundation for, and restoration of a

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derelict school building, the rehabilitation of the classrooms in the said building , repair and reconstruction of the two existing teachers’ quarters and the provision of equipment for the pre- school children’s playground.

The civil work was carried out by a government-approved sub-contractor appointed by the School Development Society under the direction and supervision of the Zonal Education Office, Ampara and completed in 2011.

On the completion of the work under Phase I in the AM/ Managalarama Maha Vidyalaya which was commissioned by

John Keells Foundation and supported by John Keells PLC, the team received a warm welcome from the Principal, staff and students of the school as well as representatives from the village community who expressed their sincere appreciation of the development work undertaken in the village. The children of the village school went to the extent of singing a song especially composed in honour of John Keells!

English for TeensJohn Keells Foundation supported by John Keells PLC inaugurated its popular “English for Teens” scholarship programme in different Districts of the country. Conceptualised by John Keells Foundation and implemented through Gateway Language Centres, the “English for Teens” programme is aimed at providing foundation-level English language training for early teens. Introduced in 2010, the programme focuses primarily on teaching English for daily use and basic interactions, helping students understand and feel comfortable in interacting with others in English in a simple way.

This year too, the programme offered 1000 scholarships to school children within the age limits of 12 to 14 years in the areas of Ambalangoda, Ampara, Bandarawela, Batticaloa, Chilaw, Colombo, Jaffna, Kegalle, Kilinochchi, Kurunegala, Matale, Matara, Mullaitivu, Negombo, Panadura, Polonnaruwa, Ratnapura, Tangalle and Trincomalee. Invitations

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for applications from eligible schools in these areas drew an overwhelming response with a total of 1463 applications being received. Separately, an additional 144 scholarships for the pre-intermediate level programme have been offered to John Keells scholars who obtained an Honours Pass in the “English for Teens” programme of 2010/11.

The “English for Teens” programme was initiated primarily to develop English language skills among early teens because of its potential both as a communication tool and gateway to knowledge in today’s context. John Keells is committed to providing these opportunities to the children and youth of our country, because we believe that empowering youth with a tool as powerful as the English Language will not only develops their personal potential, but also build greater capacity for Sri Lanka as a nation.

The “English for Teens” programme is part of the John Keells English Language Scholarship Programme which is aimed at enhancing English language skills of school children and youth from socially economically disadvantaged backgrounds so as to improve their opportunities for higher learning and sustainable employment. Since its launch in 2004, the John Keells English Language Scholarship Programme, which has been implemented through Gateway Language Centres, has to date empowered the lives of over 4400 persons in various parts of the country.

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

The Board of Directors is committed to 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 a written code of conduct, 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 that could affect the Group’s image. All the Group’s recognition schemes insist, as a minimum, that all nominees have lived the JKH values and the behaviour of the senior management of the group, are monitored through an annual 360 degree feedback programme.

The Group believes that the main source of its competitive advantage is the trust that the stakeholders place on the core values underlying its corporate activities.

The 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.

• CompaniesActof2007

• ListingrulesoftheColomboStockExchange(CSE)(Including subsequent revisions up to 1 April 2012)

• TheCodeofBestPracticeonCorporateGovernanceaspublished by the Securities and Exchange Commission and the Institute of Chartered Accountants of Sri Lanka to the extent that they are practical.

The corporate governance framework expects the Board of Directors to:

• Beresponsibletoshareholderstofulfillitsstewardshipobligations, in the best interest of the Company and its stakeholders

• Maximiseshareholderwealth-creationonasustainablebasis while safeguarding the rights of multiple stakeholders

• Ensurethatthemethodsweemploytoachieveourgoalsare as important to us as the goals themselves

• Ensurethatnoonepersonhasunfetteredpowersofdecision making

• Buildandimprovingstakeholderrelationshipsisanintegral aspect of Board effectiveness and a responsible approach to business

• Takeanactiveroleindiscussingwiththerelevantregulatory bodies the implementation of Governance Regulations, Accounting Standards, and economic reforms in Sri Lanka and other jurisdictions where the Group has major business interests

• Opt,whenpractical,forearlyadoptionofbestpracticegovernance regulations and accounting Standards

• Resolvetomaintainstronggovernancepracticeswhichpresent strong commercial advantages especially through a lowering of our cost of capital as a result of the strengthened stakeholder confidence, particularly the confidence of our investors, both institutional and Individual

• Makingofbusinessdecisions,andresourceallocations,in an efficient 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.

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

Board responsibilities and decision rightsThe Board of Directors retains full and effective control of the Company and their responsibilities include :

• ProvidingdirectionandguidancetotheCompanyin the formulation of its strategies, with emphasis on the medium and long term, in the pursuance of its operational and financial goals.

• Reviewingandapprovingannualbudgetplansincludingapproving of capital expenditure.

• ReviewingHRprocesseswithemphasisontopmanagement succession planning.

• AppointingandreviewingtheperformanceoftheCEO.

• Monitoringsystemsofgovernanceandcompliance.

• Overseeingsystemsofinternalcontrolandriskmanagement.

• Determininganychangestothediscretions/authoritiesdelegated from the Board to the executive levels.

• Approvinganyamendmentstoconstitutionaldocuments.

Board compositionThe Board of Directors of John Keells PLC as at 31st March 2012 consists of 8 Directors comprising of the Chairman who is a non-executive non independent director, three non-executive non independent directors, four non-executive independent directors.

The Directors are collectively responsible for upholding and ensuring the highest standards of corporate governance and inculcating ethics and integrity across the Group. The Board members have a wide range of expertise as well as significant experience in commercial and financial activities enabling them to discharge their governance duties in an effective manner.

All Non-Executive independent Directors listed below are considered independent in terms of the Listing Rules of the Colombo Stock Exchange.(a) Mrs. S T Ratwatte(b) Mr. T De Zoysa(c) Mrs. Y A Hansen(d) Mr. K D W Ratnayaka

All the above Non-Executive independent Directors listed above, have submitted a signed and dated declaration confirming their independence as per the Listing Rules of the Colombo Stock Exchange.

Board Induction and supply of information • Board induction - In instances where Non Executive

Directors are newly appointed to the Board, they are apprised of the:

• Valuesandculture. • OperationsoftheGroupanditsstrategies. • Operatingmodel. • Policies,governanceframeworkandprocesses. • Responsibilitiesasadirectorintermsofprevailing

legislation. • TheCodeofConductdemandedbythecompany. • Briefonimportantdevelopmentsinthebusiness

activities of the Group.

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Prior to Appointment

Nominees are requested to make known their various interests that could potentially conflict with the interest of the company.

Once Appointed

Once appointed to the board, all directors are expected to inform the board and obtain board clearance prior toAccepting any positionEngaging in any transaction that could create a potential conflict of interestAll NEDs are required to notify the Chairman of changes to their current board representations

During Board meetings

Directors who have had an interest in a matter under discussion have Excused themselves from deliberations on the subject matterAbstained from voting on the subject matter. (Abstentions, where applicable, from board decisions, are duly minuted)

• Supplyofinformation All directors are fully briefed on important developments

in the various business activities of the group. The directors have access to

• externalandinternalauditors

• expertsandotherexternalprofessionaladvisoryservices

• seniormanagersunderastructuredarrangement,

• informationasisnecessarytocarryouttheirdutiesandresponsibilities effectively and efficiently.

• periodicperformancereports

• informationupdatesfrommanagementontopicalmatters, new regulations and best practices as relevant to the group’s businesses.

• theservicesofthecompanysecretarieswhoseappointment and/or removal is the responsibility of the Board.

Board Directors delegation of authorityThe 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 delegated some of its functions subject to pre-defined limits to the President- Sector Head, CEO and the Management Committee of the company and its subsidiaries.

Conflicts of interest and independenceEach director has a continuing responsibility to determine whether he or she has a potential or actual conflict of interest arising from external associations, interests or personal relationships in material matters which are considered by the board from time to time.

In order to avoid potential conflicts or biasness, Directors adhere to best practices as illustrated below.

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Board meetings & AttendanceThe Board met 5 times during the year. The attendance at these meetings was as follows:

Name of Director No. of meetings attended

S. C. Ratnayake - Chairman 4/5

A.D. Gunewardene 4/5

J.R.F. Peiris 5/5

T. de Zoysa 5/5

K.D.W. Ratnayaka 2/5

Ms.Y.A.Hansen 4/5

Ms.S.T. Ratwatte 4/5

Mr. L.D Ramanayake* 2/3

Mr. R.S Fernando** 0/2

* Retired with effect from 30th December 2011**Appointed with effect from 2nd January 2012

Board tenure, retirement and re-electionAt each Annual General Meeting one third of the directors retire by rotation on the basis prescribed in the articles of association of the company and are eligible for re-election.

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

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

The retiring Directors’ eligible for re-election this year are mentioned in the notice of the AGM on page 92.

Human Resources and Compensation Committee and PolicyThe Human Resources and Compensation Committee of the Parent Company John Keells Holdings PLC functions as

the Human Resources and Compensation committee of the Company and its subsidiaries as permitted by the Listing Rules of the Colombo Stock Exchange. The Human Resources and Compensation Committee of John Keells Holdings PLC comprises four independent directors:Mr. E.F.G. Amerasinghe – ChairmanDr. I. CoomaraswamyMr. A.R. GunasekaraMs. S.S. Tiruchelvam

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

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

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

Compensation is set at levels that are competitive to enable the recruitment and the retention of high calibre executives in the identified job classes/bands- as guided by the best comparator set of companies from Sri Lanka. Compensation comprising of fixed (base) payments, short term incentives and long term incentives be tied to performance both individual and organizational.

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

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

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

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

ACCOUNTABILITY AND AUDITOperations planning, monitoring and decision rightsResponsibility for monitoring and achieving plans as well as ensuring compliance with Group policies and guidelines rests with the Chief Executive Officers of the company and heads of functions at the business unit and function levels.

At the Sector Management 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 Sector Committee, Management Committee and Departmental Committee levels Actual financials are reviewed at least quarterly by the Board.

Integrity of systems processes and internal controlYour board has taken necessary steps to ensure the integrity of the company and its subsidiaries accounting and financial reporting systems, internal control systems and also the review and monitoring of such systems on a periodic basis. Our systems covering risk management, financial and operational control, ethical conduct, compliance with legal and regulatory requirements and corporate social responsibility are detailed below.

Audit Committee, external auditors and independenceA 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, coupled with the identification of any deviations from the expected norms have significantly aided the committee in its efforts in ensuring correct financial reporting and effective internal control and risk management.

The detailed Audit Committee report including the areas reviewed during the financial year 2011/2012 is found in the Board Committee report section of the Annual Report.

External AuditorsErnst & Young are the external auditors of the company and its subsidiaries and also audit the consolidated financial statements.

In addition to the normal audit services, Ernst and Young also provided certain non-audit services to the company and its subsidiaries. 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, ideally, such non-audit services should not exceed the value of the total audit fees charged by the subject auditor within the relevant geographic territory. The External Auditor also provides a certificate of independence on an annual basis.

The audit and non-audit fees paid by the company and its subsidiaries to our principal auditor, Ernst & Young, are separately classified in the Notes to the Financial Statements of the Annual Report.

Care is taken to ensure that the internal audit function in group companies is not outsourced to the external auditor of that company. The Group attempts, where practical, to give preference to audit firms who are not external auditors of any Group company, in carrying out internal audit work in a further

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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 Reports section of the Annual Report.

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 complianceA 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 identify any significant deviations from the expected norms.

Internal auditorsThe 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.

At the John Keells Group, the role of the internal auditor has transformed into a value adding function instead of merely a ‘policing’ function, where audit findings form an integral input in modifying and improving our internal processes. Thereby, the Group Business Process Review function is a key contributor in achieving operational excellence and value addition across the diverse businesses among the Group.

Risk managementThe company and its subsidiaries adopt the ultimate Parent Company ‘s Risk Management Programme This focuses on

wider sustainability development, to identify, evaluate and manage significant Group risks and to stress-test 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 identified key risks to the achievement of the Group’s strategic business objectives.

Going concernThe Board of Directors upon the recommendation of the Audit committee is satisfied that the Company has sufficient resources 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.

Integrated ReportingThe 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.

Directors’ ResponsibilitiesThe 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 Board of Directors in consultation with the Audit committee have taken all reasonable steps in ensuring the accuracy and timeliness of published information and in presenting an honest and balanced assessment of results in the quarterly and annual financial statements.

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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)As per the given requirements by the ICASL, IFRS is to be implemented by the start of the 2012/2013 financial year and JKPLC is in line to meet this requirement. The Group had formed a Committee in the financial year 2010/11 comprising of financial personnel from within the Group to study and assess the impacts on the implementation of IFRS as per the guidelines set by the ICASL.

The Committee gathered information from finance and operational teams across the Group on the impact of International Financial Reporting Standards and several iterative discussions were held between internal and external parties, including technical experts, and involved the study of regional benchmarks to evaluate and quantify such impacts. The study also entailed reviewing all agreements and contracts within the respective businesses to identify contractual obligations and financial impacts of such agreements in the quantification process.

The Board and Audit Committee were continuously updated on the progress of the findings and the group had drafted a detailed policy manual to ensure full compliance and consistency in the application of IFRS guidelines. This process has culminated with the financial ERP system being upgraded to ensure compliance with the new provisions.

System of internal controlThe Board has, through the involvement of the Group Business Process Review Division, taken steps to obtain assurance that systems 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. 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 assesses the effectiveness of the risk review process and systems of internal control on a regular basis.

Securities trading policyThe Parent company’s securities trading policy prohibits all employees and agents engaged by John Keells PLC who are aware of unpublished price sensitive information from trading in John Keells PLC shares or the shares of other companies in which the company presently has business interest.

Employee RelationsThe 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.Therefore, the Group follows open-door policies for its employees and key stakeholders and this is promoted at all levels of the Group.

Employee participation in Assurance Whistleblower policyThe 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 confidentiality and such complaints are investigated and addressed via a select committee under the direction of the Chairman.

Ombudsman All employees of the Company have recourse to an Ombudsman appointed by our parent Company John Keells Holdings PLC (JKH). This is an appointment to further strengthen the governance structure and to encourage and facilitate all employees to live by JKH values.

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The Ombudsman is to entertain complaints, from an employee or a group of employees, of alleged violations of the published Code 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 Ombudsman and recommendations arising therefrom shall be confidential and be communicated to the Chairman/CEO or the Senior Independent Director, where applicable, in writing and the ombudsman’s duty will thereupon cease forthwith.

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 shall 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.

Shareholder RelationsConstructive use of AGMShareholders will have the opportunity at the forthcoming AGM, notice of which has been communicated to you, to put questions to the board and to the chairman. The contents of the Annual Report will enable existing and prospective shareholders to make better informed decisions in their dealings with the company and its shareholders.

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.

Other Stakeholders - Corporate responsibility and SustainabilityThe Group recognises that it exists not only to maximize 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.

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

The Board 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

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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 concepts would have a material impact on the Company’s and the Group’s financial performance.

This Report has been prepared as per the rules and regulations stipulated by the Corporate Governance Listing Rules published by the Colombo Stock Exchange (revised in 2011) and also by the Companies Act no. 07 of 2007.

