JKH Annual Report 2007 08

At JKH, we continuously seek to improve the manner in which we report to you, our stakeholders.
We recognise that the individual reporting expectations and needs vary among our very diverse stakeholder groups, and we have sought to make our Annual Report more functional, effective, practical and accessible for all of you. We believe that improving reporting practices need not necessarily translate to bulkier reports. The electronic age offers us many opportunities to reduce the weight of information on our stakeholders and the environment. This year, in doing what we do, better than we already do, we make a paradigm shift in our reporting practice - by producing our first comprehensive Annual Report in electronic form, with an accompanying condensed printed report, for ease of reference.
Should you wish to request a printed copy of the comprehensive version, or share your thoughts, comments and suggestions with us please contact: Investor Relations John Keells Holdings PLC 130, Glennie Street Colombo 02, Sri Lanka Tel: +94 11 2306739, 2306809 Fax: +94 11 2306160 E mail: investor.relations@keells.com
Part I
Page
Profile and discussion

3 4 5 10 11 11 12 13 14 20 22 23 25 36 42 51 61 64 66 66 About us Our industry groups Chairmans message Operating highlights and significant events Financial highlights Group financial highlights Industry group financial highlights Financial achievements and goals Industry group snapshots Board of Directors Group Executive Committee Group Operating Committee Corporate governance Board Committee reports Investor information Consolidated group and segmental performance Group financial position and liquidity Portfolio movements and evaluation Acquisitions, new business and divestments Risk management
Part III
Page
Financial reports
90 98 99 100 101 102 104 106 145 Report of the Board of Directors Statement of directors responsibility Auditors report Balance sheet Income statement Cash flow statement Statement of changes in equity Notes to the financial statements Consolidated value added statement
Management discussion and analysis
Part IV
Page
Part II
Page
Supplementary information
146 147 148 150 151 153 159 160 161 162 163 Times treasured in history Decade at a glance Group milestones Selected group financial data Indicative US dollar financial statement Group real estate portfolio Group directory Macro snapshot Glossary of financial terms Corporate information Notice of meeting Form of proxy
Sustainability report 2007/08

72 72 72 75 78 79 82 85 87 Note from the Chairman Report parameters Stakeholder engagement Summary of key impacts and responses Economic performance Environmental performance Social performance Labour practices and human rights Awards and certifications and recognition
Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC
John Keells Holdings PLC (JKH) is Sri Lankas largest listed conglomerate, with business interests in Transportation & Ports, Leisure, Consumer Foods & Retail, Property Development & management, Financial Services and Information Technology related services. Since its modest beginnings as a produce and exchange broker in the early 1870s, JKH has been known to constantly re-align, reposition and re-invent itself in pursuing growth sectors of the time. Our investment philosophy is based on a positive outlook, bold approach, commitment to delivery and flexibility to change. JKH is also committed to maintaining integrity, ethical dealings, sustainable development and greater social responsibility in a multi stakeholder context. Having produced superior returns for our shareholders and experienced significant growth in the past five years, the groups next phase of growth will be fuelled by our new vision-Building businesses that are leaders in the region.
Our values
We are passionate about Changing constantly, re-inventing and evolving Striving to get things right the first time Doing the right things always Constantly raising the bar Fostering a great place to work Building strong relationships based on openness and trust.
JKH is The third largest capitalised company on the Colombo Stock Exchange The first Sri Lankan company to be listed overseas - Global depository receipts listed on the Luxembourg Stock Exchange AAA (Sri) credit rated by Fitch Ratings Lanka Ltd A full member of the World Economic Forum A member of the UN Global Compact LMDs most respected entity in Sri Lanka for the third consecutive year
About us
Our industry groups

Transportation
The largest cargo and logistics service providers in the country are clustered within the industry group. We developed, and presently operate what was previously the Queen Elizabeth quay of the Colombo port and own the only on-shore marine bunkering facility at the port. JKH is the largest hotelier in the country, owning approximately 40 per cent of the 5-star capacity in Colombo as well as 7 resort hotels in Sri Lanka and 4 in the Maldives, under its two brands, Chaaya and Cinnamon. This is complemented by destination management businesses in Sri Lanka, Maldives and India. We are one of the leading developers of luxury residential condominiums in Sri Lanka and manage a large commercial real estate portfolio in Colombo. The group owns two of the countrys best-known consumer brands, Keells and Elephant House, which are leaders in the production and marketing of carbonated soft drinks, ice creams and processed meats in Sri Lanka, as well as the Keells Super chain of supermarkets. The primary business in this industry group is software development and providing IT solutions for off-shore clientele. We have forayed into the BPO industry and also provide office automation solutions. Our cluster of financial services companies offer a complete range of financial solutions including commercial banking, insurance, stock broking, debt trading, fund management and leasing.
Leisure
Property Consumer Foods & Retail (CF&R) Information Technology Financial Services
John Keells Holdings
Industry groups
Transportation
Leisure
Property
Consumer Foods & Retail
Financial Services
Information Technology
Other
Ports & Shipping Sectors Transportation
Hotel Management
Property Development
Consumer Foods
Insurance
IT Enabled Services
Plantation Services
City Hotels
Real Estate
Retail
Banking & Leasing
IT Services & Office Automation
Strategic Investments
Resort Hotels
Stockbroking
John Keells Social Responsibility Foundation
Destination Management Centre functions Corporate Finance & Strategy New Business Development & Group Initiatives Group Risk & Control Review Strategic Group Information Technology
Corporate Communications
Group Finance
Human Resources
Group Tax
Group Treasury
Legal & Secretarial
A key strategic priority at the board level is to build and scale up an organisation with the capability and the capacity to deliver our vision and objectives, while preserving the values of JKH
Chairmans message
5
Dear Stakeholder,
I am pleased to report that your company, and group, performed commendably in revenue and profit growth even in the face of the challenging macro environment that confronted us during the financial year. It is in response to these macro challenges, that we adopted a simple, but determined, approach of doing what we do, better than we already do. This has helped us in no small measure to pursue our long to medium term goals whilst realising our short term objectives. Having experienced the power of such an ethos, we believe it is also an appropriate theme for our Annual Report this year. As you will note, our report this year is in two parts - a compact disc containing the full annual report and a hard copy of an abridged report that focuses on areas which traditionally have been of interest to our stakeholders. We were encouraged on this route by a very recent comprehensive review of our sustainable practices that revealed to us with alarming clarity the urgent need to conserve what nature has bestowed in a variety of forms such as energy creating primary materials, water, air and trees, just to name a few. The two pronged approach is JKH's first steps in a wider greening and environment friendly strategy. In overall terms, the year under review could be termed as one of ups and downs. As for the downs, which I will refer to first, we were unable to fully achieve the high goals we had set for ourselves in substantially increasing our local and regional investments. Operating assumptions and hurdle rates for local investments were difficult to establish because of the myriad of uncertainties surrounding the local operating environment. The prevailing interest rates, anticipated inflation and industry risk premiums made the determination of discount rates extremely challenging. In the case of the regional investments, we explored several opportunities but were reluctant to invest in what we perceived to be an overheated environment and in hindsight we were proved right with significant corrections taking place post the sub-prime crisis. Some of the opportunities which were available to us did not meet our requirement of scale while in many others the reward factor for operating in unfamiliar territories were not commensurate with the associated risks. As for the upsWe focused on building better internal structures and processes and refined our compensation and benefit schemes to attract and retain the talent required for our future plans A number of our businesses and functions achieved significant milestones in productivity enhancement and organic expansion under the defined strategy We gained domain knowledge and insights in to identified regional countries and have created networks that would facilitate a smooth and successful entry into such countries In the prevailing volatile global capital market conditions, we secured long term funding from the International Finance Corporation (IFC) on terms that recognised the strength and potential of the group
Dividends increased by 125 per cent from Rs. 1.41 to Rs. 3.18 billion on the back of a one-off special dividend of Rs. 2 per share
Our performance
I am pleased to report the following key financial highlights for the year 2007/08. Group profit after tax attributable to equity holders increased by 45 per cent to Rs. 5.12 billion Group revenue increased by 27 per cent to Rs. 41.81 billion Group profit before tax grew by 37 per cent to Rs. 6.58 billion Earnings per share increased by 32 per cent to Rs. 8.00 Dividend payout increased by 29 per cent from 62.8 per cent to 81.0 per cent Net cash flows from operating activities increased by 174 per cent to Rs. 6.91 billion Cash EPS increased by 27 per cent to Rs. 9.54 Pre tax return on capital employed increased to 13.7 per cent from 13.6 per cent in the previous year
As stated earlier, the macro environment continued to pose a multitude of challenges during the year with the escalation of the North-East conflict and the increased frequency of incidents of violence across the country. Commodity and oil prices rose sharply on the back of increasing global prices. Interest rates continued to remain high against the backdrop of high inflationary trends. A re-valued Sri Lankan Rupee, while helping to lower the cost of imports, resulted in export and other forex denominated revenues being lower in local terms. Despite these adverse factors, it is pleasing to note that the country's reported GDP growth for the calendar year 2007 at 6.8 per cent was not a significant slow down from the previous year's 7.7 per cent. The above factors had varying impacts on the performance of our industry groups. While Transportation, Property, Financial Services, Plantation Services and the holding company recorded improvement in profits, Leisure, Information Technology and Consumer Foods and Retail achieved profits which were lower than that recorded during the previous year. Transportation remained the main profit earner for the group contributing 53 per cent of the group's post tax profits. This would have been higher if not for the teething costs associated with the supply chain management company which was established last year and a difficult year in the freight forwarding businesses in Sri Lanka and India. Our ports business as well as our bunkering operations recorded a significant increase in volumes which, combined with cost effective and efficient management, translated into higher profits. Leisure PAT decreased by 31 percent over the previous year. The sporadic incidents and consequent negative travel advisories in some of our major markets resulted in a fall in tourist arrivals to Sri Lanka. Furthermore, two of our new
Chairmans message
Maldivian resorts were only partially operational for a greater part of the year as they underwent extensive refurbishment, and a third, that was constructed and launched this year, had some start-up issues. All the resorts in the Maldives are now fully operational under our Cinnamon and Chaaya brands and have performed very well during the peak winter season. The lease over Velidhu Island, our first resort in the Maldives expired at the end of the financial year and was not renewed as it was not financially viable to do so at the lease rentals expected by the owner. Property recorded a decrease of 3 per cent in PAT compared to the previous year. The completion of The Monarch was behind schedule resulting in only a part of the final profits from the development being recognised in the fourth quarter. The balance will be recognised in the new financial year when all the apartments are handed over and the final instalments are received. Road closures, restrictions in the movement of materials and other impacts emanating from the high security demanded in the city of Colombo contributed greatly to the delay in the completion of the project. The construction of The Emperor is in progress, albeit slightly behind schedule, for the same reasons. However, I am pleased to state that almost 80 per cent of its 164 apartments have been sold. Consumer Foods & Retail experienced a 21 per cent drop in PAT compared to the previous year as a result of negative impacts on production costs and sales volumes of carbonated soft drinks arising from the delay in the installation of our new bottling line, increasing commodity prices, lower disposable incomes and a higher than normal rainfall. This decline was partially offset by better than previous year performances from the Retail segment, which opened 11 new stores during the year, and the Convenience Foods segment. Financial Services reported a PAT increase of 30 per cent due to an impressive performance from our banking associate, Nations Trust Bank, and an improved result from our insurance arm, Union Assurance. Information Technology recorded a 23 per cent decline in PAT. This was mainly attributable to the high fixed costs associated with the start up capability building expenses of our still nascent business process outsourcing (BPO) business. The improving revenue prospects of the joint venture between our Software business and Air Arabia is also worthy of mention, as is the steady performance of our Office Automation business. Plantation Services, which is shown under Others in our segment report, recorded a 103 per cent increase in PAT with impressive performances by both Tea Smallholder Factories and the Broking SBU. A more detailed review of the performance of the industry groups is available in the management discussion and analysis section of the comprehensive annual report.
summarise below the progress made on each of these priorities.
Internationalisation and geographical diversification in identified core segments of our businesses

The long term funding (loan) of USD 75 million from the International Finance Corporation (IFC) was a landmark transaction for the group. The funding arrangement gives us the added strength to explore and finalise new cross border growth opportunities. Given the stringent criteria that have to be fulfilled in securing an IFC loan, I believe that the facility reflects the strength of our balance sheet and the efficacy of our operating model. During the year, we evaluated a large number of hotel properties for investment in northern as well as southern India. However, prices of real estate in India, particularly in the key metros and the more established leisure destinations, have increased sharply in recent years and appear to be overpriced. Such high entry costs, coupled with the heavy investment costs of the capital intensive hotel sector, do not equate to commercially viable propositions. Whilst we recognise that exceptional rewards cannot be reaped in the absence of risk taking, we have had to exercise prudence and significant discipline in our project evaluation and investment decision processes, in avoiding investments that do not provide sustainable returns to our stakeholders. We will, however, continue to appraise and seek ideal entry opportunities for us in the Indian hospitality sector. Besides India, we are also evaluating several opportunities in the tourism-lucrative Indo China region and this will be an increasing focus going forward. In contrast, our Destination Management business established in Mumbai in 2006/07 is performing exceptionally well. Two new branches in Bangalore and Ahmadabad were opened during the year and a fourth branch will also be opened shortly in Delhi. The burgeoning tourism industry, both into and out of India, presents us with much potential for accelerated growth in this segment. Our BPO operations, though only in its second full year of operations, has about 550 staff in India and Sri Lanka. During these two years, we have developed our capability, positioned a sales team, mainly in the USA and have generated exciting leads. Portraying Sri Lanka as a reliable BPO host is proving to be quite challenging in the face of the negative publicity that Sri Lanka is currently receiving about its security situation. However, recognising the potential of Sri Lanka in the BPO area, we acquired an equity stake of 44 per cent in Quatrro Finance & Accounting Solutions (Quatrro F&A) in April 2008. Quatrro F&A recently acquired the Chicago based Financial Process Outsourcing LLC (FPO) which is a niche player in the Finance and Accounting (F&A) outsourcing vertical, focusing on small and medium enterprises. FPO currently has facilities in the USA and Mumbai with approximately 500 staff. A key consideration of the FPO acquisition was the availability in Sri Lanka of high level F&A skills. During the year, Auxicogent, our BPO company, entered into a contract to provide medical transcription services to USA based customers. A 258 seat facility has already been established in Sri Lanka for this purpose.
Progress on strategic initiatives/priorities

In my message last year, I had outlined the strategic priorities of the group and our long term goals. I now wish to
Our Convenience Foods business under the Consumer Foods and Retail industry group will commence the manufacture and marketing of processed meats in the key metros of India. We are confident of success in the Indian market given the current wide acceptance of our products in these cities and the increasing disposable incomes of the expanding Indian middle class. Meanwhile, our Retail business is pursuing opportunities for expansion in the South Asian region. Having established ourselves as a developer of super luxury condominium properties in Sri Lanka, we are now evaluating opportunities for property development in the South East Asian region in strategic partnership with established developers. Two large opportunities that came our way were thoroughly evaluated, but were not concluded because of regulatory issues in the case of one and a risk reward mismatch in the case of the other. The Transportation industry group recently reorganised its logistics business in India with a view to better exploiting the available opportunities. We are currently evaluating potential strategic investments in ports, shipping and logistics in the region. The stock broking arm of the group expanded its operations outside Sri Lanka by entering into a memorandum of understanding with Lanka Bangla Securities, the leading stock broking firm in Bangladesh. The positioning of our stock broking company in Bangladesh is just one of the many steps that we have taken, and are taking, in better understanding this large market for group investment.
During the year, the John Keells Hotels PLC announced conditional voluntary offers to acquire three listed hotel companies controlled by a local hotel group. However, the conditions of the offer were not met by the offer closure date and the offer was withdrawn. Ceylon Cold Stores (CCS) invested in a new bottling plant to increase its beverage production capacity by over 50 per cent. The new bottling line is now fully installed and has attained functioning stability. Plans that focus on product rationalisation, an improved distribution model, production efficiencies and more focused marketing and advertising, among others, have been rolled out and are being monitored closely. The Retail business has been on an aggressive expansion programme with 11 new outlets opened during the last year. The central distribution centre, established in 2006/07 under the logistics arm of the Transportation industry group, has overcome most of its teething problems and is now functioning in line with original expectations and generating significant efficiencies in back office processes including inventory and vendor management. The establishment of an in-house academy for training and certifying associates at the outlets has also been a success and will add to the quality of our customer offering. Our Financial Services associate, Nations Trust Bank (NTB), has continued its aggressive expansion through a growing branch network, innovative services and the development of multiple channels for customer reach. In the light of its impressive operating and financial performance, JKH invested in the issue of rights and warrants by NTB this year in order to maintain our stake.
Focus on selected large local industries

The port of Colombo has tremendous growth potential and the group is committed to its future development and expansion plans. During the year, the government called for proposals for private sector participation in the proposed South Container Terminal Expansion at the Colombo Port. This tender was subsequently cancelled. Encouraged by the unique success of our associate SAGT, which owns and operates the Queen Elizabeth quay at the port of Colombo, in running a world class operation, we will participate when the project is retendered. The proposed Port City development for which the group received an in-principle approval from the government of Sri Lanka is high on our list of priorities. The group is in an ongoing dialogue with the government on this project and we are working towards executing a formal Letter of Intent (LOI) during the financial year. We have a strategy in place for developing our extensive land bank in prime areas of Colombo and will launch new developments subject to market conditions. The construction of The Monarch has provided valuable learnings for the business, particularly for the development of The Emperor project. I am delighted to also report to you that JKH recently entered into a Memorandum of Understanding with Associated Motorways, Sri Lanka and Finlays Colombo, Sri Lanka to develop a contiguous 6.6 acre block of land in the heart of Colombo under a City within the City theme.
Divest businesses that contribute disproportionately to management time

In line with our continuous evaluation of our portfolio of businesses, we divested a majority 74 per cent of our stake in the Systems Integration business, Keells Business Systems, as this business, although profitable, does not fit with the long term strategic priorities of the Information Technology industry group.
Building organisational capability

A key strategic priority at the board level is to build and scale up an organisation with the capability and the capacity to deliver our vision and objectives, while preserving the values of JKH. This past year was a year of insight and introspection for the group. Each of our businesses delved deeply into their processes and embarked on an aggressive drive of generating cost efficiencies and increasing productivity and these initiatives were regularly monitored by the Group Executive Committee. We believe that if our businesses are to become regional leaders we must relentlessly pursue internal efficiencies and make continuous process improvements and this is an area where we left no stone unturned. It has given me great pleasure to lead a young and energetic team at JKH and one of my most rewarding tasks has been
Chairmans message
my personal involvement in the many structured processes that proactively identify, select and develop a strong second line in every business and function. Ours is a growth focused group and there is tremendous potential for accelerated growth in each of our industry groups and these, in turn, create many opportunities to recruit, train, develop and spawn high performers. The implementation of our new pay for performance scheme aligning employee rewards to organisational performance was another important step towards enhancing performance. This proved to be a timely move, in an environment where, as I stated earlier, revenues are under pressure because of lower disposable incomes and an appreciated Sri Lankan Rupee in the case of forex denominated revenues and costs are increasing because of escalating commodity and energy prices, and significant increases in other inputs because of inflation. The need for an uncompromised focus on productivity has never been greater, not just for JKH, but for our nation as a whole. Though the new scheme may have initially caused some trepidation in the minds of our employees, there is now near full acceptance with employees having understood the long term sustainability and the upside of the scheme. I have no doubt that history will prove that it was the right move.
locally, we will intensify our efforts in the region and I am delighted to state that the prospects there are encouraging. We will take whatever steps necessary to preserve our competitive advantage in the many businesses that we are involved in. We recognise, and acknowledge, that tough situations require bold steps and we will not hesitate to take them provided that they are imperative, and appropriate, in the circumstances. We will focus on areas within our control and work in close partnership with the government and all our stakeholders in portraying our group as a reliable provider of goods and services, a preferred partner, a responsible corporate citizen in the communities that we operate in and ensuring that JKH is an organisation that our shareholders can continue to invest in with the assurance of attractive returns. To this end, we will do what we do, better than we already do.
Appreciation
As you are aware Mr Rusi Captain resigned from the board in May 2008 because of increasing personal commitments. I wish to acknowledge on behalf of the board the valuable contribution made by Mr Captain to board deliberations. I wish to thank all the women and men of JKH for recognising, and understanding, the importance of the steps we have taken, for being willing partners in many of our change initiatives, for supporting us wholeheartedly in pursuit of our medium term to long term objectives and for making 2007/08 the year it was for JKH. I also take this opportunity to thank all my colleagues on the board for their support, guidance and stewardship in effective and exemplary corporate governance. Finally, I thank all of you, our stakeholders, for your support and the confidence and trust that you have placed in us.
Corporate citizenship
We are increasingly conscious of the impact of our businesses on a wider range of stakeholder groups and in particular on the environment. As a first step in understanding such impacts, we engaged the services of an internationally recognised consultancy group to conduct a gap assessment of the sustainable business practices of the group as well as our sustainability reporting process. This exercise was concluded recently and as of date, detailed action plans are being formulated to address the various issues that emerged out of the study in order of priority. It is our intention to make sustainability a key business priority in 2008/09 and thereafter until it is institutionalised as part of organisational DNA and towards this, a steering committee headed by an executive director and consisting of other very senior managers has been formed to ensure that all objectives pertaining to sustainable practices are achieved in the planned time frames. The John Keells Social Responsibility Foundation continued making progress on its major projects, details of which could be found in the Sustainability Report of the comprehensive Annual Report.
Susantha Ratnayake Chairman 22 May 2008
The future
The year ahead of us will be a tough and challenging one for the country, in general, as it attempts to solve the ethnic conflict, develop the eastern province and stabilise inflation and for businesses, in particular, as they try to sustain their operations in an environment of rising costs, restless employees and declining disposable incomes. In such an environment, both the government and the private sector have to take bold steps - the government in creating opportunities that promote public-private partnerships and the corporate sector in exploiting such opportunities to create value. As a reliable partner in development, JKH is ready to play its part. As we consolidate and improve our position
Operating highlights and significant events

June 2007
JKH subscribed to the 5:6 rights issue of its subsidiary, John Keells Hotels and increased its stake in the company to 92.8 per cent. The Rs. 2.90 billion raised was utilised to retire debt undertaken to fund its new hotel investments in the Maldives.
January 2008
The newly purchased resort hotels, in the islands of Ellaidhoo and Dhonveli in the Maldives, were fully refurbished during the year including the construction of 24 new water bungalows at Ellaidhoo and re-launched under the group's Chaaya brand as Chaaya Reef Ellaidhoo and Chaaya Island Dhonveli. JKH announced and paid a special dividend of Rs. 2 per share amounting to approximately Rs. 1.3 billion, in consideration of significantly higher profits projected for the year ending 31st March 2008, because of higher dividend income, interest income arising from a high interest rate environment and various cost saving measures. JKH invested Rs. 313 million in the 3:1 rights issue with warrants attached by its associate, Nations Trust Bank, and maintained its percentage stake in the banking associate. This capital was raised by the bank to fund its aggressive growth plans.
July 2007
The group implemented a pay for performance remuneration policy linking employee rewards directly to individual as well as organisational performance. The group's first Cinnamon resort in the Maldives, Cinnamon Island Alidhoo, commenced operations from 1st July 2007.
August 2007
LMD ranked JKH as Sri Lanka's most respected entity for the third consecutive year.
October 2007
The two new bottling lines commissioned at Ceylon Cold Stores became fully operational and have more than doubled the beverage production capacity.
February 2008
The International Finance Corporation, a member of the World Bank group, signed a long term funding arrangement amounting to USD 75 million with JKH to support the group's expansion plans in key business areas in Sri Lanka and other countries in the region.
November 2007
JKH won the award for Best Corporate Citizen 2007 presented by the Ceylon Chamber of Commerce.
March 2008
The group's Retail sector expanded aggressively during the year with the launch of 11 new retail outlets under its Keells Super brand of super markets. The total number of outlets as at 31st March 2008 is 37 including 3 franchisee outlets. The lease held by JKH on the Velidhu Island Resort in the Maldives expired. JKH divested a majority stake in the systems integration business, Keells Business Systems.
December 2007
The group's associate, Union Assurance, won the Gold award for Best Annual Report by both the Institute of Chartered Accountants of Sri Lanka (ICASL) and the South Asian Federation of Accountants (SAFA). The JKH Annual Report won the Gold Award for Good Corporate Governance Disclosure from both the ICASL and SAFA.
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Group financial highlights

Year ended 31 March 2008 Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. Rs. No. of Times % % 41,805 8,197 6,579 5,524 5,118 3,176 8.00 9.54 5.1 12.3 13.7
Financial highlights
2007 32,855 6,109 4,795 3,943 3,535 1,412 6.04 7.50 4.6 11.4 13.6 Chg. % 27% 34% 37% 40% 45% 125% 32% 27% 11% 8% 1% 2006 29,463 4,836 4,310 3,492 3,050 1,197 5.30 6.69 9.2 14.7 16.0
Earnings highlights and ratios

Group revenue Group profit before interest and tax Group profit before tax Group profit after tax Group profit attributable to shareholders Dividends Diluted earnings per share Cash EPS Interest cover Return on equity (ROE) Pre-tax return on capital employed (ROCE)
Balance sheet highlights and ratios

Total assets Total debt Net debt / (cash) Total shareholders' funds No. of shares in issue Net assets per share Debt / Equity Net debt / Equity * Debt / Total assets Rs. million Rs. million Rs. million Rs. million millions Rs. % % % 71,794 12,667 20 44,218 636 69.1 25.9 0.0 17.6 65,946 15,363 (2,403) 39,235 553 67.1 35.8 (4.6) 23.3 9% (18%) (101%) 13% 15% 3% (28%) 101% (24%) 39,525 5,327 1,196 22,801 400 39.7 20.2 4.9 13.5
Market/shareholder information
Market price of share as at 31 March (actual) Market price of share as at 31 March (diluted) Market capitalisation Enterprise value * Total shareholder return Price earnings ratio (PER) (diluted) Dividend payout Dividend per share Dividend yield Rs. Rs. Rs. million Rs. million % No. of Times % Rs. % 119.75 119.75 76,160 76,181 (19.5) 15.0 81.0 5.0 4.2 155.00 155.00 97,945 95,962 39.7 25.6 62.8 3.0 2.3 (23%) (23%) (22%) (21%) (149%) (41%) 29% 67% 83% 157.75 113.43 63,101 64,389 43.9 21.4 65.7 3.0 3.0
Other
Total value added Employees Government Others Total employees (excluding associates) Rs. million Rs. million Rs. million Rs. million Number 16,227 4,369 3,271 8,587 9,992 12,800 4,090 2,328 6,382 9,703 27% 7% 41% 35% 3% 11,236 4,191 1,944 5,100 9,815
Monarch and Emperor customer advances have been excluded.
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Industry group financial highlights

2008
5% 10% 5% 33% 9% 6%
2007
5% 32% 8% 5%
2006
7% 32%
Turnover
Rs. billion Transportation Leisure Property CF & R Financial Services IT
17%
2008 16.7 9.8 2.6 11.4 4.8 2.2 2.7
2007 12.4 7.6 1.5 9.8 3.5 2.4 1.8
2006 10.5 5.4 2.4 7.8 2.7 1.7 2.5
23% 19% 5%
25% 19% 4%
24%
Others
7%
EBIT
6% 24% 38% 11% 2% 1% 48% 8% 8% 2% (2)%
Rs. billion Transportation