The Group has also given due consideration and adhered to the Code of Best Practice on Corporate Governance Reporting guidelines jointly set out by the Institute of Chartered Accountants of Sri Lanka and the Securities & Exchange Commission in preparation of this Corporate Governance Report, and where necessary deviations have been explained as provided within the rules and regulations.

Going ForwardThe Board is committed to its highest standards of corporate governance in order that the company shall achieve its long term sustainable growth objectives. The Board is accountable to the Company’s shareholders for good governance in the management of the affairs of the Company. The Board confirms that the Company has made every endeavour to comply with all the principles and provisions of the good corporate governance throughout the year ended 31 March 2012.

The company’s approach to corporate governance enables it to understand the expectations of stakeholders, forecast trends in social, environmental and ethical requirements and to manage the company’s performance in an appropriate manner.

While the Board is satisfied with its level of compliance with the governance requirements, it recognizes that practices and procedures can always be improved, and there is merit in continuously reviewing its own standards. The Boards program of review will continue throughout the year ahead.

The following Chart sets out the company’s adherence to the corporate Governance Principles in a nutshell.

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Rule No. Subject Applicable requirement Compliance Status

Applicable Section in the Annual Report

7.10.1(a) Non Executive Directors (NED)

Two or at least one third of the total number of Directors should be NEDs

Compliant Corporate Governance

7.10.2(a) Independent Directors (ID)

Two or one third of NEDs, whichever is higher, should be independent

Compliant Corporate Governance

7.10.2(b) Independent Directors Each NED should submit a declaration of independence

Available with the Secretaries for review

7.10.3(a) Disclosure relating to Directors

The Board shall annually determine the independence or otherwise of the NEDsNames of IDs should be disclosed in the Annual Report (AR)

Compliant Corporate Governance

7.10.3(b) Disclosure relating to Directors

The basis for the Board’s determination of ID, if criteria specified for independence is not met

Compliant Corporate Governance

7.10.3(c) Disclosure relating to Directors

A brief resume of each Director should be included in the AR including the Director’s areas of expertise

Compliant Board of Directors (profile) section in the Annual Report

7.10.3(d) Disclosure relating to Directors

Provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3(a), (b) and (c) to the CSE

Compliant Corporate Governance and Board of Directors (profile) section in the Annual Report

7.10.4 (a-h) Determination of Independence

Requirements for meeting criteria Compliant Corporate Governance

7.10.5 Remuneration Committee (RC)

A listed company shall have a RC Corporate Governance

7.10.5(a) Composition of Remuneration Committee

Shall comprise of NEDs, a majority of whom will be independent

Compliant Corporate Governance

7.10.5.(b) Functions of Remuneration Committee

The RC shall recommend the remuneration of the Chief Executive Officer (CEO) and EDs

Compliant Corporate Governance

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

Names of Directors comprising the RCStatement of Remuneration PolicyAggregated remuneration paid to EDs and NEDs

Compliant Corporate Governance and the Board Committee Reports

7.10.6 Audit Committee (AC) The Company shall have an AC Compliant Corporate Governance

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Rule No. Subject Applicable requirement Compliance Status

Applicable Section in the Annual Report

7.10.6(a) Composition of Audit Committee

Shall comprise of NEDs a majority of whom will be IndependentA NED shall be appointed as the Chairman of the CommitteeCEO and Chief Financial Officer (CFO) should attend AC meetingsThe Chairman of the AC or one member should be a member of a professional accounting body

Compliant

Compliant

Compliant

Compliant

Corporate Governance and the Board Committee Reports

7.10.6(b) Audit Committee Functions

Overseeing of the –Preparation, presentation and adequacy of disclosures in the financial statements in accordance with Sri Lanka Accounting StandardsCompliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirementsProcesses to ensure that the internal controls and risk management are adequate to meet the requirements of the Sri Lanka Auditing StandardsAssessment of the independence and performance of the external auditorsMake recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors, and approve the remuneration and terms of engagement of the external auditor

Compliant

Compliant

Compliant

Compliant

Compliant

Corporate Governance and the Board Committee Reports

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

Names of Directors comprising the ACThe AC shall make a determination of the independence of the Auditors and disclose the basis for such determinationThe AR shall contain a Report of the AC setting out the manner of compliance with their functions

Compliant

Compliant

Compliant

Corporate Governance and the Board Committee Reports

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Risk ManagementIntroductionThe Group operates in a constantly evolving environment, which exposes it to risk factors and uncertainties brought about by the changing environment. 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 business strategies and policies, external environment, organisation and people, business processes and technology as the main risk categories that could have an impact on the Group. Each risk event is analysed by a simple formula that identifies possible occurrence, the likelihood of occurrence (probability) and outcome (severity). Thus the need

to identify and systematically manage risks. The systematic approach required for risk management when carrying out its business is exposed to the identification of such risks and the implementation of appropriate strategies and processes to manage them within a tolerable level have become extremely important in the context of modern business processes which are geared towards maximizing shareholder value.

The Company and the subsidiaries have adopted the John Keells Group Risk Management Strategy which is an ongoing process of identifying risk (Risk Mapping), measuring the potential impact and likelihood thereof against a broad

John Keells Risk UniverseHeadline Risks

Layer 4 JKH PLC Audit Committee

Group Executive Committee (GEC)

Group Operating Committee (GOC)

Sector Committee

Business Unit

Listed Company Audit Committee

Layer 3

Layer 2

Layer 1

Business Strategies &

Policies

Analysis & Reporting

External Environment

Organization & People

Report Content

•RiskM

anagementTeam

•Risk&

ControlR

eviewTeam

•SustainabilityIntegration

JK Group Review Risk

Report & Action

BU Review & Sector Risk

Report & Action

BU Risk Report & Action

Business Process

Technology & Data

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set of assumptions (Risk Action/Decisions), establishing unacceptable exposures and initiating mitigating activities to reduce exposures to within tolerance levels (Risk Control Strategies).

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

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

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

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

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

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

Risk Management team of the Company is headed by the CEO and comprise of functional and operational managers. The Audit Committee of the Board receives regular reports regarding the Company risk profile, and mitigation activities. The Group risk & control review function also evaluates the risk mitigation procedures as a part of its audit programs.

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

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

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

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Competition This relates to the loss of business due to Regional Plantation companies’ (RPC’s) investing in Broking companies and competition from Brokers who are not members of the Colombo Brokers Association (CBA) resorting to unethical business practices. This is being addressed by having an excellent relationship with the RPC’s , ensuring high broking standards and by lobbying with important authorities and conveying the importance for new entrants to be members of the CBA.

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

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

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

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

The Company deals with mostly recognized, credit worthy clients who are private Tea Factory Owners and Plantation Companies. Credit Risks are minimized as we advance funds based on inventories available in our warehouse valued

at historical prices obtained for the relevant marks. Over advances granted are made available only for those clients who have a good track record and are monitored closely.

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

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

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

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Audit Committee ReportIntroductionThe responsibilities of the 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 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 judgements, suitability of assertions made and the adequacy of disclosures in the financial statements.

They are also responsible for the relationship with the external auditors and for assessing the role and effectiveness of the Company’s Group Business Review Process (GBPR) 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 GBPR Division and the reports of the independent outsourced internal audit firms engaged in carrying out the internal audits of the group entities.

The committee is also responsible 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 fees and, on an annual basis, assesses the effectiveness and independence of the external auditors.

A resolution to reappoint Messrs. Ernst & Young, Chartered Accountants, as auditors for the financial year ending 31 March 2013 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 Committee, independent external auditors and the outsourced internal audit firm performing the JKPLC internal audit, the committee held at least one closed door meeting with the external auditors without the presence of any executive directors and management.

Composition of the Audit CommitteeThe Audit Committee consists exclusively of independent, Non Executive Directors.

The Audit Committee is a sub committee of the Board of Directors and consists of four independent non-executive directors as follows:Ms. S.T. Ratwatte– ChairmanMr. Tilak de Zoysa Mr. K.D.W. RatnayakaMs. Y.A. Hansen

The members of the audit committee are persons with expertise and ability in their respective fields and bring their collective business expertise to bear in the deliberations of the committee. The Chairman of the Audit Committee is a Fellow of the Chartered Institute of Management Accountants (UK). The Financial Controller serves as Secretary to the Audit Committee.

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

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Name of the Director Attendance PercentageMs. S.T. Ratwatte 6 100Deshabandu Tilak de Zoysa 5 83K.D.W. Ratnayaka 5 83Ms. Y.A. Hansen 5 83

The Executive Director/ Sector Head, the Chief Executive Officer, Financial Controller and Finance Manager attend by invitation and briefed the committee on specific issues. Other officers of the company attend meetings by invitation on a need basis. The external auditors and the internal auditors are also required to attend meetings when matters pertaining to their functions come up for consideration.

Report of the Committee’s ActivitiesThe committee reviewed with the independent external auditors who are responsible for expressing an opinion on the truth & fairness of the audited financial statements and their conformity the Sri Lanka Accounting Standards (SLAS) their judgements as to the quality, not just the acceptability of the accounting Policies of the company and the group and any such other matters as are required to be discussed with the committee in compliance with Sri Lanka Auditing Standard 260 – Communication of matters with those charged with Governance.

The external auditors have direct communication channels with the audit committee and have kept the committee informed of any matters of significance that arose during their course of their limited review of financial statements for the nine months ended 31st December 2011 and financial year end audit.

Quarterly compliance confirmationsThe committee obtained quarterly declarations from the company and its subsidiaries confirming financial and operational 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 had carried out in consultation with external auditors, a gap analysis to identify areas requiring action. An implementation in liaison with the John Keells Group IFRS implementation team had been appointed to migrate to SLFRS and LKAS before the deadline. The Audit Committee was apprised of on an ongoing basis, the progress of this project and the implications of adopting SLFRS and LKAS.

Independent external auditorsThe committee held a special closed door meeting with the external auditors without the presence of any executive directors or officials of the company to ensure that no limitations had been placed on their examination and reporting and that they received full cooperation from the management and unhindered access to records and personnel.

The external auditors of the company submitted a detailed audit plan for the financial year 2011/12, which specified, inter alias, the areas of operations to be covered in respect of the Company. The audit plan specified “areas of special emphasis” which had been identified from the last audit or from a review of current operations. The areas of special emphasis had been selected due to the probability of error and the material impact it can have on the financial statements. At the conclusion of the audit, the auditors met with the Audit Committee to discuss and agree and the treatment of any matters of concern discovered in the course of the audit. There were no issues of significance.

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The Audit Committee has recommended to the Board of Directors that Messrs. Ernst & Young be re-appointed as Auditors for the financial year ending 31st March 2013, subject to the approval of the shareholders at the next Annual General Meeting.

Internal AuditThe internal audit function, in addition to reviewing the efficiency of internal controls, reviews the actions taken to control and mitigate operational and business risks and monitors and reports on the compliance with statutory requirements and group accounting and operational policies. The internal audit function has been outsourced to BDO Partners a firm of Chartered Accountants, who are a member of BDO International Limited. The Audit Committee has agreed with the internal auditor as to the frequency of audits to be carried out, the scope of the audit and the areas to be covered and the fee to be paid for their services.

During the year under review, the emphasis of the internal audit function covered:• Reviewofinternalcontrols• Operationalrisks• Businessrisks• Compliancewithstatutoryrequirements• Non-compliancewithcompanypolicies• Identificationofinefficienciesandproposalsforremedial

action

The internal auditor was also required to provide and overview of the risk profile of the business being audited together with a risk grading on a specified scale.

The internal audit frequency depends on the risk profile of each area, with higher risk areas being on a shorter audit cycle. The Audit committee is of the opinion that this approach provides an optimal balance between the need to manage risk and the costs thereof.

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

Ms. Sharmini T. RatwatteChairman, Audit Committee25th May 2012

Other members – Deshabandu Tilak de Zoysa, Mr. Karvan Ratnayaka, Mrs. Yolande Anne Jordan- Hansen

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2011

Historical milestones

1870 1878

1890 1895

1960 1962

19701971

1986

1990

1993

2000

2005

2006

2001

2003

2010

2007

1976

1966

1948

1876

Edwin John came to Ceylon, as the Island was then called, to join his brother George. Together, they established themselves as Produce and Exchange Brokers.

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

E. John and Co., amalgamated with two London Tea Broking rms, William Jas and Hy Thompson and Co. and Geo White and Co. The rm was then incorpo-rated as a private limited liability company and the name was changed to E. John, Thompson, White and Co. Ltd.

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

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

The initial step towards diversi cation of the activities of the Company was taken with the acquisition of Ceylon Mineral Waters Ltd.,

A partnership styled "John Brothers and Company" was formed with of ces situated in Colombo and Kandy.

Prospects began to improve rapidly with the approaching tea business.

The rm moved to the sixth �oor of the then newly constructed Ceylinco House V. Lintotawela

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

John Keells Ltd., became a People's Company.

John Keells Ltd., moved its of ces to Glennie Street, Slave Island.

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

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

2004

The Company disposed of its Investment in International Tourists and Hoteliers Ltd.

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

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

The Board of Directors at a meeting held on 11th May 2011 resolved to increase the number of shares by way of a share sub -division in the ratio of one (1) share for every one (1) share held. Consequently, the no of shares after the sub -division increased to 60,800,000 shares from the previous 30,400,000 shares.

The Board of Directors at a meeting held on 20 th July 2010 resolved to increase the number of shares by way of a share sub -division in the ratio of one (1) share for every one (1) share held. Consequently, the no of shares after the sub -division increased to 30,400,000 shares from the current 15,200,000 shares.

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

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

V. Lintotawela retired as Chairman on 31st December 2005.

S. Ratnayake took over as Chairman on 01st January 2006.

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

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2011

Historical milestones

1870 1878

1890 1895

1960 1962

19701971

1986

1990

1993

2000

2005

2006

2001

2003

2010

2007

1976

1966

1948

1876

Edwin John came to Ceylon, as the Island was then called, to join his brother George. Together, they established themselves as Produce and Exchange Brokers.

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

E. John and Co., amalgamated with two London Tea Broking rms, William Jas and Hy Thompson and Co. and Geo White and Co. The rm was then incorpo-rated as a private limited liability company and the name was changed to E. John, Thompson, White and Co. Ltd.

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

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

The initial step towards diversi cation of the activities of the Company was taken with the acquisition of Ceylon Mineral Waters Ltd.,

A partnership styled "John Brothers and Company" was formed with of ces situated in Colombo and Kandy.

Prospects began to improve rapidly with the approaching tea business.

The rm moved to the sixth �oor of the then newly constructed Ceylinco House V. Lintotawela

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

John Keells Ltd., became a People's Company.

John Keells Ltd., moved its of ces to Glennie Street, Slave Island.

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

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

2004

The Company disposed of its Investment in International Tourists and Hoteliers Ltd.

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

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

The Board of Directors at a meeting held on 11th May 2011 resolved to increase the number of shares by way of a share sub -division in the ratio of one (1) share for every one (1) share held. Consequently, the no of shares after the sub -division increased to 60,800,000 shares from the previous 30,400,000 shares.

The Board of Directors at a meeting held on 20 th July 2010 resolved to increase the number of shares by way of a share sub -division in the ratio of one (1) share for every one (1) share held. Consequently, the no of shares after the sub -division increased to 30,400,000 shares from the current 15,200,000 shares.

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

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

V. Lintotawela retired as Chairman on 31st December 2005.

S. Ratnayake took over as Chairman on 01st January 2006.

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

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Annual Report of the Board of DirectorsThe Directors have pleasure in presenting the 65th Annual Report of your Company together with the audited financial statements of John Keells PLC., and the audited consolidated financial statements of the Group for the year ended 31st March, 2012.

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

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

SubsidiariesJohn Keells Stock Brokers (Private) Limited continues to provide stock broking services.John Keells Warehousing (Private) Limited continues to provide warehousing facilities.

Business ReviewA review of the Group’s performance during the financial year is given in the Chairman’s Review and the Chief Executive Officer’s Report. These reports form and integral part of the Directors Report and provide a fair review of the performance of the Group during the financial year ended 31st March 2012.

Financial StatementsThe Financial Statements of the Company and the Group are set out on pages 46 to 81 of the Annual Report.

Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on page 45 of the Annual Report.

Significant Accounting PoliciesThe Accounting Policies adopted in the preparation of the Financial Statements are given on pages 51 to 61 of the Annual Report. There were no changes in the Accounting Policies adopted in the previous year for the Company or the Group.

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

Stated CapitalThe total stated capital of the Company as at 31 March 2012 was Rs.152 mn (2011 - Rs.152 mn).

The Board of Directors at a meeting held on 11th May 2011 resolved to increase the number of shares by way of a share sub -division in the ratio of one (1) share for every one (1) share held. Consequently, the no of shares after the sub -division increased to 60,800,000 shares from the previous 30,400,000 shares.

The Articles of the company permits the sub- division of shares. The sub - division did not increase the stated capital of the company.

RevenueRevenue generated by the Company amounted to Rs.492 mn (2011 - Rs.490 mn), whilst Group revenue amounted to Rs.891 mn (2011 - Rs.1,058 mn). Contribution to Group revenue, from the different business segments is provided in Note 18.2 to the financial statements on page 73.

Results And AppropriationsThe profit after tax of the Company was Rs.902 mn (2011 - Rs.623 mn) whilst the Group profit attributable to equity holders of the parent Company for the year was Rs.858 mn (2011 - Rs.766 mn).

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Results of the Company and of the Group are given in the income statement on page 47 .

DividendThe Board of Directors at a meeting held on 25th May 2012 proposed a First and Final Dividend of Rs.4.00 per share for the Financial Year ended 31 March 2012. 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. 07 of 2007, and has obtained a certificate from the auditors, prior to declaring a Final Dividend which is to be paid on the 15th June 2012.

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

Detailed description of the results and appropriations are given below.

GROUP COMPANY 2011/2012 2010/2011 2011/2012 2010/2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’sProfitsAfter making provision for bad and doubtful debts and for all known liabilities and after providing for depreciation on fixed assets, the profit earned was 1,023,476 1,012,451 966,693 699,398 From which has to be deducted the provision for taxation of (135,458) ( 197,515) ( 64,711) (75,975)Leaving a net profit on ordinary activities after taxation of 888,018 814,936 901,982 623,423 From which the amount attributable to Minority Interest was (deducted)/added (29,604) (49,209) - - And after the balance brought forward from the previousyear was added 1,582,664 968,937 1,258,786 787,363 The amount available for appropriation was 2,441,078 1,734,664 2,160,768 1,410,786 AppropriationsFirst and Final Dividend of Rs.5/- per share paid for 2010/2011 on 13 th May 2011 (152,000) (152,000) (152,000) (152,000)Leaving a balance to be carried forward to the next year of 2,289,078 1,582,664 2,008,768 1,258,786

DONATIONSTotal donations made by the Company and Group during the year amounted to Rs.4.4 mn (2011 - Rs.1.7 mn) and Rs.2.9 mn (2011 - Rs.1.1 mn), respectively, of these, the donations to approved charities were Rs.4.2 mn (2011 - Rs.0.05 mn) at Company and Rs.2.6 mn (2011 Rs.0.6 mn) at group. The amounts do not include contributions on account of John Keells Foundation 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 Company’s contribution to John Keells Foundation was Rs.0.3 mn (2011 Rs.2.0 mn) and the groups contribution was Rs.2.5 mn (2011 3.0 mn) respectively.

PROPERTY, PLANT AND EQUIPMENTThe book value of property, plant and equipment as at the balance sheet date amounted to Rs.25 mn (2011 - Rs.32 mn)

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and Rs.148 mn (2011 - Rs.154 mn) for the Company and Group respectively.

Capital expenditure for the Company and Group amounted to Rs.2.2 mn (2011 - Rs.13.1 mn) and Rs.16.1 mn (2011 - Rs.21.0 mn), respectively. Details of property, plant and equipment and their movements are given in note 2 to the financial statements on page 62.

MARKET VALUE OF PROPERTIES All properties classified as investment property were valued in accordance with the requirements of SLAS 40 (2005) Investment Property. The carrying value of investment property of the Company and Group amounted to Rs1,668 mn (2011 – Rs.1,087 mn) and Rs.1,668 mn (2011 - Rs.1,087 mn) respectively. The investment, property was revalued by Mr. P.B. Kalugalagedera as at 31 March 2012.

Details of the valuation of investment property is provided in note 3 to the financial statements on pages 64 .

The real estate portfolio of the Group as at 31 March 2012 is disclosed on pages 64 .

INVESTMENTSInvestments of the Company and the Group in subsidiaries, associates, and other external investments amounted to Rs.172 mn (2011 - Rs.172 mn) and Rs.110 mn (2011 - Rs.102 mn), respectively.

Detailed description of the long term investments held as at the balance sheet date, are given in note 5 to the Financial Statements on page 66.

RESERVESTotal reserves as at 31 March 2012 of the Company and Group amounted to Rs.2,113 mn (2010 - Rs.1,363 mn) and Rs.2,406 mn (2011 - Rs.1,700 mn), respectively.

The movement and composition of the capital and revenue reserves is disclosed in the statement of changes in equity on page 48.

EVENTS OCCURRING AFTER THE BALANCE SHEET DATEThere have been no events subsequent to the Balance Sheet date, which would have any material effect on the Company

or on the Group other than those disclosed in Note 28 to the Financial Statements on page 81.

CONTINGENT LIABILITIES AND CAPITAL COMMITMENTSThere have been no commitments or contingent liabilities other than those stated in note 25 on page 78 of the Annual report.

HUMAN RESOURCESThe number of persons employed by the Company and group as at 31 March 2012 was 103 (2011 - 109) and 178 (2011 – 181), respectively.

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

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

CORPORATE GOVERNANCECorporate Governance practices and principles with respect to the management and operations of the Company is set out on page 19 of this report. The Directors confirm that the Company is in compliance with the relevant rules on Corporate Governance contained in the listing rules of the Colombo Stock Exchange.

The Directors declare that:

a) The Company has not engaged in any activities, which contravene laws and regulations

b) The Directors have declared all material interest 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) The Directors have conducted a review of internal controls covering financial operational and compliance

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controls and risk management and have obtained a reasonable assurance of their effectiveness and successful adherence herewith.

RISK MANAGEMENT AND INTERNAL CONTROLThe Board confirms that there is an ongoing process for identifying, evaluating and managing any significant risks faced by the group. Risk assessment and evaluation for each business unit takes place as an integral part of the annual strategic planning cycle and the principle risks and mitigating actions in place are reviewed regularly by the Board and the Audit Committee. The Board, through the involvement of the Group Business Process Review Division 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 Business Process Review Division has direct access to the Chairman of the Audit Committee.

AUDIT COMMITTEEThe following members of the Board serve on the Audit Committee.

Ms. S.T. Ratwatte - ChairmanT. De ZoysaK.D.W. RatnayakaMs. Y.A. Hansen

The report of the Audit Committee is given on page 33 of the Annual report.

HUMAN RESOURCES AND COMPENSATION COMMITTEEAs permitted by the Listing Rules of the Colombo Stock Exchange, the Remuneration Committee of John Keells Holdings PLC, the parent Company of John Keells PLC functions as the Remuneration Committee of the Company and subsidiaries. The remuneration committee of John Keells Holdings PLC comprises of four independent Directors.

E.F.G. Amerasinghe – ChairmanMs. S.S. Tiruchelvam Dr. I. Coomaraswamy Mr. A.R. Gunasekara

The remuneration policy of the Company and its subsidiaries is detailed in the Corporate Governance Report on page 22 of the Annual Report.

STOCK MARKET INFORMATIONAn ordinary share of the Company was quoted on the Colombo Stock Exchange at Rs.66.20 as at 31st March 2012 (31st March 2011 – Rs 185.20). Information relating to public holding, earnings, dividend, net assets, market value per share and share trading is given in “Key Ratios and Information” on pages 88 to 89 and in the Shareholders Information Section on pages 84 to 85.

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

SUBSTANTIAL SHAREHOLDINGS The names of the twenty largest shareholders, the number of shares held and the percentages held are given on page 85 of the Annual Report. The distribution schedule of the shareholders and public holdings are disclosed on page 84 of the Annual Report.

DIRECTORATEDuring the year the Board of Directors of John Keells PLC consisted of eight Directors with wide commercial, academic knowledge and experience. The Directors profile is given on page 11 of the Annual Report.

The Board of Directors of the Company and its subsidiaries as at 31 March 2012 is listed below.

Name of the Director John

Keells

PLC

John Keells

Stock Brokers

(Private) Limited

John Keells

Warehousing

Limited

S.C. Ratnayake √ √ √A.D. Gunewardene √ √ √J.R.F. Peiris √ - -R.S. Fernando √ - √K.N.J. Balendra - √ -T. de Zoysa √ - -K.D.W. Ratnayaka √ - -Ms. Y.A. Hansen √ - -Ms. S.T. Ratwatte √ - -

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RETIREMENT OF DIRECTORS BY ROTATION OR OTHERWISE AND THEIR RE-ELECTIONMr. J.R.F Peiris and Mr. T.de. Zoysa retire by rotation in terms of Article 83 of the Articles of association of the company, and being eligible offer themselves for re-election.

Mr. L. D. Ramanayake retired with effect from 30th December 2011.

Mr. R.S Fernando retires in terms of Article 90 of the Articles of Association and being eligible is recommended by the Board for re-election.

DIRECTORS’ REMUNERATIONDetails of the remuneration and other benefits received by the directors are set out in page 75 of the financial statements.

DIRECTORS’ and CEO’s ShareholdingsNumber of shares

Name of the Director As at 31st

March 2012

As at 31st

March 2011

S.C. Ratnayake Nil NilA.D. Gunewardene Nil NilJ.R.F. Peiris Nil NilR.S. Fernando Nil NilT. de Zoysa Nil NilK.D.W. Ratnayaka Nil NilMs. Y.A. Hansen Nil NilMs. S.T. Ratwatte Nil NilS.C. Munasinghe (CEO) Nil Nil

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

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

Annual Report of the Board of Directors

particulars of entries made in the Interests Registers of subsidiaries.

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

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

b) There have been no disclosures of share dealings as at 31st March 2012.

c) Indemnities and Remuneration

The Board approved the payment to the Executive Director of the Company, L.D. Ramanayake (retired) of;

• Shorttermvariableincentivesbasedonindividualperformance, organization performance and role responsibility based on the results of the financial year 2010/2011 paid in July 2011; and

• LongTermIncentiveinthenatureofESOPinJohnKeellsHoldings PLC dependant on the aforesaid performance rating, organizational rating and role responsibility as recommended by the Human Resources and Compensation Committee of JKH the holding company of John Keells PLC in keeping with the Group Remuneration Policy.

• TheNon-ExecutiveDirectorsofJohnKeellsPLCreceivedan increment in fees with effect from 1st August 2011, as recommended by the Remuneration Committee of John Keells Holdings PLC being its holding company and as permitted by the Rules of the Colombo Stock Exchange) which increase is commensurate with the market and complexities of the business of the Company. The fees payable to non-executive nominees of John Keells Holdings PLC are paid to John Keells Holdings PLC and not to individual directors.

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SUPPLIER POLICYThe Group applies an overall policy of agreeing and clearly communicating terms of payment as part of the commercial agreements negotiated with suppliers, and endeavors to pay for all items properly charged in accordance with these agreed terms. As at 31 March 2012 the trade and other payables of the Company and Group amounted Rs.188 mn (2011 - Rs.68 mn) and Rs.588 mn (2011 - Rs.554 mn), respectively.

RELATED PARTY TRANSACTIONThe details of Related Party Transactions during the year are shown in Note 27 on page 79 and Investments made in related parties are shown in Note 5 on page 66.

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

STATUTORY PAYMENTSThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of, and in respect of the employees of the Company and its subsidiaries, and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the balance sheet date have been paid or, where relevant provided for, except as specified in Note 25.3 to the financial statements on page 78, covering contingent liabilities.

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

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

A total amount of Rs.1.4 mn (2011 – Rs.1.3 mn) by the Company and Rs.2.2 mn (2011 – Rs.2.0 mn) by the Group has been paid out as audit fees. The Auditors, do not have any relationship (other than that of an Auditor) with the Company or any of its subsidiaries.

Further details on the work of the Auditor and the Audit Committee are set out in the Audit Committee Report on page 33.

ANNUAL REPORTThe Board of Directors approved the Company and Consolidated financial statements on 25th May 2012. The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board.

ANNUAL GENERAL MEETINGThe annual general meeting will be held at the HR Auditorium, (Ground Floor) of John Keells Holdings PLC, No. 130, Glennie Street, Colombo 2, on 27th June, 2012 (Wednesday) at 9.00 a.m. The notice of the Annual General Meeting appears on page 92 .

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

Director DirectorKeells Consultants (Private) Ltd.

Secretaries25th May 2012

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Statement of Directors’ ResponsibilityThe 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 the provision the Companies Act No 7 of 2007, is set out in the Report of the Auditors.

the financial statements comprise of:• Abalancesheet,whichpresentsatrueandfairviewof

the state of affairs of the Company and its subsidiaries as at the end of the financial year and

• anincomestatementofincome,whichpresentsatrueand fair view of the profit or loss of the company and its subsidiaries for the financial year; which comply with the requirements of the act.

The directors are required to confirm that the Financial Statements have been prepared:• usingtheappropriateaccountingpoliceshavebeen

selected and applied in a consistent manner and material departures, if any, have been disclosed and explained,

• inaccordancewiththeapplicableAccountingStandardsas relevant, have been followed;

• reasonableandprudentjudgementsandestimateshave been made so that the form and substance of transactions are properly reflected’ and

• Providesinformationrequiredbyandotherwisecomplywith the Companies Act No.7 of 2007 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 its subsidiaries, and to ensure that the Financial Statements reflect the transparency of transactions and provide an accurate disclosure of the Company’s financial position and comply with the requirements of the Companies Act No. 7 of 2007.

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

The Directors are required to prepare the Financial Statements and to provide the Auditors with every opportunity to take whatever steps and undertake whatever inspections they may consider to be appropriate to enable them to give their audit opinion.

Further, as required by Section 56(2) of the Companies Act. No. 7 of 2007, the Board of directors have confirmed that the company, based on the information available, satisfies the solvency test immediately after the distribution, in accordance with Section 57 of the Companies Act. No. 7 of 2007, and has obtained a certificate from the auditors, prior to declaring a First and Final Dividend of Rs.4.00 per share for the year, which will be paid on 15th June 2012.