49%
2008 3.1 1.1 0.9 0.6 0.4 0.1 2.0
2007 2.9 1.1 0.9 0.6 0.3 0.1 0.2
2006 2.4 0.8 0.8 0.4 0.4 0.1 (0.1)
Leisure Property CF & R Financial Services IT Others
1% 5% 7% 11% 14%
14%
18%
18%
17%
Capital employed
19% 18% 8% 3% 3% 7% 8% 3% 3% 41% 5% 8% 35% 19% 4% 1% 6% 17%
Rs. billion Transportation Leisure Property CF & R Financial Services IT
2008 11.5 25.3 4.8 4.3 2.0 1.8 12.0
2007 10.5 20.5 4.6 3.1 1.6 1.9 16.3
2006 5.3 14.3 6.0 2.4 1.4 0.3 2.0
19%
28%
45%
Others
Total assets
18% 3% 4% 4% 9% 8% 39% 3% 8% 8% 34% 16% 41% 19% 25% 9% 18% 10% 2% 4% 18%
Rs. billion Transportation Leisure Property CF & R Financial Services IT Others
2008 13.9 28.1 5.4 6.6 2.6 2.1 13.2
2007 11.8 22.4 5.5 5.0 1.7 2.5 17.1
2006 7.1 16.1 6.5 3.7 1.5 0.7 4.0
Employees
14% 7% 42% 7% 14% 7% 15% 6% 39% 7%
Number Transportation Leisure Property CF & R Financial Services
2008 720 4,154 118 2,896 24 700 1,380
2007 632 4,231 149 2,567 27 735 1,362
2006 687 3,862 162 3,020 24 583 1,477
8%
44%
29% 1%
26% 1%
31% 2%
IT Others
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Financial achievements and goals
Indicator (%) EBIT growth EPS growth (fully diluted) Cash EPS growth (fully diluted) Pre-tax return on capital employed (ROCE) Return on equity (ROE) Debt/equity
Goal FY08 >20 >20 >20 18 20 100 34.2 32.4 27.1 13.7 12.3 25.9
Achievement FY07 26.3 13.9 13.0 13.6 11.4 35.8 FY06 36.0 33.2 10.3 16.0 14.7 20.2
Growth in earnings and cash earnings per share

Growth % 35 33.2
30 25 20 15 10 5 0
Movement in capital productivity

Rs. billion 70 60 50 58.3 16.0% >18% % 19 17 15 31.8 13.6% 13.7% 13 11 9 7 2006 2007 2008 CE ROCE Goal
32.4 27.1 >20 >20 13.0 13.9
61.7
40 30 20 10 0
10.3
2006
2007
2008
Goal
Cash EPS EPS
Return to equity holders

Rs. billion 50 42.9 40 30 20 10 0 2006 2007 2008 Equity ROE Goal 5 14.7% 26.4 12.3% 11.4% 10 20 10 0 2006 20.2% 5.3 15 40 30 26.4 49.0 >20% % 20 Rs. billion 50
Change in leverage
49.0 42.9 80 60 35.8% 15.4 25.9% 12.7 40 20 0 2007 2008 Equity Debt Debt/equity Goal 100% % 100
13
Transportation
Ports & Shipping Transportation

- Logistics - Airlines
Highlights
SAGT handled record volumes of over 1.6 million TEUs during 2007/08 John Keells Logistics (Pvt) Ltd commenced operations of its distribution centre supporting the supply chain management of the Retail sector LMS volumes grew year-on-year by 13 per cent on the back of an increased off-take of 380cst fuel oil, newly introduced by LMS two years ago
Turnover
16,706 3,101 12,429 In Rs. millions In Rs. millions 10,519 78% 77% 81% 60% 22% 40%
EBIT
2,906 2,374 53% 57%
47% 23% 19%
43%
2007/08
2006/07
2007/08
2005/06
2006/07
Ports & Shipping
Transportation
Financial capsule
(Rs. million)
SAGT bettered its previous year's record volumes and handled over 1.6 million TEUs during 2007/08. In order to further improve our performance, we have invested in equipment to enhance capacity and operational efficiencies.
Rs. 16.7 bn 33%
Rs. 3.1 bn 38%
Rs. 11.5 bn 19%
720 7%
Transportation Turnover* EBIT PBT PAT Total assets Total equity Total debt Capital employed** Capital expenditure Number of employees EBIT per employee***
*
07/08 16,706 3,101 3,054 2,904 13,862 11,203 272 11,474 241 720 4.3
06/07 Chg% 05/06 12,429 34.4 10,519 2,906 6.7 2,374 2,887 5.8 2,370 2,757 5.3 2,211 11,768 17.8 7,114 10,272 9.1 5,185 179 51.4 165 10,452 9.8 5,349 151 59.2 194 632 13.9 687 4.6 (6.3) 3.5
Turnover is inclusive of the group's share of associate company turnover
** For associate companies the capital employed is representative of the groups equity investment in these companies
Turnover
EBIT
Capital employed
Employees
*** EBIT per employee is calculated excluding the employees of associate companies
14
2005/06
Hotel Management City Hotels Resort Hotels

- Sri Lankan resorts - Maldivian resorts
Leisure
Destination Management Highlights

The first Cinnamon property in the Maldives, Cinnamon Island Alidhoo, commenced operations from 1st July 2007 The resort hotels, Ellaidhoo and Dhonveli, in the Maldives, were fully refurbished during the year and re-launched under the group's Chaaya umbrella in January 2008 The Indian Destination Management operations, expanded and opened two more branches in Ahmadabad and Bangalore
Turnover
9,792 1,124 20% In Rs. millions 7,589 In Rs. millions 20% 51% 46% 5,442 28% 32% 30% >0% 34% >0% 40% >0% 13% 9% 30%
EBIT
1,089 3% 821 >0% 53% 30%
48% 42% 3% 73%
2007/08
2006/07
2007/08
2005/06
2006/07
Hotel Management Resort Hotels
City Hotels Destination Management
Financial capsule
(Rs. million)
Leisure Turnover EBIT PBT PAT Total assets Total equity Total debt Capital employed Capital expenditure Number of employees EBIT per employee
07/08 06/07 Chg% 05/06 9,792 7,589 28.8 5,442 1,124 1,089 3.2 821 364 519 (29.8) 727 347 500 (30.6) 619 28,067 22,426 25.2 16,117 18,277 13,739 33.0 12,311 7,047 6,746 4.5 1,989 25,323 20,485 23.6 14,300 1,581 1,395 13.4 3,259 4,154 4,231 (1.8) 3,862 0.3 0.3 5.2 0.2
2005/06
(3%)
The group expanded its product offering in the Maldives by launching its first Cinnamon property Cinnamon Island Alidhoo, delivering on its brand promise of indulgence.
Rs. 9.8 bn 19%
Rs. 1.1 bn 14%
Rs. 25.3 bn 41%
4,154 42%
Turnover
EBIT
Capital employed
Employees
15
Property
- Development and sale of residential apartments - Operations of the Crescat Boulevard
Real Estate
- Management of group office sites within the city - Management of construction projects for group companies
Highlights
The Monarch condominium project is in its completion phase with units being handed over to the buyers for occupation The construction of The Emperor condominium project is progressing on schedule with over 80 per cent of the units already sold Successful management and completion of construction and refurbishment projects for the group's resort hotels, Alidhoo and Ellaidhoo, in the Maldives
Turnover
2,618 2% 2,436 3% In Rs. millions 902 9%
EBIT
870 12% 847
In Rs. millions
35%
1,463 4% 98% 96% 97%
91% 65%
88%
2007/08
2006/07
2007/08
2005/06
2006/07
Real Estate
Financial capsule
(Rs. million)
JKH completed the construction of the super luxury condominium project,The Monarch, and despite obstacles and delays in completion, we delivered a superior product to our customers.
Rs. 2.6 bn 5%
Rs. 0.9 bn 11%
Rs. 4.8 bn 8%
118 1%
Turnover
EBIT
Capital employed
Employees
Property Turnover EBIT PBT PAT Total assets Total equity Total debt Capital employed Capital expenditure Number of employees EBIT per employee
07/08 2,618 902 841 785 5,400 4,765 82 4,847 37 118 7.6
06/07 1,463 870 844 813 5,460 4,333 227 4,561 63 149 5.8
Chg% 79.0 3.7 (0.4) (3.4) (1.1) 100 (64.0) 6.3 (41.0) (20.8) 30.9
05/06 2,436 847 847 832 6,484 5,912 114 6,026 257 162 5.2
16
2005/06
Consumer Foods
- Beverages - Frozen Confectionary - Convenience Foods
Retail
- Supermarkets
Highlights
The two new bottling lines commissioned at Ceylon Cold Stores for the expansion of its soft drinks operations became fully operational during the year and have more than doubled the beverage production capacity The Retail sector expanded aggressively during the year with the launch of 11 new retail outlets under its Keells Super brand of super markets. The total number of outlets as at 31st March 2008 is 37, including 3 franchisee outlets
Turnover
11,384 9,791 In Rs. millions In Rs. millions 51% 51% 47% 49% 49% 53% 7,809 580 12%
EBIT
645 6% 395 7% 88% 94% 93%
2007/08
2006/07
2007/08
2005/06
2006/07
Consumer Foods
Retail
Financial capsule
(Rs. million)
2005/06
Consumer Foods & Retail 07/08 Turnover 11,384 EBIT 580 PBT 387 PAT 248 Total assets 6,563 Total equity 2,694 Total debt 1,572 Capital employed 4,266 Capital expenditure 673 Number of employees 2,896 EBIT per employee 0.2
06/07 9,791 645 540 313 4,973 1,780 1,326 3,106 926 2,567 0.3
Chg% 16.3 (10.1) (28.3) (20.6) 32.0 51.4 18.5 37.3 (27.4) 12.8 (20.3)
05/06 7,809 395 310 191 3,713 1,610 810 2,420 367 3,020 0.1
The Keells Super chain of supermarkets aggressively expanded its retail roll out during the year, opening 11 new outlets - the highest number of outlets opened in any given year since its inception.
Rs. 11.4 bn 23% Rs. 0.6 bn 7% Rs. 4.3 bn 7% 2,896 29%
Turnover
EBIT
Capital employed
Employees
17
Financial Services
Insurance Banking & Leasing Stockbroking
Highlights
The group's banking arm, Nations Trust Bank (NTB), reviewed its growth strategy during the year and developed a new strategic plan for the period 2008 - 2012 which was formulated on the theme of unpalleled and unprecedented levels of convenience
NTB successfully completed a 1:3 rights issue with attached warrants, which in total will raise approximately Rs. 3 billion in capital over the next 3 years towards funding its aggressive growth plans The group's insurance arm, Union Assurance (UA), won the overall best annual report award from both the Institute of Chartered Accountants of Sri Lanka and the South Asian Federation of Accountants for its 2006 Annual Report
Turnover
4,796 3% 3,462 In Rs. millions 58% 6% 51% 38% 43% 43% 22% 7% 50% 2,681 In Rs. millions 18% 422
EBIT
338 29% 33%
367
60% 43% 48% 20% 28%
2007/08
2006/07
2007/08
2005/06
2006/07
Stockbroking
Insurance
Banking & Leasing
Financial capsule
(Rs. million)
In its quest to provide unparalleled levels of convenience to its customers, our banking associate NTB, has rolled out its unique service proposition of bringing financial solutions to the customer's doorstep.
Rs. 4.8 bn 10% Rs. 0.4 bn 5% Rs. 2.0 bn 3% 24 0%
Financial Services Turnover* EBIT PBT PAT Total assets Total equity Total debt Capital employed** Capital expenditure Number of employees EBIT per employee***
*
07/08 4,796 422 422 292 2,555 1,990 12 2,003 0.3 24 17.6
06/07 Chg% 05/06 3,462 38.5 2,681 338 24.8 367 337 25.0 367 225 29.7 250 1,735 47.2 1,454 1,517 31.2 1,326 47 (73.6) 33 1,564 28.0 1,358 5 (93.9) 1 27 (11.1) 24 12.5 40.4 15.3
** For associate companies the capital employed is representative of the groups equity investment in these companies
Turnover
EBIT
Capital employed
Employees
*** EBIT per employee is calculated excluding the employees of associate companies
18
2005/06
IT Services
- Software Services
Office Automation IT Enabled Services Highlights

JKH divested a majority stake in the Systems Integration business, Keells Business Systems, in March 2008 The Software Services business, John Keells Computer Services, substantially increased its order book for solutions from award-winning airline customers in the Middle East region The BPO business expanded its operations during the year with approximately 550 revenue generating staff servicing key new customers in the US
Turnover
2,243 7% In Rs. millions In Rs. millions 41% 48% 1,707 0% 47% 35% 17% 28% 22% 28% 26% (171%) 121% 83% 66% 2,446 1% 98
EBIT
102 86% 21% 46% (53%) 63% 9% 30% (1%)
116
2007/08
2006/07
2007/08
2005/06
2006/07
Software Services Office Automation
Systems Integration IT Enabled Services
Financial capsule
(Rs. million)
Information Technology Turnover* EBIT PBT PAT Total assets Total equity Total debt Capital employed** Capital expenditure Number of employees*** EBIT per employee
*
07/08 2,243 98 90 43 2,099 1,775 2 1,777 62 700 0.1
06/07 2,446 102 100 56 2,494 1,840 16 1,857 46 735 0.1
Chg% 05/06 (8.3) 1,707 (4.8) 116 (10.2) 115 (22.7) 83 (15.8) 660 (3.5) 315 (89.6) 3 (4.3) 318 33.9 16 (4.8) 583 (0.0) 0.2
2005/06
With our investment in Financial Process Outsourcing LLC, a US-based Finance & Accounting (F&A) service provider, we have expanded our existing BPO product portfolio to include the high value F&A segment.
Rs. 2.2 bn 5% Rs. 0.1 bn 1% Rs. 1.8 bn 3% 700 7%
** For associate companies the capital employed is representative of the groups equity investment in these companies *** EBIT per employee is calculated excluding the employees of associate companies
Turnover
EBIT
Capital employed
Employees
19
Susantha Ratnayake
Chairman-CEO
Mr Ratnayake was appointed as the Chairman and CEO of John Keells Holdings in January 2006 and has served on the JKH board since 1992/93. He has overall responsibility for Group Strategy and New Business Development. Mr Ratnayake is a council member of the Employers' Federation of Ceylon and is a committee member of the Ceylon Chamber of Commerce. He also serves on various clusters of the National Council of Economic Development (NCED). Mr Ratnayake has over 29 years management experience, all of which is within the John Keells group.
Sithie Tiruchelvam
*Director
Appointed to the board in January 2007, Ms Tiruchelvam, a lawyer of the Supreme Court of Ceylon, specialises in corporate law, intellectual property law and labour law and is a notable human rights campaigner. She obtained her LLB from the University of Ceylon in 1966, and was admitted to the Supreme Court as Advocate in 1968. She is a founding Partner of Tiruchelvam Associates. Ms Tiruchelvam currently serves on several boards, among them being Central Corporate & Consultancy Services (Pvt.) Limited, Galadari Hotels (Lanka) Limited, Nadesan Centre for Human Rights, LIRNEasia and South Asians for Human Rights, a regional organisation with its secretariat in Colombo. She is the Chairperson of the Foundations for Peace Network, a worldwide network of community foundations working on peace and reconciliation in fractured societies. She has also completed a programme on corporate philanthropy at the Rockefeller Foundation, programme for philanthropy in New York, USA in 2000/01.
Ajit Gunewardene
Deputy Chairman
Mr Gunewardene is the Deputy Chairman of JKH and has been a member of the board since 1992/93. Whilst having overall responsibility for the Financial Services, Leisure and Property industry groups, he oversees the Investor Relations function at the centre. He is also a member of the Capital Markets Cluster of the NCED. He is a former Chairman of the Colombo Stock Exchange. Mr Gunewardene brings 26 years of management experience to the board. He is a graduate of the University of North Carolina with a major in economics.
Franklyn Amerasinghe
*Director
Appointed to the board during 1999/00, Mr Amerasinghe is the former CEO and Director General of the Employers' Federation of Ceylon. He was thereafter attached to the ILO as a senior specialist in the social dialogue sector in charge of Employers Organizations in East Asia up to October 2002. A Bachelor of Law and a lawyer by profession, he is currently a consultant and trainer in social dialogue, human resource management and industrial relations, both in Sri Lanka and abroad. He is a Founder Trustee of the Employment Mediation Services Centre and is a judge for sustainability reporting for the ACCA since the initiative commenced in Sri Lanka. He was also one of the Founder Directors of the Skills Development Fund. He has authored books on a wide range of subjects and his papers on Industrial Relations in Sri Lanka have been published in some international and local journals.
Sumithra Gunesekera
Director and President
Appointed to the Board in 1997/98, Mr Gunesekera has overall responsibility for the Plantation Services sector and the Corporate Communications function at the centre. He is also the Head of the John Keells Social Responsibility Foundation Management Committee. Mr. Gunesekera is the Chairman of the Corporate Social Responsibility sub-committee of the Ceylon Chamber of Commerce as well as the Chairman of the Employers' Network on Disability of the Employers' Federation of Ceylon. He also serves on the Board of Directors of the Sri Lanka Institute of Tourism and Hotel Management. Mr Gunesekera is a Director in many group companies and has over 25 years of management experience.
Rusi Captain
**Director
(resigned w.e.f. 6th May 2008)
Ronnie Peiris
Group Finance Director
Appointed to the board during 2002/03, Mr Peiris has overall responsibility for Group Finance including Treasury, Taxation, Corporate Finance, Group Initiatives, Shared Services and the Information Technology functions at the centre. Previously, Managing Director of Anglo American Corporation (Central Africa) Limited and EXCO member of Konkola Copper Mines plc, both in Zambia, Mr Peiris has served on many boards overseas. He has over 35 years 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 a 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.
Appointed to the board in March 2007, Mr Captain is an entrepreneur and investor in the Sri Lankan corporate sector, bringing with him a wealth of knowledge and over 16 years of business experience in a range of manufacturing sectors. His current business interests range from paints, garments, industrial gloves, cutting and polishing diamonds to plastics and other packaging material. He is the co- founder of Asia Stock Brokers, Asia Capital, Dutch Lanka Trailers, Asia Siyaka and Asian Alliance. Mr Captain was educated at the University of Miami, Florida.
Tarun Das
*Director
Appointed to the board during 2000/01, Mr Das has served with the Confederation of Indian Industry (CII) for a long period and was its Chief Executive from 1974 to 2004. Mr Das is currently Chief Mentor, CII. He is also the Chairman of Haldia Petrochemicals Limited of India.
20
Steven Enderby
*Director
Appointed to the board in 2005/06, Mr Enderby is currently based in Delhi where he is a Partner in the leading emerging markets private equity investor, Actis Capital LLP, UK. His other directorships include Swaraj Mazda, Nitrex Chemicals, Tema India, Phoenix Lamps, Ceylon Oxygen, MFE and Actis Advisers. Mr Enderby holds a BSc (Hons) in Economics and Accounting from the Queens University of Belfast and is a member of the Chartered Institute of Management Accountants, UK.
Mohamed Muhsin
*Director
Appointed to the board in 2005/06, Mr Muhsin is a strategic management consultant and director on international corporate and foundation boards. Mr Muhsin retired from the World Bank in 2005 having served in various senior positions for 17 years, ten of which as Vice President and Chief Information Officer. Prior to this, he served for ten years as an advisor to the President of Zambia on state enterprise reform and as the Group Financial Director of the business conglomerate, the Zambia Industrial and Mining Corporation (ZIMCO). Mr Muhsin is a Fellow of the Institute of Chartered Accountants of Sri Lanka (FCA). Susantha Ratnayake Ajit Gunewardene Sumithra Gunesekera
Deshamanya Deva Rodrigo

*Director
Appointed to the board in July 2006, Mr Rodrigo, a Chartered Accountant, had a career with the international accounting and consulting firm, PricewaterhouseCoopers, joining the firm in East Africa in 1974 and serving in its London offices in 1980. He was a Founder Partner when PricewaterhouseCoopers established its Sri Lankan firm in 1981, and held the position of Senior Partner from 1992 to 30 June 2006, when he retired from the firm. Mr Rodrigo was the Chairman of the Ceylon Chamber of Commerce from 2004 to 2006. He has previously held public office as a Director of People's Bank from 2000 to early 2003 and as a member of the Telecommunication Regulatory Commission from May 1997 to January 2002. Mr Rodrigo was also a member of the Monetary Board of the Central Bank of Sri Lanka from 2003 to 2006 and a member of the National Council for Administration from 2004 to 2006.
Ronnie Peiris
Sithie Tiruchelvam
Franklyn Amerasinghe
Rusi Captain
Tarun Das
Steven Enderby
* Independent non-executive ** Non-independent non-executive
Board of Directors
Mohamed Muhsin
Deva Rodrigo
21
Dilani Alagaratnam
President
Dilani Alagaratnam has overall responsibility for the group Human Resources, Legal and Secretarial functions. A lawyer by profession, she has been with the group for 16 years and is a law graduate and a holder of a Masters Degree in Law. She is a member of the Advisory Committee on Human Resources and Education and is the Alternate Chairperson of the Advisory Committee on Legislation of the Ceylon Chamber of Commerce. She is also a permanent member of the Legal Forum convened by the Central Bank of Sri Lanka.
Dilani Alagaratnam
Romesh David
Jitendra Gunaratne
Romesh David
President
Romesh David has been with the group for 28 years and has overall responsibility for the Transportation and IT industry groups. He is a member of the National Council for Economic Development (Transport Cluster), a member of the Economic Infrastructure Sub-Committee of the Ceylon Chamber of Commerce and a committee member of the Chartered Institute of Logistics and Transport (Sri Lanka Branch). He is a past Chairman of the Sri Lanka Freight Forwarders' Association and the Council for Business with Britain.
Jitendra Gunaratne
President
Jitendra Gunaratne is responsible for the Consumer Foods & Retail (CF&R) industry group. Prior to his appointment as President, he overlooked the Plantations and Consumer Foods Manufacturing sector. His 27 years of management experience in the group also covers Leisure and Property. He holds a Diploma in Marketing and serves as a member of the Advisory Committee on Consumer Affairs and the Law and Order Committee of the Ceylon Chamber of Commerce.
Group Executive Committee

Currently a 7 member committee including the 4 executive directors and the above members.
22
Krishan Balendra
Executive Vice President
Krishan Balendra has been Head of Corporate Finance and Strategy since September 2002. He started his professional career at UBS Warburg, Hong Kong, in investment banking, focusing primarily on equity capital markets. After a four year stint in Hong Kong, he continued his career in corporate finance at Aitken Spence & Co. Ltd., Sri Lanka prior to joining JKH. He holds a Law Degree (LLB) from the University of London and an MBA from INSEAD. He is a member of the board of the Colombo Stock Exchange.
Krishan Balendra
Manilal De Silva
Sujiva Dewaraja
Manilal De Silva
Manilal De Silva, Head of the Consumer Foods Sector, joined the group in July 2003. Prior to joining the group, he gained wide international experience in a variety of industries which included food processing, construction, professional services, and international trade, whilst serving in senior management and board positions with multinational organizations over a period of seventeen years. During this period he was based in Zambia, Zimbabwe, South Africa and the USA. He is an Associate member of the Chartered Institute of Management Accountants, UK. He also serves as Chairman, Interest Group for the Food Sector of the Ceylon Chamber of Commerce and on the Food Advisory Committee of the Ministry of Health.
Sanjeeva Fernando
Roshanie Jayasundera-Moraes
Sanjeeva Jayaweera
Sujiva Dewaraja
Sujiva Dewaraja heads the IT Sector. Since passing out as a Chartered Management Accountant in London, he worked in Corporate Strategy at a diversified conglomerate and in MIS for a Middle Eastern Government. Moving to USA in 1987, he read for an MBA from the University of Pittsburgh, Pennsylvania, earning a place on the Dean's List. Since then he has been in General Management, holding CEO level positions in the past 16 years. He is a Fellow of CIMA, UK and an Associate Member of the Chartered Institute of Bankers, London. He has served on the Committee of the Ceylon Chamber of Commerce and currently serves on the advisory panel on ICT Export to the Minister of Enterprise Development.
Sanjeeva Fernando
Sanjeeva Fernando heads the BPO arm of the group. Prior to this, he was Head of the Transportation industry group. He has over 21 years of management experience, 14 of which have been with the group in diverse businesses and capacities. A printer by profession, he qualified from the London School of Printing and is a member of the London Institute of Printing. He joined JKH in 1993 to head the group's printing and packaging business and was the CEO of Lanka Marine Services from the time of its acquisition in 2002 until 2005.
Jayantissa Kehelpannala
Vasantha Leelananda
Chandrika Perera
Group Operating Committee