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

Compliance ReportThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries, and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the Balance Sheet date have been paid, or where relevant provided for. Except as specified in Note 25.3 to the Financial Statements covering contingent liabilities.

By Order of the Board

Keells Consultants (Private) Ltd.Secretaries25th May 2012

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Independent Auditors, Report

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF JOHN KEELLS PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of John Kells PLC (“Company”), the consolidated financial statements of the Company and its subsidiaries which comprises the balance sheets as at 31 March 2012, 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 The management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express and 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 misstatements.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting

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

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

OpinionIn our opinion, so far as appears from our examination the Company maintained proper accounting records for the year ended 31st March 2012 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March 2012 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 2012 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company.

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

25th May 2012Colombo

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Balance Sheet GROUP COMPANYAs at 31st March 2012 2011 2012 2011 Note Rs.000’s Rs.000’s Rs.000’s Rs.000’sASSETSNon-Current Assets Property, Plant & Equipment 2 148,361 154,075 24,638 32,162 Investment Properties 3 1,667,941 1,086,750 1,667,941 1,086,750 Leasehold Property 4 43,469 44,558 - - Investments in Subsidiaries 5.1 - - 120,380 120,380 Investments in Associates 5.2/5.3 82,023 74,640 24,000 24,000 Other Investments 5.4 27,535 27,534 27,535 27,534 Other Non Current Assets 6 60,489 26,647 50,213 16,060 Deferred Tax Asset 7 3,827 2,983 - -Deposits With Colombo Stock Exchange 3,500 12,500 - - 2,037,145 1,429,687 1,914,707 1,306,886

Current AssetsInventories 8 2,059 3,069 1,926 2,997 Trade & Other Receivables 9 1,040,505 761,844 723,819 459,894 Other Recoverables - Short Term Deposits 2,809 2,794 2,808 2,794 Income Tax Refunds - - 4,759 -Amounts Due From Related Parties 27.1 14,850 14,552 14,852 14,552 Short Term Investment 10.1 392,570 637,500 - - Cash and Bank 10.1 139,632 70,700 111,421 55,757 1,592,425 1,490,459 859,585 535,994

Total Assets 3,629,570 2,920,146 2,774,292 1,842,880

EQUITY AND LIABILITIESEquity Attributable to Equity Holders of the ParentStated Capital 11 152,000 152,000 152,000 152,000 Revenue reserves 12 2,406,378 1,699,964 2,112,768 1,362,786 2,558,378 1,851,964 2,264,768 1,514,786 Minority Interest 13 61,497 79,893 - -Total Equity 2,619,875 1,931,857 2,264,768 1,514,786 Non-Current LiabilitiesInterest Bearing Loans & Borrowings 17 1,958 23,543 - -Deferred Tax Liabilities 14 40,609 37,853 35,627 33,926 Retirement Benefit Obligations 15 52,752 57,060 32,505 39,337 95,319 118,456 68,132 73,263

Current LiabilitiesTrade and Other Payables 16 587,875 553,724 187,576 67,679 Income Tax Payable 13,075 111,729 - 35,618 Amounts due to Related Parties 27.2 6,946 4,639 4,570 5,921 Interest Bearing Loans & Borrowings 17 21,586 17,481 - - Bank Overdrafts 10.2 284,894 182,260 249,246 145,613 914,376 869,833 441,392 254,831Total Equity and Liabilities 3,629,570 2,920,146 2,774,292 1,842,880

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

Financial Controller

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

Director Director The Accounting Policies and Notes on pages 51 through 81 form an integral part of the Financial Statements.

25th May 2012

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Income Statement GROUP COMPANYYear ended 31st March Note 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Revenue 18 891,499 1,057,863 492,077 489,609Cost of Sales (254,032) (303,394) (147,430) (138,682)Gross Profit 637,467 754,469 344,647 350,927Dividend Income 19.1 - - 163,800 68,148Other Operating Income 19.2 39,766 44,556 2,306 4,227Distribution Expenses (35,392) (16,895) (29,711) (10,706)Administrative Expenses (167,568) (152,989) (66,832) (73,935)Finance Expenses 20 (39,654) (33,364) (28,708) (22,983)Share of Associate Company Profit 7,666 32,954 - -Change in fair value of investment property 581,191 383,720 581,191 383,720Profit Before Tax 21 1,023,476 1,012,451 966,693 699,398Income Tax Expense 22 (135,458) (197,515) (64,711) (75,975)Profit for the Period 888,018 814,936 901,982 623,423

Attributable to:Equity Holders of the Parent 858,414 765,727Minority Interest 29,604 49,209 888,018 814,936

Earning Per Share - Basic 23 14.12 12.59

Dividends Per Share - Gross 24 2.50 2.50

Figures in brackets indicate deductions.The Accounting Policies and Notes on pages 51 through 81 form an integral part of the Financial Statements.

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Statement of Changes in Equity Note Stated General Accumulated Total Minority TotalGROUP Capital Reserve Profit Interest Rs.000’S Rs.000’S Rs.000’S Rs.000’S Rs.000’S Rs.000’S

Balance as at 31 March 2010 152,000 117,300 968,937 1,238,237 47,964 1,286,201Net Profit for the year 765,727 765,727 49,209 814,936Final Dividend -2009/2010 24 (152,000) (152,000) (152,000)Subsidiary Dividends to Minority Shareholders - - (17,280) (17,280)Balance as at 31 March 2011 152,000 117,300 1,582,664 1,851,964 79,893 1,931,857Net Profit for the year 858,414 858,414 29,604 888,018Final Dividend -2010/2011 24 (152,000) (152,000) (152,000)Subsidiary Dividends to Minority Shareholders - - (48,000) (48,000)Balance as at 31 March 2012 152,000 117,300 2,289,078 2,558,378 61,497 2,619,875

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

Balance as at 31 st March 2010 152,000 104,000 787,363 1,043,363Profit for the Period - - 623,423 623,423 Final Dividend -2009/2010 24 - - (152,000) (152,000)Balance as at 31 March 2011 152,000 104,000 1,258,786 1,514,786 Profit for the Period - - 901,982 901,982 Final Dividend Paid - 2010/2011 24 (152,000) (152,000)Balance as at 31 March 2012 152,000 104,000 2,008,768 2,264,768

The Accounting Policies and Notes on pages 51 through 81 form an integral part of the Financial Statements.

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Cash Flow Statement GROUP COMPANYYear ended 31st March Note 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s CASH FLOW FROM /(USED IN) OPERATING ACTIVIESOperating Profit Before working Capital Changes A 467,879 618,965 264,960 281,808 (Increase)/Decrease in Leasehold Properties 1,089 - - -(Increase)/Decrease in Inventories 1,010 184 1,071 202 (Increase)/Decrease in Trade and Other Receivables (278,661) (157,216) (263,925) (54,129) (Increase)/Decrease in Other Non Current Assets (33,842) (6,934) (34,153) (4,579) (Increase)/Decrease in Other Recoverables (15) (42) (15) (42) (Increase) /Decrease in Amounts Due from Related Parties (298) 8,577 (300) 8,641 Increase/ (Decrease) in Amounts Due to Related Parties 2,309 (16) (1,351) 516 Increase /(Decrease) in Trade and Other Payables 34,151 272,304 120,135 9,381 Cash Generated from Operations 193,622 735,822 86,422 241,798 Finance Expenses Paid 20 (39,654) (33,364) (28,708) (22,983) Income Tax Paid (233,010) (198,812) (103,624) (91,998) Retirement Benefit Cost Paid 15 (12,418) (2,399) (12,172) (895) Retirement Benefit Cost (Net) Transferred 15 (466) - (466) (3,275) Deposits made with Colombo Stock Exchange 9,000 (4,500) - - Net Cash Flows from/(Used in) Operating Activities (82,926) 496,747 (58,548) 122,647 CASH FLOWS FROM /(USED IN) INVESTING ACTIVITIESAcquisition of Property, Plant & Equipment 2 (16,141) (21,078) (2,221) (13,140) Addition of Investment Property - (6,780) - (6,780) Proceeds from Sale of fixed assets 876 2,891 181 2,891 Interest Received 19.2 37,039 41,110 819 759 Dividend Received 19.1 - - 163,800 68,148 Net Cash Flows from/(Used in) Investing Activities 21,774 16,143 162,579 51,878

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Cash Flow Statement Contd.

GROUP COMPANYYear ended 31st March Note 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s CASH FLOWS FROM /(USED IN) FINANCING ACTIVITIESRepayment of Interest Bearing Borrowings 17 (17,480) (164,059) - (150,000) Dividends Paid 24 (152,000) (152,000) (152,000) (152,000) Dividends Paid to Minority Shareholders’ (48,000) (17,280) - - Net Cash Flows (Used in) Financing Activities (217,480) (333,339) (152,000) (302,000)

NET INCREASE IN CASH AND CASH EQUIVALENTS (278,632) 179,551 (47,969) (127,475)CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 10.3 525,940 346,389 (89,856) 37,619 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 10.3 247,308 525,940 (137,825) (89,856)

(A) Operating Profit Before working Capital ChangesProfit Before Tax 1,023,476 1,012,451 966,693 699,398

Adjustments for Associate companies Share of Profit (7,666) (32,954) - - Depreciation 21 21,331 24,032 9,744 9,261 Amotisation of Lease Charges 1,089 1,089 - - Change in fair value of investment property (581,191) (383,720) (581,191) (383,720) Profit on Sale of Property, Plant & Equipment (351) (2,882) (181) (2,882) Provision for Retirement Gratuity 15 8,576 8,695 5,806 5,675 Interest Income 19.2 (37,039) (41,110) (819) (759) Investment Income 19.1 - - (163,800) (68,148) Finance Expenses 20 39,654 33,364 28,708 22,983 467,879 618,965 264,960 281,808

The Accounting Policies and Notes on pages 51 through 81 form an integral part of the Financial Statements.

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Notes to the Fnancial Statements1. CORPORATE INFORMATION1.1 General John Keells PLC, is a public limited liability company

incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. The registered office and 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.

In the Annual Report of the Board of Directors and in the Financial Statements, “the Company” refers to John Keells 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 2012 were authorised for issue by the directors on 25th May 2012 .

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 being 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 2012. The Financial Statements of the subsidiaries are prepared in compliance with the Group’s accounting policies unless specifically stated.

All intra Group Balances, income and expenses and unrealized gains and losses and dividends resulting from Intra Group transactions are eliminated in full.

Subsidiaries are fully consolidated from the date of acquisition or incorporation, 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.

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

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Notes to the Financial Statements Contd.

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 period in the income statement and as a component of equity in the consolidated balance sheet, separately from parent shareholders’ equity.

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

1.3 Accounting Policies1.3.1 Changes in Accounting Policices The accounting policies adopted are consistent with

those of the previous financial year.

Comparative information Previous years’ figures and phrases have been re-

arranged, wherever necessary, to conform to the current year’s presentation.

1.3.2. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the financial statements of the Group require the management to make judgments, 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 judgments that have a significant 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 measure land and buildings at revalued amounts with changes in fair value being recognised in the statement or 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 specialist to determine fair value of Investment properties as at 31.03.2012.

For investment property valuation, the valuer has used valuation techniques such as market values and depreciated replacement cost method where there was lack of comparable market data available based on the nature of the property.

The determined fair value of investment properties are most sensitive to the estimated yield as well as the long term occupancy rate. The key assumptions used to determine the fair value of the investment properties, are further explained in Note 3.

Taxes Uncertainties exist with respect to the interpretation of

complex tax regulations and the amount and timimg of future taxable income. Given the wide range of business relationships and the long- term nature and complexity of existing contractual agreements, differences arisisng between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expenses 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 utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised , based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

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Contingent Liabilities Contingent liabilities are possible obligations that arise

from past events and whose existence will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the entity. All contingent liabilities are disclosed in note 25.3 to the financial statement in page 78 unless the possibility of an outflow of resources embodying economic benefit is remote.

Employee Benefit Liability The employee benefit liability of listed company

(JKPLC) 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 15 on page 70.

Deferred tax asset / liability Deferred tax assets are recognized for all unused tax

losses to the extent that it is probable that taxable profit will be available against which the tax losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with the future tax planning strategy. Deferred tax assets and liabilities are computed based on the prevailing income tax rate of 28% or relevant concessionary rates as announced in the recent budget proposals and the movement in the deferred

tax assets and liabilities due to change in applicable rate have been charged to the income statement in the current year.

1.4 Summary of Significant Accounting Policies1.4.1. 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 the associate.

Associate companies of the Group which have been accounted for under the equity method of accounting is:

Keells Realtors Ltd The associate is incorporated in Sri Lanka. the

investments in associate is carried in the balance sheet at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included 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. Any changes recognised

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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 recognize 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 company conform to those used for similar transactions of the Group.

Equity method of accounting has been applied for associate financial statements using their respective 12 month financial period.

The reporting date of the Associate is the same as that of the other companies in the Group which is 31 st March.

1.4.2. Tax(a) Current tax Current tax assets and liabilities for the current and prior

periods are 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.

(b) 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 recognized for all taxable temporary differences, except:

• wherethedeferredtaxliabilityarisesfromtheinitialrecognition 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, and associates 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 temporary differences, 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 utilized except:

• wherethedeferredincometaxassetrelatingtothedeductible temporary difference arises from the initial recognition 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·

• inrespectofdeductibletemporarydifferencesassociatedwith investments in subsidiaries and associates 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

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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 recognized directly in equity is recognized 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.

(c) Sales tax Revenues, expenses and assets are recognised net of

the amount of sales tax except:

• wherethesalestaxincurredonapurchaseofaassetsorservices 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

• receivablesandpayablesthatarestatedwiththeamountof 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.

1.4.3. Property, plant and equipment(a) Cost Property, Plant and equipment are stated at cost

less accumulated depreciation and any accumulated impairment in value.

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.

Item of property, plant and equipment are derecognized 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 the asset is derecognised.

(b) 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:

Building on Leasehold Land Over 50 years Plant and Machinery 2 -10 years Office Equipment Over 6 Years Furniture and Fittings Over 8 Years Motor Vehicles Over 5 years Computer Equipment Hardware Over 5 Years Software Over 3 years Others Over 5 years

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.

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1.4.4 Leases Operating Leases Leases where the lessor effectively retains substantially

all the risk and benefits of ownership over the leased term are classified as Operating Leases. Rentals paid under operating leases are recognised as an expenses in the Income Statement on a straight – line basis over the lease term.

1.4.5 Leasehold property Prepaid lease rentals paid to acquire land use rights

are amortised over the lease term in accordance with the pattern of benefits provided. Leasehold property is tested for impairment annually and is written down where applicable. The impairment loss if any, is recognised in the income statement.

1.4.6 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 period of valuation.

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, the

deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, 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.

1.4.7 Equity investments All quoted and unquoted securities, which are held

as non-current investments, are valued at cost. 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 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.

1.4.8 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

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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 recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was 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 profit or loss 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.

1.4.9 Inventories Building materials, consumables and spares are valued

at the lower of cost and net realisable value after making due allowance for obsolete and slow moving items.Net realisable value is the estimated selling price less estimated costs 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 Other inventories - At actual cost

1.4.10 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.

1.4.11 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.

1.4.12 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 maturity of 3 months or less, net of outstanding bank overdrafts.

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1.4.13 Defined benefit plan - gratuity The liability recognized 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.

1.4.14 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 the defined percentages of gross emoluments of employees to an approved Employees’ Provident Fund and to the Employees’ Trust Fund respectively, which are externally funded.

1.4.15 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, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

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.

1.4.16 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:

(a) Brokerage Income Brokerage Income is recognised on an accrual basis on

the contractual date. Brokerage Income in respect of forward sales contracts are recognised at the point of delivery of goods.

(b) Rendering of services Revenue from rendering of services is recognised by

reference to the stage of completion.

(c) Dividend Dividend Income is recognised on a cash basis.

(d) Interest Income Interest income is recognised as interest accrues.

(e) Rental Income Rental Income is recognised on an accrual basis over the

term of the lease.

(f) Gians and Losses Net gain and losses of a revenue nature arisisng 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.

Gian 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.

Other income Other income is recognised on an accrual basis.

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1.4.17 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.

1.4.18 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 SEGMENT INFORMATION1.5.1 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.

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

1.5.2 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.

1.6 Sri Lanka Accounting Standards effective from 01 January 2012

The Group will be adopting the new Sri Lanka Accounting Standards (new SLAS) comprising LKAS and SLFRS applicable for financial periods commencing from 01 January 2012 as issued by the Institute of Chartered Accountants of Sri Lanka. The Group has commenced reviewing its accounting policies and financial reporting in readiness for the transition. As the Group has a 31 March year end, priority has been given to considering the preparation of an opening balance sheet in accordance with the new SLASs as at 01 April 2011. This will form the basis of accounting for the new SLASs in the future, and is required when the Group prepares its first new SLAS compliant financial statements for the year ending 31 March 2013. Set out below are the key areas where accounting policies will change and may have an impact on the financial statements of the Group.

(a) SLFRS 1 – First Time Adoption of Sri Lanka Accounting Standards requires the Group to prepare and present opening new SLFRS financial statements at the date of transition to new SLAS. The Group shall use the same accounting policies in its opening new SLAS financial statements and throughout all comparable periods presented in its first new SLAS financial statements.

(b) LKAS 1 – Presentation of Financial Statements requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non owner changes in equity are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). This standard also requires the Group to disclose information that enables users of its financial statements to evaluate the entity’s objectives, policies and processes for managing capital.

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(c) LKAS 16 – Property Plant and Equipment requires a Group to initially measure an item of property plant and equipment at cost, using the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognized as interest over the period, unless such interest is capitalized in accordance with LKAS 23 Borrowing Costs.

All site restoration costs including other environmental restoration and similar costs must be estimated and capitalised at initial recognition, in order that such costs can be depreciated over the useful life of the asset.

This standard requires depreciation of assets over their useful lives, where the residual value of assets is deducted to arrive at the depreciable value. It also requires that significant components of an asset be evaluated separately for depreciation.

(d) LKAS 32 – Financial Instruments: Presentation, LKAS 39 – Financial Instruments: Recognition and Measurement and SLFRS 7 – Disclosures will result in changes to the current method of recognising financial assets, financial liabilities and equity instruments. These standards will require measurement of financial assets and financial liabilities at fair value at initial measurement. The subsequent measurement of financial assets classified as fair value through profit and loss and available for sale will be at fair value, with the gains and losses routed through the statements of comprehensive income and other comprehensive income respectively.

Financial assets classified as held to maturity and loans and receivables will be measured subsequently at amortized cost. These assets will need to be assessed for any objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) coupled with a

reliable estimate of the loss event (or events) impact on the estimated future cash flows of the financial asset or group of financial assets . As such the current method of assessing for impairment will have to be changed to meet the requirements of these new standards.

Financial liabilities will be either classified as fair value through profit or loss or at amortized cost. At present, the Group does not identify, categorise and measure financial assets and liabilities as per the requirements of the standard and also does not recognise certain derivative instruments on the balance sheet,

(e) SLFRS 3 – Business combinations will require the company to apply this standard to transactions and other events that meet the new definition of a business i.e. an integrated set of assets (inputs) and activities( processes) which are capable of being conducted and managed to provide a return, as opposed to a mere asset acquisition. Under the new acquisition method of accounting, in addition to recognising and measuring in its financial statements the identifiable assets acquired and liabilities assumed the standard also requires recognition and measurement of any non-controlling interest in the acquiree and re-measuring to fair value any previously held interests which could have an impact on the recognition of goodwill. Subsequent to the acquisition of control any acquisitions or disposals of non-controlling interest without loss of control will be accounted for as equity transactions and cannot be recognized as profit/loss on disposal of investments in the statement of financial performance.

(f) LKAS 12 – Income Tax requires deferred tax to be provided in respect of temporary differences which will arise as a result of adjustments made to comply with the new SLAS.

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(g) LKAS 18 – Revenue requires the company to measure revenue at fair value of the consideration received or receivable. It also specifies recognition criteria for revenue, and the group needs to apply such recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction.

The Institute of Chartered Accountants of Sri Lanka has resolved an amendment to Sri Lanka Accounting Standard 10, whereby the provision contained in paragraphs 30 and 31 of SLAS 10 – Accounting Policies, Changes in Accounting Estimates and Errors, would not be applicable for financial statements prepared in respect of financial periods commencing before 1 January 2012 and hence the impact of this transition is not required to be disclosed in these financial statements.

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2 PROPERTY, PLANT & EQUIPMENT Balance Additions Disposals Balance GROUP as at as at 2.1 At Cost 01.04.2011 31.03.2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Building on Leasehold Land 121,186 - - 121,186 Plant & Machinery 95,897 10,771 - 106,668 Furniture & Fittings 92,749 209 (251) 92,707 Motor Vehicles 17,160 - (170) 16,990 Computer Equipment 45,257 2,204 (2,015) 45,446 Office Equipment 4,549 34 - 4,583 Others 13,882 347 (205) 14,024 Computer Software 6,720 2,576 (669) 8,627 Total Value of Assets 397,400 16,141 (3,310) 410,231

2.2 Depreciation Balance Charge for Disposals Balance as at the year as at 01.04.2011 31.03.2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s At Cost Building on Leasehold Land 20,980 2,362 - 23,342 Plant & Machinery 79,381 5,196 - 84,577 Furniture & Fittings 78,244 5,556 (251) 83,549 Motor Vehicles 8,107 2,599 (170) 10,536 Computer Equipment 39,940 1,906 (2,015) 39,831 Office Equipment 3,188 535 - 3,723 Others 9,981 1,892 (205) 11,668 Computer Software 3,504 1,285 (145) 4,644 Total Depreciation 243,325 21,331 (2,786) 261,870

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2.3 Net Book Value of Assets 2012 2011 Rs.000’s Rs.000’s At Cost 148,361 154,075 Total carrying amount of Property, Plant & Equipment 148,361 154,075

COMPANY At Cost2.4 PROPERTY, PLANT & EQUIPMENT Balance Additions Disposals Balance as at as at 01.04.2011 31.03.2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Plant & Machinery 64,782 550 - 65,332 Furniture & Fittings 39,278 209 (251) 39,236 Motor Vehicles 17,160 - (170) 16,990 Computer Equipment 29,049 239 (430) 28,858 Computer Software - 939 - 939 Office Equipment 1,143 34 - 1,177 Others 10,596 250 (205) 10,641 Total Value of Assets 162,008 2,221 (1,056) 163,173

2.5 Depreciation Balance Charge for Disposals Balance At Cost as at the year as at 01.04.2011 31.03.2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Plant & Machinery 55,550 2,073 - 57,623 Furniture & Fittings 29,027 3,016 (251) 31,792 Motor Vehicles 8,107 2,599 (170) 10,536 Computer Equipment 27,650 505 (430) 27,725 Computer Software - 22 - 22 Office Equipment 1,043 239 - 1,282 Others 8,469 1,291 (205) 9,555 Total Depreciation 129,846 9,745 (1,056) 138,535

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2.6 Net Book Value of Assets 2012 2011 Rs.000’s Rs.000’s

At Cost 24,638 32,162 Total carrying amount of Property, Plant & Equipment 24,638 32,162

3 . INVESTMENT PROPERTIES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

At the beginning of the year 1,086,750 696,250 1,086,750 696,250 Additions - 6,780 - 6,780 Change in fair value during the year 581,191 383,720 581,191 383,720 At the end of year 1,667,941 1,086,750 1,667,941 1,086,750

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

Owner Company/Location Area (Bldgs.) Land in Acres Sq.Ft. John Keells PLC 122,338 1.78 130,Glennie Street, Colombo 2

50, Minuwangoda Road - 2.64 Ekala, Ja- Ela

58, Kirulapone Avenue - 0.08 Colombo 6

Fair value of the above Investment Properties has been ascertained by independent valuations carried out by Messrs. P.B. Kalugalagedera & Associates - Chartered Valuer, using the Open Market Value Method as at 31st March 2012.

In determining the fair value, the current condition of the properties, future usability and associated redevelopment

requirements have been considered. The Valuer has made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are approximated within appropriate range of values.

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3.2 The significant assumptions used by the valuer in valuing the Land are as follows: Market Value Per Perch 2012 2011 Location Rs. Rs. 130,Glennie Street, Colombo 2 5,000,000 3,000,000 50, Minuwangoda Road, Ekala, Ja- Ela 200,000 175,000 There has been no change in the value of Kirulapone Land.

3.3 Rental income earned from investment properties by the Company amounted to Rs.94,433,255/- (2011 - Rs.89,556,969/-). Direct operating expenses incurred by the Company amounted to Rs.28,723,304/- (2011 -Rs.26,797,187/-).

4. LEASEHOLD PROPERTY 2012 2011 Rs.000’s Rs.000’s4.1 Summary Balance as at 1st April 44,558 45,647 Amortised during the year (1,089) (1,089) Balance as at 31st March 43,469 44,558 4.2 Amortisation of Leasehold Property Muturajawela Land Rs.000’s

To be amortised in 2012 1,089 To be amortised from 2013 - 2017 5,445 To be amortised from 2018 - 2052 36,935 43,469 John Keells Warehousing (Pvt) Ltd has entered into a 50 year lease agreement with the Sri Lanka Land Recramation and

Development Corporation to lease a land in Muthurajawela for a total lease rent of Rs.54,450,000/-. The total lease liability was paid off during 31/03/2005.

The total pre-paid lease rentals are being amortised over the lease period of 50 years.

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4.3 Details of Leasehold Land as at 31 st March 2012 Leasehold Extend Period Annual Property of Land of Lease Rental Rs 000’s John Keells PLC A - R - P Rs. Land facing the Beira Lake at 130, Glennie Street Colombo 2 - 2 12.64 Annual 12,771/-

John Keells Warehousing (Pvt) Ltd Land at Muthurajawela 43,469 6 - - Ending 2052 1,089,000/-

Year Ended 31st March 2012 GROUP COMPANY5. LONG TERM INVESTMENTS 2012 2011 2012 2011 Summary Rs.000’s Rs.000’s Rs.000’s Rs.000’s Investments in Subsidiaries (5.1) - - 120,380 120,380 Investments in Associates (5.2) & (5.3) 82,023 74,640 24,000 24,000 Other Investments (5.4) 27,535 27,534 27,535 27,534 Total Investments 109,558 102,174 171,915 171,914

5.1 Investment in Subsidiaries 2012 2011 No. of shares Holding Cost Directors’ Cost Directors’ Non-Quoted 2012 2011 % Valuation Valuation 000’s 000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s John Keells Warehousing (Pvt) Ltd. 12,000 12,000 100% 120,000 120,000 120,000 120,000 John Keells Stock Brokers (Pvt) Ltd. 570 570 76% 380 380 380 380 120,380 120,380 120,380 120,380

5.2 Investments in Associate 2012 2011 No. of shares Holding Cost Directors’ Cost Directors’ Non-Quoted Valuation Valuation 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s 000’s 000’s % Keells Realtors Ltd. 2,400 2,400 32% 24,000 24,000 24,000 24,000

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5.3 Summarised Financial Information of Associate - Group 2012 2011 Rs.000’s Rs.000’s Group Share of Balance Sheet Total Assets 83,623 75,801 Group Share of Balance Sheet Total Liabilities (1,600) (1,161) 82,023 74,640

Group Share of Revenue 1,812 661 Group Share of Profits 7,666 32,954

5.4 Other Investments - Group & Company 2012 2011 No. of shares Holding Cost Market/ Cost Market Quoted 2012 2011 % Directors’ Valuation 000’s 000’s Valuation Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Keells Food Products PLC 789 789 9.28% 27,534 78,878 27,534 118,318 Non-Quoted Ceylon Cold Stores PLC- Preference Share 1 - 1 1 - - 27,535 78,879 27,534 118,318

6 OTHER NON CURRENT ASSETS GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Staff Vehicle Loan At the beginning of the year 34,570 26,909 20,438 15,884 Loans Granted 11,796 11,456 8,129 5,666 Loans transferred from /(to) - - - (2,359) Loans Recovered (15,669) (9,671) (12,026) (4,629) Long Term Portion of Loans Given to Tea Clients 38,376 5,876 38,376 5,876 69,073 34,570 54,917 20,438

Receivable with in one year 8,584 7,923 4,704 4,378 Receivable after one year 60,489 26,647 50,213 16,060 69,073 34,570 54,917 20,438

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7. DEFERRED TAX ASSET GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s At the beginning of the year 2,983 3,192 - - Addition / (Release) 844 (209) - - At the end of the year 3,827 2,983 - -

The closing Deferred Tax Asset Balance relates to the following: Accelerated Depreciation for tax purposes (558) (772) - - Retirement Benefit Obligations 4,385 3,755 - - 3,827 2,983 - -

8. INVENTORIES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Building Materials 859 903 859 903 Consumables and Spares 1,200 2,166 1,067 2,094 2,059 3,069 1,926 2,997

9. TRADE AND OTHER RECEIVABLES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Trade Debtors 1,061,206 758,563 753,830 465,335 Less: Provision for Doubtful Debts (36,237) (20,877) (36,163) (20,865) Other Debtors 1,705 8,450 727 7,787 Advances and Prepayments 5,247 7,785 721 3,259 Loans to Executives 8,584 7,923 4,704 4,378 1,040,505 761,844 723,819 459,894

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10. CASH AND CASH EQUIVALENTS IN CASH FLOW STATEMENT GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s10.1 Favourable Cash & Cash Equivalents Cash & Bank Balances 139,632 70,700 111,421 55,757 Short Term Investment 392,570 637,500 - - 532,202 708,200 111,421 55,757 10.2 Unfavourable Cash & Cash Equivalents Bank Overdrafts (284,894) (182,260) (249,246) (145,613) 10.3 Net Cash & Cash Equivalents 247,308 525,940 (137,825) (89,856)

11. STATED CAPITAL GROUP COMPANY 2012 2011 2012 2011 No of Shares Rs.000’s Rs.000’s Rs.000’s Rs.000’s 11.1 Issued and Fully Paid Openning Balance Ordinary Shares 30,400,000 152,000 152,000 152,000 152,000 Closing Balance Ordinary Shares 60,800,000 152,000 152,000 152,000 152,000