Currently a 23 member committee consisting of the GEC and the above members
Mano Rajakariar
Waruna Rajapaksa
Suresh Rajendra
Lallith Ramanayake
Ramesh Shanmuganathan
Devika Weerasinghe
23
Group Operating Committee (Contd.)
Roshanie Jayasundera-Moraes
Roshanie Jayasundera-Moraes, Head of the Retail sector, has been with the group since 1991. She was with the Airlines sector of the Transportation industry group, before being appointed as Head of the group's supermarket business in November 2003. A holder of a Diploma in Marketing from the Chartered Institute of Marketing (CIM), UK, she also holds a MBA from the PostGraduate Institute of Management of the University of Sri Jayawardenepura, Sri Lanka.
Waruna Rajapaksa
Waruna Rajapaksa, Head of New Business Development and Group Initiatives, has over 21 years of experience in Sri Lanka and in the UK, primarily in management consultancy and project finance. Prior to joining the group in 2002, he worked for the government at the Bureau of Infrastructure Investment, Informatics International Ltd (UK) and at Ernst & Young. He is a Fellow member of the Chartered Institute of Management Accountants, UK and an Associate member of the Institute of Chartered Accountants of Sri Lanka. He also holds a MBA from Cass Business School, London, UK. He is a member of the Advisory Committee on Economic Infrastructure Development of the Ceylon Chamber of Commerce.
Sanjeeva Jayaweera
Sanjeeva Jayaweera, the Chief Financial Officer for the CF&R industry group, has been with the group for 15 years, during which he served in the Resort Hotels sector of the Leisure industry group and was the Sector Financial Controller for Resort Hotels from 1998 to 2005. Prior to joining the group, he was based in the United Kingdom and worked for several years as an Audit Manager.
Suresh Rajendra
Suresh Rajendra, Head of the Property Development and Real Estate sectors, has over 16 years of experience in the fields of finance, travel & tourism and business development acquired both in Sri Lanka and overseas. Prior to joining the group, he was the Head of Commercial and Business Development for NRMA Motoring & Services in Sydney, Australia. He is a Fellow of the Chartered Institute of Management Accountants, UK.
Jayantissa Kehelpannala
Jayantissa Kehelpannala, currently Sector Head Resort Hotels, has been with the Group for 26 years. He has over 19 years of management experience in the leisure industry, both in hoteliering and inbound tourism. He is currently a committee member of the Tourist Hotels Association of Sri Lanka and represents the Sri Lankan Hotel Industry at the committee of the Ceylon Chamber of Commerce. He is also a Director of the Rainforest Ecolodge which is an industry driven hotel development project to cater and popularise Eco Tourism in Sri Lanka. In addition, he holds office as the President of The Sri Lanka Maldives Bilateral Business Council and Vice Chairman, Hotels and Tourism Employers Group of the Employers Federation of Ceylon.
Lallith Ramanayake
Lallith Ramanayake is currently the Sector Head of the Transportation industry group. He was Head of the Plantation Services sector till July 2007 and counts over 36 years with the group and the tea industry. He is a Member of the Chartered Institute of Marketing, UK with the Chartered Marketer status. He holds a MBA from the Postgraduate Institute of Management, University of Sri Jayawardenapura. He has been the Chairman of the Colombo Brokers' Association, a Director of the Sri Lanka Tea Board, Deputy Chairman of the Tea Association of Sri Lanka, and a member of the Plantation/Tea Cluster of the NCED. He has served on the Committee of the Ceylon Chamber of Commerce.
Vasantha Leelananda
Vasantha Leelananda is Head of the Destination Management sector and counts over 29 years in the leisure industry with the John Keells group. He served as the Managing Director of Walkers Tours from 1997 to 2005 and overlooks the travel operations in Maldives, India and Sri Lanka. Vasantha holds a MBA from the University of Leicester. He is the immediate past President of the Sri Lanka Association of Inbound Tour Operators (SLAITO), a Board Member of the Sri Lanka Institute of Tourism & Hotel Management and a co-chair of the Responsible Tourism Partnership which is affiliated to the Travel Foundation UK.
Ramesh Shanmuganathan
Ramesh Shanmuganathan is the group's Chief Information Officer and has over 15 years of experience in the ICT industry both in Sri Lanka and the USA, with the last 8 years in C-level management. Prior to this he has served in the Group's IT sector as the CEO of Keells Business Systems Limited since 2001 and Head of Strategy/New Business Initiatives of John Keells Computer Services Ltd since 2004, until he assumed duties as the group's CIO. He is a Hayes-Fulbright Scholar and holds to his credit a MSc (Information Technology & Computer Science) with Phi Kappa Phi Honours from Rochester Institute of Technology, MBA (General) from Postgraduate Institute of Management, University of Sri Jayewardenepura and BSc.Eng. (Electronics & Telecommunications) with First Class Honours from University of Moratuwa. He is a Chartered Engineer, Chartered IT Professional and a Fellow of the British Computer Society. He also has active memberships in several other professional institutions and is a visiting faculty member for several post-graduate programmes.
Chandrika Perera
Chandrika Perera was appointed as the Chief Financial Officer of the Leisure industry group in March 2005. She has been with the group for 25 years. She held the position of Group Financial Controller from 1999 to 2005. A Fellow of the Institute of Chartered Accountants of Sri Lanka and the Society of Certified Management Accountants, Sri Lanka, she holds a MBA (Finance) from the University of Southern Queensland. She serves as a management committee member of the Financial Reporting Faculty of ICASL and is a member of the Steering Committee on Income Taxes.
Devika Weerasinghe
Devika Weerasinghe, Chief Financial Officer of the Transportation industry group, previously held the position of Sector Financial Controller of the Transportation sector. She also served as the Sector Financial Controller of the Airlines SBU of the Transportation sector during the period 1998-2004. She is an Associate member of the Chartered Institute of Management Accountants, UK and also holds a Bachelors Degree in Business Administration, from the University of Sri Jayawardenepura.
Mano Rajakariar
Mano Rajakariar has been the Group Financial Controller since April 2005. He has been with the group for over 12 years in many capacities including serving as the Sector Financial Controller of the Plantations sector and heading the Shared Services implementation within the Group. He has over 20 years of experience in audit, finance and general management, acquired both in Sri Lanka and overseas. He is a Fellow member of the Institute of Chartered Accountants of Sri Lanka (ICASL) and the Chartered Institute of Management Accountants, UK. He currently serves as a committee member of the Urgent Issues Task Force (UITF) of the ICASL.
24
Corporate governance
Doing what we do, better than we already do aptly summarises the mind-set that we have applied in the past year, and will be applying in the year ahead of us, to all our endeavours, including corporate governance. The key reference point in most of our corporate governance enhancements in 2007/08 has been the Companies Act of 2007 which became effective in May 2007. The new Act demands, in the main, greater disclosure, transparency, shareholder empowerment and higher levels of personal responsibility and accountability, particularly at board and senior management levels. Whilst acknowledging that the thrust of the Act is to improve the status quo, which resonates well with our own thinking of doing what we do, better than we already do, there are areas of the Act which are not very clear. We are confident that dialogue, and discussion, among the various stakeholders will result in greater definition being achieved in the coming year. The new rules of governance and disclosure requirements for listed companies, as mandated by the Securities and Exchange Commission of Sri Lanka, also came in to effect during the financial year 2007/08. JKH was in full compliance of this last year. JKH is also in compliance with all aspects of the governance requirements of the listing rules of the Colombo Stock Exchange. We follow, and comply with, the recommendations of the Combined Code of 2006 to the extent that they are practicable in the context of the nature of our diverse businesses and their risk profiles. Our policy in this regard, is to comply, or explain. The following report has been structured, at minimum, to address all provisions of the code of governance of the Institute of Chartered Accountants of Sri Lanka. The methods we employ to achieve our goals are as important to us as the goals themselves, and this has been well communicated to the individual businesses and functional units within the group Our operating models facilitate the making of business decisions, and resource allocations, 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 We believe that building and improving stakeholder relationships is an integral aspect of board effectiveness and a responsible approach to business We will take an active role in discussions with the relevant regulatory bodies regarding the implementation of governance regulations, accounting standards, and economic reforms in Sri Lanka, and any other jurisdiction where the group has major business interests We opt for early adoption of best practice governance regulations or accounting standards, where practicable We understand that our resolve to maintain strong governance practices presents strong commercial advantages for us and the reduction of our cost of capital via the strengthening of stakeholder confidence, particularly the confidence of our investors, both institutional and individual
THE BOARD OF DIRECTORS

Board responsibilities and decision matrix
The Board of Directors is accountable to the shareholders for the governance of the company. All directors are accountable for the proper stewardship of the company's affairs and share a responsibility in ensuring the highest standards of public information, particularly financial information, ethics and integrity across the group. Powers specifically reserved for the board as highlighted in the JKH decision matrix include Guiding the overall direction, strategies and financial objectives of JKH and monitoring the implementation of the same Reviewing HR processes with emphasis on top management succession planning Appointing and reviewing the performance of the Chairman-CEO Approving major acquisitions and disposals and capital expenditure Monitoring systems of governance and compliance
JKH corporate governance framework

John Keells Holdings PLC (JKH) is committed to the highest standards of business integrity, ethical values and professionalism in all its activities towards rewarding our stakeholders with greater creation of value, year-on-year. Our governance framework is based on the following The board of JKH is responsible to shareholders to fulfill its stewardship obligations, in the best interest of the company and its stakeholders Maximising shareholder wealth-creation on a sustainable basis while safeguarding the rights of multiple stakeholders is a fundamental value shared by all levels of our management
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Overseeing systems risk management
of
internal
control
and
Role of the Chairman-CEO

The Chairman, who is also the Chief Executive Officer (CEO), is responsible for leading the board and for its effectiveness, as well as executing the strategies and policies of the board. The board has deemed that combining the two roles is more appropriate for the group at present, in meeting stakeholder objectives in a conglomerate setting. The board composition, group organisation, and in particular, the committee overlay structures discussed, under the heading Group organisation & operational controls later in this report, ensure that no one individual has unfettered powers of decision making. As the head of the Group Executive Committee (GEC), the Chairman-CEO provides the overall direction and policy/execution framework for the board's decisions via this structure. This enables him to effectively balance his role as the Chairman of the board and the CEO of the company/group. The Chairman, while leading the board in effectively discharging its duties towards all stakeholders, ensures with the assistance of the Board Secretary, that board procedures are followed and directors receive timely, accurate and clear information, before board meetings and updates on matters arising between meetings. As the CEO, he guides and supervises executive directors in striking a balance between their board and executive responsibilities. The Chairman also ensures that constructive working relations are maintained between the executive and non-executive members of the board so that every member is able to contribute effectively within their respective competencies. Finally, he sets the tone for the governance and ethical framework of the group.
Approving of annual budgets and strategic plans Approval of any issue of JKH equity/debt securities Determining any changes to the discretions delegated from the board to the executive levels
Delegation of authority
The board has, subject to pre-defined limits, delegated its executive authority to the Chairman-CEO who exercises this authority through the use of the Group Executive Committee (GEC), which he heads and to which he provides leadership and direction. While the board sets the strategic direction and the overall policy framework of the group, it has delegated strategy formulation at industry-group level and the implementation of board set strategies/policies to the Chairman-CEO. Details of the group's management, operating and overlay structures are detailed later in the report. Board decision rights, as opposed to executive director decision rights, covering people, strategy and planning and finance are well defined and meticulously followed and ensure the balance between the speed of decision and appropriate debate. These decision rights are subjected to regular review and were recently revised to reflect the current needs of the group. The board has also delegated some of its functions to board committees, while retaining final decision rights pertaining to matters under the purview of these committees. The Audit Committee and Remuneration Committee consist solely of independent directors whilst 4 out of the 5 members of the Nominations Committee, the exception being the Chairman-CEO of the company, are independent directors. All three committees are chaired by independent directors.
Board meetings, agenda and attendance

The board of JKH, as decided during the previous financial year, meets once every quarter. During the year under review, the board met on 5 occasions; 4 being regular meetings and 1 being a special-purpose meeting.
Attendance of board and committee meetings

Board meetings HEA 5 5 5 5 5 5 5 5 5 5 5 A 5 5 5 5 5 2 5 5 4 3 5 Nominations Committee meetings HEA 1 1 1 1 1 A 1 1 1 1 1 Remuneration Committee meetings HEA 2 2 2 A 2 2 2 Audit Committee meetings HEA 5 5 5 5 A 5 2 5 5 -
S Ratnayake - Chairman A Gunewardene S Gunesekera R Peiris F Amerasinghe - Chairman, Remunerations Committee T Das - Chairman, Nominations Committee S Enderby M Muhsin D Rodrigo - Chairman, Audit Committee S Tiruchelvam R Captain (resigned w.e.f. 6th May 2008) HEA - Meetings held and eligible to attend A - Attended
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The formal schedule of matters reserved for board consideration, and decision, include the items of the Decision Matrix as aforementioned, and other matters having a material effect on the company and the group. Your board states that every one of its members dedicated adequate time and effort in discharging their duties and that member attendance during board meetings and board committee meetings (as highlighted in the table on the previous page) was healthy. Allowing for non-executive director involvement in various board committees and time spent by them in considering various matters that require discussion, and decision, in between the formal board meetings, the company estimates that non-executive directors devoted around 25 full time equivalent days each to the group during the year.
refresh progressively its composition over time. The company also notes the value that has been brought to bear by the non executive directors on the governance of the group.
Conflicts of interest
Over and above the issue of independence, each Director has a continuing responsibility to determine whether he or she has a potential or actual conflict of interest arising from external associations, interests or personal relationships, in material matters which are considered by the board from time to time. In the past, directors who have had an interest in a matter under discussion have excused themselves from deliberations on the subject matter and have abstained from voting on them. Abstentions, where applicable, from board decisions, are duly minuted. Prior to appointment to the board, eligible persons are requested to make known their various interests that could potentially conflict with the interest of the company. Once appointed to the board, all directors are expected to inform the board of any new conflicting interests and obtain board clearance prior to accepting any position, or engaging in any transaction that could create a potential conflict of interest. All non-executive directors are required to notify the Chairman of changes in their outside board appointments, and the Chairman reviews such appointments in consultation with other directors, where necessary, in order to ascertain potential conflict situations. Details of companies in which board members hold board or board committee membership is available with the company, for inspection by shareholders on request. Name of director Type Involvement/interest Share Material holding Management business relationship Yes Yes No Yes Yes No Yes Yes No Yes Yes No Yes No No No No No No No No Yes No No No No No No No No Yes No No
Board composition and independence

As at 31st March 2008, the board consisted of 11 directors of whom 4, including the Chairman, are executive and 7 are non-executive. The board considers that 6 of the 7 non-executive directors are independent in accordance with the criteria suggested by the Combined Code and the criteria proposed for listed companies by the Securities and Exchange Commission of Sri Lanka, and have been identified as such in the board profiles given earlier in this report. Mr Rusi Captain is the only non-executive director considered by the board to be not independent, given that he and his connected parties have a significant shareholding in the company. The 6 independent non-executive members represent a majority on the board. The non-executive directors had direct discussions with the Chairman-CEO, on 1 occasion during the year, without the presence of the other executive directors. Although a lead non-executive director has not been formally appointed, such discussions were led by Mr Tarun Das, an independent director. Non-executive directors are encouraged to propose discussion items and are provided with the agenda and supporting material well in advance to facilitate awareness and preparation. The board is of the view that its present composition ensures a right balance between executive expediency and independent judgment. Collectively, the non-executive directors bring a range of value adding domestic and international experience, and expertise, in specialist functions. Biographical details of directors are set out in the Board of Directors section of the annual report. The nonexecutive directors of the board collectively possess strong financial acumen and are in good positions to assess the integrity of the group's financial reporting systems and controls, continually review and critique these systems and make changes to them as necessary. The company is conscious of the need to maintain an appropriate mix of skills and experience on the board and to
S Ratnayake A Gunewardene S Gunesekara R Peiris F Amerasinghe T Das S Enderby M Muhsin D Rodrigo S Tiruchelvam R Captain*
ED ED ED ED NED/ID NED/ID NED/ID NED/ID NED/ID NED/ID NED/NID
* (resigned w.e.f. 6th May 2008)
ED - executive director, NED - non executive director, ID - independent director, NID - non independent.
Supply of information and board induction

All directors are fully briefed on important developments in the various business activities of the group and they regularly receive information concerning the group's operations, finances, situations which may give rise to conflicts of interest, risks and its people, enabling them to fulfill their
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duties and obligations effectively. A monthly CEO's report informs directors of shares that they cannot deal in during periods where the director may have information which is not in the public domain. Steps are taken in ensuring that newly appointed nonexecutive directors are apprised of the operations of the group, its values and culture, strategies, its operating model, governance framework and processes. Their attention is also drawn to their responsibilities as directors in terms of prevailing legislation and to the code of conduct demanded by the company. The directors have access to auditors, senior managers under a structured arrangement and information, as is necessary, to carry out their duties and responsibilities effectively and efficiently. Apart from periodic performance reports, directors also receive information updates, from management, on topical matters, new regulations and best practices as relevant to the group's businesses. Additionally, all directors have access to the services of the company secretaries whose appointment and/or removal is the responsibility of the board.
comments, were collated by a nominated independent director and the results were analysed to give the board an indication of its effectiveness as well as areas that required addressing and/or strengthening. The open and frank discussions that followed the evaluation reflected the keenness of the board on doing what we do, better than we already do. While the analysis concluded that the board was functioning effectively, it did highlight some areas which could be improved on and action plans to address such highlighted issues were agreed. The Remuneration Committee appraises the performance of the Chairman-CEO on the basis of pre-agreed objectives for the group, set in consultation with the board. Such performance is not merely judged in terms of the group's performance against plan but also considers the group's performance against its peers in areas such as revenue growth, market share, profit growth and earnings per share. Non quantifiable issues such as company image, customer orientation, societal trust are also considered in the overall assessment.
Board appointments and Nominations Committee

The responsibility for identifying and proposing suitable candidates for appointment as non-executive directors to the board of JKH, in keeping with the target board composition and skill requirements, lies with the Nominations Committee. It also manages the process of appointing the Chairman of JKH. Board appointments follow a formal and transparent procedure. There were no new appointees to the Board in the financial year 2007/08. The Nominations Committee, comprises of 4 independent directors (including the chairman of the committee) and the Chairman-CEO of JKH. The detailed Nominations committee report is given in the Board Committee reports section of the annual report.
External professional advice

The board seeks independent professional advice when and where necessary. During the year under review, professional advice was sought on various matters including The Companies Act 2007 Tax and regulations prevailing in certain Indian states Compensation and benefits applying to businesses, functions and industries that the group is involved in Asset impairment accounting and the practicability of some of the provisions of the new standard, early adoption of SLAS 16 covering employee benefits (gratuity) and, in particular, its actuarial valuation, and deferred tax in tax exempt companies Extensions to SAP HR and SAP business integration Employee Share Options and its accounting Sustainability reporting Carbon trading, among others
Tenure, retirement and re-election

The executive directors are appointed and re-appointed only until their prescribed company retirement age. The nonexecutive directors on the other hand, are appointed for a term of three years, ideally up to a maximum of three terms each subject to the age limit as per statutory provision at the time of re-appointment following the end of a term. One-third of the directors, except the Chairman, retire by rotation on the basis prescribed in the articles of the company. A director retiring by rotation is eligible for re-election by a shareholder resolution at the annual general meeting. All directors are subject to election by shareholders at the first annual general meeting after their appointment. The board recommends that shareholders vote in favour of the resolutions to elect the relevant directors whose biographical profiles have been provided in the annual report.
Board and CEO's performance appraisal

In the financial year 2007/08, an appraisal of the board's efectiveness was conducted on the basis adopted in the last year, thereby giving the board the opportunity of better understanding areas that had room for improvement. It is a formalised process of self appraisal, whereby each member assessed, on an anonymous basis, the performance of the board under the headings of role clarity and effective discharge of responsibilities (in relation to the responsibilities highlighted earlier in this report), people mix and structures, systems and procedures, quality of participation and board image. The scoring, and open
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The board recommends the re-election of Messers E F G Amerasinghe, G S A Gunesekera and S Enderby who retire this year and become eligible for election at the Annual General Meeting to be held on the 27th of June 2008. Mr R S Captain resigned from the board on the 6th of May 2008.
Share options are not awarded below market price, and Statutory and legal requirements are complied with
None of the executive directors or members of the GEC are involved in influencing, or determining, their own compensation packages. For the purpose of this report, the terms Compensation and Remuneration have been used in reference to cash and non cash benefits received in consideration of employment (excluding statutory entitlements such as employees provident fund and employees trust fund contributions), unless otherwise qualified.
REMUNERATION
A customised pay for performance scheme based on the pillars of individual performance rating and organisational performance rating was implemented during the subject financial year for all group employees at manager level and above, and based purely on individual performance rating for all group employees at assistant manager and executive levels. The rationale for the exclusion of organisational rating in linking pay to performance at the lower levels was that the individuals at those levels had little direct influence on bottom line of their organisations. Whilst there were initial concerns regarding the acceptance by the subject employees of the raison d'etre of the new scheme, actual experiences are proving that the scheme is achieving the objectives of employee motivation towards better performance, employee recognition and reward and the alignment of employee, management and stakeholder interests. The pay for performance system has, as its bedrock, the performance management system that the group has been perfecting over the last four years and the detailed remuneration surveys that the group conducted, using the services of Ernst and Young, Sri Lanka and Cornucopia Lanka Limited, Sri Lanka, in mid 2007, in addition to ongoing reviews of remuneration based on the participation in various surveys relevant to the group. During the year under review, the group participated in three specific surveys, all conducted by Mercer on behalf of a leading private sector company in Sri Lanka, a leading hotel based in Sri Lanka and our transportation company based in India.
Key principles
The key principles underlying the group's remuneration policy are All AVP and above roles across the group have been banded by an independent third party on the basis of the relative worth of jobs, thereby enabling internal equity Compensation is set at levels that are competitive to enable the recruitment and the retention of high calibre executives in the identified career levels/job bands - as guided by the median, 65th percentile and 75th percentile of the best comparator set of companies (from Sri Lanka and the region, where relevant) Compensation, comprising of fixed (base) payments, short term incentives and long term incentives are tied to individual performance at all levels and organisational performance at manager levels and above Performance is measured annually on well defined individual and organisation objectives and metrics which reflect, and are positively correlated to, the company's objectives, thereby aligning employee, management and stakeholder interests. Organisational ratings are additionally modified to reflect market conditions via a set of pre-agreed peer comparators The more senior the level of management, the higher the proportion of the incentive component, and thereby lower proportion of the fixed (base) component of total compensation As the decision influencing capability of the position on organisational results, increases, the individual performance will hold lesser weightage than the organisational performance when determining total compensation and incentives Long term incentives currently take the form of Employee Share Options and are offered to employees, in defined career levels, based on pre-determined criteria which are uniformly applied across the same. Such options are offered at market prices prevailing on the date of the offer Affordability and sustainability Communication and transparency
Remuneration Committee
The Remuneration Committee, comprising three independent directors, is responsible for assisting the Board of Directors in establishing remuneration policies and practices in the group and in reviewing and recommending to the board appropriate remuneration packages for the Chairman-CEO and the other executive directors. In addition to being fully apprised of the pay for performance system introduced during the year under review, the Committee had discussions with various experts in understanding the rationale, and the operations, of various ESOP schemes in Sri Lanka. The Remuneration Committee in consultation with the Chairman-CEO ensures that Levels of remuneration are sufficient to attract, retain and motivate directors of the desired quality at the right price
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Board remuneration
The remuneration of the Chairman-CEO, the executive directors and other members of the Group Executive Committee are determined as per the above principles. At these higher levels, the benchmark weightage between individual and organisation performances in establishing compensation is a 20:80. The remuneration of executive directors have a significant element which is variable, such variability being linked to the peer adjusted consolidated group bottom-line and minimum returns on shareholder funds. The ratio between fixed and variable in 2007/2008, with variable being based on the actual performance in 2006/2007 was;
Fixed Emoluments of executive board members 49% 51% Variable
Cash compensation highlighted above comprises salary, pension contributions, short term incentive plans and other non-share based benefits. In accordance with the guidelines of the Securities & Exchange Commission of Sri Lanka, we have disclosed the aggregate remuneration paid to executive and non-executive directors during the financial year 2007/2008. We have also disclosed the total value of share options granted to executive directors during the same financial year.
ACCOUNTABILITY & AUDIT

Your board has taken necessary steps to ensure the integrity of the group's accounting and financial reporting systems and internal control systems and also their review and monitoring on a periodic basis. Our systems of risk management, financial and operational control, ethical conduct, compliance with legal and regulatory requirements and corporate social responsibility are detailed below.
Audit Committee, independence
external
auditors
and
Compensation of non-executive directors (NEDs) is determined in reference to fees paid to other NEDs of comparable companies. The fees received by NEDs is determined by the Board and reviewed annually. NEDs receive a fee for devoting time and expertise for the benefit of the group in their director capacities, and additional fees for either chairing or being a member of a committee. NEDs do not receive any performance/incentive payments and are not eligible to participate in any of the group's pension plans or share option plans. Non executive fees are not time bound or defined by a maximum/minimum number of hours committed to the group per annum, and hence is not subject to additional/lower fees for additional/lesser time devoted.
The Audit Committee comprises of three independent directors. It is governed by a charter which, in the main, covers the principles governing financial reporting, internal control and the management of risks, both financial and operational, and the workings of the committee. The committee is responsible for the consideration and appointment of external auditors, the maintenance of a professional relationship with them, reviewing the accounting principles, policies and practices adopted in the preparation of public financial information and examining all documents representing the final financial statements. A quarterly self certification programme that 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 and requires the CEOs of business units 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 Chairman-CEO, the Group Finance Director, the Group Financial Controller and the Head of Risk Control and Review and the external auditors are regular invitees to the meetings of the Audit Committee. The detailed Audit Committee report including the areas reviewed during the financial year 2007/2008 is found in the Board Committee report section of the annual report. Although Ernst & Young are the external auditors of the holding company and many other group companies and also audit the consolidated financial statements, the individual group companies employ many other audit firms, these being
Make-up of remuneration for executive directors

The levels and make-up of remuneration, organisation-wide, are linked to the key principles highlighted before. In order to further align the interests of executive directors and shareholders, the executive directors, like other eligible employees, receive employee share options based on role responsibility and actual performance against the same. The number so awarded are recommended to the board by the remuneration committee. Such options are awarded at the closing market price on the date of award. The share options made available to each of the executive directors for the year has been disclosed in the Directors' Report of the JKH Annual Report 2007/08. Value of total remuneration (cash) Executive Directors (company) Non Executive Directors (company) Rs. million 100.0 12.5
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KPMG Ford, Rhodes, Thornton & Co, Pricewaterhouse Coopers, SJMS Associates, Deloitte and Touch, India and Luthra and Luthra, India. The audits have been distributed in a manner that does not give rise to one dominant external auditor in terms of fees. In addition to the normal audit services, Ernst and Young and the other external auditors, have also provided certain non audit services to the group. 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. We have separately classified the audit and non audit fees paid by the company and group to our principal auditor, Ernst & Young, and to other auditors of companies in the group in the notes to the financial statements of the comprehensive 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 attempt to ensure external auditor independence. The Auditors report on the financial statements of the company for the year under review in the Financial Reports section of the annual report.
maintain proper accounting records and provide management information are in place and are functioning according to expectations. The risk review programme covering the internal audit of the whole group is outsourced and the reports arising out of such audits are, in the first instance, considered and discussed at the business/functional unit levels and after review by the sector head and the president of the industry group are forwarded to the relevant audit committee on a regular basis. Further, the audit committees also assess the effectiveness of the risk review process and systems of internal control on a regular basis.
Risk management
The GEC has adopted a group-wide risk management programme to identify, evaluate and manage significant group risks and stress-test for various risk scenarios. The programme ensures that a multitude of risks, arising as a result of the group's diverse operations, are effectively managed in creating and preserving shareholder and other stakeholder wealth. The detailed Risk Management Report of the comprehensive Annual Report describes the process of risk management as adopted by the group and the key risks to the achievement of the group's strategic business objectives. During the year, JKH further reviewed and updated its group-wide financial policies and procedures, taking in to consideration new technology, the existence of a shared services arm, regulations and best practices. This has resulted in greater uniformity in financial and management reporting processes and has facilitated better discipline and easier monitoring. The highlight of the year was the review, and strengthening, of the VAT accounting and VAT returns/claims processes in catering to the prevailing requirements of the Inland Revenue Department. The group continues its phased implementation of actions in order to align its group-wide common processes such as vendor payments, bank account reconciliations, inter company reconciliations and invoice verification, among others, in line with the COSO framework, which is the framework commonly used for assessing the effectiveness of internal controls over financial reporting under section 404 of the Sarbanes-Oxley Act 2002, with a view to assessing the degree of internal control when recording transactional data under SAP. The phased implementation is aimed at streamlining transaction authorisation access based on role requirement, making user administration easier, enabling users access for roles they perform in full as well as ensuring a more effective categorisation of user IDs for licensing purposes. Some of the issues faced by the group in the 3-phased implementation process include certain roles requiring a greater degree of flexibility based on the nature of the business, difficulty in altering the system in existing businesses vs. implementation in new business units, and changes to authorisation matrices arising out of periodic
Combining internal audit, risk management and insurance

During the latter part of the financial year, a key move was made in bringing the functions of internal audit, risk management and insurance under a common risk umbrella. The group has identified a synergising relationship among these functions and aims to have in place, in the future, subject to further study and cost-benefit/risk-reward analysis, better risk management and risk transfer mechanisms, including the establishment of a captive insurance scheme that uses the strength of the group balance sheet, in optimising the residual cost of risks. The proactive identification of all risks, both operational and financial, has helped in ensuring that internal, and external, audit programmes are tailored to the current needs of the subject entities. Risk Management is now a key heading in all feasibility reports of new investments.
System of internal control

Your board has, through the involvement of the risk review and control department, taken steps to gain assurance that systems, designed to safeguard the company's assets,
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review and restructuring. An authorisation matrix based on roles, as opposed to individuals, has been identified as a possible part solution to changes required in SAP due to changes in personnel.
Organisational and operational control

The operating model currently in place clearly defines authority limits, responsibilities and accountability facilitating operating expediency, healthy debate and decision freedom. The committee structure, as depicted below, whilst ensuring that no one operating body or individual has unfettered powers of decision making, allows consensus to as great an extent as practical, but it is the Chairman-CEO, the presidents, sector/functional heads and profit centre/function managers, who are accountable for the total group, industry/ functions groups, the sectors/functions and the business units/sub-functions respectively.
functional heads and other senior managers and the career management of assistant vice presidents and above. This process is well tested and on a proactive basis, a pool of potential successors for a number of key positions is identified and earmarked for specific training and development as is necessary. A key feature of the operating model is that the GEC members, particularly the presidents, not only play a mentoring role, but are totally accountable for the businesses and functions under them.
Group Operating Committee (GOC)

The 22 member GOC consists of the Chairman-CEO, the Deputy Chairman, the executive director presidents, the presidents and the executive vice presidents. The GOC provides a platform to share learning on issues that cross industry groups, sectors, business units and functions. It is also the forum to discuss group strategy, group initiatives and group best practices. Its main purpose is to act as a glue in connecting the various businesses within the group towards identifying and extracting group synergies and implementation of such.
Board
Group level Group Executive Committee GEC Group Operating Committee GOC * Industry/function group level Industry/function SBU/sector level Business/function BU/departmental level Group Management Committee GMC Sector Committee
Group Management Committee (GMC) and other committees and succession planning
The other key operating committees are the GMCs, the Sector Committees and the Management Committees that focus on strategy, performance monitoring, career management and succession planning of employees below assistant vice president level, risk management and group initiatives at an industry group, sector, strategic business unit and business unit levels respectively. Functions have GMCs and functional committees. Business units are encouraged to take responsibility and accountability to the lowest possible level via suitably structured committees and teams in a management by objectives setting. The agendas of these committees are carefully structured to avoid duplication of effort and ensure that discussions and debate are complementary both in terms of a bottom-up and top-down flow of accountabilities and information. As stated earlier, the responsibility and accountability lie with the Chairman-CEO, the presidents, the sector/functional heads and the profit centre/function managers as applicable. The introduction of peer adjusted organisational ratings in determining pay for performance has resulted in the search by business units, sectors and industry group of productivity enhancements, process improvements and cost efficiencies within a framework of better teamwork.
Management Committee
* Is not a decision making body and acts as a glue
The independence of the finance function is preserved through a structure that has executive vice presidents - finance and sector financial controllers having a direct functional reporting line to the Group Finance Director in a setting that allows them to contribute and add value to operations via their direct administrative reporting links with presidents and sector heads.
Group Executive Committee (GEC) and succession planning

The 7 member GEC consists of the Chairman-CEO, the Deputy Chairman, the executive director presidents and the presidents. The GEC is the overlay structure that implements, under the leadership and direction of the Chairman-CEO, the policies and strategies determined by the board, manages, through delegation and empowerment, the business and affairs of the group, makes portfolio decisions and prioritises the allocation of capital, technical and human resources. The GEC also assists the Chairman-CEO in succession planning and the appointment of presidents, sector heads,
Operations planning, monitoring and decision rights

A planning and monitoring process, which facilitates and encourages the involvement of staff through annual plans that articulate strategy at industry group, sector, strategic business unit, business unit, departmental and functional unit levels, ensures employee involvement and empowerment. Decision rights are defined for each level and
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this has resulted in an inculcation of a sense of ownership, the reduction of bureaucracy and speedier decision-making. Annual and five year plans are formulated on a bottom-up basis using futuristic scenarios developed by the GEC and GMCs and macro economic factors developed by the corporate centre. Actuals are compared against the original plan and/or the reforecast on a monthly basis at GMC, Sector Committee, Management Committee and Departmental Committee levels and are reviewed at least quarterly by the GEC. The Chairman-CEO and the GEC are able to view key financial information for all group companies on a real time basis via the group ERP system while the presidents and executive vice presidents, the CEOs of business units and managers of functions are able to view, on an online basis, information relevant to their areas of responsibility. Responsibility for monitoring and achieving plans as well as ensuring compliance with group policies and guidelines rests with the chief executive officers of each group company and heads of functions at the corporate centre at the business unit and function levels. Individual performance objectives are established for all staff from executives to the Chairman-CEO and such objectives are linked to the group objectives. A performance management system that is founded on the performance objectives and a competency matrix developed as a part of the human resources management process provides the basis for training and development while individual performance ratings coupled with organisational rating, at levels applicable, form the basis of a pay for performance system. At the GMC level and above, the focus is more on headline financial and non-financial indicators, strategic priorities, risk management, use of IT as a tool of competitive advantage, new business development, continuous process improvements and human resource management.
and Analysis which explains to shareholders the strategic, operational, investment and risk related aspects of the company that have translated in to the reported financial performance and are likely to influence future results. The Statement of Directors' Responsibilities in relation to financial reporting is given in the Financial Reports Section of the annual report. The Directors' Interests in contracts of the company are addressed in the Annual Report of the Board of Directors. The directors have taken all reasonable steps in ensuring the accuracy and timeliness of published information and in presenting an honest and balanced assessment of results in the quarterly and annual financial statements. As discussed in the shareholder relations section of this note, all price sensitive information has been made known to the Colombo Stock Exchange, shareholders and the press in a timely manner and in keeping with the regulations.
Ethical and responsible decision making values

The board encourages management to promote value-based decision making across the organisation. The culture within JKH draws upon a set of unifying values to guide the actions and decisions of the board and all employees. The group's values are found in the Our Values section of the Annual Report and are/have been constantly referred to by the Chairman-CEO, Presidents and BU heads during employee, agent and other key stakeholder engagement. The group believes that the main source of its competitive advantage is the trust that the stakeholders place on the core values underlying its corporate activities. The group's core values are regularly displayed in the group's intranet and are also disseminated in many other ways, including new employee induction sessions, feedback sessions and performance management feedback sessions, just to name a few. The senior management of the group, generally recognised as AVP and above grades including the Chairman-CEO, are expected to walk the talk and their management behaviour is monitored through an annual 360degree feedback. All the group's recognition schemes insist, as a minimum, that all nominees have lived the JKH Values.
Going concern and financial reporting

The directors are 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. The going concern principle has been adopted in preparing the financial statements. All statutory and material declarations are highlighted in the Annual Report of the Board of Directors in the comprehensive Annual Report. Financial statements are prepared in accordance with the Sri Lanka Accounting Standards (SLAS), including all the new standards introduced during the subject year, and International Accounting Standards (IAS), as applicable. Information in the financial statements of the Annual Report are supplemented by a detailed Management Discussion
Code of conduct
A code of conduct has been formally communicated to all employees, executives and above and are now a component of the employee self service - HR portals - developed by group HR and group IT on a SAP platform and is based on four basic principles, namely The allegiance to the company and the group The compliance with rules and regulations applying in the territories that the group operates in The conduct of business in an ethical manner at all times and in keeping with acceptable business practices, and The exercise of professionalism and integrity in all business and public personal transactions
33
The subject employees are expected to adhere to the code in the performance of their official duties and in other situations that could affect the group's image and are expected to entrench the expected behaviour at all levels in the organisation through communication and role modelling.
to be used where the systems and processes that are already in place do not, or are not, capable of addressing the issue at hand.
Compliance
The board is conscious of its responsibility to the shareholders, the government and the society in which it operates and is committed to upholding the highest standards of ethical behaviour in conducting its business. The board, through the group legal division, the group finance division and its other operating structures, strives to ensure that the company and all of its subsidiaries and associates comply with the laws and regulations of the countries they operate in. The Board of Directors have also taken all reasonable steps in ensuring that all financial statements are prepared in accordance with the Sri Lanka Accounting Standards and the requirements of the Colombo Stock Exchange and other applicable authorities. The Sri Lanka Accounting Standards, as set by the Institute of Chartered Accountants of Sri Lanka, are those, which govern the preparation of the financial statements. The International Accounting Standard is used in the rare instance where a Sri Lanka Accounting Standard does not exist. The board is aware of the growing importance of the disclosure of critical accounting policies as a part of good governance and opine that there are no instances where the use of such concept would have a material impact on the company's and the group's financial performance. The group has made every effort to comply with the requirement of the new Companies Act which came into effect from 3rd May 2007.
Securities trading policy

The group's securities trading policy prohibits all employees and agents engaged by JKH who are aware of unpublished price-sensitive information from trading in JKH shares or the shares of other companies in which the group has a present business interest. The board, GEC, GOC as well as certain identified employees in senior executive roles who are privy to JKH's results prior to its availability to the public are prohibited from trading during periods leading up to the release of quarterly and annual results, new investments, particularly mergers and acquisitions, announcements of scrip issues and dividend payments.
Open communications
JKH board believes in maintaining open-door policies for its employees and key stakeholders and this is promoted at all levels of the group. Given the hierarchical structures that are unavoidable in an organisation as diverse as JKH, the entrenchment of open communications is yet to take the form and be in the extent desired. The importance of communication, top-down, bottom-up and lateral in gaining employee commitment to organisational goals through a sense of belonging as a result of being better informed has been emphasised through various communiqus issued by the Chairman-CEO and other senior managers. Skip-level meetings, which were introduced for employees at assistant manager and above levels throughout the group companies in 2006/2007 and enabled employees to get an opportunity to interact, and discuss, with superiors who are at a level higher than their own immediate supervisor, gained in stature during 2007/2008 and proved to be more effective as the subject employees gained more confidence in its intent. This has furnished the management with a conduit, via firsthand feedback, to information, which has been helpful in improving operations and work relationships.
Corporate responsibility
The group recognises that it exists not only to maximise long term shareholder value but also to look after the rights and appropriate claims of many non-shareholder groups such as employees, consumers, clients, suppliers, lenders, environmentalists, host communities and governments. We recognise that they have a stake in the outcome of the group's actions and, accordingly, we will accord to them an increasing status when making corporate decisions. More importantly, we are becoming more aware of the impact of our business decisions on these stakeholder groups, the environment and broader communities. Corporate responsibility is admittedly an area that demands more prominence in the group's decision matrix. While we have been reporting on our sustainability practices in the past, we believe that our efforts, particularly on stakeholder and environmental aspects, could be more focused, further refined and better organised. This year, the group undertook an extensive audit of its operations in order to ascertain the full impacts of its business operations on the economy, environment and society and establish the gaps and shortcomings in the way we currently integrate such impacts
Whistleblower policy
The group has established a mechanism for employees to 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. While this is a key process within JKH to support and promote honest and ethical behaviour, this course of action is
34
in our short term, medium term and long term decisions and strategies. An audit of our sustainability practices was recently conducted by Det Norske Veritas (DNV) and the main findings of the audit have been captured in the Sustainability Report of the comprehensive Annual Report. A quick scan of the findings give us the confidence that much can be achieved by a few immediate actions and the group has already taken the next steps in formulating action plans and in establishing a steering committee that will monitor the actual progress against plans. It has also been agreed that sustainability priorities and objectives will be developed and adopted, for each of our major businesses and will be integrated in to the annual planning and strategy formulation processes. The John Keells Social Responsibility Foundation, the vehicle used by the group in developing and implementing the group's involvement in the community, is gearing itself to ensure that the social programmes of the group are consistent with the principles of sustainable development. The company, through its Investor Relations division (IR), maintains an active dialogue with shareholders, potential investors, investment banks, stockbrokers and other interested parties. Any concerns raised by a shareholder are addressed promptly at the department level and are forwarded, when necessary, to the GEC for consideration and advice. Analysts reports are circulated among the GEC, as and when available, and its contents debated.
brought to the attention of the GEC and/or the board, as appropriate, and addressed.
Major transactions
All material and price sensitive information about the company is promptly communicated to the Colombo Stock Exchange, where the shares of the company are listed and released to the press and shareholders. The group also publishes quarterly, half-yearly and nine months ended interim reports to all its shareholders in a timely manner. The interim and annual reports, contain a Chairman's message which explains, at a high level, the performance, background and rationale for all major transactions.
THE FUTURE
JKH is committed to conducting its affairs with integrity, efficiency and fairness to all stakeholders. Our approach to governance is of introspection, critical review, continued benchmarking and improvement. This, we believe, is not a choice as much as it is an essential, as the global investment community becomes more and more stakeholders oriented in their expectations of how companies should conduct business. As a businesses based in an emerging market, now sometimes referred to as a frontier market, we seek to remain a preferred choice for investment. Therefore, as in the past few years, our key areas of focus will continue as follows Creating robust operating structures that are able to evolve to face the challenges of our strategic plans and continuous re-invention of our portfolio, while maintaining sound internal controls Developing the depth and reach of our external stakeholder relationships, improving transparency and efficiency in information flows and promoting partnership and mutual understanding between management and external stakeholders Staying abreast of international best practices and adopting those that add value to the group and its stakeholders, and Doing what we do, better than we already do.
SHAREHOLDER RELATIONS
Constructive use of AGM
Shareholders 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 of JKH and the chairmen of the various committees. The contents of this annual report will enable existing and prospective stakeholders to make better informed decisions in their dealings with the company. In general, all steps are taken to facilitate the exercise of shareholder rights at AGMs, including the receipt of notice of the AGM and related documents within the specified period, voting for the election of new directors, new long term incentive schemes or any other issue of materiality that requires a shareholder resolution.
Dialogue with institutional shareholders

The company has a well-developed investor relations programme to address the information needs of investment institutions and analysts regarding the company, its strategy, performance and competitive position. Given the wide geographic distribution of the company's current and potential shareholders, this programme includes regular roadshows to Asia Pacific, Europe and the USA conducted by the Deputy Chairman and the Head of Investor Relations. Matters discussed, and issues raised, at these meetings are
35
Board Committee reports

REMUNERATION COMMITTEE REPORT
The Remuneration Committee met on several occasions, two of them to conduct regular remuneration committee business in accordance with its mandate and the requirements of the board, and several other occasions to review the proposed pay for performance scheme and to consider the impacts of the Companies Act 2007 on director remuneration. A water-shed in the financial year was the introduction of a pay for performance scheme, which significantly augmented the variable pay mind-set that the group had nurtured in 2005/2006. The scheme, which was introduced and has now been accepted by all concerned, was adopted at all grades, executives and above. The company had the benefit of arguably the best professional guidance in this regard and the consensual methods adopted helped introduce a very sensitive and radical change without any apparent opposition. The process which was customised to meet the specific requirements of John Keells group has shown that change is possible in Sri Lanka, as long as there is adequate dialogue and fairness in dealing with possible areas of dissent. There is no doubt that a culture of granting remuneration based on just the cost of living factors, without reference to the corporate and individual performance, is not sustainable in the medium to long term and that, if allowed to continue, will lead to an erosion of an organisation's financial capacity and operating capability. The Committee is proud to have been associated with management in this farsighted, timely and bold initiative. The committee fulfilled its obligations in relation to remuneration of the executive directors, the Chairman and non executive directors, following best practice, keeping in mind the special requirements of the organisation whilst also recognising market trends. Every effort has been made in ensuring compliance with the requirements of the Companies Act as it applies to director remuneration based on advice received from legal experts. The committee also had the task of reviewing the design of a new Employee Stock Option Plan, this being the fourth issue since the company decided on granting long term benefits to employees, at selected levels, in its quest for improved loyalty and commitment of key executives by inculcating a sense of belonging. The enjoyment by employees of a long term benefit through stock options, which is a universally popular method of recognising good performance, is an integral part of the group's reward strategy. Given a lack of firm definition regarding the future direction of the application of Sri Lankan accounting standards on share options and given the possibility of such a definition being available in 2008, the board recommended that the award be limited to a single year as opposed to it being spread over a period of three years as was the practice previously. This was duly approved at an Extraordinary General Meeting. It is likely that future ESOP schemes will follow the normal practice of being open for a period of three to five years with a view to creating a stability of employee expectations. The committee interacted regularly with the Human Resource division and management in ensuring that compensation structures were in line with an overall group policy subject to the specificities of different trades and services. The key principles of the groups remuneration policy are found in the Remuneration section of the Corporate governance report. In conclusion, I wish to thank my colleagues, Deshamanya Deva Rodrigo and Mohamed Muhsin, for their valuable contributions to the work of the committee and also to our secretary, Linda Starling.
Franklyn Amerasinghe Chairman, Remuneration Committee 22 May 2008 Members M V Muhsin, P D Rodrigo
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AUDIT COMMITTEE REPORT

Composition of the Audit Committee
The Audit Committee consists of four independent non-executive directors. The committee draws on the expertise of members with leadership backgrounds in finance, audit, legal, human resource management and regulatory institutions. In keeping with the Guidelines for Best Practice on the Role of Auditors issued by the Securities and Exchange Commission of Sri Lanka, the Chairman of the committee is a Chartered Accountant and former Senior Partner of PricewaterhouseCoopers, Sri Lanka. The Head of Group Risk and Control Review serves as Secretary to the Audit Committee.
ascertain that the improvements are aligned to best business practices. During the course of the year, the committee reviewed the effectiveness of the internal financial controls to ensure they provide reasonable assurance to the directors that the financial reporting system adopted by the group can be relied on in the preparation and presentation of the quarterly and annual financial statements. These reviews included discussions on the effectiveness and security of information processing and technology platforms. The committee considered the Internal and External Audit reports of all group companies which were made available to them and discussed, where necessary, areas of concern with the audit committee attendees with a view to receiving assurance that the significant internal control and accounting issues highlighted by the Internal and External Auditors have been and/or are being addressed by the management and, where applicable, have been correctly recognised in the financial statements. The committee obtained quarterly declarations from the industry groups and sectors confirming compliance with established group policies and procedures and highlighting departures, if any, together with reasons, from financial reporting and statutory requirements. The committee held a special closed door meeting with the External Auditors without the presence of any executive directors or officers, to discuss in particular matters relating to the co-operation, quality of information, and representations received from the management. Such discussions also covered the internal rules and guidelines followed by the External Auditors in ensuring independence. The committee met with the Head of Group Tax to review the key group and sector specific tax issues impacting the group and the related status and action plans taken. Based on the submissions made by management, the committee recommended the early adoption of Sri Lankan Accounting Standard 16 (revised) on Employee Benefits. The committee deliberated on the many representations made by the group to the relevant statutory and regulatory authorities directly to obtain clarity and guideline on matters of Accounting Standards, tax and other related issues. As at date of this report, a ruling is awaited from the Urgent Issues Task Force (UITF) Committee of the Institute of Chartered Accountants of Sri Lanka on the accounting treatment and disclosure to be made in relation to the necessity of providing for deferred tax on BOI and Tax Holiday Companies as per Sri Lankan Accounting Standard 14 (revised) on Income Taxes During the course of the year, the committee established processes, via a review of movements, variances and ratios to vet the quarterly and annual financial statements of
Meetings
There were five meetings of the committee held during the year. The Chief Executive Officer and the Chief Financial Officer, both executive directors, together with the Group Financial Controller attend most parts of these meetings by invitation. Other officials are invited to attend on a needs basis. The Internal Auditors and External Auditors attend meetings when matters pertaining to their functions come up for consideration.
Terms of reference
The committee is governed by the specific terms of reference as set out in the Audit Committee Charter which is reviewed on a bi-annual basis. The terms of reference comply with and go beyond the requirements of the listing rules of the Colombo Stock Exchange. The committee focuses on the following objectives in discharging its responsibilities (a) Oversees the functions of risk management (b) Oversees the policies and procedures in place to have a system of internal controls adequate in design and effective in operation (c) Ensures and strengthens the independence and objectivity of the External (statutory) Auditors (d) Reviews the appropriateness of the principal accounting policies used (e) Reviews the financial statements (f ) Ensures the integrity of the financial statements
Summary of activities
The committee reviewed the consistency and appropriateness of the accounting policies adopted by the group and was assured that the policies used were appropriate and were in compliance with the Sri Lanka Accounting Standards. The committee reviewed and deliberated on policy updates on internal procedures to
37
John Keells Holdings PLC prior to recommendation to be adopted by the board.
Risk and control review

The Audit Committee is supported by an established group Risk and Control Review Department (R&CR), which manages the internal audit and risk management requirements of the group. The Head of Group R&CR reports functionally to the Chairman of the Audit Committee on activities and key control issues. Internal audits are outsourced to leading audit firms in line with an agreed annual audit plan. Regular follow up reviews are conducted by group R&CR to ascertain that audit recommendations have been acted upon. Group R&CR also conducts special reviews as requested either by the Audit Committee or by management. The Internal Audit function, in addition to reviewing the efficacy of internal controls, reviews the actions taken to control and mitigate operational and business risks and monitors and reports on the compliance of group companies with statutory requirements and group accounting and operational policies. Internal audit reports provide an overview of the risk profile of the business being audited, and the internal audit frequency depends on the overall risk grading, with higher risk areas being on a shorter audit cycle. During the period under review, the board was apprised of the enterprise risk management programme implemented across the group. During the latter part of the year, with a view to synergise on the functions of internal control, the internal audit, risk management and risk transfer functions were brought under one risk umbrella with accountability lying with the group R&CR Department.
The External Auditors have direct communication channels with the Audit Committee and have kept the committee advised of matters of significance that arose during the course of the audit. The Audit Committee met with the External Auditors on 16th and 22nd May 2008 to review and approve the financial statements before presentation to the board for adoption. The Audit Committee has reviewed the other services provided by the External Auditors to the group to ensure that their independence as auditors has not been compromised. The Audit Committee has recommended to the board that Ernst & Young, Chartered Accountants, be appointed external auditors of John Keells Holdings PLC for the financial year ending 31st March 2009, subject to approval by the Shareholders at the next Annual General Meeting.
Conclusion
The Audit Committee is satisfied that the group's accounting policies, operational controls, and risk management process provides 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. During the course of the year, Mukhlis Ismail replaced Mike Anthonisz as the Head of Risk and Control Review and as the Secretary to the Audit Committee. Mike Anthonisz's contribution to the committee is acknowledged. Finally, I would like to thank Franklyn Amerasinghe, Steven Enderby and Ms Sithie Thiruchelvam who served on the committee and contributed immensely with their professional expertise.
Subsidiary company Audit Committees

Quoted subsidiaries have appointed their own audit committees consisting of independent directors. Such audit committees are independent of the Audit Committee of John Keells Holdings PLC but maintain the standards agreed with John Keells Holdings PLC Audit Committee and report to the JKH Audit Committee on any issue of significance. The minutes of their meetings are made available to the Audit Committee of John Keells Holdings PLC. The group R&CR Department provides secretarial and logistical support to such audit committees.
Deva Rodrigo Chairman, Audit Committee 22 May 2008 Members F Amerasinghe, S Enderby, S S Tiruchelvam
External Audit
The Audit Committee has discussed with the External Auditors before the audit commenced, the nature, approach and scope of the audit and has reviewed the audit plan for the financial year 2007/2008.
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NOMINATIONS COMMITTEE REPORT

The Nominations Committee, as of 31st March 2008, consisted of four independent directors and the ChairmanCEO of John Keells Holdings PLC. The mandate of the committee remains To recommend to the board the process of selecting the Chairman and the Deputy Chairman To identify suitable persons who could be considered for appointment to the board as non executive directors Make recommendation on matters referred to it by the board
During the period under review, the committee met once, with all members in attendance. The committee continues to work closely with the board in reviewing, regularly, its skills needs. The committee opines that the skills representation in the board is appropriate for the group's current board level needs.
Tarun Das Chairman Nominations Committee 22 May 2008 Members S Enderby, M V Muhsin, S S Tiruchelvam, S C Ratnayake
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Thinking BEYOND our current thinking

Management discussion and analysis
Investor information
Highlights
JKH share performance during the year 2007/08 The JKH share price fell 22.7 per cent during the year 2007/08, against a fall of 17.1 per cent in the blue chip Milanka Price Index (MPI). Lower trading volumes compared to 2006/07 of the JKH share was a key factor in the share underperforming the Colombo Stock Exchange (CSE). The drop in the share price resulted in a negative TSR of 19.5 per cent in the current year. float of Rs. 56.79 billion, reflecting the relatively higher liquidity of the JKH share. Recognition for superior performance JKH was voted as the most respected entity In Sri Lanka by LMD for the third consecutive year since the ranking's inception in 2005. JKH was ranked number 1 in the areas of management profile, quality consciousness, honesty, work environment, vision, CSR and national-mindedness. JKH was recognised as the best Corporate Citizen in Sri Lanka at the Ten Best Corporate Citizens Award 2007 organised by Ceylon Chamber of Commerce. The JKH annual report of 2006/07 won the Gold award for corporate governance and was adjudged one of the joint runners up in the Overall Winner category by the Institute of Chartered Accountants of Sri Lanka. The JKH annual report of 2006/07 also won the Gold award for corporate governance disclosure by the South Asia Federation of Accountants.
Optimising the capital structure IFC, a member of the World Bank Group, extended a long term corporate investment facility of USD 75 million on a floating rate basis to support JKH's expansion in key business areas in Sri Lanka and other countries in the region. -
Continued belief in financial position and financial performance JKH retained its rating of AAA (Sri) assigned by Fitch Ratings Lanka Limited on account of the continued strength of its balance sheet and strong business fundamentals.
The JKH share

The Colombo Stock Exchange (CSE) experienced negative growth in 2007/08, compared to the positive growth in 2006/07, due to declining investor confidence as a result of an escalation of the North East conflict and higher interest rates. The All Share Price Index (ASPI) fell by 8.6 per cent to 2,550 points, whilst the MPI fell by 17.1 per cent to 3,181 points by 31st March 2008. The JKH share fell 22.7 per cent to Rs. 119.75 as at 31st March 2008 compared with a closing price of Rs. 155.00 at the end of the previous year. The JKH share traded between a low of Rs. 116.25 and a high of Rs. 156.75 during the year under review. Generally depressed market conditions, coupled with lower trading volumes of the JKH share, as seen in the annualised share turn ratio, were the key reasons for the fall in the JKH share price. However, it is pertinent to note that the composition of shareholders changed during the year under review, with the shareholding of non-resident investors increasing to 49.9 per cent from 43.1 per cent in the previous year, as a result of greater foreign institutional investor interest. During the initial months of the financial year under review, the JKH share performance was largely in line with the market. However, relatively lower trading volumes of the JKH share beginning from September 07 through to the end of the financial year affected the JKH share price. Conversely, sustained margin trading on mid-cap companies' shares and the occasional heavy trading on shares of large companies helped to maintain CSE's performance at levels higher than that of JKH.
Expansion of business portfolio In April 2008, JKH announced an investment of USD 5.72 million for a 44 per cent equity stake in Quatrro Finance & Accounting Solutions. Quatrro F&A is the India based Financial and Accounting (F&A) business of the Quatrro group. Quatrro F&A recently acquired the Chicago based Financial Process Outsourcing LLC in a structured financing transaction The group also invested in John Keells Foods India Private Limited, a company incorporated in India to manufacture and market processed meats to the growing Indian market. The group entered in to an MOU with its associate, Associated Motorways (AMW), and Finlays Colombo to jointly develop a contiguous 6.6 acre block of land with access from Union Place and Vauxhall street.
Continuous re-evaluation of business portfolio In March 2008, JKH announced the sale of its Systems Integration business with the divestment of Keells Business Systems.
Highest market capitalisation of shares in free float Despite the correction in the share price, JKH has the highest market capitalisation of shares in free
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Index
JKH share volumes and relative performance vs market
Volume
150
9,000,000
140
8,000,000
130
7,000,000
120
6,000,000
110
5,000,000
100
4,000,000
90
3,000,000
80
2,000,000
70
1,000,000
60
Apr 07 May 07 Jun 07 Jul 07 Aug 07 JKH volume Sep 07 JKH Oct 07 ASI Nov 07 Dec 07 MPI Jan 08 Feb 08 Mar 08
The JKH share has been a solid long term value creator and is expected to remain so. As illustrated in the following graph, the JKH share has outperformed the ASPI and blue-chip MPI consistently over the last five years. Despite the fall in the share price during the current year, the JKH share has recorded a compound annual growth rate of 32.5 per cent over the last five years, outperforming the ASPI, MPI and DSI, which recorded compound annual growth rates of 28.1 per cent, 20.4 per cent and 31.3 per cent respectively. The performance of equity markets across the globe was affected negatively due to a move away from higher risk asset
classes. Due to the escalation of the conflict in Sri Lanka, the CSE and the JKH share underperformed regional stock exchanges such as the Sensex Index of the Mumbai Stock Exchange (BSESN), the Straits Times Index of Singapore (SGX) and the Kuala Lumpur Stock Exchange (KLSE) during the year under review. Over a period of 5 years, the JKH share has outperformed regional stock markets such as Singapore and Kuala Lumpur, with a compound annual growth rate of 32.5 per cent compared with SGX's STI index growth of 18.9 per cent and KLSE's growth of 14.4 per cent. The JKH share has however,
JKH outperforms ASPI & MPI (over 5 years)