12. REVENUE RESERVES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

General Reserve 117,300 117,300 104,000 104,000 Accumulated Profit 2,289,078 1,582,664 2,008,768 1,258,786 2,406,378 1,699,964 2,112,768 1,362,786 13. MINORITY INTEREST 2012 2011 Rs.000’s Rs.000’s Balance at the beginning of the year 79,893 47,964 Share of Profits for the year 29,604 49,209 Dividend Paid (48,000) (17,280) Balance at the end of the year 61,497 79,893

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14. DEFERRED TAX LIABILITIES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Balance as at the Beginning of the Year 37,853 63,772 33,926 51,605 Charge/(Reversed) for the Year 2,756 (25,919) 1,701 (17,679) Balance as at the end of the Year 40,609 37,853 35,627 33,926

The closing Deferred Tax Liability balance relates to the following: Accelerated Deprecistion for Tax Purposes 8,684 8,687 3,243 3,627 Revaluation of Investment Property to Fair Value 41,485 41,313 41,485 41,313 Retirement Benefit Obligations (9,560) (11,445) (9,101) (11,014) Others - Tax Losses - (702) - - 40,609 37,853 35,627 33,926

15. RETIREMENT BENEFIT OBLIGATIONS - GRATUITY GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Balance as at the Beginning of the Year 57,060 50,764 39,337 37,833 Provision made during the Year 4,522 3,377 3,033 2,207 Interest Cost for the Year 5,706 5,377 3,934 3,783 Payments made during the Year (12,418) (2,399) (12,172) (895) Transfers During the Year (466) - (466) (3,275) (Gain)/Loss arising from changes in the assumptions or due to (over)/under provision in the previous years (1,652) (59) (1,161) (316) Balance as at the end of the Year 52,752 57,060 32,505 39,337 The employee benefit liability of the Company is based on the actuarial valuation carried out by Messrs. Actuarial &

Management Consultants (Pvt) Ltd., actuaries. The employees benefit liability of all other companies in the Group are based on gratuity formula in Appendix E of SLAS 16 - Employee Benefits

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The expenses are recognised in the following line items in the income statement GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Cost of Sale 6,378 6,169 4,720 4,589 Administrative Expenses 2,198 2,526 1,085 1,085 8,576 8,695 5,805 5,674

The principal assumptions used in determining the cost of employee benefits were: Discount rate 10% 10% Future salary increases 10% 10%

16. TRADE AND OTHER PAYABLES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Trade Creditors 522,616 481,837 159,772 40,070 Sundry Creditors and Accrued Expenses 61,725 71,887 27,804 27,609 Other Creditors 3,534 - - - 587,875 553,724 187,576 67,679

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17. INTEREST BEARING LIABILITIES GROUP Loans Loans Balance Obtained Repaid Balance Asset Backed notes payable as at during the during the as at 01/04/2011 year year 31/03/2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Gross Liability 50,534 - 24,362 26,172 Finance Charges (9,510) - (6,882) (2,628) 41,024 - 17,480 23,544

2012 2012 2011 2011 Amount Amount Amount Amount Repayable Repayable 2012 Repayable Repayable 2011 Within 1 year After 1 year Total Within 1 year After 1 year Total Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Asset Backed Notes 21,586 1,958 23,544 17,480 23,544 41,024 21,586 1,958 23,544 17,480 23,544 41,024 Gross Liability 24,216 1,958 26,174 24,362 26,172 50,534 Finance Charges Allocated to future periods (2,630) - (2,630) (6,882) (2,628) (9,510) 21,586 1,958 23,544 17,480 23,544 41,024

18. REVENUE GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s18.1 Summary Gross Revenue 891,499 1,057,863 492,077 489,609 891,499 1,057,863 492,077 489,609

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18.2 Segment Information - Group Produce Broking & Warehousing Share Broking Real Estate Total 2012 2011 2012 2011 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Segment Revenue Gross Revenue - Third Parties 491,761 482,895 313,130 492,911 9 12 804,900 975,818 - Related Parties - - 97,376 93,304 97,376 93,304 Inter Segment Sales (10,777) (11,259) (10,777) (11,259) Sales to customers outside the Group 491,761 482,895 313,130 492,911 86,608 82,057 891,499 1,057,863

Segment Results Profit Before Tax 189,648 214,076 171,441 320,975 662,387 477,400 1,023,476 1,012,451 Taxation (4,173) 739 (48,089) (115,937) (18,484) (6,343) (70,746) (121,541) Unallocated Tax (64,712) (75,974) Total Tax (135,458) (197,515) Profit After Tax 888,018 814,936 Segment Assets 1,107,721 767,390 727,658 938,861 1,794,191 1,213,895 3,629,570 2,920,146 Segment Liabilities 498,993 343,383 470,506 605,059 40,196 39,847 1,009,695 988,289 Others Purchase of Property Plant & Equipment 12,310 10,009 2,822 6,092 1,009 4,977 16,141 21,078 Depreciation 12,188 14,562 2,764 2,169 6,379 7,301 21,331 24,032

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19. OTHER INCOME GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

19.1 Dividend Income Income from Investments with Related Parties - Non-quoted - - 163,800 68,148 - - 163,800 68,148

19.2 OTHER OPERATING INCOME Interest Income - Outside 36,172 41,110 819 759 - Related Parties 867 - 73 - Guarantee Fees 49 195 83 195 Sundry Income 1,722 369 545 391 Profit on Sale of Fixed Assets 351 2,882 181 2,882 Profit on Disposal of Non-Current Investments 605 - 605 - 39,766 44,556 2,306 4,227

20. FINANCE EXPENSES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Interest Expense on Overdrafts 32,629 12,651 28,564 12,572 Interest Expense on Loans & Borrowings Payable to - Related Parties 144 - 144 - - Others 6,881 20,713 - 10,411 39,654 33,364 28,708 22,983

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21. PROFIT BEFORE TAX GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

Stated after charging/(crediting) Remuneration to Executive Directors 11,777 11,171 9,161 9,155 Remuneration to Non Executive Directors 6,000 5,400 5,600 4,200 Personnel costs includes - - Defined Benefit Plan Costs - Gratuity 8,576 8,695 5,806 5,675 - Defined Benefit Plan Costs - EPF & ETF 22,966 26,505 10,228 9,644 - Other Staff Costs 218,549 231,924 89,042 79,297 Donations 6,239 5,297 5,739 3,797 Auditors’ Fees & Expense 2,221 2,010 1,476 1,336 Depreciation 21,331 24,032 9,744 9,261 Amortisation of Lease Charges 1,089 1,089 - - Legal Fees & Professional Charges 2,320 2,178 2,320 2,178 BOI Fee 260 255 - - (Profit)/Loss on Disposal of Assets (956) (2,882) (786) (2,882)

22. INCOME TAX EXPENSE GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Current Tax on Ordinary Activities for the year (22.1) 115,346 215,653 63,010 93,654 Deferred Taxation Charge (22.2) 1,912 (25,710) 1,701 (17,679) Tax on Dividend Income 18,200 7,572 - - Total Income tax Expenses 135,458 197,515 64,711 75,975

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22.1 Reconciliation between tax expenses/(income) and the product of accounting profit. GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Profit Before Tax 1,023,476 1,012,451 966,693 699,398 Dividend Income From Group Companies (163,800) (68,148) (163,800) (68,148) Share of Profits From Associate Companies 7,666 32,954 - - Aggregate Accounting Profit 867,342 977,257 802,893 631,250 Accounting Profit 867,342 977,257 802,893 631,250 Income Tax on Accounting Profit at Applicable Rates 114,061 197,574 61,910 75,687 Under/(Over ) Provision for Previous Year - 655 - 655 Aggregate Disallowed Expenses 1,001 5,459 1,100 6,612 Deferred Tax Charge 1,912 - 1,701 - Social Responsibility Levy - Nil (2011 - 1.5%) - 3,454 - 1,496 Tax on Dividend Income 18,200 7,572 - - Tax effect on rate differentials - (15,970) - (8,475) Share of Associate Company Income Tax Expense 284 (1,229) - - Total Income Tax Expenses 135,458 197,515 64,711 75,975

Income Tax charged at Standard Rate - CSE Listed Companies 63,010 91,504 63,010 91,504 Standard Rate - Others 28% - (2011 - 35%) 48,933 121,269 - - Concessionary Rate of 10% - (2011 - 15%) 3,119 - - - Social Responsibility Levy - Nil (2011 - 1.5%) - 3,422 - 1,495 Deferred Tax Charge 1,912 (25,710) 1,701 (17,679) Under/(Over ) Provision for Previous Year - 655 - 655 Share of Associate CompanyIncome Tax Expenses 284 (1,229) - - Tax on Dividend Income 18,200 7,572 - - SRL on Inter Company Dividends - Nil (2011 - 1.5%) - 32 Total Income Tax Expenses 135,458 197,515 64,711 75,975 The Group tax expenses is based on the taxable profit of each Group Company, since at present the tax laws do not provide

for Group taxation.

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22.2 Deferred Tax Expense GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Deferred Tax arising Accelerated Depreciation for tax purposes (218) (15,334) (384) (1,245) Revaluation of Investment Property to Fair Value 172 (18,668) 172 (18,668) Retirement benefits - Gratuity 1,256 2,574 1,913 2,234 Deffered Tax Recognised due to change in income tax rate 702 - - - Benefit Arisisng from Tax Losses - 5,718 - - Total Deferred Tax Charged 1,912 (25,710) 1,701 (17,679)

Deferred Tax Liabilities have been computed at 28% for all standard companies (including listed companies) and at 10% for John Keells Warehousing (Pvt) Ltd

23. EARNINGS PER SHARE

23.1 Amounts Used as the Numerator: GROUP 2012 2011 Rs.000’s Rs.000’s Net Profit Attributable to Ordinary Shareholders 858,414 765,727

23.2 Number of Ordinary Shares Used as the Denominator: GROUP 2012 2011 Rs.000’s Rs.000’s Ordinary Shares at the begining of the year 30,400 15,200 Effect of share sub-division 30,400 15,200 Weighted Average number of Ordinary Shares in Issue 60,800 30,400 Basic Earnings Per Share (Rs) 14.12 12.59 The Basic Earnings Per Share is calculated by dividing the net profit for the year attributable to ordinary shareholders by

the weighted average number of ordinary shares outstanding during the year. The Weighted average number of ordinary shares outstanding during the year & previous year are adjusted for events that have changed the number of ordinary shares outstanding without a corresponding change in the resources such as a bonus issue and share sub-division.

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24. DIVIDENDS GROUP 2012 2011 Rs.000’s Rs.000’s Final Dividend Paid - Rs.5/- per share (2010/2011) Out of Dividends received - Free of tax 18,900 69,923 Out of Profits - Liable for tax 133,100 82,077 152,000 152,000 Total 152,000 152,000

24.3 Dividend Per Share - Gross Dividends Paid During the Year - (Rs.) 2.50 2.50

The dividend per share is based on the dividend declared and proposed for the period covered by the financial statements. The dividend per share has been adjusted to reflect the 60,800,000 shares in issue as at 31 March 2012. 25. COMMITMENTS AND CONTINGENCIES

25.1 Capital Commitments The company does not have any Capital Commitments as at the Balance Sheet Date.

25.2 Financial Commitments The Company has guaranteed banking facilities of it’s related companies amounting to Rs.39.1 Mn (2011- Rs.63.5 Mn).

Name of the Company Amount Amount Guaranteed Guaranteed 2012 2011 Relationship Rs.000’s Rs.000’s Keells Food Products PLC. Affiliate 1,000 1,000 John Keells Stock Brokers (Pvt) Ltd. Subsidiary 2,000 2,000 Walker Tours Ltd. Affiliate 10,000 10,000 John Keells Warehousing (Pvt) Ltd. Subsidiary 26,174 50,535 39,174 63,535

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

Sesame Senhora Tea (Pvt) Ltd has claimed a sum of Rs.0.5 million ,which has been contested in courts, and another action has been filed against John Keells PLC and the Brokers Association Office Bearers for preventing a buyer buying teas from the tea auction. The matter is pending in Court. We have been advised that the said claim has no basis and is not prescribed in Law. Other than these, there are no other claim or litigation expected to be received.

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26 ASSETS PLEDGED As at the Balance Sheet date the following assets of the Company have been pledged as security against the Company’s

borrowings. Carrying Carrying Amount Amount Pledged Pledged Nature of assets Nature of Liability 2012 2011 Rs.000’s Rs.000’s

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

27 RELATED PARTY DISCLOSURES GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

27.1 Amounts due from Related Parties Ultimate Parent 6,343 6,032 6,343 6,032 Subsidiary - - - - Companies Under Common Control 8,507 8,520 8,509 8,520 Key Management Personnel - - - - Companies controlled / jointly controlled / significantly influenced by KMP and their close family members Close Family Members of KMP - - - - 14,850 14,552 14,852 14,552

27.2 Amounts due to Related Parties Ultimate Parent 670 919 409 463 Subsidiary - - - 1,822 Companies Under Common Control 1,188 3,720 4,161 3,636 Key Management Personnel 5,066 - Close Family Members of KMP 22 - - - Companies controlled / jointly controlled / significantly influenced by KMP and their close family members - - - - 6,946 4,639 4,570 5,921

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GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

27.3 Transactions with Related Parties Ultimate Parent Receiving of Services for which fees are paid 25,650 17,845 15,275 8,411 Renting of office space for which rent is received (40,704) (40,142) (40,704) (40,142) Providing of Services for which fees are received - (7,206) - -

Subsidiaries Taken store space on Rent - - 3,998 3,761 Renting of office space for which rent is received - - (6,707) (7,498) Providing Services for which Fees are Paid - - 4 -

Companies under Common Control Purchase of goods for a fee 4,955 4,049 3,722 2,311 Receiving of Services for which fees are paid 8,788 10,141 8,788 10,141 Renting of office space for which rent is received (47,737) (42,720) (47,737) (42,720) Lending money for which interest is received (867) - (73) - Providing of Services for which fees are received (26,941) (44,854) (16,353) (34,613) (76,856) (102,887) (79,787) (100,349) Guaranteed Bank Facilities 2012 2011 Relationship Rs.000’s Rs.000’s Keells Food Products PLC. Affiliate 1,000 1,000 John Keells Stock Brokers (Pvt) Ltd. Subsidiary 2,000 2,000 Walker Tours Ltd. Affiliate 10,000 10,000 John Keells Warehousing (Pvt) Ltd. Subsidiary 26,174 50,535 39,174 63,535

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GROUP COMPANY 2012 2011 2012 2011 Rs.000’s Rs.000’s Rs.000’s Rs.000’s

27.4 Post Employment Benefit Plan Contribution to the staff provident fund 6,535 1,795 6,535 1,795

27.5 Compensation of Key Management Personnel Short Term employee Benefits 17,777 16,571 14,761 13,355 Post employment benefits - - - - Other Long Term benefits - - - - Termination benefits - - - - Share based payments - - - - 17,777 16,571 14,761 13,355

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

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

and settlement occurs in cash.