Index 700
600
500
JKH
400
ASPI 300 MPI 200
100 Apr03
Jul03
Oct03
Jan04
Apr04
Jul04
Oct04
Jan05
Apr05
Jul05
JKH
Oct05
Jan06
ASI
Apr06
Jul06
Oct06
MPI
Jan07
Apr07
Jul07
Oct07
Jan08
43
JKH share compared with key regional indices

Index 170 160 150 140 130 120 110 100 90 80 70
JKH Kuala Lumpur Singapore Bombay
60 Apr-07
May-07
Jun-07
Jul-07
Aug-07
BSESN
Sep-07
Oct-07
KLSE
Nov-07
STI
Dec-07
JKH
Jan-08
Feb-08
Mar-08
underperformed the Mumbai Stock Exchange over the 5-year period. This was mainly due to the rally in September 2007 in Indian equities.
amounts received by the company, or due and payable to the company, in the respect of the issue of shares and the call of shares. The total number of shares in issue at the beginning of the financial year was 552.94 million. During the financial year, a total of 83.05 million shares were allotted, with 78.96 million shares originating from a 1:7 scrip issue and 4.09 million shares arising out of the exercise of employee share options (ESOPs), resulting in the number of shares in issue
Issued share capital

The new Companies Act, which came into effect on 3rd May 2007, requires companies to present the previous share capital, share premium and preference share capital as one stated capital account. This account will reflect the total
JKH share compared with key regional indices (over 5 years)

Index 780
680
580
Bombay
480
380
JKH
280
Singapore
180
Kuala Lumpur
80 Apr-03
Oct-03
Apr-04
Oct-04
BSESN
Apr-05
Oct-05
KLSE
Apr-06
STI
Oct-06
JKH
Apr-07
Oct-07
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Market information on ordinary shares of the company

2007/08 Q4 128.00 116.25 119.75 1.00 Q3 134.00 125.50 128.00 3.00 Q2 146.00 125.75 129.00 Q1 156.75 143.00 145.50 1.00 2006/07 183.25 96.97 155.00 3.00
Share information
Highest price (Rs.) Lowest price (Rs.) As at period end (Rs.) Dividends paid (per share) 156.75 116.25 119.75 5.00
Trading statistics
Number of transactions Number of shares traded (thousands) % of total shares in issue Value of all shares traded (Rs. mn) Average daily turnover (Rs. mn) % of total market turnover Market capitalisation (Rs.000) % of total market capitalisation 9,048 104,754 16.5 13,930 58.3 16.1 76,160 9.2 2,701 16,814 2.6 2,028 35.6 9.9 76,160 9.2 2,748 20,795 3.3 2,695 43.5 10.7 81,407 9.9 2,088 38,395 6.0 4,957 78.7 26.3 82,043 10.0 1,511 28,751 4.5 4,249 74.5 19.3 92,537 11.2 17,449 117,968 21.30 20,112 83.8 17.1 97,945 11.1
increasing to 635.99 million. The 1:7 scrip issue, which was declared on 13th March 2007, was allotted during the financial year 2007/08. In addition to the shares in issue, there are a further 34.86 million shares equivalent of unexercised ESOPs as at 31st March 2008. These are eligible for immediate exercise as at the date of this report. The balance of global depositary receipts (GDRs), in ordinary share equivalents, increased to 1.11 million as at the end of the year from 0.97 million at the beginning of the year due to allotment of the scrip issue discussed above.
Dividends vs payout ratio

Rs. billion
3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

2004 2005 Dividend 2006 2007 61% Rs.1.1 billion Rs.0.8 billion 66% Rs.1.2 billion 63% Rs.1.4 billion 97%
Rs.3.2 billion
81%
2008
Dividend payout
Dividends
The dividend policy of JKH seeks to ensure a dividend payout which correlates with the growth in profits, whilst ensuring that the company retains adequate funds to support investments which facilitate the creation of sustainable shareholder value in the short, medium and long term.
During the year, the company has declared, and paid, two interim dividends of Rs. 1 per share each and a one-off special dividend of Rs. 2 per share. The special dividend was made to reward the shareholders based on improved profits after tax of the company during the current financial year on account of a higher dividend income, interest income in a high interest rate environment and various cost saving measures. The company also announced a final dividend of
EMPLOYEE SHARE OPTION PLAN AS AT 31ST MARCH 2008 Date of grant PLAN 2 Award 2 Award 3 PLAN 3 Award 1 Award 2 Award 3 PLAN 4 25.03.2008 Total 5,405,945 24.03.2013 34,829,221 120.00 5,405,945 47,945,415 11,480,983 1,602,004 5,405,945 34,862,428 120.00 12.11.2002 23.01.2004 Shares granted Expiry date Option grant price 76.00 104.25 Shares ** adjusted 6,810,320 5,129,406 11,939,726 Lapsed/ cancelled 130,928 115,605 246,533 387,905 519,046 448,520 1,355,471 Current price ** 70.81
Exercised 6,679,392 2,051,778 8,731,170 2,247,494 502,319 2,749,813
Outstanding 2,962,023 2,962,023 7,111,424 9,280,494 10,102,542 26,494,460
3,728,580 11.11.2007 2,994,209 22.01.2009 6,722,789 5,503,850 28.03.2010 6,645,575 09.04.2011 10,551,062 27.05.2012 22,700,487
29.03.2005 10.04.2006 28.05.2007
136.00 9,746,823 157.25 10,301,859 146.00 10,551,062 30,599,744
92.72 120.74 146.00
** Adjusted for bonus issues and right issues

45
Key ratios
2007/08 Market capitalisation (Rs. mn) EV/EBITDA (times) Diluted earnings per share (Rs.) PER (diluted) Price to book (times) Price/cash earnings Dividend yield (%) Total shareholder returns Market value added (Rs. mn) Dividend payout ratio (%) 76,160 7.8 8.00 15.0 1.7 12.6 4.2 (19.5) 31,942 81.0 2006/07 97,945 13.0 6.04 25.6 2.3 20.7 2.3 39.7 58,709 62.8 2005/06 63,101 10.7 5.30 21.4 2.9 17.1 3.0 43.9 40,300 65.8
Rs. 1 per share based in the profits of the financial year 2007/08 for payment on 27th June 2008. Accordingly, the dividend per share (DPS) in the current year increased to Rs. 5 per share compared with Rs. 3 per share in the previous year. The dividend payout ratio increased to 81 per cent compared to 63 per cent the previous year, primarily due to the special dividend of Rs. 2 per share. In absolute terms, the dividend paid and payable out of 2007/08 profits will be Rs. 3.18 billion compared to the dividend of Rs. 1.41 billion in the previous year.
with Rs. 3.53 billion in the previous year. As a result, the return on equity (ROE) increased to 12.3 per cent in 2007/08, compared with 11.4 per cent in the previous year. Return on capital employed (ROCE) increased marginally to 13.7 per cent from 13.6 per cent in the previous year. Further discussion on ROE and ROCE can be found in the consolidated group performance section of this report.
Market capitalisation and entercprise value

Total market capitalisation as at 31st March 2008 was Rs. 76.16 billion, recording a drop of 22 per cent from the market capitalisation of Rs. 97.94 billion at the beginning of the year. The enterprise value as at 31st March 2008 dropped 21 per cent to Rs. 76.18 billion as a result of the drop in the market capitalisation.
Earnings per share

The fully diluted earnings per share (EPS) for the period grew 32 per cent from Rs. 6.04 to Rs. 8.00. The cash EPS increased 27 per cent from Rs. 7.50 to Rs. 9.54 in the current year.
Total shareholder returns

The total shareholder returns (TSR) of the JKH share was a negative 19.5 per cent as a result of the 22.7 per cent fall in the JKH share price during the year, offset by a higher DPS. The average 1-year T/bill rate for the same period was 17.6 per cent. Even though the TSR on the JKH share yielded negative returns, the JKH share has consistently outperformed the 1-year T/bill yield in the past.
Price earnings ratio

The price earnings ratio (PER) as at 31st March 2008 was 15.0 times compared with 25.6 times the previous year as a result of a lower share price and a higher EPS. The JKH PER still remains attractive against the market PER of 10.4 times as at 31st March 2008 as published by the CSE.
Price to book
As at 31st March 2008, the price to book ratio of the group was 1.7 times, compared with 2.3 times and 2.9 times in the last two years. The drop in the year was due to the drop in market value of JKH. Trend in composition of shareholders
20% 22% 23% 23% 20%
Capital productivity
Profits attributable to equity holders for the year under review increased by 45 per cent to Rs. 5.12 billion compared Five-year total shareholder returns
322% 114.7% 259% 35% 231% 160% 39.7%
36%
35% 43% 49%
115%
39.7%
43.9%
34%
33% 7% 2%
35% 28% 25% 5% 1% 6% 1% 5% 1%
(19.5%) 2004 2005 Annual TSR 2006 2007 2008
8% 3%
2004
2005
2006
2007
2008
Indexed 5-year TSR
Executive directors and spouses Non executive directors and connected parties Public non-resident and GDRs
Executives and connected parties Public resident Shareholders' holding more than 10%
46
Enterprise value composition

Rs. million 100,000 80,000 60,000 40,000 20,000 0 2004 2005 Net debt 2006 2007 Market capitalisation 2008 Rs. billion 100,000 80,000 60,000 40,000 20,000 0 2004
JKH market capitalisation and free float
Enterprise value
2005 Market Cap
2006
2007 Market Cap in free-float
2008
Liquidity
Average daily turnover of the JKH share was Rs. 58.3 million compared to a Rs. 362.3 million average daily turnover recorded by the CSE. Liquidity of the JKH share marginally decreased to 16.1 per cent of the total market turnover, compared with 17.1 per cent recorded in the previous year. Total volumes of JKH shares traded during the year dropped to 104.8 million shares from the 118.0 million shares recorded in the previous year. The annualised share turn ratio decreased significantly to 0.18 from 0.25, reflecting the lower trading volumes of the share. The free float of the shares as at 31st March 2008 was 74.6 per cent compared to the 70.8 per cent at the end of last year.
shareholder while, 97 per cent of shareholders held 5 per cent of the total shares at an average of 3,921 shares per shareholder. Composition - 74.6 per cent of the shares in issue were held by public, while 25.4 per cent of the shares were held by the directors, executives and connected parties as at 31st March 2008. Subsequent to the resignation of Mr R S Captain from the Board of Directors of JKH with effect from 6th May 2008, the latter figure came down to 5.9 per cent. Domicility - 50.1 per cent of shares were held by residents and 49.9 per cent was held by non residents.
Shareholder information
The issued ordinary shares of JKH are listed on the Colombo Stock Exchange (CSE) CSE ticker symbol for John Keells Holdings PLC shares: JKH.N0000 Newswire codes: - Bloomberg: JKH.SL - Dow Jones: P.JKH - Reuters: JKH.CM
Distribution and composition of shareholders

The total number of shareholders of JKH dropped to 8,475 from the 8,926 seen last year, as the shareholders list was merged during the year to avoid duplication of records. Distribution - 3 per cent of shareholders held 95 per cent of the total shares, averaging 2.3 million shares per
Distribution of shareholders
31 March 2008 Number of Number of shareholders % shares held Less than or equal to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 50,000 50,001 to 100,000 100,001 to 500,000 500,001 to 1,000,000 Over 1,000,001 Grand total 5,151 60.78 1,717 20.26 477 5.63 747 8.81 115 1.36 144 1.70 31 0.37 93 1.10 8,475 100.00 31 March 2007 Number of Number of shareholders % shares held 5,608 62.83 1,780 19.94 506 5.67 669 7.49 117 1.31 126 1.41 34 0.38 86 0.96 8,926 100.00
1,229,290 0.19 4,123,286 0.65 3,380,914 0.53 15,525,960 2.44 7,916,985 1.24 33,511,546 5.27 23,687,289 3.72 546,619,292 85.95 635,994,562 100.00
1,173,369 0.21 4,206,227 0.76 3,672,648 0.66 13,948,910 2.52 7,989,449 1.44 27,920,015 5.05 24,880,442 4.50 469,148,927 84.85 552,939,987 100.00
47
Composition of shareholders Number of shareholders Executive directors and spouses Non-executive directors and connected parties* Executives and connected parties Public resident Institution Individual Public non resident Individual Institution Global depository receipts Shareholders holding more than 10% Total 6 12 123 560 7,499 97 177 1 8,475 31 March 2008 Number of shares held 8,598,117 124,274,250 28,901,205 73,491,771 83,323,494 % 1.35 19.54 4.54 11.56 13.10 Number of shareholders 6 12 160 603 7,836 90 218 1 8,926 31 March 2007 Number of shares held 7,845,938 124,823,768 28,626,702 74,421,962 80,680,833 169,839,120 67,728,063 973,601 552,939,987 % 1.42 22.57 5.18 13.10 14.59 30.72 12.25 0.17 100.00
248,498,728 39.07 67,794,301 10.66 1,112,686 0.17 635,994,552 100.00
* Subsequent to the resignation of Mr R S Captain on 6th May 2008, the percentage held by non executive directors and connected parties was 5.9 per cent.
Twenty largest shareholders of the company Shareholders name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Mr S E Captain Mr R Rajaratnam Galleon Technology Offshore Ltd Genesis Smaller Companies Estate of Mr A A N De Fonseka Aberdeen Global Asia Pacific Fund Arisaig India Fund Limited Genesis Emerging Markets Opportunities Fund Limited Genesis Group Trust Emerging Markets Fund Galleon Diversified Fund Limited FS Asia Pacific Rubber Investment Trust Limited Paints & General Industries Limited CEI Plastics Ltd Mr K Balendra Fast Gain International Limited Aberdeen Asia Pacific Fund Ms L A Captain The Emerging Markets South Asian Fund FS Global Emerging Markets Fund 31 March 2008 Number of shares 81,364,526 58,186,212 21,185,785 15,988,995 15,819,977 15,737,023 14,783,475 13,989,739 13,666,677 13,143,573 12,062,964 10,847,729 8,440,325 8,280,267 8,142,909 7,406,314 7,194,843 7,058,272 7,025,900 6,955,246 % 12.79 9.15 3.33 2.51 2.49 2.47 2.32 2.20 2.15 2.07 1.90 1.71 1.33 1.30 1.28 1.16 1.13 1.11 1.10 1.09 31 March 2007 Number of shares 72,943,961 54,484,136 6,466,925 17,224,005 14,799,770 12,935,541 11,958,343 11,500,627 6,580,021 9,617,848 9,097,010 9,808,859 8,087,546 6,295,488 7,295,813 6,295,816 % 13.19 9.85 1.17 3.11 2.68 2.34 2.16 2.08 1.19 1.74 1.65 1.77 1.46 1.14 1.32 1.14
Directors shareholdings Name S C Ratnayake A D Gunewardene G S A Gunesekera J R F Peiris E F G Amerasinghe T Das S Enderby M V Muhsin P D Rodrigo S S Tiruchelvam R S Captain** 31 March 2008 3,227,747 4,018,568 1,348,374 3,428 4,136 Nil Nil 35,163 Nil Nil 124,234,951 31 March 2007 3,057,223 3,749,192 1,036,523 3,000 3,619 Nil Nil 30,769 Nil Nil 124,789,380
Employee share options Year ended 31 March 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Number of options exercised* (million) 0.02 0.16 0.27 0.47 0.02 1.78 2.30 4.08 1.53 2.04 3.67 4.06
Options available under the employee share option plan of John Keells Holdings PLC. S C Ratnayake A D Gunewardene G S A Gunesekera J R F Peiris 1,931,981 1,759,824 1,260,611 1,587,617 1,389,159 1,352,302 1,217,511 883,667
* First exercised in FY1997 ** Resigned with effect from 6th May 2008
48
History of dividends and scrip issues since 1992/93 Year ended 31 March 1992 1993 1994 1995 1995 1996 1997 1998 2000 2000 2001 2004 2004 2004 2004 2005 2006 2007 2007 * Unadjusted prices GDR history (in terms of ordinary shares, million) Year ended 31 March 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 * * Issued* 4.50 0.59 0.27 0.28 0.26 0.72 0.13 0.06 0.14 0.12 0.14 Converted 0.21 0.20 2.80 1.06 0.75 0.52 0.23 0.17 0.16 Balance 4.50 4.29 4.67 2.14 1.37 0.63 0.36 0.85 0.68 0.52 0.65 0.71 0.85 0.97 1.11 Share capital Year ended 31 March 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Number of shares in issue (million) 10.00 10.00 12.50 15.00 24.50 24.50 28.00 32.02 40.21 40.47 61.18 183.56 185.35 187.64 300.08 331.63 400.00 552.94 635.99 Issue Rights @ Rs.160* Bonus GDRs Bonus Rights @ Rs.200* Bonus Bonus Bonus Bonus Bonus Bonus Bonus Private placement Rights @ Rs.75* Bonus Bonus Bonus Rights @ Rs.140* Bonus Basis 1:4 1:5 n/a 1:6 1:6 1:7 1:7 1:4 1:5 1:4 2:1 1:4 n/a 1:7 1:10 1:5 1:7 1:5 1:7 Number of new shares (million) 2.50 2.50 4.50 2.50 2.50 3.50 4.00 8.02 8.09 12.14 122.36 46.94 24.00 37.42 30.02 66.34 57.16 92.10 78.96 Ex-date 16-Jan-92 03-Sep-92 n/a 19-Jan-94 19-Jan-94 20-Dec-95 20-Jan-97 09-Jan-98 15-Jun-99 05-Jan-00 27-Jul-00 10-Jun-03 21-Oct-03 07-Nov-03 13-May-04 10-May-05 13-Jun-06 23-Jan-07 13-Mar-07
First issued in FY1994 and subsequently increased along with bonus issues of ordinary shares GDRs/Ordinary shares = 1:2
Dividends since 1992/93 Year 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 DPS (Rs.) 3.00 2.50 2.50 3.50 2.80 3.00 4.00 4.00 3.00 2.00 2.00 2.00 2.50 3.00 3.00 3.00 5.00 Dividends (Rs.'000) 34,701 35,754 47,340 84,285 77,586 92,050 155,783 151,343 168,150 353,128 329,869 342,203 725,783 1,027,497 1,199,460 1,412,306 3,176,302
49
If you need help with the following

Corporate information Dividend payments or direct deposit of dividends into your bank account Change of address Transfer of shares Loss of share certificates Consolidation of multiple mailings to one shareholder Estate settlements
Contact the secretaries

Keells Consultants Limited 130, Glennie Street Colombo 02 Sri Lanka Telephone : + (94) 11 242 1101-9 Fax : + (94) 11 244 7087
If you need help with the following

Latest news releases Company developments Financial results and clarifications
Contact the Investor Relations team

John Keells Holdings PLC 130, Glennie Street Colombo 02 Sri Lanka Telephone : + (94) 11 230 6739 Fax : + (94) 11 230 6160 E-mail : investor.relations@keells.com Web : www.keells.com
Registered office
John Keells Holdings PLC 130, Glennie Street Colombo 02 Sri Lanka Tel: + (94) 11 230 6000 Fax : + (94) 11 244 7087
Auditors
Ernst & Young Chartered Accountants P.O. Box 101 Colombo Sri Lanka
Financial calendar
2007/08 Interim financial statements Three months ended 30 June 2007 Six months ended 30 September 2007 Nine months ended 31 December 2007 First interim dividend paid on Special dividend Second interim dividend paid on Final dividend proposed to be paid on Annual Report 28th Annual General Meeting 2008/09 Interim financial statements Three months ended 30 June 2008 Six months ended 30 September 2008 Nine months ended 31 December 2008 Annual Report 2008/09 30th Annual General Meeting
26 July 2007 26 October 2007 24 January 2008 23 November 2007 21 March 2008 6 July 2008 on or before 1 June 2008 27 June 2008
on or before 31 July 2008 on or before 30 October 2008 on or before 29 January 2009 on or before 29 May 2009 26 June 2009
50
Consolidated group and segmental performance

Highlights
Profit attributable to equity holders of the parent increased by 45 per cent to Rs. 5.12 billion Group revenue excluding associates increased by 27 per cent to Rs. 41.81 billion Earnings before interest and tax increased by 34 per cent to Rs. 8.20 billion Profit before tax increased by 37 per cent to Rs. 6.58 billion Fully diluted earnings per share increased by 32 per cent to Rs. 8.00 per share Cash earnings per share increased by 27 per cent to Rs. 9.54 per share Return on capital employed increased marginally from 13.6 per cent to 13.7 per cent Return on equity increased from 11.4 per cent to 12.3 per cent
Summary of key income statement items

Rs. million Revenue 2007/08 41,805 2006/07 32,855 Change 8,950 % 27 Explanatory highlights Transportation revenue growth of Rs. 3.44 billion driven by LMS Leisure growth of Rs. 2.20 billion due to commencement of operations of Cinnamon Island Alidhoo CF&R growth of Rs. 1.59 billion due to expansion of Retail business Increased to 74 per cent of revenue from 71 per cent due to the inability to pass on all cost increases to customers Higher share of an increased SAGT profit Increase in profits of associates - NTB, UA and AMW Interest income on LKR investments and foreign exchange gains Operating and start up cost of Cinnamon Island Alidhoo and depreciation charge on hotel investments and refurbishments Depreciation of new bottling line at CCS and operating expenses relating to supermarket expansion Increase in EBIT of Plantation Services due to higher tea volumes and prices Increase in Transportation EBIT due to contribution from Ports and Shipping Interest income at the holding company Despite a reduction in debt, the increase in the average weighted prime lending rate had an impact due to higher proportion of borrowings on a floating rate Growth in Transportation, Financial Services, Plantation Services and holding company Offset by reduction in PBT of Leisure and CF&R PBT of Property and IT remain flat during the year Increase in taxable profits due to holding company performance End of tax holiday at LMS with effect from 1st December 2007 SAGT, AHPL and Maldivian hotels helped in alleviating the overall effective tax rate Growth of 40 per cent led by Transportation, Plantation Services, Financial Services and the holding company
Cost of sales Share of associate company profits Other operating income Administrative expenses
30,847 2,243 2,717 5,122
23,236 1,701 1,180 4,261
7,611 542 1,537 861
33 32 130 20
EBIT
8,197
6,109
2,088
34
Finance expenses
1,618
1,314
304
23
Profit before tax
6,579
4,795
1,784
37
Tax expense
1,055
852
203
24
Profit for the period
5,524
3,943
1,581
40
51
OVERVIEW
2007/08 was a challenging year characterised by high inflation, rising fuel and food prices, both locally and globally, the escalation of military operations in the North and the East and a sharp increase in incidence of ethnic conflict related violence outside the formal hostilities theatre of the North and the East. Resultantly, the economy has slowed from the highest ever recorded 7.7 per cent growth in 2006 to 6.8 per cent growth in the calendar year 2007. Growth in all three sectors, namely, services, industry and agriculture declined, with services, the largest component of the economy, growing by 7.1 per cent compared with 7.7 per cent last year. This growth was led by the posts and telecommunications, cargo handling, transport and financial services segments. This was mirrored by the group's businesses as the Transportation and Financial Services industry groups performed well during the year on the back of increased volumes. However, the impact of the ongoing hostilities and unfavourable travel advisories from the main tourism generating countries adversely affected the performance of the Leisure industry group with the total number of tourist arrivals dropping by 12 per cent to 494,008 from the 559,603 witnessed in the previous year. The New Colombo Consumers' Price Index (CCPI-N) continued to rise, with the annual average inflation at 17.7 per cent as at 31st March 2008. The point-to-point inflation as at end April was recorded at 25 per cent. The soaring inflation was due to a combination of factors, including increases in international oil prices and food related commodities, such as sugar, wheat, milk powder and rice and also partly due to the government's borrowing from the banking system in the middle of the year. Monetary policy was kept under tight control throughout the year and interest rates in all markets increased in line with the monetary policy. Call money market rates, however, fluctuated widely, ranging from a low of 12.36 per cent to a high of 42.25 per cent during the financial year. The average weighted prime lending rate (AWPLR), which is the base for a majority of the group's borrowings, decreased to 18.61 per cent as at 31st March 2008 from 20.01 per cent at the beginning of the financial year. However, the mean AWPLR during 2007/08 increased to 17.57 per cent from an average 13.75 per cent during the previous year. This had an impact on the finance expense of the group, in spite of a reduction in the overall debt. The above factors had a varied impact on the group's performance. On the one hand, high inflation affected the purchasing power of consumers due to increased prices of essential commodities, which in turn affected volumes and profitability of the Consumer Foods & Retail industry group, in particular, the beverage segment. The high inflation environment also affected the rate of new investments because of steeper hurdle rates. On the other hand, the group thrived on the volatility of interest rates and a stronger Sri Lankan Rupee (LKR) by proactively managing its exposures and opportunities. Further, the group's remuneration model which is founded on a fixed element and a variable component tied to performance/profitability helped to buffer the negatives of high inflation. Contrary to expectations, the LKR appreciated against the US dollar by 1 per cent from the Rs. 109.32 to close at Rs. 107.78 as at 31st March 2008. During the first half of the financial year, the LKR depreciated against the US dollar in line with expectations, reaching Rs. 113.50 in September 2007, with forward premiums on US dollar forward contracts having implied interest rates of 20 per cent. The Government of Sri Lanka's maiden sovereign bond for USD 500 million at a fixed interest rate of 8.25 per cent was successfully concluded in November 2007. The impact of receipt of bond proceeds, coupled with policy changes regarding the limits on bond investments for foreign investors had a favourable impact on the LKR, with the LKR steadily appreciating against the US dollar, reaching a peak of Rs. 107.50 in March 2008. The appreciation of the LKR posed a challenge to all exporters having rupee cost structures. This was no different for the JKH group, which has a majority of its revenue streams denominated in US dollars, such as receipts from SAGT and LMS, apartment sales, hotels (particularly in the Maldives), destination management business and the software development business. The group was able to successfully mitigate adverse impacts through appreciation of the LKR by entering into a series of forward contracts based on its cash flow projections. Similarly, the import related businesses benefited from the appreciation of the rupee by managing its exposures in accordance with perceived trends. The year under review was also extremely volatile from a global standpoint. The sub prime crisis in the US directly impacted economic growth in the US, foreign exchange markets and interest rates, resulting in unprecedented volatility. With the aim of boosting growth, the US Federal Reserve (Fed) began an aggressive monetary easing policy cycle, which resulted in the LIBOR borrowing rates reducing from its high of 5.70 per cent in September 2007 to 2.70 per cent by 31st March 2008. This had a positive impact on the cost of the group's US dollar borrowings in the Maldives, which are primarily on floating rates. The sub prime crisis and consequent write downs by large, reputed international banks resulted in a shortage of liquidity in the market. Considering the environment, JKH concluded a standby loan facility of USD 75 million with the International Finance Corporation (IFC) in February 2008 to fund its expansion plans in Sri Lanka and the region. The loan is repayable over 9 years from the date of drawdown, with interest payable at LIBOR plus 275 basis points, which is attractive in the current Sri Lankan market environment. In order to lock-in the credit spread, JKH drew down on the total loan on the 4th of April 2008. These funds are now held in foreign currency and would be available to fund the group's overseas investments. The currency exposures arising due to the drawdown are being proactively managed.
52
REVIEW 2007/08
Revenue
Group revenue, excluding associate company turnover, registered an increase of 27 per cent from Rs. 32.85 billion to Rs. 41.81 billion in 2007/08, while group revenue, including share of associate company turnover, increased by 29 per cent from Rs. 39.00 billion to Rs. 50.28 billion. The increase is primarily attributable to revenue growth from Transportation, Leisure and Consumer Foods & Retail, all industry groups with high turnover bases. Property also recorded impressive turnover growth, albeit off a lower base. Financial Services and Information Technology revenues declined during the year. Revenues of the Plantation Services sector also contributed to the increase in group revenue.
In spite of being partially closed for refurbishment, Dhonveli and Ellaidhoo also recorded impressive growth in revenue during the period under review. Despite low tourist arrivals into the country, the Sri Lankan resorts also recorded an 18 per cent revenue growth, mainly as a result of the domestic segment. All Sri Lankan resorts recorded revenue growth, with the exception of Yala Village, which was affected by sporadic incidents of violence in the area resulting in the closure of the hotel for a period of 4 months. City Hotels registered a modest 13 per cent increase in revenue boosted by a minimum rate imposition which was effective from 1st January 2008. This has led to an increase in average room revenues. The Destination Management business also recorded a 25 per cent revenue increase, primarily on account of the strong performance of its Indian subsidiary, Serene Holidays, which opened 2 new branches in India during the year to meet growing market demand.
Revenue 2007/08
4% 10% 5% 33%
Transportation Leisure Property CF & R Financial Services
Property
Revenue increased by 79 per cent from Rs. 1.46 billion to Rs. 2.62 billion during the year. Revenue recognition cycle of The Monarch was the primary reason for the increase. Construction of The Monarch project was completed during the year with a majority of the revenue relating to the project being recognised in the current year. Recognition of revenue of The Emperor project, the construction of which is in progress, also contributed to the increase in revenue. Real estate sector revenues grew on the back of improved utilisation of the group's commercial office space. Revenue from Crescat Boulevard increased marginally on account of improved occupancy.
23% 19% 5%
IT Others
Revenue 2006/07
6% 9% 5% 32%
Transportation Leisure Property CF & R Financial Services
25% 19% 4%
IT Others
Transportation
Revenue, including share of associate company turnover, recorded strong growth of 34 per cent from Rs. 12.43 billion to Rs. 16.71 billion during the year. Growth led by South Asia Gateway Terminal (SAGT) and the bunkering subsidiary, Lanka Marine Services (LMS) on the back of increased volumes. Growing volumes also helped DHL Keells (DHL) increase turnover by 21 per cent over the previous year. The Airlines segment revenues remained flat as compared to the previous year, mainly due to capacity constraints on movement of cargo from Colombo.

Revenue increased by 16 per cent from Rs. 9.79 billion to Rs. 11.38 billion during the year. Led by impressive growth of 31 per cent in the Retail business, owing to the 11 new supermarket outlets which opened during the year, coupled with growth in same store revenues. The turnover of the Consumer Foods business grew by a modest 15 per cent compared with the previous year's turnover.
Leisure
Revenue grew by a healthy 29 per cent from Rs. 7.59 billion to Rs. 9.79 billion during the year. Maldivian resort hotels registered a 49 per cent revenue growth, supported by the commencement of operations during the year of the first Cinnamon resort in the Maldives, Cinnamon Island Alidhoo.
Financial Services
Revenue, including share of associate company turnover, increased by 39 per cent from Rs. 3.46 billion to Rs. 4.80 billion during the year. Both associates in this industry group, Nations Trust Bank (NTB) as well as Union Assurance (UA), performed well in the present macroeconomic
53
conditions, registering 58 and 23 per cent revenue growth respectively. This increase was marginally offset by the revenue decline in the stock broking business, due to the decrease in activity on the Colombo Stock Exchange (CSE).
24%
Group EBIT composition 2007/08

Transportation Leisure
1% 5% 38%
Property CF & R Financial Services IT Others
Revenue, including share of associate company turnover, decreased by 8 per cent from Rs. 2.45 billion to Rs. 2.24 billion during the year. The decline is attributable to the Systems Integration segment, where many corporate customers postponed their planned capital expenditure. The decrease was offset to an extent by the 15 per cent revenue growth in the Software business. The Resource Augmentation Service (RAS) business contributed to growth in turnover with increased contribution from the Middle Eastern markets. The Office Automation business also maintained its steady performance with a modest 7 per cent increase in turnover.
7% 11% 14%
Group EBIT composition 2006/07

2% 3% 6% 11% 47%
Transportation Leisure Property CF & R Financial Services IT Others

17%
14%
Transportation
Increased by Rs. 194 million to Rs. 3.10 billion from Rs. 2.91 billion in the previous year. Growth was primarily due to increased EBIT contributions from Ports and Shipping, led by SAGT. The increase was offset by the decrease in EBIT in the Logistics and Airlines businesses. DHL recorded lower margins on account of a higher depreciation charge on investments in automated operational processes and the quality control centre in its new facility. Start up costs relating to the third party logistics operations of John Keells Logistics, and a difficult year for freight forwarding in India and Sri Lanka, also adversely impacted EBIT of the Logistics segment.
Others (including Plantation Services)

Plantation Services revenue increased 51 per cent from Rs. 1.80 billion to Rs. 2.72 billion during the year. Growth in revenue due to the excellent year recorded by the tea industry, both in terms of record volumes and high international prices. Total revenue from Others increased by 51 per cent as a result of Plantation Services.
Earnings before interest and tax (EBIT)

Group EBIT increased by 34 per cent to Rs. 8.20 billion compared with Rs. 6.11 billion during the previous year. EBIT contributions from Transportation, Leisure, Property and Others at Rs. 3.10 billion, Rs. 1.12 billion, Rs. 902 million and Rs. 1.97 billion respectively, contributed to 87 per cent of the group's total EBIT. Plantation Services contributed an EBIT of Rs. 466 million during the year. The EBIT contribution from Others, including Plantation Services and the holding company, increased to 24 per cent of total EBIT from 3 per cent the previous year. Increases in group EBIT were due to growth in associate company profits from Rs. 1.70 billion to Rs. 2.24 billion and an increased contribution from the holding company. Share of associate company contributions from SAGT, NTB, UA, as well as Associated Motorways (AMW) improved. Other operating income more than doubled to Rs. 2.72 billion as compared to Rs. 1.18 billion in the previous year, the main contributor being interest income of Rs. 2.08 billion and exchange gains of Rs. 275 million.
Leisure
Increased by Rs. 35 million to Rs. 1.12 billion from Rs. 1.09 billion in the previous year. The EBIT of both the Sri Lankan and Maldivian resorts decreased when compared to the previous year. This decrease was more than offset by the increase in EBIT in City Hotels, Destination Management and the Hotel Management sectors. EBIT of the Maldivian resorts declined as two of the resorts, Dhonveli and Ellaidhoo, were operational for only a part of the year on account of refurbishments; whilst Cinnamon Island Alidhoo, which commenced operations in July 2007, became fully operational only in October due to teething issues. Given the unfavourable travel advisories issued by some major tourism generation countries and the resultant drop in volumes, the Sri Lankan resorts experienced lower margins due to the lower absorption of fixed costs.
54
The resorts in Yala and Habarana experienced disruptions in operations during the year owing to the security situation in these areas. Destination Management companies performed well mainly on account of the cost savings generated from process efficiencies at Walkers Tours and the sale of its subsidiary, Unawatuna Walk Inn Limited. Hotel Management companies also recorded a higher EBIT on account of expansion of its portfolio of providing technical and other services.
Increase partially offset by the reduction in EBIT of the stock broking business which was affected by reduced activity at the CSE.
Declined by Rs. 4 million to Rs. 98 million from Rs. 102 million in the previous year. Reduction primarily due to losses in the business process outsourcing (BPO) business, albeit within plan, owing to the insufficient dilution of its high fixed cost base. This decrease was partially compensated by higher EBIT from the Software Services business, John Keells Computer Services (JKCS) as well as the Office Automation business. The joint venture of JKCS with Air-Arabia is beginning to reap rewards, with its flagship reservation solution AccelAero in demand with a number of low cost carriers. The appreciation of the rupee, the resultant lower input costs and rationalising of the product portfolio, enabled the Office Automation business to improve its EBIT.
Property
Increased by Rs. 32 million to Rs. 902 million from Rs. 870 million in the previous year. Increase was despite a reduction in the EBIT of Keells Realtors, as the previous years EBIT included the profits from the divestment of Nawam Mawatha property. Increase primarily on account of recognition of profits arising from the receipt of the final tranche of The Monarch project, and cash received on The Emperor project. The remaining profits from The Monarch project will be recognised during the first quarter of the financial year 2008/09. EBIT growth was also supported by the reduction in maintenance costs through various cost saving initiatives.
Others, including Plantation Services

Plantation Services EBIT increased by Rs. 228 million to Rs. 466 million from Rs. 238 million in the previous year. Increased contributions from Tea Smallholders, John Keells PLC and John Keells Teas Limited on account of higher revenues and margins. As a result, total EBIT from Others, including Plantation Services, increased by Rs.1.81 billion in 2007/08, owing both to the strong performance of the Plantation Services sector as well as higher interest income arising from the effective management of funds.

Declined by Rs. 65 million to Rs. 580 million from Rs. 645 million in the previous year. JayKay Marketing (JMSL), the owners of the Keells Super brand of retail outlets, did extremely well and more than doubled their EBIT during the year supported by the opening of 11 new outlets, which progressively dilute the fixed costs of operations at the centre. The Convenience Foods segment also increased its EBIT by 45 per cent, driven by growth in revenue and an increase in margins. However, these increases were offset by the decrease in EBIT at Ceylon Cold Stores (CCS). In spite of revenue growth of 15 per cent, the CCS EBIT declined due to longer than expected time required for installing the two new bottling lines and the higher depreciation arising from its capitalisation. The delay also resulted in an increase in operating costs and a loss of sales volumes which resulted in an under-absorption of fixed costs. High commodity prices and local cost increases also had an impact on the margins.
Industry group EBIT margins

EBIT margins of the group increased to 16.3 per cent against 15.7 per cent in the previous year. Increased pressure on the cost structures and the inability to pass on all cost increases
Group EBIT and EBIT margins

Rs. million 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 EBIT EBIT margin 2008 15.7% EBIT % 18 17 16.3% 16 15 14.6% 14 13 12
Financial Services
Increased by Rs. 84 million to Rs. 422 million from Rs. 338 million in the previous year. Strong performances of associates NTB and UA with increases of Rs. 92 million and Rs. 28 million respectively were the primary reasons for the increase.
55
to customers, resulted in EBIT margins of Transportation, Leisure and Consumer Foods & Retail declining when compared with the previous year. This was offset by impressive margins in Plantation Services and at the holding company. Further details on EBIT margins can be found in the ROCE discussion of this report.
Taxation
Group tax expense increased to Rs. 1.05 billion from Rs. 852 million in the previous year, an increase of 24 per cent. Total tax expense comprised primarily of Rs. 949 million as income tax and Rs. 184 million as dividend tax. Despite the higher contribution to group profits by taxable companies and the impact of LMS ceasing its tax exemption in December 2007, the overall effective group tax rate fell from 17.8 per cent to 16.0 per cent in the current year. This is primarily attributable to the holding company benefiting from set-off of tax losses in the current year, where the company had not recognised a corresponding deferred tax asset in the previous year. Moreover, resulting from changes in fiscal legislation, the group also benefited from the writeback of Economic Service Charge (ESC) of Rs. 33 million, which had been written off previously.
Industry group EBIT margins

2008 2007 2006
Transportation Leisure Property CF & R Financial Services IT
18.6% 11.5% 34.5% 5.1% 8.8% 4.3%
23.4% 14.3% 59.5% 6.6% 9.8% 4.2%
22.6% 15.1% 34.8% 5.1% 13.7% 6.8%
Finance expenses
Group finance expenses increased by 23 per cent to Rs. 1.62 billion from Rs. 1.31 billion in the previous year. Although the debt as at 31st March 2008 reduced to Rs. 12.67 billion as compared to Rs. 15.36 billion the previous year, the increase in the mean AWPLR throughout the year to 17.57 per cent from 13.75 per cent during the previous year, resulted in the increase in finance expenses. However, the impact of rising interest rates were partially negated due to Rs. 2 billion of debentures raised by JKH last year being on fixed rates and applicable caps. Proceeds from the rights issue were partly utilised to retire short term debt. The Leisure and Consumer Foods & Retail industry groups together accounted for Rs. 953 million of finance expenses, being 59 per cent of the total group. The finance expense of the holding company reduced to Rs. 529 million from Rs. 570 million in the previous year.
Profit after taxation (PAT)

Group PAT increased to Rs. 5.52 billion, an increase of 40 per cent from Rs. 3.94 billion in the previous year. Main contributors towards PAT were Transportation at Rs. 2.90 billion and Property at Rs. 785 million. Plantation Services contributed Rs. 277 million to PAT, while a contribution of Rs. 519 million came from the holding company.
Minority interest
Minority interest remained almost flat at Rs. 406 million for 2007/08 compared to the previous year. However, the MI share of PAT reduced to 7.3 per cent from 10.4 percent recorded during the previous year. The lower profits of CCS and the Maldivian resorts resulted in much lower minority shares during the year, although this decrease was offset by an increase in the minority share of the plantation subsidiaries.
Finance expense 2007/08

3%
Profit attributable to equity holders of the parent

Transportation
46%
Leisure Property CF & R Financial Services
35%
The profit attributable to equity holders of the parent increased by 45 per cent to Rs. 5.12 billion during the year. The net profit margin of the group also increased to 12.2 per cent as compared to 10.8 per cent during the previous year.
0% 0% 12% 4%
IT Others
Rs. million
Net profit ratio and net profit

NP ratio % 12.2% 9.8% 8.5% 10.4% 10.8% 14 12 10 8 3,000 6 2,000 1,000 0 2004 2005 2006 2007 2008 4 2 0 6,000 5,000
Finance expense 2006/07

1% 43%
Transportation Leisure Property CF & R Financial Services IT Others
4,000
46%
0% 0% 8%
2%
Profit attributable to group Net profit %
56
Quarterly performance at a glance

FY 2007/08 Rs. millions Net turnover PBT Transportation Leisure Property CF&R Financial Services IT Other Profit attributable to shareholders Total assets Total equity Total debt Closing share price (Rs.) Q1 Q2 Q3 Q4 Total
8,468 9,669 11,066 12,602 41,805 1,093 1,279 1,716 2,491 6,579 824 831 729 670 3,054 (351) (66) 88 693 364 95 89 207 450 841 86 39 117 145 387 113 141 123 45 422 (26) 21 6 89 90 352 224 446 399 1,421 821 1,028 1,356 1,913 5,118 66,214 66,333 67,488 71,794 71,794 43,105 44,335 44,999 48,992 48,992 15,225 13,509 13,710 12,667 12,667 145.50 129.00 128.00 119.75 119.75
The return on equity (ROE) improved to 12.3 per cent in 2007/08 from 11.4 per cent the previous year, on account of the 45 per cent growth in profits attributable to equity holders of the parent. Growth in ROE was driven primarily by an increase in the return on assets from 7.5 per cent to 8.0 per cent. The common earnings leverage (CEL) which indicates the proportion of PAT that is allocable to shareholders, increased to 0.93 due to increased contribution from associate companies and a reduction in profits from companies with a high MI. The capital structure leverage (CSL) which measures the degree to which shareholders funds are utilised to fund assets, fell to 1.65 due to the increase in average shareholders equity.
ROE 2007/08 2006/07 12.3% 11.4% = = = ROA 8.0% 7.5% x x x CEL 0.93 0.90 x x x CSL 1.65 1.70
The quarterly performance of the group depicts the improving quarter on quarter performance with the last quarter showing the strongest growth. Leisure recorded an impressive 4th quarter jump in profits owing to the good performance of the group's Maldivian resorts, all of which were fully operational during this quarter. Property also recorded the bulk of its profits in the 4th quarter based on recognition of revenues on the receipt of the final tranche of customer payments on The Monarch. Transportation showed a slight decline in profits on the back of falling margins.
Though group EBIT margins increased to 16.3 per cent from 15.7 per cent last year, ROCE improved only marginally due to the decrease in capital employed turnover to 0.84 as compared to 0.87 in the previous year, indicating that revenues did not increase commensurately with the increase in capital employed.
ROCE = EBIT margin 16.3% 15.7% x Asset turnover 0.73 0.74 x Assets/ (Debt+ equity) 1.15 1.17
2007/08 2006/07
13.7% 13.6%
= =
x x
x x
Return on equity and return on capital employed

The group capital employed increased by 6 per cent to Rs. 61.66 billion as at 31st March 2008 from Rs. 58.20 billion in the previous year. The ROCE for the group improved marginally to 13.7 per cent against the 13.6 per cent recorded in 2006/07, on the back of the 34 per cent increase in EBIT to Rs. 8.20 billion from the Rs. 6.11 in the previous year.
From an industry group standpoint, Property, Financial Services and Others contributed to higher ROCEs while the ROCE of Transportation, Leisure, Consumer Foods & Retail and Information Technology declined, compared to the previous year. The industry groups with the larger share of capital employed, namely, Transportation and Leisure which together account for approximately 60 per cent of the group's capital employed, registered a drop in EBIT margins which impacted the group's ROCE.
ROE vs ROCE
Transportation
ROCE of 28.3 per cent, an 8.5 percentage point drop as compared to 36.8 per cent in the previous year. Although the average capital employed increased to Rs. 10.96 billion from Rs. 7.90 billion in the previous year due to the increased investment in SAGT in October 2006, the asset turnover at 1.30 remained in line with last year. The reduction in ROCE is primarily attributable to the decrease in EBIT margins from 23.4 per cent last year to 18.6 per cent during the year, primarily as a result of lower margins in the Transportation segment.
16.3%
16.0% 13.0% 13.6% 14.7% 13.7%
14.0% 12.7%
12.3% 11.4%
2008
2004
2005
2006 ROE
2007 ROCE
57
ROCE
EBIT margin
Asset turnover
Assets/ (Debt+ equity) 1.17 1.10 1.15 1.56 1.17 1.26
Transportation Leisure Property CF&R Financial Services IT
28.3% 4.9% 19.2% 15.7% 25.7% 5.4%
= = = = = =
18.6% 11.5% 34.5% 5.1% 8.8% 4.3%
x x x x x x
1.30 0.39 0.48 1.97 2.50 0.98
x x x x x x
Leisure
ROCE of 4.9 per cent, a 1.4 percentage point drop as compared to 6.3 per cent in the previous year. The average capital employed increased from Rs. 17.39 billion to Rs. 22.90 billion due to the capitalisation of refurbishments costs of Dhonveli and Ellaidhoo and the acquisition of Tranquility (Pvt) Ltd. Turnover increases were in line with the increase in capital employed, resulting in similar asset turnover ratios. Decrease in ROCE is solely attributable to a fall in EBIT margins to 11.5 per cent from 14.3 per cent in the previous year. EBIT margins were impacted by part closure of the two Maldivian properties for refurbishments, the operating costs of Cinnamon Island Alidhoo and lower margins at the Sri Lankan resorts. US dollar denominated contracts entered into previously at lower rates, coupled with increased rupee costs due to the high inflation environment, affected margins in the Sri Lankan resorts.
EBIT margins were also higher in the previous year due to the profits realised from the sale of the Nawam Mawatha property, the divestment of Crescat Restaurants as well as the gains from the change in fair value of investment property, all non recurring one time gains.

ROCE of 15.7 per cent, 7.6 percentage point drop compared to 23.3 per cent in the previous year. Decrease on account of lower EBIT margins as well as a lower asset turnover ratio. EBIT margins dropped to 5.1 per cent during the year compared to 6.6 per cent during the previous year, mainly on account of higher input costs and higher depreciation of the two bottling lines installed. Average capital employed increased from Rs. 2.76 billion to Rs. 3.69 billion as at 31st March 2008 due to the capitalisation of the two new bottling lines at CCS. However, the asset turnover reduced to 1.97 against the previous year's 2.25 as the revenue generating capacity of the bottling lines were not fully utilised, given that they became fully operational only in October 2007.
Sector-wise ROCE comparison

Transportation Leisure Property Development
Consumer Foods & Retail 4.9% 6.3% 19.2% 16.4% 15.7% 23.3% 25.7% 23.1% 5.4% 0 5 9.4% 10 15 28.3% 36.8%
Financial Services
ROCE of 25.7 per cent, an increase of 2.6 percentage points compared to 23.1 per cent in the previous year. Increase primarily attributable to the increase in asset turnover, off a low capital base, to 2.50 from 2.17 in the previous year, which more than offset the 1 percentage point EBIT margin drop to 8.8 percent. The drop in EBIT margins was due to a fall in the margins of the stock broking business, while margins at NTB and UA remained essentially the same.
Financial Services
35 40 ROCE %
20
25
30
2007
2008
ROCE of 5.4 per cent, 4.0 percentage point drop compared to 9.4 per cent in the previous year. EBIT margins improved marginally to 4.3 per cent from 4.2 per cent. The reduction in asset turnover to 1.0 from 1.6 the previous year is a result of lower than expected performance of Keells Business Systems and the unabsorbed higher fixed costs at the still developing BPO business.
Property
ROCE of 19.2 per cent, 2.8 percentage points increase compared to 16.4 per cent in the previous year. Although EBIT margins dropped significantly from 59.5 per cent to 34.5 per cent, this decrease was more than offset by the increase in asset turnover, which doubled to 0.48 compared to the previous year, due to the revenue recognition cycle.
58
The average capital employed increased to Rs. 1.82 billion from Rs. 1.09 billion in the previous year as a result of more investment in the BPO business.
increase significantly since the group has entered into a fixed price US dollar contract with the contractor. Although interest rate and inflation differentials would indicate depreciation of the LKR against the US dollar, inflows from foreign investors seeking to take advantage of carry trade opportunities would support the LKR, resulting in expectations for the LKR to remain at present levels and then depreciate gradually in the latter part of the financial year. Since the group's revenue streams from Maldivian hotels, final payment of The Monarch and advances of The Emperor and inflows from LMS are primarily in US dollars, the group will continuously evaluate hedging mechanisms to optimise the effects from its US dollar receipts. The high LKR interest rate environment is expected to have an impact on the finance expenses of the group, particularly in Leisure and CF&R which have a higher level of borrowings on floating rates. The easing of the interest rate policy by the US Fed and the corresponding reduction in LIBOR rates, should compensate for any adverse impacts in Leisure which has a significant portion of its borrowings in US dollars. However, the group is conscious of the possibility of an increase in LIBOR and will continuously evaluate the attractiveness of entering into interest rate swaps to fix interest rates.
Further details on ROCE are available in the portfolio movements and evaluation section.
Group outlook
The trend of rising inflation and the corresponding increase in interest rates is expected to have an impact on the growth of the Sri Lankan economy. Coupled with a slowdown in the US and the Euro zone, which could affect the exports of the country, growth is forecasted to be lower than the present year. The Sri Lankan economy is projected to grow at 7.0 per cent in 2008 as per the Central Bank of Sri Lanka. Independent forecasts from IMF, ADB and other analysts range between 5.5 to 6.4 per cent. From a policy standpoint, the primary concern would be reduction of inflation. With this in mind, the Central Bank has reduced the reserve money target. However, supply side factors such as high oil prices and sustained high price levels of essential commodities, would limit the impact of curbing demand driven inflation. It is likely that inflation would remain at present levels in the initial portion of the financial year, although a fall in inflation could be anticipated towards the end of the year, aided by base effects. Whilst the decision to allow foreign investors to invest up to 10 per cent of treasury bills issued has resulted in lowering of yields, many forecasts are that interest rates would remain at present levels till such time inflation is on a definitive downward trend. In such an environment, the group is conscious of the importance of driving efficiencies, managing volatility and being proactive. The anticipated high inflationary environment, coupled with increases in electricity tariffs are expected to put further pressure on the cost structures, particularly in industry groups such as Leisure and CF&R. Whilst initiatives have been in place, renewed focus will be paid to lowering energy costs across the board. As discussed in the Sustainability Report, the group has commissioned internationally recognised consultants to assist the group in measuring its sustainable practices, which would include aspects such as energy efficiencies, water preservation, paper recycling and future measurement of the group's carbon footprint. Continuous and unprecedented rises in global commodity prices such as oil and sugar have posed challenges in maintaining margins in some of the groups key businesses. The group will monitor price movements closely and enter into hedging instruments, where deemed necessary. Whilst managing costs is important, building scale in operations is also crucial, particularly for the Keells Super chain of supermarkets. The operations of the central warehouse are being consolidated and this would enable the chain to be more aggressive in its rollout of outlets, resulting in synergies and economies of scale, which could have a positive impact on margins. In spite of rising raw material prices, construction costs of The Emperor are not expected to
Outlook for industry groups

The services sector of the economy has consistently grown over the last few years, with the performance of the Colombo Port expected to continue its growth momentum. This would positively impact the Transportation industry group, with SAGT and LMS benefiting. During the ensuing year, the group would accelerate its thrust to expand its logistics operations in India. Continuation of the conflict at heightened levels as seen during the year would have an impact on the performance of Leisure in the Sri Lankan market. The group invested a total of USD 10.4 million in refurbishing and expanding the facilities at Ellaidhoo and Dhonveli. With all four resorts in the Maldives now fully operational, the group would be able to mitigate adverse impacts, if any, in the Sri Lankan market. In order to strengthen its position in the Maldives, the group is investing further in the construction of beach and shore protection measures at Alidhoo and Dhonveli. With a view to further diversifying its risk in Sri Lanka and Maldives, the Leisure industry group is aggressively pursuing hotel investments in the Indo-China region. Meanwhile, Serene Holidays, the group's destination management business in India, is expected to expand, with the opening of new branches on the cards. Although the current environment is not conducive for investment in property development, the group will retain its land bank and look to enter the market when factors are
59
more favourable. During the ensuing year, Property will look to capitalise on the competencies built through construction of The Monarch to embark on property development projects in the South Asian and South East Asian region, in partnership with reputed international developers. The group recently entered into a MOU with AMW and Finlays Colombo to jointly develop a contiguous 6.6 acre block of land with access from Union Place and Vauxhall Street. The project is expected to commence in 2010, subject to market conditions. With expectations for inflation to remain high, and the resultant impact on disposable incomes of consumers, the CF&R industry group could potentially face a slowdown in market growth. Lower disposable incomes have also limited the quantum of cost escalations that could be passed on to the consumer. The new bottling line at CCS is expected to improve efficiency as well as give flexibility in marketing by catering to consumer needs through different product offerings. Certain strategic initiatives are in place to ensure rationalisation of the portfolio, a new distribution model, automation of processes to increase production efficiencies and to optimise the use of its management information system. In order to drive volumes in Convenience Foods, the group has invested in setting up a manufacturing plant in India to cater to its growing middle class. Once infrastructure and capacity are built, particularly relating to the cold chain, the group plans to ramp up production and cater to a wider geographical segment of the market. The group's investment in Quatrro F&A is a first step in its expansion into the high value F&A vertical in the BPO space, exploiting the potential of Sri Lanka. With the slowdown in the US and companies seeking to rationalise costs, the BPO industry is expected to continue its growth.
The group will seek to expand the operations of the newly acquired US-based F&A entity, Financial Process Outsourcing LLC, by adding seats in Sri Lanka and India. Moreover, Auxicogent, the groups BPO arm is expected to increase its capacity in Sri Lanka and India as it focusses aggressively on new customer acquisition. The Software Services sector will focus on creating and owning Intellectual Property rights that will enable it to increase its penetration in to the UK and Middle Eastern markets. The present high levels of interest rates have posed challenges, whilst also creating opportunities, for the financial services industry. NTB and UA are expected to continue the growth momentum seen in the current year. Both entities are looking at launching new products to enhance the present levels of solutions offered to its client base. The partnership entered into with the leading Bangladeshi stock broking firm to participate in investment banking transactions and management of initial public offerings by Bangladeshi corporates, is expected to have a positive impact on the profits of the stock broking arm of the group. The volatile environment in Sri Lanka, and globally, will make the year ahead a challenging one. However, as outlined above, the group is well positioned to overcome these challenges through the initiatives discussed above. At a time when the market is short of liquidity, the group has adequate cash resources in LKR and US dollars to funds its project pipeline. The JKH group has delivered consistent performance in the past. Through the numerous initiatives outlined above and discussed in the Chairman's message, the group intends continuing its growth momentum towards meeting its goal of providing shareholders with a 20 per cent ROE.
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Group financial position and liquidity