28 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE The Board of Directors at a meeting held on 25th May 2012 proposed a First and Final Dividend of Rs.4.00 per share for

the Financial Year ended 31st March 2012. As required by section 56 (2) of the Companies Act No 7 of 2007, the Board of Directors have 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 the auditors, prior to declaring a Final Dividend which is to be paid on the 15th June 2012.

In accordance with the Sri Lanka Accounting Standard 12 (revised 2005), Events after the Balance Sheet date, the final dividend has not been recognized as a liability in the financial statements as at 31st March 2012.

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Statement of Value Added COMPANY CONSOLIDATED 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

VALUE ADDEDGross Revenue 409,215 457,023 490,621 489,609 492,077 641,348 607,949 848,144 1,057,863 891,499 Other Income & Valuation Gains 171,686 55,534 22,970 456,096 747,297 32,256 30,177 25,684 428,276 620,957 580,901 512,557 513,591 945,705 1,239,374 673,604 638,126 873,828 1,486,139 1,512,456 Cost of Materials and Services purchased (134,065) (96,046) (140,462) (99,244) (270,323) (162,024) (136,847) (186,526) (118,357) (272,826) 446,836 416,511 373,129 846,461 969,051 511,580 501,279 687,302 1,367,782 1,239,630 % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE

DISTRIBUTION OF VALUE ADDED To employees as Remuneration 20 89,311 27 111,424 21 77,874 20 93,822 12 114,972 34 174,785 38 187,792 28 198,669 18 176,133 21 260,706 To Government (see below) 15 68,072 20 82,405 24 89,049 20 91,298 8 76,870 24 122,279 18 91,030 24 164,764 22 213,342 12 148,121 To Lenders of Capital - Interest on borrowings 4 17,718 11 45,364 10 36,972 5 22,983 3 28,708 7 34,597 12 60,668 7 50,099 3 33,363 3 39,654 - Minority Interest - - 2 11,280 - (1,230) 5 26,687 5 49,209 2 29,604 To Shareholders as Dividends 24 106,400 36 152,000 40 152,000 33 152,000 16 152,000 21 106,400 30 152,000 22 152,000 15 152,000 12 152,000 Retained in the Business 37 165,335 6 25,318 5 17,234 22 486,358 62 596,501 12 62,239 2 11,019 14 95,083 37 743,735 49 609,545 100 446,836 100 416,511 99 373,129 101 846,461 100 969,051 100 511,580 100 501,279 100 687,302 100 1,367,782 100 1,239,630 The statement of Value Added shows the wealth,the Company and the Group have been able to create on its own and its employees effort. It also explains how Value Added has been distributed.

REVENUE TO GOVERNMENT.SRL /NBT/FINANCIAL VAT 6,609 12,838 14,044 12,092 8,598 6,609 12,838 14,044 12,092 8,598 Rates and Taxes 3,326 3,331 3,323 3,231 3,561 3,326 3,331 3,323 3,735 4,065 Income Tax 58,137 66,236 71,682 75,975 64,711 112,344 74,861 147,397 197,515 135,458 Total 68,072 82,405 89,049 91,298 76,870 122,279 91,030 164,764 213,342 148,121

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COMPANY CONSOLIDATED 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s

VALUE ADDEDGross Revenue 409,215 457,023 490,621 489,609 492,077 641,348 607,949 848,144 1,057,863 891,499 Other Income & Valuation Gains 171,686 55,534 22,970 456,096 747,297 32,256 30,177 25,684 428,276 620,957 580,901 512,557 513,591 945,705 1,239,374 673,604 638,126 873,828 1,486,139 1,512,456 Cost of Materials and Services purchased (134,065) (96,046) (140,462) (99,244) (270,323) (162,024) (136,847) (186,526) (118,357) (272,826) 446,836 416,511 373,129 846,461 969,051 511,580 501,279 687,302 1,367,782 1,239,630 % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE % SHARE

DISTRIBUTION OF VALUE ADDED To employees as Remuneration 20 89,311 27 111,424 21 77,874 20 93,822 12 114,972 34 174,785 38 187,792 28 198,669 18 176,133 21 260,706 To Government (see below) 15 68,072 20 82,405 24 89,049 20 91,298 8 76,870 24 122,279 18 91,030 24 164,764 22 213,342 12 148,121 To Lenders of Capital - Interest on borrowings 4 17,718 11 45,364 10 36,972 5 22,983 3 28,708 7 34,597 12 60,668 7 50,099 3 33,363 3 39,654 - Minority Interest - - 2 11,280 - (1,230) 5 26,687 5 49,209 2 29,604 To Shareholders as Dividends 24 106,400 36 152,000 40 152,000 33 152,000 16 152,000 21 106,400 30 152,000 22 152,000 15 152,000 12 152,000 Retained in the Business 37 165,335 6 25,318 5 17,234 22 486,358 62 596,501 12 62,239 2 11,019 14 95,083 37 743,735 49 609,545 100 446,836 100 416,511 99 373,129 101 846,461 100 969,051 100 511,580 100 501,279 100 687,302 100 1,367,782 100 1,239,630 The statement of Value Added shows the wealth,the Company and the Group have been able to create on its own and its employees effort. It also explains how Value Added has been distributed.

REVENUE TO GOVERNMENT.SRL /NBT/FINANCIAL VAT 6,609 12,838 14,044 12,092 8,598 6,609 12,838 14,044 12,092 8,598 Rates and Taxes 3,326 3,331 3,323 3,231 3,561 3,326 3,331 3,323 3,735 4,065 Income Tax 58,137 66,236 71,682 75,975 64,711 112,344 74,861 147,397 197,515 135,458 Total 68,072 82,405 89,049 91,298 76,870 122,279 91,030 164,764 213,342 148,121

To Employees as Remuneration 21%To Government (see below) 12%To Lenders of Capital Interest on borrowings 3%To Lenders of Minority Interest 2%To Shareholders as Dividends 12%Retained in the Business 49%

SRL /NBT/FINANCIAL VAT 6%Rates and Taxes 3%Income Tax 90%

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Information to Shareholders and Investors1 STOCK EXCHANGE LISTING The issued ordinary shares of John Keells PLC are listed with the Colombo Stock Exchange of Sri Lanka. The Audited

Accounts of the Company and the Consolidated Accounts for the year ended 31st March, 2012 have been submitted to the Colombo Stock Exchange.

2 DISTRIBUTION OF SHAREHOLDINGS

No. of Shares held 31st March 2012 31st March 2011

Shareholders Holdings Shareholders Holdings

Number % Number % Number % Number %

Less than 1,000 726 58.64 256,031 0.42 712 67.55 239,579 0.79

1,001 - 10,000 396 31.99 1,397,389 2.30 268 25.43 922,205 3.03

10,001 - 100,000 100 8.08 2,977,769 4.90 65 6.17 1,569,480 5.16

100,001 - 1000,000 15 1.21 3,334,027 5.48 8 0.76 1,251,344 4.12

over - 1,000,000 1 0.08 52,834,784 86.90 1 0.09 26,417,392 86.90

Total 1238 100.00 60,800,000 100.00 1054 100.00 30,400,000 100.00

No. of Shares held 31st March 2012 31st March 2011

Shareholders Holdings Shareholders Holdings

Number % Number % Number % Number %

Individuals 1147 92.65 5,268,282 8.66 961 91.18 2,727,592 8.97

Institutions 91 7.35 55,531,718 91.34 93 8.82 27,672,408 91.03

Total 1238 100.00 60,800,000 100.00 1054 100.00 30,400,000 100.00

Residents 1222 98.71 60,525,016 99.55 1041 98.77 30,290,608 99.64

Non Residents 16 1.29 274,984 0.45 13 1.23 109,392 0.36

Total 1238 100.00 60,800,000 100.00 1054 100.00 30,400,000 100.00

John Keells Holdings and

Subsidiaries 1 0.08

52,834,784 86.90 1 0.09

26,417,392 86.90

Public 1237 99.92 7,965,216 13.10 1053 99.91 3,982,608 13.10

Total 1238 100.00 60,800,000 100.00 1054 100.00 30,400,000 100.00

4 SHARE PERFORMANCE AT COLOMBO STOCK EXCHANGE

2011/2012 2010/2011 Highest Market Price 104.00 371.00 Lowest Market Price 59.00 160.00 Closing Price as at 31st of March 66.20 185.20

3 ANALYSIS OF SHAREHOLDERS

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5 DIVIDEND PAYMENTS First and Final Dividend of Rs.5/- per share was paid on 13th May 2011.

6 TOP TWENTY SHAREHOLDERS

NAME OF SHAREHOLDERS As at 31st March 2012 As at 31st March 2011 No. of Holding No. of Holding Shares % Shares % John Keells Holdings PLC 52,834,784 86.90 26,417,392 86.90 Dr. H.S.D. Soysa 620,160 1.02 308,880 1.02 The Roman Catholic Archbishop of Colombo 342,832 0.56 171,416 0.56 Bank of Ceylon No 2 a/c 338,800 0.56 169,400 0.56 Bhadra Investments Ltd. 251,424 0.41 125,712 0.41 Mrs. H.G.S. Ansell 240,000 0.39 120,000 0.39 Mr. M. Radhakrishnan 232,800 0.38 116,400 0.38 Employees Trust Fund Board 214,200 0.35 - - Mrs. M.L. De Silva 207,872 0.34 103,936 0.34 Mr. W.R.H. Perera 173,072 0.28 86,536 0.28 N S De Mel 137,115 0.23 68,568 0.23 Mrs. Tirimanne 132,000 0.22 66,000 0.22 WML / Delmedge Forsyth & Co shipping Ltd 122,400 0.20 94,800 0.31 Colombo Fort Investments PLC 112,800 0.19 56,400 0.19 Sisira Investors Limited 105,704 0.17 52,852 0.17 Colombo Investment Trust PLC 102,848 0.17 51,424 0.17 MISS W.K. Pitiyage 100,000 0.16 - - Mrs. H.J.C. Fernando 90,608 0.15 45,304 0.15 Waldock Mackenzie Ltd./Delmege Forsyth and Company (Exports) Ltd. 85,600 0.14 51,200 0.17 H P N Zoysa 85,060 0.14 - - 56,530,079 92.98 28,106,220 92.45

Earnings & Dividends per Share

0 3 6 9 12 15

2012

2011

2010

2009

2008

Earnings per shareDividends per share

Net Assets & Market Price per Share

0 50 100 150 200

2012

2011

2010

2009

2008

Net Assets Per ShareMarket Price per Share

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Five Year Summary COMPANY CONSOLIDATEDFor the year ended 31 st March 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s TRADING RESULTSGross Revenue 409,215 457,023 490,621 489,609 492,077 641,348 607,949 848,144 1,057,863 891,499 Operating Profit 159,328 180,105 230,970 266,286 248,104 243,733 187,349 428,931 584,585 434,507 Other Income 5,330 3,132 2,295 4,227 2,306 31,212 28,715 23,909 44,556 39,766 Dividend Income 166,356 52,402 20,675 68,148 163,800 1,044 1,462 1,775 - - Changes inFair Value of Investment Property - 34,531 - 383,720 581,191 - 34,531 - 383,720 581,191 Finance Charges (17,719) (45,364) (36,972) (22,983) (28,708) (34,597) (60,668) (50,099) (33,364) (39,654)Share of Association Company Profits/ (Loss) - - - - - 17,195 10,357 (585) 32,954 7,666 Profit before Taxation 313,295 224,806 216,968 699,398 966,693 258,587 201,746 403,931 1,012,451 1,023,476 Taxation based thereon (58,137) (66,236) (71,682) (75,975) (64,711) (112,344) (74,861) (147,407) (197,515) (135,458)Profit after Taxation 255,158 158,570 145,286 623,423 901,982 146,243 126,884 256,524 814,936 888,018 Minority Interest - - - - - (11,280) 1,230 (26,686) (49,209) (29,604)Profit attributable to John Keells PLC 255,158 158,570 145,286 623,423 901,982 134,963 128,115 229,838 765,727 858,414 SHARE CAPITAL AND RESERVESStated Capital 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 Revenue Reserves 891,507 898,077 891,363 1,362,786 2,112,768 1,032,284 1,008,399 1,086,237 1,699,964 2,406,378 Shareholders’ Funds 1,043,507 1,050,077 1,043,363 1,514,786 2,264,768 1,184,284 1,160,399 1,238,237 1,851,964 2,558,378 Minority Interest - - - - - 30,908 21,278 47,964 79,893 61,497 1,043,507 1,050,077 1,043,363 1,514,786 2,264,768 1,215,192 1,181,677 1,286,201 1,931,857 2,619,875 ASSETS LESS LIABILITIES Current Assets 597,289 635,492 553,222 535,994 859,585 1,313,105 768,648 1,121,710 1,490,459 1,592,425 Current Liabilities (355,057) (416,526) (328,358) (254,831) (441,392) (922,735) (471,637) (676,690) (869,833) (914,376)Net Current Assets/(Liabilities) 242,232 218,966 224,864 281,163 418,193 390,370 297,011 445,020 620,626 678,049 Fixed Assets and Investments 877,259 917,501 907,937 1,306,886 1,914,707 981,036 1,043,251 996,741 1,429,687 2,037,145 Long Term Liabilities - - - - - (66,390) (55,083) (41,024) (23,543) (1,958)Deferred Liabilities (75,984) (86,390) (89,438) (73,263) (68,132) (89,824) (103,502) (114,536) (94,913) (93,361) 1,043,507 1,050,077 1,043,363 1,514,786 2,264,768 1,215,192 1,181,677 1,286,201 1,931,857 2,619,875

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COMPANY CONSOLIDATEDFor the year ended 31 st March 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s Rs.000’s TRADING RESULTSGross Revenue 409,215 457,023 490,621 489,609 492,077 641,348 607,949 848,144 1,057,863 891,499 Operating Profit 159,328 180,105 230,970 266,286 248,104 243,733 187,349 428,931 584,585 434,507 Other Income 5,330 3,132 2,295 4,227 2,306 31,212 28,715 23,909 44,556 39,766 Dividend Income 166,356 52,402 20,675 68,148 163,800 1,044 1,462 1,775 - - Changes inFair Value of Investment Property - 34,531 - 383,720 581,191 - 34,531 - 383,720 581,191 Finance Charges (17,719) (45,364) (36,972) (22,983) (28,708) (34,597) (60,668) (50,099) (33,364) (39,654)Share of Association Company Profits/ (Loss) - - - - - 17,195 10,357 (585) 32,954 7,666 Profit before Taxation 313,295 224,806 216,968 699,398 966,693 258,587 201,746 403,931 1,012,451 1,023,476 Taxation based thereon (58,137) (66,236) (71,682) (75,975) (64,711) (112,344) (74,861) (147,407) (197,515) (135,458)Profit after Taxation 255,158 158,570 145,286 623,423 901,982 146,243 126,884 256,524 814,936 888,018 Minority Interest - - - - - (11,280) 1,230 (26,686) (49,209) (29,604)Profit attributable to John Keells PLC 255,158 158,570 145,286 623,423 901,982 134,963 128,115 229,838 765,727 858,414 SHARE CAPITAL AND RESERVESStated Capital 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 152,000 Revenue Reserves 891,507 898,077 891,363 1,362,786 2,112,768 1,032,284 1,008,399 1,086,237 1,699,964 2,406,378 Shareholders’ Funds 1,043,507 1,050,077 1,043,363 1,514,786 2,264,768 1,184,284 1,160,399 1,238,237 1,851,964 2,558,378 Minority Interest - - - - - 30,908 21,278 47,964 79,893 61,497 1,043,507 1,050,077 1,043,363 1,514,786 2,264,768 1,215,192 1,181,677 1,286,201 1,931,857 2,619,875 ASSETS LESS LIABILITIES Current Assets 597,289 635,492 553,222 535,994 859,585 1,313,105 768,648 1,121,710 1,490,459 1,592,425 Current Liabilities (355,057) (416,526) (328,358) (254,831) (441,392) (922,735) (471,637) (676,690) (869,833) (914,376)Net Current Assets/(Liabilities) 242,232 218,966 224,864 281,163 418,193 390,370 297,011 445,020 620,626 678,049 Fixed Assets and Investments 877,259 917,501 907,937 1,306,886 1,914,707 981,036 1,043,251 996,741 1,429,687 2,037,145 Long Term Liabilities - - - - - (66,390) (55,083) (41,024) (23,543) (1,958)Deferred Liabilities (75,984) (86,390) (89,438) (73,263) (68,132) (89,824) (103,502) (114,536) (94,913) (93,361) 1,043,507 1,050,077 1,043,363 1,514,786 2,264,768 1,215,192 1,181,677 1,286,201 1,931,857 2,619,875

Revenue & PBT(Rs 000's)

0 200000 400000 600000 800000 1000000 1200000

2012

2011

2010

2009

2008

RevenuePBT

Quoted Investments(Rs 000's)

0 20000 40000 60000 80000 100000 120000

2012

2011

2010

2009

2008

Book ValueMarket Value

Growth In Shareholder's Funds(Rs 000's)

0 500000 1000000 1500000 2000000 2500000

2012

2011

2010

2009

2008

ReservesStated Capital

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Key Ratios and Information COMPANY CONSOLIDATED 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 KEY INDICATORS(A) Profitability & Return to ShareholdersAnnual Turnover Growth (%) 9.15 11.68 7.35 (0.21) 0.50 1.06 (5.21) 39.51 24.63 (15.72)Net Profit Ratio (%) 62.35 34.70 29.61 127.33 183.30 21.04 21.07 27.10 72.44 96.28 Earnings per share (Rs.) ** 4.20 2.61 2.39 10.25 14.84 2.22 2.11 3.78 12.59 14.12 Returns on Shareholders’ Funds (%) 24.45 15.10 13.92 41.16 39.83 11.11 10.84 17.87 39.64 32.77 Return on Capital Employed (%) 28.37 23.49 19.93 43.51 37.02 19.35 18.69 27.86 48.53 36.33 Dividend per share (Rs.)** 1.75 2.50 2.50 2.50 2.50 1.75 2.50 2.50 2.50 2.50 Debt Equity Ratio (%) 11.81 9.51 22.11 9.61 11.01 17.37 14.14 26.87 11.56 11.77

(B) Liquidity Current Ratio (No. of Times) 1.68 1.53 1.68 2.10 1.96 1.42 1.63 1.66 1.71 1.74 Interest Cover (No. of Times) 18.68 5.96 6.87 31.43 34.67 8.47 4.33 9.06 31.35 26.81

(C) Investor RatiosNet Assets per share at year end (Rs.)** 14.72 17.16 17.27 24.91 37.25 19.48 19.09 20.37 30.46 42.08 Price-Earnings Ratio (Times)** 21.44 23.78 81.38 18.06 4.46 40.54 29.42 51.46 14.71 4.69 Effective rate at Dividend (%) 234.00 70.00 100.00 100.00 100.00 70.00 100.00 100.00 100.00 100.00Dividend (Rs.000’s) 348,080 106,400 152,000 152,000 152,000 106,400 152,000 152,000 152,000 152,000 Dividend Cover (Times)** 2.40 1.04 0.96 4.10 5.93 1.27 0.84 1.51 5.04 5.65

(D) Share ValuationMarket price per share (Rs.) 90.00 62.00 194.50 185.20 66.20 90.00 62.00 194.50 185.20 66.20

(E) Other InformationNumber of Employees 133 109 118 109 103 153 140 183 181 178 Turnover per employee (Rs.000’s) 3,077 4,193 4,158 4,492 4,778 4,192 4,342 4,635 5,844 5,008 Value Added per Employee (Rs.000’s) 3,360 3,821 3,162 3,396 9,385 3,227 3,581 3,096 4,101 6,964

Note:**Earnings per share ,Dividends per share & Net Assets per share is based on 60,800,000 number of shares in issue as at 31st March, 2012.

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COMPANY CONSOLIDATED 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 KEY INDICATORS(A) Profitability & Return to ShareholdersAnnual Turnover Growth (%) 9.15 11.68 7.35 (0.21) 0.50 1.06 (5.21) 39.51 24.63 (15.72)Net Profit Ratio (%) 62.35 34.70 29.61 127.33 183.30 21.04 21.07 27.10 72.44 96.28 Earnings per share (Rs.) ** 4.20 2.61 2.39 10.25 14.84 2.22 2.11 3.78 12.59 14.12 Returns on Shareholders’ Funds (%) 24.45 15.10 13.92 41.16 39.83 11.11 10.84 17.87 39.64 32.77 Return on Capital Employed (%) 28.37 23.49 19.93 43.51 37.02 19.35 18.69 27.86 48.53 36.33 Dividend per share (Rs.)** 1.75 2.50 2.50 2.50 2.50 1.75 2.50 2.50 2.50 2.50 Debt Equity Ratio (%) 11.81 9.51 22.11 9.61 11.01 17.37 14.14 26.87 11.56 11.77

(B) Liquidity Current Ratio (No. of Times) 1.68 1.53 1.68 2.10 1.96 1.42 1.63 1.66 1.71 1.74 Interest Cover (No. of Times) 18.68 5.96 6.87 31.43 34.67 8.47 4.33 9.06 31.35 26.81

(C) Investor RatiosNet Assets per share at year end (Rs.)** 14.72 17.16 17.27 24.91 37.25 19.48 19.09 20.37 30.46 42.08 Price-Earnings Ratio (Times)** 21.44 23.78 81.38 18.06 4.46 40.54 29.42 51.46 14.71 4.69 Effective rate at Dividend (%) 234.00 70.00 100.00 100.00 100.00 70.00 100.00 100.00 100.00 100.00Dividend (Rs.000’s) 348,080 106,400 152,000 152,000 152,000 106,400 152,000 152,000 152,000 152,000 Dividend Cover (Times)** 2.40 1.04 0.96 4.10 5.93 1.27 0.84 1.51 5.04 5.65

(D) Share ValuationMarket price per share (Rs.) 90.00 62.00 194.50 185.20 66.20 90.00 62.00 194.50 185.20 66.20

(E) Other InformationNumber of Employees 133 109 118 109 103 153 140 183 181 178 Turnover per employee (Rs.000’s) 3,077 4,193 4,158 4,492 4,778 4,192 4,342 4,635 5,844 5,008 Value Added per Employee (Rs.000’s) 3,360 3,821 3,162 3,396 9,385 3,227 3,581 3,096 4,101 6,964

Note:**Earnings per share ,Dividends per share & Net Assets per share is based on 60,800,000 number of shares in issue as at 31st March, 2012.

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Glossary of Financial TerminologyACCRUAL BASISRecording Revenues and Expenses in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period.

CAPITAL EMPLOYEDShareholders’ Funds plus Debt

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

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

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

3. It is unable to be measured with sufficient reliability

CURRENT RATIOCurrent Assets over Current Liabilities

DEBT/EQUITY RATIODebt as a percentage of Shareholders Funds

DIVIDEND COVEREarnings per Share over Dividends per Share

DIVIDEND PAYOUT RATIOTotal Dividend interest and Tax as percentage of Capital Employed

EARNINGS PER SHARE (EPS)Profit after tax attributable to ordinary shareholding over weighted average numbers of shares in issue during the period

EARNINGS YIELDEarnings per Share as a percentage of Market price per Share end of the period.

EFFECTIVE RATE OF TAXATIONIncome Tax, including deferred tax over Profit before Tax

INTEREST COVERProfit before Interest and Tax over Finance Expenses

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

NET ASSETSTotal assets minus Current Liabilities minus Long Term Liabilities minus Minority Interest

NET ASSET PER SHARENet Assets, over number of Ordinary Shares in issue

NET DEBTNet Debt minus (Cash plus Short Term Deposits)

NET TURNOVER PER EMPLOYEENet Turnover over average number of employees

PRICE EARNINGS RATIOMarket Price per Share over Earnings per Share

QUICK ASSET RATIOCash plus Short Term Investments plus Receivables, Dividend by Current Liabilities

QUICK RATIOCash plus Short Term Investments plus Receivables over Current Liabilities

RETURN ON ASSETSProfit after Tax over Average Total Assets

RETURN ON EQUITYProfit after Tax as a percentage of Average Shareholder’s Funds

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RETURN ON CAPITAL EMPLOYEDEarning before interest and tax as percentage of Capital Employed

SHAREHOLDERS FUNDSStated Capital, Capital Reserves plus Revenue Reserves

TOTAL DEBTLong Term Loans plus Short Term Loans and Overdrafts

TOTAL VALUE ADDEDThe difference between revenue (including other income) and expenses, cost of materials and services purchased from external sources

TOTAL ASSETSFixed Assets plus Investments plus Non Current Assets plus Current Assets

WORKING CAPITALCapital required finance the day-to-day operations Current Assets minus Current Liabilities

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Notice of MeetingNotice is hereby given that the Sixty Fifth Annual General Meeting of John Keells PLC will be held on Wednesday 27th June 2012 at 9.00 a.m. at the HR Auditorium, (Ground Floor) of John Keells Holdings PLC, No.130, Glennie Street, Colombo 02. The business to be brought before the meeting will be:

• ToreadtheNoticeConveningtheMeeting

• ToreceiveandconsidertheAnnualReportandFinancialStatements of the company for the financial year ended 31st March 2012 with the Report of the Auditors thereon

• Tore-electasaDirector,Mr.J.R.FPeiriswhoretiresby rotation in terms of Article 83 of the Articles of Association of the company

• Tore-electasaDirector,Mr.T.De.Zoysawhoretiresinterms of Article 83 of the Articles of Association of the company

• ToappointMrRSFernandointermsofArticle90oftheArticles of Association

• Tore-appointAuditorsandtoauthorizetheDirectorstodetermine their remuneration

• ToauthorisetheDirectorstodetermineandmakedonations

• Toconsideranyotherbusinessofwhichduenoticehasbeen given

Note:

(i) A member is entitled to appoint a proxy to attend and vote in his / her place.

(ii) A proxy need not be a member of the company.

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

(iv) To be valid, the completed Proxy Form must be lodged at the registered office of the company not less than 48 hours before the meeting.

By Order of the Board

Keells Consultants (Private) LimitedSecretariesColombo01st June 2012

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Form of ProxyI / We ................................................................................................................................................................................................

of .......................................................................................................................................................................................................

being a member / members of John Keells PLC hereby appoint

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

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

Mr. Susantha Chaminda Ratnayake of Colombo, failing him Mr. Ajit Damon Gunewardene of Colombo, failing him Mr. James Ronnie Felitus Peiris of Colombo, failing him Mr. Tilak de Zoysa of Colombo, failing him Mr. Kavantissa Danura Weerawardene Ratnayaka of Colombo, failing him Ms. Yolande Ann Hansen of Colombo, failing her Ms. Sharmini Tamara Ratwatte of Colombo, failing her Mr. Ravinath Sanjeeva Fernando of Colombo

as my / our proxy to vote for me / us on my / our behalf at the Sixty Fifth Annual General Meeting of the company to be held on Wednesday, 27th June 2012 and at every poll which may be taken in consequence of the aforesaid meeting and at any adjournment thereof; For Against

i) To re-elect as a Director, Mr. J.R.F Peiris who retires by rotation in terms of Article 83 of the Articles of Association of the company.

ii) To re-elect as a Director, Mr. Tilak. De. Zoysa who retires by rotation in terms of Article 83 of the Articles of Association of the company.

iii) To appoint Mr. R.S. Fernando in terms of Article 90 of the Articles of Association

iv) To re-appoint Auditors and to authorise the Directors to determine their remuneration.

v) To authorise the Directors to determine and make donations

(*) The proxy may vote as he / she thinks fit on any other resolution brought before the meeting.

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

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

Note :(i) * Strike out whichever is not desired.(ii) A proxy need not be a member of the company(iii) Instructions regarding completion appear on the reverse hereof.(iv) Please indicate an ‘X’ in the cage provided how your proxy should vote on each resolution. If no indication is given, or if there

is, in the view of the proxy holder, any doubt (by reason of the manner in which the instructions contained in the proxy have been completed) as to the way in which the proxy holder should vote, the proxy holder in his / her discretion may vote as he / she thinks fit.

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Instructions as to completion

1. Kindly complete the Form of Proxy by filling in legibly your full name and address and that of the Proxy holder. Please sign in the space provided and fill in the date of signature.

2. The instrument appointing a Proxy shall, in the case of an individual, be signed by the appointer or by his Attorney and in the case of a Corporation must be executed under the Common Seal or in such other manner prescribed by its Articles of Association or other Constitutional documents.

3. If the Proxy Form is signed by an Attorney the relevant Power of Attorney or a notarially certified copy thereof, should also accompany the completed Form of Proxy if it has not already been registered with the company.

4. To be valid, the completed Form of Proxy should be deposited at the Registered Office of the company at No. 130, Glennie Street, Colombo 02, not less than 48 hours before the time appointed for the holding of the meeting.

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

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

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

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

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

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

John Keells PLC is an alliance of success – with core businesses in tea and rubber broking, and the warehousing of produce; whilst our real estate activities include the renting of of�ce space. Our pre-eminent position as Sri Lanka’s leading tea and rubber broker owning the largest state-of-the-art warehousing complex gives us effective leverage to go into the future.

As we go forward into the new �nancial year, we are con�dent of our leading position, strengthened by years of experience and the traditions of world-class quality we now represent.

Designed & Produced byPhotography by Studio TimesDigital Plates by Imageline (Pvt) LtdPrinted by Printage (Pvt) Ltd

Name of CompanyJohn Keells PLC

Company Registration NumberPQ 11

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

Name of Associate CompanyKeells Realtors Limited

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

Registered Of�ce P.O. Box 76, 130, Glennie Street, Colombo 2, Sri LankaTel: 2306000Telex: 21389 KEELLS CETelefax: 2446223E-mail: jkl@keells.com

Directors S C RatnayakeA D GunewardeneJ R F PeirisR S FernandoT de ZoysaK D W RatnayakaMs. Y A HansenMs. S T Ratwatte

Secretaries & RegistrarsKeells Consultants (Private) Limited130, Glennie Street, Colombo 2

AuditorsMessrs. Ernst & YoungChartered AccountantsP.O. Box 101, Colombo

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

Corporate Information

What matters...JOHN KEELLS PLC

P. O. Box 76, Glennie Street, Colombo 02. Sri LankaJOHN KEELLS PLCANNUAL REPORT 2011/2012

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