Highlights
Total assets increased by 9 per cent to Rs. 71.79 billion Cash and short term investments of Rs. 12.65 billion Total shareholders' funds increased by 13 per cent to Rs. 44.22 billion Total debt reduced by 18 per cent to Rs. 12.67 billion Debt to equity reduced to 25.9 per cent Long term debt to total debt increased to 61.8 per cent Net cash flow from operations of Rs. 6.91 billion
Summary of key balance sheet items

Rs. million Non current assets Property, plant and equipment (including leasehold properties) Investments in associates Other non current assets 2007/08 33,811 2006/07 25,165 Change 8,646 % 34 Explanatory highlights Acquisition of TPL, holding company of Alidhoo, added Rs. 3.31 billion as PPE Rs. 2.79 billion investment in PPE, primarily in Leisure and CF&R Revaluation of group properties by Rs. 3.96 billion Investment of Rs. 545 million in the BPO business Investment of Rs. 313 million in the NTB rights issue Addition of The Monarch work in progress partially offset by transfer of similar amount to cost of sales and inventory Transfer of The Monarch work in progress to inventory Primarily due to increases in receivables of stock broking, JMSL and LMS, although partially offset by reduction in Cinnamon Grand and JKMR Retirement of selected debt Investment in BPO business and rights issue at NTB Enhanced dividend payment Profit attributable to company of Rs. 5.12 billion, surplus on revaluation of land of Rs. 2.90 billion, less Rs. 3.18 billion as dividends paid Increased due to long term borrowings in the Maldives to fund the construction of Cinnamon Island Alidhoo
9,887 1,806
8,515 1,435
1,372 371
16 26
Current assets Inventories Trade and other receivables Short term investments and cash in hand Shareholders' funds
3,985 6,753
3,400 6,592
585 161
17 2
12,647 44,218
17,765 39,235
(5,118) 4,983
(29) 13
Non current liabilities Interest bearing borrowings Current liabilities Trade and other payables Short term borrowings
7,809
6,451
1,358
21
7,869 375
5,795 2,688
2,074 (2,313)
36 (86)
Increase in trade payables of LMS, stock broking and JMSL Repayment of short term loan raised to fund SAGT investment by the holding company Settlement of short term bridging finance to fund refurbishment of properties in the Maldives Repayment of Rs. 500 million fixed rate note borrowing at the holding company and borrowings by Leisure Repayment of overdraft facilities of the holding company of Rs. 2 billion
Current portion of interest bearing borrowings Bank overdraft
1,060
1,374
(314)
(33)
3,402
4,819
(1,417)
(29)
61
Balance sheet structure

Total assets grew from Rs. 65.95 billion to Rs. 71.79 billion as at 31st March 2008, a growth of 9 per cent. The composition of assets changed with cash and short term investments reducing to Rs. 12.65 billion from Rs. 17.77 billion the previous year. This reduction was offset by an increase in property, plant and equipment (PPE), inclusive of leasehold property, to Rs. 33.81 billion from Rs. 25.17 billion in the previous year. Total liabilities comprised of Rs. 48.99 billion as total equity, Rs. 9.74 billion as non current liabilities and Rs. 13.06 billion as current liabilities. Balance sheet structure
Assets
All figures in Rs. million
Liabilities 12,647 13,059 9,744 4,774 14,882 8,129 3,700 9,523 3,567 3,634 33,811 44,218 39,235 22,801
larger reduction in current assets compared with current liabilities. The divestment of Keells Business Systems and Unawatuna Walk Inn (UWL), which no longer are treated as subsidiaries of the group, had an impact of Rs. 191 million and Rs. 163 million on current assets and current liabilities respectively due to elimination of inventory, debtors and creditors of the company. Short term investments and cash reduced by Rs. 5.12 billion on account of the holding company infusing Rs. 2.90 billion as capital to Keells Hotels, which was in turn used to repay debt, and repayment of debt at the holding company level. Current liabilities decreased by Rs. 1.82 billion due to repayment of short term borrowings and reductions in overdrafts, although partially offset by an increase in trade and other payables of Rs. 2.07 billion. JKH utilised part of the proceeds from the rights issue to repay short term borrowings that were taken to fund the investment in SAGT last year.
17,765 4,131 7,347 7,935 20,112 9,994 13,022 25,165
10,793 14,544
Liquidity management
Rs. million 30,000 25,000
39,525
65,946
71,794
71,794
65,946
39,525
2006
2007
2008
2008
2007
2006
20,000 15,000 10,000 5,000
Cash and short term investments Inventory and receivables Other non current assets Property, plant & equipment
Current liabilities Non current liabilities Minority interest Shareholders funds
Non current assets

Total non current assets increased by 27 per cent to Rs. 48.35 billion from Rs. 38.19 billion in the previous year, on account of increases in PPE of Rs 8.77 billion and investment in associates of Rs 1.37 billion. Non current assets comprised primarily of PPE of Rs. 29.17 billion, investments in associates of Rs. 9.89 billion and leasehold property of Rs. 4.64 billion. Leisure accounted for a majority of the PPE within the group, with Rs. 18.81 billion of PPE. The increase in PPE was also primarily attributable to Leisure on account of the addition of Rs. 3.31 billion of PPE on account of the acquisition of TPL, the holding company of Alidhoo, as well as capitalisation of refurbishment costs of Dhonveli and Ellaidhoo. The addition of the new bottling lines at CCS also had an impact on the increase in PPE by Rs. 456 million. The group also revalued its real estate portfolio during the year. The net addition to PPE as a result of the revaluation was Rs. 3.96 billion. The bulk of the increase came from AHPL and CCS. Investments in associates increased on account of the group's investment of Rs. 545 million in Auxicogent International, the BPO operating arm of the group, and Rs. 313 million in the NTB rights issue.
0 2004 2005 2006 2007 2008 Current assets
Cash and short-term investments
Current liabilities
Activity and liquidity ratios Activity

Although turnover including associate companies grew by 29 per cent during the year, the average asset base of the group also increased by 31 per cent. As a result, the asset turnover of the group at 0.73, remained in line with that of last year. The PPE turnover remained at 1.7 in 2007/08.
Liquidity
Both liquidity ratios declined marginally in the year under review from its high base in the previous year. The current ratio decreased to 1.8 from 1.9, while the quick ratio decreased to 1.5 from 1.6 the previous year.
Cash flow
Cash generated from operations prior to working capital changes increased to Rs. 5.38 billion in 2007/08 compared with Rs. 4.83 billion the previous year. Cash generated from operations increased compared to the previous year, due to positive working capital changes when compared with last year. As a result, net cash generated from operating activities increased to Rs. 6.91 billion against Rs. 2.52 billion the previous year. Growth in cash from operating activities also emanated from the increase in interest received from Rs. 494 million to Rs. 2.08 billion, as well as growth in dividend income.
Working capital
Net working capital decreased to Rs. 10.38 billion from Rs. 12.88 billion the previous year due to a proportionately
62
Group financial position and liquidity
Net cash used in investment activities was Rs. 4.37 billion during 2007/08, as against Rs. 10.09 billion the previous year. The group invested a total of Rs. 1.16 billion in BPO related investments in Auxi BPO Solutions India, currently treated as an associate, and Quatrro F&A. During the year, the group repaid higher cost short term borrowings using funds generated through the rights issue. In summary, the group repaid Rs. 3.17 billion, net of proceeds received from new borrowings. The declaration and payment of a special dividend, coupled with regular dividends increased the total dividend outlay of the group, including dividends to minority shareholders, to Rs. 3.38 billion in 2007/08, compared with Rs. 1.70 billion in the previous year. As a result, the net cash used in financing activities increased to Rs. 6.25 billion compared with net receipts of Rs. 18.42 billion the previous year. The net decrease in cash and cash equivalents was Rs. 3.71 billion, with cash and cash equivalents as at 31st March amounting to Rs. 9.24 billion.
Long term funding of assets was Rs. 58.74 billion, which amounted to 82 per cent of total assets, funded in the proportion of 75 per cent, 8 per cent and 17 per cent by shareholders funds, minority interest and long term creditors, compared with 77 per cent, 7 per cent and 16 per cent respectively in the previous year.
Debt
Total debt of the group declined by Rs. 2.70 billion to Rs. 12.67 billion as a result of repayment of debt using funds generated through the rights issue last year. The reduction of debt was timely, given the significant increase in interest rates during the course of the year. The net debt position of the group was Rs. 20 million, compared to a net cash position of Rs. 2.40 billion in the previous year. Utilisation of cash available to repay higher cost short term debt resulted in the debt to equity ratio of the group declining to 25.9 per cent from 35.8 per cent the prior year. Whilst the group has a target of increasing its debt to equity ratio, increasing leverage at current market interest rates is not justifiable. The composition of debt in the group changed during the year under review, with a higher portion of long term debt in the portfolio. As a result, the long term debt to total debt increased to 61.8 per cent from 42.2 per cent in the previous year. Of the total debt of Rs. 12.67 billion within the group, Leisure accounted for the majority of debt with Rs. 7.05 billion of debt, with a large portion relating to borrowings to finance its expansion in the Maldives. The balance debt in Leisure was primarily due to term borrowings outstanding relating to refurbishment of the Cinnamon Grand. The holding company also accounted for Rs. 3.46 billion of debt, which consists primarily of Rs. 2 billion of long term debentures raised last year at attractive market rates.
Interest cover
The increase of EBIT by 34 per cent to Rs. 8.20 billion in 2007/08 had a positive impact on the interest cover of the group which increased to 5.1 from 4.6 in the previous year. The cash interest cover of the group decreased marginally to 3.3 from 3.7 in the previous year due the high growth in finance expense. The cash interest and tax cover of the group was 2.0 compared with 2.2 in the previous year. In spite of a drop in the cash cover ratios, these are considered healthy levels.
Interest coverage
Rs. million 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2004 2005 2006 2007 2008 4.6 6.2 5.1 8.8 9.2 No. of times 10 9 8 7 6 5 4 3 2 1 0
Statement of changes in equity

Total shareholders funds increased by Rs. 4.98 billion to Rs. 44.22 billion on account of an increase in profit for the period of Rs. 5.12 billion, Rs. 2.90 billion as surplus on revaluation of land held by the group, offset by payment of dividends amounting to Rs. 3.18 billion, which includes the special dividend made during the financial year.
EBIT Finance Expenses Interest Cover
Leverage and capital structure Capital structure

Total assets of the group increased to Rs. 71.79 billion as at 31st March 2008, compared with Rs. 65.95 billion in the previous year. Assets were funded by shareholders funds (62 per cent), minority interest (7 per cent), long term creditors (13 per cent) and short term creditors (18 per cent).
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Portfolio movements and evaluation

Active portfolio management and evaluation by JKH has resulted in the group housing a portfolio of businesses that lead in strategic growth sectors of the economy. The company will continue to build its portfolio of investments by effective regional investments/expansion and enhancing its investments in core industry groups. The JKH portfolio evaluation and review process is grounded on four filters Financial Filter- that has the JKH hurdle rate as its cornerstone Growth Filter - which evaluates a business in terms of its industry attractiveness Strategic Fit - that critiques the long term competitive advantage of a business/industry by evaluating the strength of competitive forces, specific industry/business risks, ability to control value drivers and the competencies and critical success factors already inherent in the group company Complexity Filter - which considers factors such as senior management time and the risk to brand, image and reputation the graph, Hotel Management, Transportation, Destination Management, Financial Services and Property performed well above the Financial Filter hurdle rate expectation. The Transportation industry group continues to generate the highest return on capital employed (ROCE) of the portfolio, apart from the low capital-intensive Hotel Management business. Financial Services sector continued its strong performance during the year under review led by the associates NTB and UA. Property industry group generated relatively higher returns than the previous year due to recognition of most of the income from The Monarch during the year. Destination Management sector saw a major turnaround with strong performance of Walkers Tours during 2007/08. Gains on exchange translations due to the exercise of prudent hedging, process efficiencies which resulted in significant cost savings and the gain on the disposal of land were the key factors which contributed to this growth. The Consumer Foods industry group experienced a relatively low ROCE, largely as a result of lower margins due to cost pressures and a higher capital employed attributable to investment in 2 modern bottling lines by CCS. The Retail sector, though continuing to be below the hurdle rate, is expanding aggressively and the returns will improve with the sector gaining scale through increased number of outlets. The Leisure industry group continues to perform well below the hurdle rate due to the ongoing ethnic conflict in Sri Lanka having an adverse impact on tourism. The Maldivian resorts, which have been the strongest performer for the group's Leisure portfolio, experienced relatively low returns during 2007/08. This was due to the addition of Alidhoo, the group's first Cinnamon property in the Maldives and extensive refurbishments at Ellaidhoo and Dhonveli, which enhanced the capital employed of the portfolio, further impacted by drop in revenues and profits due to closure of Ellaidhoo and Dhonveli for refurbishment during part of the year.
JKH's hurdle rate (or required rate of return) is a function of the weighted average cost of capital (WACC), derived from the group's cost of equity, cost of debt, target leverage, tax rates and the value creation premium required over and above the WACC. Strategic business units are risk assessed under headings such as customer concentration, suppliers/JV partner dependence, risk of international entrant, labour dependence, cyclicality, dependence on Sri Lankan economy, regulatory dependence and impact of the North-East conflict etc. Given below is a graphical representation of an output of the JKH portfolio review and evaluation process. As indicated by
ROCE (%)
Portfolio analysis ROCE vs capital employed 2007/08

Hotel Management (120.7%)
120
40 35 30 25 20 15 10 5 0 (5) (10)
5 Transportation
Destination Management
Financial Services Property Consumer Foods Retail Maldivian Resorts IT City Hotels Sri Lankan Resorts 10 15 20 25 30 35 40 45 Rs. billion Capital employed Hurdle Rate 18%
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Capital employed Rs. billion
Portfolio movements
70 60 50 40 30 20 10
2004 Transportation
2005 Leisure Property
2006 F&B Financial Services
2007 IT Centre & Other
2008
2005
Investments
75.4% of Mercantile Leasing for Rs. 0.5 billion
2006
Alidhoo island in the Maldives for USD 3 million
2007
Construction of resort on Alidhoo island for USD 22.5 million
2008
Rs. 313 million subscribed to the NTB rights issue to maintain stake at 29.9 per cent Rs. 2.9 billion in Keells Hotels PLC and increased stake to 92.69 per cent Investment of USD 6.0 million in the completion of the Alidhoo resort
Increased effective stake in Trans Asia to 85% for Rs. 1.6 billion
80% of Yala Village hotel for Rs. 0.2 billion Joint venture with Raman Roy Associates to develop BPO business in the region - USD 15 million
15 year sub lease on Dhonveli island in the Maldives for USD 21 million 20% stake in Associated Motorways for Rs. 0.7 billion
14 year sub lease on Ellaidhoo island in the Maldives for USD 12.5 million Additional 7.5% stake in South Asia Gateway Terminals for Rs. 3.6 billion Creation of umbrella holding company for resort hotels Merger of Mercantile Leasing into Nations Trust Bank Sports and Recreation Bentota merged into parent CHR Four Destination Management sector companies merged into Walkers Tours Keells Plantation Management Services ( Namunukula plantation) for Rs. 0.2 billion Keells Restaurants and Crescat Restaurants for Rs. 0.2 billion Unawatuna Walk Inn for a consideration of Rs. 81 million
Mergers & restructuring
Divestments
Property owned by Keells Realtors for Rs. 0.5 billion Debenture issue of Rs. 2 billion Rights issue of Rs. 12.9 billion
74 per cent stake in Keells Business Systems Ltd for Rs. 70.7 million
Capital raisings
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Acquisitions, new business and divestments

Acquisition in the BPO space
On 9th April 2008, JKH acquired a 44 per cent equity stake in Quatrro Finance & Accounting Solutions Private Limited (Quatrro F&A) for a value of USD 5.72 million. Quatrro F&A is the India based Financial and Accounting (F&A) business of the Quatrro group, headed by Raman Roy. Quatrro F&A recently acquired the Chicago based Financial Process Outsourcing LLC (FPO) in a structured financing transaction using a combination of instruments including debt and equity. FPO is a niche player in the F&A outsourcing vertical, focusing on small and medium enterprises. FPO currently has facilities in the USA and Mumbai with approximately 500 staff. The F&A outsourcing vertical has grown rapidly over the last few years as the cost advantages from labour arbitrage are compelling. The investment in Quatrro F&A is a step forward in JKH's plans of building a regional BPO business. JKH currently has BPO facilities located in Gurgaon and Colombo with approximately 550 staff. With the investment in Quatrro F&A, we believe that our presence in the BPO business will be significantly enhanced.
Sale of Unawatuna Walk Inn

In April 2007, JKH and its subsidiaries sold Unawatuna Walk Inn, of which the group had an effective stake of 87.29 per cent for Rs. 81.0 million. The group made a book profit of Rs. 43.55 million from the sale. Unawatuna Walk Inn, the owning company of a 20.5 acres of freehold land on Unawatuna beach, which, did not fit with the groups leisure portfolio development plans.
Sale of a majority stake in Keells Business Systems

During March 2008, JKH sold a 74 per cent stake in Keells Business Systems Limited (KBSL), its systems integration and solutions provider in the IT industry group for Rs. 70.7 million to Co Serv (Pvt) Limited (CSL), which has diversification plans in the South Asian region. The group made a book profit of Rs. 11.6 million from the sale. The sale is a result of the group's portfolio evaluation process whereby we look to dispose of businesses that take up a disproportionate amount of management time.
Lease on Velidhu Island in the Maldives expires

On 25th March 2008 the lease held by the group on the Velidhu resort island, in the Ari Atoll, Maldives, expired. The lease was held by Travel Club Maldives (Pvt) Limited (TCM), a 100 per cent subsidiary of John Keells Maldivian resorts. The 120-room resort, operated since 1995/96, was the group's first investment in the Maldives. The group at present has 440 rooms in the Maldives. During the financial year 2006/07, TCM acquired a 14-year lease on the 94-room Ellaidhoo island resort, which is also located in the Ari Atoll, Maldives, in anticipation of the expiry of the Velidhu lease. The Ellaidhoo island resort was closed for a full refurbishment since May 2007 and was re-opened in January 2008, as Chaaya Reef Ellaidhoo, with 112 rooms including 24 water bungalows. We expect the new resort to fully compensate for the loss of earnings from Velidhu by its second year of operations. Earnings from the Maldivian resort cluster is expected to achieve healthy growth in the year 2008/09 given the first full year of earnings of our three new resorts, Chaaya Reef Ellaidhoo, Chaaya Island Dhonveli (also acquired during 2006/07) and the group's first premium luxury resort, Cinnamon Island Alidhoo.
Investment in the Indian processed meats industry

In April 2008, Keells Food Products PLC (KFP) incorporated a 100 per cent subsidiary in India, John Keells Foods India Pvt Ltd (JKFIL), to manufacture and market processed meats in India. The planned initial investment totaling USD 2 million over a period of about a year would involve establishing manufacturing operations as well as a marketing and distribution network in key metros. Initial distribution will also be supported by exports of selected products of our range from Sri Lanka. We target to have our products present in the top 20 metros in India comprising of both tier 1 and tier 2 cities by the end of 2009/10. There is significant potential for the processed meats industry in India, which is in a very early stage of development in comparison to the rapid growth in modern retail formats, presenting an opportunity for the group to leverage its expertise.
Risk management
Active risk management - a core competence to exploit opportunities
At the John Keells Group, risk management is an integral part of its value-driven corporate governance. Through a proactive risk management programme, risks, both at group level and within all constituent businesses, the assets, financial position and earnings situation of the group are secured enabling the business units and GEC to recognise and analyse adverse trends early for prompt corrective action. The enterprise risk management (ERM) process is structured to align the key fundamentals of governance, strategies, business objectives, ethics, policies, standards and compliance, and hence is an integral part of all our decisions and business processes. The group recognises the complexity and the diversity of risks that surround its operational activities and endeavours, through a risk management program, to maximise opportunities and minimise exposures to risk while being cognisant of the risk/reward relationship and the ranges of its risk appetite.
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Efficient organisation of risk management

In line with its vision, the group maintains an integrated, ERM program. The group has set up a central risk management function to ensure that the GEC is continuously and promptly kept informed of important developments in risk management by the Group Risk and Control Review (R&CR) Department. During the latter part of the year, with a view to achieving synergies, on the functions of internal control, the internal audit, risk management and risk transfer were brought under one risk umbrella with accountability lying with the Group R&CR Department. The Chairman-CEO and under his direction, the GEC, are the prime movers in setting the risk management policy of the group. The R&CR Department at the centre, converts the policy so set, into a set of processes, procedures and guidelines for the uniform adoption by the businesses within the group. The Audit Committee monitors the progress regularly. The risks in the group are identified and analysed using a universal risk register adapted, as appropriate, for the group. The individual risk categories are founded on the critical success factors for the implementation of the corporate strategy and its objectives. The key operational and financial risks include areas such as socio- economic, competition, internal processes, procurement, product, currency and interest rate fluctuations, information technology, human resources etc. Appropriate mitigating actions have been identified and have been put into place at the various levels of the group. The group rates its risk as ultra high, high, moderate, low and insignificant after taking into consideration the probable impact/severity ranking on one side and the likelihood/occurrence ranking on the other.
procedures under the leadership of the CEOs of the business units, sector heads and the presidents of the industry groups. At the first level of operations, responsibility for strategy, performance management and risk control lies with the chief executives of the business units, The top risks identified at the first operating level are considered along with the specific risks affecting the industry and market by the sector/industry groups, The key risks identified at sector and industry group levels and macro risks are considered by the Group Executive Committee when identifying and assessing the risks faced by the group as a whole, The holding company and/or business unit audit committees review the findings of the risk management program on a regular basis to gain assurance on its effectiveness. The centre based R&CR function (Internal Audit) also audits the risk procedures as a part of its audit programs.
Consistent risk monitoring

It is the duty of every risk champion to see to the implementation and effectiveness of risk management. Based on periodic monthly reviews at business unit level and quarterly at sector levels, the business units are in a position to continuously update and complete their risk profile and matrix. Every six months, the GEC is presented with status reports from the Group R&CR Department for discussion and review of progress and action plans. The group R&CR department checks the central and decentralised risk management reports for functionality, topicality, completeness, reliability and effectiveness and collates the same for highlighting to the Group Executive Committee and the business unit audit committees. In addition, as a part of its audit programs, audits are performed at company level by the appointed outsourced internal audit firms and external auditors.
Clear allocation of responsibilities identification, analysis and assessment
for
risk
The group has established a comprehensive and systematic risk management system, the basic principles of which are laid down in group guidelines. It is incumbent on the operational management of the risk owner to take direct responsibility for the early recognition, management and communication of the risks. Under the risk management system, the group companies adopt a bottom-up approach and report the status of any significant risks and any changes in those risks. In addition, any risks which arise at short notice or which have repercussions for the whole group are communicated directly to the appropriate personnel in the group, irrespective of the normal reporting channels. The aim is to identify potential risks of our operations at an early stage by incorporating them into a database, to assess them using specific criteria, to evaluate the extent and characteristics of the risks and to introduce appropriate precautionary and security measures. Risk Management is analysed, evaluated and controlled efficiently at four broad levels. The risk champions at the business units/sectors ensure the implementation of the
Key risk areas

A review of the JKH portfolio of risks saw a hardening in the risk ratings in certain areas due to prevailing economic and external factors and the relevant business units are developing appropriate action plans towards mitigating the impacts arising from this. The risk ratings after taking into consideration the implementation progress made on identified action plans and other mitigation activities and control measures are as detailed below -
Political and economic risks

Financial Year Risk Rating 2007/08 Ultra High 2006/07 Ultra High 2005/06 High
Action plans
The group is actively working with the government, private sector and other relevant stakeholders in influencing progress towards lasting peace, stability of economic factors and the operating environment.
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The group acknowledges the important role that the private sector can play in increasing the quality of life by wealth creation through good investment and increasing productivity through training, development and empowerment.
Legal and regulatory risks

Financial Year Risk Rating 2007/08 High 2006/07 High 2005/06 High
Action plan Enabling infrastructure risks

Financial Year Risk Rating 2007/08 2006/07 2005/06 Ultra High Ultra High Ultra High It's our business to stay abreast of constantly changing statutory and regulatory requirements in order to ensure that our operations and services remain in compliance. Towards this, quarterly compliance reviews and audits at sector and business unit levels have been implemented. The group continues to campaign through established lobby groups for clear and unambiguous policies and laws. This is still an area of concern.
Action plan
The lack of enabling infrastructure has been identified as one of the key inhibitors of economic growth. It is most welcome to note that the government has, as one of its strategic priorities, focused on developing and strengthening infrastructure that is required to create an enabling environment towards economic growth. The group continues to lobby the authorities for progress in this area through chambers, trade associations and lobby groups and through direct dialogue.
Financial risks
Financial Year Risk Rating 2007/08 Moderate 2006/07 High 2005/06 Moderate
Action plan
The basic risk strategies for interest, currency and liquidity management, and the objectives and principles governing group finances are determined by the central group treasury function in discussion with the business units. Business, financing and other forex exposure activities which are not in the local currency inevitably lead to foreign currency exposures. The businesses actively monitor the resulting transaction risks themselves and agree appropriate hedging transactions with group treasury in line with agreed parameters. Interest rate risks are also centrally managed. The group evaluates potential interest rate risks, ascertains the interest risk exposure in the major currencies and conducts sensitivity analyses. Interest rate risks are actively managed using a variety of methods.
Brand control and protection risks

Financial Year Risk Rating 2007/08 Moderate 2006/07 Moderate 2005/06 Moderate
Control and protection of the brand, the company's most valuable asset, is of utmost importance. During the year many action plans were put to place to mitigate the weaknesses highlighted in the brand audit conducted last year with the assistance of specialised consultants.
Internal operational processes

Action plan
The groups commitment to mitigate this risk to acceptable levels is ensured through continuous improvements developed around the concept of document, measure, analyse, and improve. These quality processes include documented work processes; documented corrective/preventative action process; effective problem solving and root cause analysis; quality service measurements based on customer requirements; customer satisfaction measurements and vendor performance evaluations. These processes are taking root throughout most of our business units and are subject to periodic review by management.
IT risks
Action plan
To minimise the risk of business processes being interrupted as a result of systems failure, numerous security and fallback measures have been implemented. These include access control systems, contingency plans, an uninterrupted electricity supply for critical systems, back-up systems and data mirroring. In addition, we use firewall systems and virus scanners to counter data security risks arising from unauthorised access to the IT systems. We also ensure the confidentiality, availability and integrity of the data. Disaster recovery plans are regularly reviewed as disruptions to critical management information systems could have a material impact on the group's continuing operations.
Environmental, health and safety risks

Action plan
John Keells promotes appropriate environment, health and safety management systems at most of our operational facilities. This is a result on the strengths of our environmental, health and safety efforts which include EHS surveys, physical risk surveys, energy audits, safety awareness programs and training with the assistance of specialised consultants and organisations.
Personnel risks
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Risk management
Action plan
John Keells continues to position itself as an attractive employer and will seek to ensure the long term loyalty of its committed team by training, development, recognition and reward. The rigorous management leadership programme includes the provision of development, mentoring, support and advice, while the early identification and advancement of high achievers and those with potential is promoted via attractive performance incentive schemes. The success of the group depends on the commitment, motivation and skills of its employees. The group is addressing the issue of the shortage of qualified personnel in some fields by ensuring opportunities for professional development. This strengthens our position as an attractive employer in the competitive market for suitably qualified employees.
This year, we focused much attention on how we as a group address the issue of sustainability, and in order to successfully meet these growing expectations, a group-wide sustainability audit was commissioned through the service of specialised consultants. This exercise was completed after the end of the financial year and suitable action plans are now being drawn up with a view to be a more goal-driven in our sustainability practices and align these with the activities of the John Keells Social Responsibility Foundation, the nerve centre for JKH's CSR efforts.
Industry group/sector risk

By consolidating and aggregating the findings of our industry groups/sectors, it is possible to form a view of the 10 most important strategic risks across the group. The table below shows the weighting of the top 10 strategic business risks across the industry groups/sectors that we studied. While many risks were unique to a sector, a few key challenges had a high or critical impact for many, or even all of the sectors. Hence the risks at the top of the chart are those that will do the most to influence markets and drive corporate performance in 2008 and beyond. This cannot, however, be used to definitively conclude that one industry group/sector is more or less risky than another. However, we can infer that, compared with what we believe are the most common strategic business risks, some industry groups/sectors are more exposed than others.
Stakeholder risks
Financial Year Risk Rating 2007/08 Moderate 2006/07 High 2005/06 High
Action plan
The group believes that its success depends on the degree to which it can balance both profit and the interests of all its stakeholders. We constantly conduct analyses of our market environment and competitive situation. We obtain vital information about our customers' needs by maintaining regular contact with them, and this enables us to stay close to the market. We use the information we receive to develop and supply products tailored to suit the needs of the market and to enhance our competitive position and level of market awareness. The competence and commitment of employees are key factors for the successful development of the group and this idea is anchored in JKH HR mission of More than just a workplace. The group has already implemented a series of measures to counter possible personnel risks.
The future outlook

The experience gained during the past two years has now enabled the R&CR team to roll out and implement effective business continuity and disaster recovery plans, not only from a technology perspective, but more importantly from a continued business operational focus.
Transportation
Leisure
Property
Financial Services (Excluding Associates)
IT Sector (Excluding BPO)
Plantation Services
Legal, regulatory & compliance Environment health & safety Political Macro economic Catastrophic loss Reputation & brand image Organisation and people Technology reliability & recovery Capital and finance Internal business process
Ultra High
High
Moderate
Low
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Doing simple things to make a BIGGER difference

Sustainability Report
NOTE FROM THE CHAIRMAN

Corporate responsibility and a stakeholder focus have long been entrenched in the John Keells value system. We are conscious of the impact of our actions, not just on the bottom-line, but also on our role as an employer, provider, partner, investor and neighbour. Sustainable practices are growing in corporate priorities across the globe as it becomes apparent that sustainable growth of corporations will hinge not only on economic performance, but increasingly on the often less obvious social and environmental performance aspects. Accordingly, good sustainability reporting is growing in relevance, as stakeholders, including shareholders and providers of capital, consumers, employees, partners, suppliers, governments, the public and their agents, raise the bar of expectation in relation to the responsible and sustainable practices of corporations. This year, as the world battles with a food crisis and an energy crisis, we focused much attention on how we, as a group address, the issue of sustainability, in order to successfully meet these growing expectations. While we are aware of its significance and have, over the years, launched a number of successful initiatives that address valid societal needs, admittedly, our current practices and sustainability-driven projects have been generated in a more ad hoc fashion at the industry group levels. We subscribe to the UN Global Compact and support the Millennium Development Goals. Nevertheless, we have identified the need for a more goaldriven internal process in order to translate good intentions into sustainable business practices and align these with the activities of the John Keells Social Responsibility Foundation, the nerve centre for the group's CSR efforts. Bearing these in mind, we commissioned a group-wide sustainability assessment through the service of Det Norske Veritas AS, assurance providers and specialists in the field of sustainability reporting, in order to gain greater insight in to what we do - and what we need to do better. The exercise, which
was completed after the end of the financial year, highlighted the opportunities arising from within our businesses to achieve multiple stakeholder goals, as well as - curiously certain relevant practices that were not captured by the present reporting process. Additionally, as a group, our ability to capture data relevant to Global Reporting Initiative (GRI) G3 parameters differed among our diverse industry groups. As a result of these learnings, the following initiatives are in the process of being introduced 1. Incorporation of strategic priorities for environmental and social performance into the group's annual and long term planning processes 2. Improving capability among our industry groups to pursue sustainability goals 3. Creating a robust reporting system to capture groupwide information relating to GRI-G3 parameters Accordingly, I present to you, this year's Sustainability Report, which briefly captures our key business impacts, stakeholder dialogue, and some of our ongoing sustainable initiatives, with the intention of publishing our first comprehensive report in line with GRI-G3 guidelines upon the successful implementation of the above initiatives. I would like to thank my colleagues at JKH whose commitment and dedication to continuous improvement have enabled the group to take this large and yet essential stride.
Susantha Ratnayake Chairman the Note from the Chairman, and have structured this report to follow GRI-G3 guidelines as closely as possible. As mentioned earlier, we have made a concerted effort to reduce the printed bulk of our Annual Report in making it more functional and environmentally friendly, and have accordingly condensed our Sustainability Report in the printed version. The printed form of this report contains the note from the Chairman and key impacts of our industry groups. The full report, provided in the CD accompanying the printed report, which can also be accessed on the Investor Relations page of www.keells.com, includes details on selected projects that highlight our environmental, economic and social performance and policies on labour practices and human rights.
REPORT PARAMETERS
John Keells Holdings has been reporting its sustainability practices on an annual basis as part of its Annual Report. The information in this report covers material aspects pertaining to the financial year 2007/08 and covers relevant information from the JKH Centre as well as all its subsidiaries in all industry groups that have been detailed in the Group Profile section of the annual report. Our most recent previous report was included in the annual report for the financial year 2006/07. Any queries or clarifications required on this report could be addressed to investor.relations@keells.com. Information included in this report has been gathered through formal mechanisms and mainly cover issues of materiality whereby our industry groups have displayed their commitment to business, environmental and social goals. While a formal monthly reporting exists for all activities carried out by the John Keells Social Responsibility Foundation, the information and data channels from the industry groups require a more formalised system in order to enable us to report group-wide aggregate information on all of the GRI-G3 core and additional indicators. We are presently in the process of putting in to place such formalised systems in accordance with strategic initiatives highlighted in
STAKEHOLDER ENGAGEMENT
With six very diverse industry groups, we as a group of companies cater to the needs of a multiplicity of stakeholders and continuously strive to anticipate and proactively address emerging stakeholder needs. The following is a summary of JKH's key stakeholder groups, our mode and frequency of engagement with them, their respective interests and how we, as a group, address them.
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Sustainability report
STAKEHOLDER ENGAGEMENT
Stakeholder group Key interests Approach and frequency of stakeholder engagement Annual General Meeting, timely communications and press releases of material transactions, road shows, Investor Relations effort, regular updates of capital risk rating Our response
Shareholders and providers of capital
Profitability and returns, sustained growth prospects, risk profile of businesses, ability to service borrowings
Releasing quarterly reports including a statement from the Chairman within 3 weeks of the end of the first three quarters of every year; releasing the audited annual results within 2 months of the end of the financial year Making the corporate website a good source of information, tracking patterns and of usage and providing key contact points Ensuring that shareholders and their agents have year-round access to the highest governing body of the company via the Investor Relations division. The division also proactively caters to needs of institutional investors via regular annual roadshows
Customers
Quality of product/ services, accessibility, value for money, value addition, delivery of product/ service promise
Regular customer feedback depending on the nature of the industry group through surveys, one-on-ones, market visits, mystery customer surveys, market research
Making customer feedback a focal point for innovation and product/service development across the group Adopting responsible marketing policies - eg: all group advertisements to be aired on multimedia are vetted by a committee nominated by the Group Executive Committee for suitability of content Adopting international quality certification systems and quality management systems (details given later) Enterprise resource planning for process efficiency and continuously reviewing and enhancing the systems
Employees
Individual and career development prospects, compensation and benefits, recognition, equal opportunity, work-life balance
Direct interactions both formal and informal, systematic performance management scheme incorporating top-down, bottom-up, and lateral feedback, open-door policy, Intranet for news and communication, meetings with trade unions among others
Nurturing a culture of open communication, open-door policies and the creation of multiple channels for upward feedback (eg: skip level meetings, Chairman Direct) Keeping abreast of new trends in employee engagement, whereby employees are encouraged to contribute at their best via suitable reward and recognition systems Investing in training and development, a robust performance management scheme and making succession planning for senior executive and other critical roles a board-level priority Allowing immediate access of relevant general and personal employment information through an Employee Self Service (ESS) portal Creating working environments that are pleasant, safe and conducive for a healthy culture and work ethic, in line with the group's HR vision of being More than just a workplace. We encourage dialogue at all levels and actively engage in dialogue with employee representatives, including trade unions. We foster a workplace where there is freedom of association to engage in lawful trade union activity.
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STAKEHOLDER ENGAGEMENT (Contd)

Stakeholder group Key interests Approach and frequency of stakeholder engagement Our response
Organising sports events (inter and intra organisational), year-end annual get-together, BU-based oubound training activities etc Organising CSR roadshows and encouraging employee participation in their choice of community welfare projects Suppliers Adequate returns, steady commitments, ethical dealings and timely settlements, prospects for growth of business Regular vendor participation and dialogue via a central group sourcing function, periodic vendor reviews, on-going interactions in developing small scale suppliers, vendor education in invoicing etc towards integrating with the JKH ERP. Documenting and sharing planning cycle in order balance vendor capacity utilisation interests and with group's realistic delivery requirements via the Group Initiatives (central sourcing) function Sharing best practice learnings and knowledge transfer Supporting small and medium industries by providing them with know-how, fair prices and ready markets through extensive engagement - eg: the Ceylon Cold Stores vanilla and ginger farmer projects and Jaykay Marketing Services Tambuttegama collection centre project
Governments, policy-makers, regulators and industry associations
Sustainable revenue streams for the broader economy, creation of employment, compliances, countrycompetitiveness, industry competitiveness and equality
Focused interventions, Participation in government, statutory and public-private sector business forums on issues relating to regulatory engagements, written and public policy framework that have a material communications, impact on our businesses committee participation Linking matters of national interest with business goals - eg: participation in the development of the port of Colombo Proactive and leading participation in industry associations such as the Ceylon Chamber of Commerce sub-committees as well as industry specific associations relating to our businesses Regular interaction through core focus projects of the John Keells Social Responsibility Foundation Taking on community development projects and improving livelihoods via village adoption and developing IT competencies and employment opportunities for village youth through extensive engagement exercises covering pre and post-implementation Maximising benefits to communities from engagement - HIV/AIDS awareness campaigns, English language scholarship programmes, undergraduate soft-skills programmes, cataract surgeries through the Vision Project Social Responsibility Foundation - working with the industry groups in order to incorporate community related aspects into their sustainability projects
Communities
Environmental, societal and cultural impact of operations and expansion projects, livelihood generation, provision of services, aid
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SUMMARY OF KEY IMPACTS AND RESPONSES

Industry group Transportation Areas of key impact based on order of materiality Safety and health Current responses Published and reviewed policies for zero accidents at our Port operation Periodic audits - HS&E Risk Management (March 2007) Checking and routine maintenance of equipment for safety and fit for purpose, with equipment audits Continuous training on OHS Medical checks, medical centre availability, emergency treatment and medical assistance Sound emergency response - trained team, dedicated emergency equipment Local hiring and local opportunities creation Ensuring group policies on minimum wages, equal opportunity, child labour etc. are met, even for contract labour via the terms of contract Non-executive staff, employed in large numbers by port and bunkering operations, covered by collective agreements Preventive maintenance of equipment, waste treatment and training personnel to counter and contain spillage in terminal spillage containment equipment and materials available Compliance with MARPOL regulations Disposing of hazardous wastes (sludge, waste oil and residues) to MPP authorised agencies Ensuring industrial effluents comply with local regulatory requirements, treatment of sewage and monitoring and reporting of waste Measures taken to preserve the bio-diversity of sensitive localities in which we operate hotels - Habarana, Trincomalee, Kandy and Yala in Sri Lanka, as well as some of our resort locations in the Maldives Maintaining CEA standards of discharged effluents and recycling waste water A number of our resorts practice recycling and reusing programmes for glass, plastic and paper products Implemented audit recommendations to reduce on power and energy consumption All Chaaya and Cinnamon branded hotels have obtained ISO 14001 environmental certification Our Destination Management business has opted for early adoption of the Environmental Emissions Act with regard to their fleet of vehicles All Cinnamon branded hotels and three of the five Chaaya resorts are certified for the food safety management system against ISO 22000 (others in progress) Minimum quality standards required to be maintained by our branded hotels that cover FTO standards of health and safety practices, pest control, safety and emergency preparedness etc. Training on HACCP in the supply chain Regular internal/external audits are carried out to ensure the standards are maintained in facilities such as kitchens, rooms, public areas and banquets
Labour practices
Environment
Leisure
Environment
Safety, health and hygiene
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Industry group
Areas of key impact based on order of materiality Society
Current responses Promoting responsible traveller concepts among our clients and showcasing of local heritage and cultures as part of our brand promise Significant contributions to the local population in terms of hiring, procurement and indirect opportunities Active participation in JKH group social projects such as HIV/AIDS awareness, English language scholarship programme and village adoption as strategic socio-economic activities Building safety measures considering seismic activity zones, fire protection according to BS standards, CCTV, access controls, shatter proof glasses, emergency plans Dedicated safety managers appointed for construction safety Comprehensive clauses on health and safety built into contracts of outsourced contractors Projects are undertaken after conducting an environmental impact assessment, where applicable Electricity consumption continuously monitored and savings accrued Careful monitoring of water consumption Systematic segregation of garbage and disposal to municipality, where applicable Comprehensive clauses related to local labour, housing for labour, child labour, fair wages and forced labour built in to contract of outsourced contractors Meat processing plant is ISO 9001:2004, HACCP certified and SLSI certified Responsible labelling in relation to product lifecycle Focus on maintaining high plant hygiene practices across all facilities Rigorous training of staff in maintaining high food safety measures Working closely with supply chain on maintaining required quality standards
Property
Safety and health
Environment
Labour practices
Consumer Foods and Retail
Product responsibility
Environment
Developmental programme to convert the slaughter waste into byproduct like animal feed Sludge being generated from the ETP at the plant is tested and given to the surrounding villages as manure Treatment of waste water/effluents Energy and electricity monitoring for conservation and continuous efficiency targets Involvement in nurturing and promoting small farming communities also includes creating awareness about healthy environmental practices, use of pesticides etc. Launch of the Red Bag towards promoting reduced use of polythene Continuous health and safety monitoring and review Systematic medical checks, emergency treatment and medical assistance Focus on ensuring that group policies on equal opportunity, child labour/forced labour etc. extend to proportionately large numbers of contract staff
Labour practices
Financial Services
John Keells Stockbrokers is the only subsidiary in this sector. Sustainability practices of our associates, Nations Trust Bank PLC and Union Assurance PLC, are found in their respective Annual Reports.
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Industry group IT
Areas of key impact based on order of materiality Technological obsolescence and information security
Current responses Building measures of countering risk of technological obsolescence in to product and service design Building Intellectual Property (IP) by creation of new software products JKOA has many firsts in bringing new technologies to the country - e.g. Microsoft CRM packaging allowing for sales force automation, service instructions and monitoring via short messaging services linked to inhouse software programmes, field operating support system developed in-house Systems are being developed against ISO 27001 standard Consultative sessions and engagements with employees - e.g. JKOA Joint consultative committee Regular health checks Continuous health and safety monitoring review Greater initiatives towards Green IT concepts Energy saving initiatives Responsible disposal of e-waste after maximising recycling possibilities Three factories (that contribute to 40 per cent of production) are HACCP certified Focus on maintaining lowest residual pesticide levels The commodity broking unit adopts the code of ethics of the Colombo Tea Brokers' Association Transparent mechanism for financial dealing with tea suppliers and clients through uniform disclosures Employing a larger number of women in workforce - empowerment of non-urban women Entrenching sustainability values into corporate value system - robust governance, risk review and internal control systems Over the past decade 38.2 per cent of the groups valued added was distributed to employees, 16.2 per cent to state coffers Focus on shareholder value creation while addressing the interests of all stakeholder groups Infrastructure investments that also provide public benefit - ports, bunkering Creating 9,992 jobs for the local economy and significantly more in indirect opportunities Local sourcing and entrepreneur development through the Group Initiatives (Central sourcing) function Internationalisation strategies gradually increasing foreign exchange earnings repatriated to the country Financial, technical support to the John Keells Social Responsibility Foundation, a dedicated body for championing the group's social responsibility projects Providing educational supports such as English language scholarship programmes, undergraduate soft skills programmes, neighbourhood schools programme Involvement in core health related issues such as sponsoring cataract operations for a targeted 2000 recipients and conducting extensive and focused HIV/AIDS awareness campaigns Taking on community development projects and improving livelihoods via village adoption projects, creating sustainable employment opportunities taking our BPO operations to villages, sponsoring Sri Lankan arts
Labour practices
Environment
Other (Plantations related companies)
Product responsibility
Labour practices
Centre
Economy
Society
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ECONOMIC PERFORMANCE Value added over a decade

16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0
Management approach
The John Keells group is committed to sustainable value creation, for its shareholders, varied stakeholder groups and the geographies in which we operate. Our rapid growth in the past 5 years now requires us to increase our investment exposure in the Asian region in order to maintain the momentum of returns our stakeholders have begun to expect of us, and we believe, to do this, we need to improve the competencies of Sri Lankan industry as well as its workforce. Our aspiration to create enduring value for the nation drives us to achieve regional competencies within each of our businesses and our people.
2006 2007 2008
1998
1999
2000
2001
2002
2003
2004
2005
MI Tax
Value creation
JKH's value addition has grown from Rs. 3.45 billion in FY 1997/98 to Rs. 16.23 billion in FY 2007/08; a compound annual growth rate of 16.7 per cent. Of the total value created during the decade, 15.6 per cent accrued to the state coffers while 36.8 per cent was distributed to employees. Total revenue of JKH during the period grew from Rs. 8.68 billion in FY 1997/98 to Rs. 41.81 billion in FY 2007/08. JKH and its subsidiaries, employ 9,992 persons while creating indirect employability and benefits for an even larger number. While our total numbers of staff have declined compared to 19,834 in FY 1997/98, this is mainly as a result of the group's strategic decision to exit its cyclical tea/rubber plantations businesses. Excluding this sector, the group's employment creation has grown by 37.3 per cent in the last decade. JKH is on a constant drive to be a superior value creator for its shareholders. Details of our performance in this regard are included in the Investor Information section of the comprehensive Annual Report.
Retained earnings Depreciation Dividends Interest
To Employees
Supporting small-scale suppliers

Small scale outsourced construction workers Small scale outsourced producers Rural suppliers Leisure Consumer foods and retail Transportation IT Individual truck owners Other (Plantations related) Small-scale distributors Plantation smallholders SMEs Small-scale distributors Shop-owners SME-grade manufacturers Rural farming communities
Property
SME-Clearing agents
Infrastructure investment
JKH's total investments have grown from Rs. 2.22 billion in 1997/98 to Rs. 23.66 billion in 2007/08, of which 25 per cent is in the ports and bunkering businesses, which are directly linked to the competitiveness of the national economy. These businesses have created 737 jobs for the national economy. Additionally, JKH has, as part of activities undertaken by the John Keells Social Responsibility Foundation, invested in public infrastructure relating to irrigation, schools, maintenance of roads and railways, the details of which are included in the Social Performance section of this report.
SMEs
Give
1. 2. 3. 4. 5. 6. Fair prices Ready markets Regular cash-flows Technology transfer and know-how Best practice sharing Increasing margins and receipt of competitive prices 7. Greater livelihood options and exposure
Receive
1. 2. 3. 4. 5. 6. Required quality Elimination of middle men Ability to pay competitive prices where applicable Market insights and feedback Innovative suggestions
Reaping economic gains of responsible sourcing

The Group Initiatives function had another successful
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year with Rs. 220 million of savings derived from the group sourcing initiative. The savings were achieved from 32 categories under term contracts with preferred suppliers, of which 13 categories were renewed in this financial year. The group sourcing initiative is currently in its fifth year of being implemented and is in its second year of being institutionalised across the group. Institutionalisation of the group sourcing initiative was carried out by means of empowering user groups to manage and carry out the sourcing of various high valued products and services. The institutionalisation process has resulted in the standardisation of all sourcing documentation such as requests for proposals, supplier contracts for all sourcing categories and the setting up of systems and processes for vendor management. The cross-selling initiative focused on the reduction of customer acquisition cost to the group companies whilst increasing the overall customer retention by consolidating the group's existing customer database. The cross-selling initiative was initially launched in the Transportation and Financial Services sectors with the formation of a group-wide cross-selling team. This initiative resulted in incremental sales of Rs. 286 million during the financial year, predominantly from the above two sectors.
guaranteed prices and volumes for farmers. The companies, in turn, are guaranteed of good quality and continuous supply. No of participants as at 31 March 2008 Ginger Vanilla Treacle Dairy Cashew 230 2,300 14 1,200 40 No of at participants commencement of initiative 35 80 12 900 10
Creating self-employment opportunities

Commenced as an experimental move by John Keells Office Automation (JKOA) in 2006 in Colombo, this self-employment initiative has since grown island-wide to cover a number of the company's key distribution centres. The programme was designed to enable technically trained JKOA employees to evolve into successful entrepreneurs and carry out outsourced operations. Currently, 40 per cent of the active photocopier machine base is maintained by such outsource partners, while receiving supports and regular monitoring of service quality standards by JKOA to ensure compliance with required quality standards. The model has enabled the company to successfully control the growth in fixed costs and headcount in spite of growth in installed equipment base. The programme has grown to cover 13 service providers as at 31st March 2008 compared to 2, as at 31st March 2006.
Supporting small-scale suppliers

The nature and diversity of JKH's businesses enable the group to bring communities living on the periphery of society into mainstream businesses. The group's engagement across diverse value chains spans the farming community, small-scale distributors and shop owners, among others, in the small and unorganised business sectors, as illustrated below. Our involvement has enabled these smaller suppliers to benefit from technological know-how, fair prices, market access and sustainable livelihoods.
Sustainable livelihoods for farming communities

Some of our best internal case study examples in the area of supporting small-scale suppliers come from our Consumer Foods and Retail industry group. As a key player in the national consumer food industry, we are heavily dependent on an adequate and safe supply of agricultural raw material inputs at required standards. Accordingly, over the past few years, companies in the industry group have developed sustainable sourcing initiatives and out-grower programmes that have empowered and provided livelihoods to targeted farming communities. Companies in this industry group have worked with various farming communities over the past few years and been instrumental in rolling out sustainable sourcing programmes for ginger, vanilla, treacle, dairy, and most recently mango and cashew farming communities. These initiatives have involved often creating new supply systems, facilitating financial assistance for farmers, involving the relevant state or other institutions, providing technical and other supports, as well as
Developing small scale service providers

Keells Tours has partnered with 75 of its drivers in a project that assisted them to purchase modern vehicles on a self-financed model. Having negotiated preferred rates on behalf of the 75 chauffeurs, Keells Tours also provided a guaranteed minimum income each month. The programme has been very successful, with all 75 drivers nearing the completion of their four-year lease period, at the end of which they will take full ownership of the vehicles, each worth over Rs. 2 million.
ENVIRONMENTAL PERFORMANCE
Management approach
The John Keells Group is aware of the environmental impact of its operations, particularly in terms of energy consumption and related impacts, consumption of water and release of effluents and the generation of solid wastes. As a group, we endeavour to minimise our impact on the environment, and where possible, contribute positively to its conservation. Over the years, our industry groups have launched various initiatives to minimise the environmental footprint of their
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respective operations in line with the group's value system. In the future, we intend to unify these efforts, and as a first step, the group will launch water positive and reduction of carbon footprint initiatives in the year 2008/09. Selected environmental projects are highlighted as follows.
Pioneering the green-building concept

In February 2008, the John Keells Social Responsibility Foundation joined hands with the Central Environment Authority (CEA) to establish a nature field centre at Rumassala, in Galle. The Rs. 6.9 million project is being constructed on a section of the 0.8 hectares of land managed by the CEA in this area. The facility, which will include an auditorium, library and canteen, will primarily target school children, and will be operated by the regional staff of the CEA from Galle. Designed by the faculty of architecture, university of Moratuwa, this building supports the concept of green building in Sri Lanka and is expected to be completed by May 2008. The centre will conduct half-day programmes for groups of 75-100 children to experience, observe and learn about bio-diversity in the area, eco-friendly practices and co-existing in harmony with the environment. Audio-visual tools will also be used to educate visitors about global warming and the detrimental effects of green house gases. Nature Odyssey, a member of the John Keells Group and an inbound tour operator specialising in nature and adventure, will also carry out quarterly programmes on birds and butterflies; while the IUCN (The World Conservation Union) would be involved in the study of coral reefs at the site.
A unique ecological initiative

On 11th March 2008, Cinnamon Lodge, Habarana launched a simple but original initiative as an environmentally friendly gesture: selling 5 kg and 10 kg packs of compost to its visitors and guests, as well as those of the neighbouring Chaaya Village, Habarana. Sold at Rs. 100 and Rs. 180 respectively, the compost is made up of the garden waste collected from the two hotels, along with farmyard manure, crop residue, dolomite and top soil, in order to improve its quality. The idea was born because of the large amount of garden waste collected from the two hotels on a daily basis: around 750kg to 1,000kg of dried leaves each day. Two large pits (approximately 20'x 20'x10' in size) were then prepared in which to allow the leaves to decompose. The dried leaves are left in these pits for a total period of six months. Meanwhile, separate compost pits have been prepared for the purpose of the two hotels and the vegetable plots. The pits have the capacity to produce 1,000kg of compost each month.
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Preserving bio-diversity
With much focus on re-forestation and conservation attached to the travel industry, the Leisure industry group, led by the initiative of its subsidiary Nature Odyssey, has devised a number of awareness and conservation programmes aimed at preserving the rich bio-diversity of some of the locations of our tourism operations. A few noteworthy examples are given below:
Systematic disposal of solid waste at the Yala Village hotel

In line with continued measures to preserve the environment and optimise the usage of its resources, the Yala Village team devised a method for the systematic disposal of garbage using bio gas technology, given that over 50 per cent of the hotel's daily garbage consisted of digestible organic substances. Accordingly, they instated a system consisting of 4 units of 12ft. diameter and 6ft deep masonry underground chambers with a lifting mechanism. Complete digestion of garbage in a chamber takes approximately 4 months. As digestion takes place in concealed bio gas chambers, the breeding of mosquitoes as well as bad odours are eliminated. Bio-gas produced as a by-product of this process is utilised to cover part of the hotel's heating requirements (i.e. water, gas for cooking etc), whilst the residual organic digest provides fertilizer for the garden. This initiative, in line with the group's intensions to keep reducing our quantum of GHG emissions will be used as a benchmark for the other hotels within the chain.
Creating butterfly habitats in Habarana

Habarana, in which we own and operate two hotels, is a rich butterfly habitat area - a fact that has been, however, decreasingly evident with growing urbanisation. On 11th March 2008, the group launched a butterfly park at Cinnamon Lodge, Habarana, with the help of project consultant, Dr. Michael van der Poorten, who has tremendous experience in habitat enrichment. The project also attracted the attention of the IUCN who partnered the group in this unique effort at Habarana. The first phase of the project was completed with more than 300 larval host plants put in place. The initiative of planting more than 1000 ideal larval host plants to enrich a butterfly habitat will certainly speak for the efforts of the team, who believe that responsible travellers will appreciate these efforts in sustaining the environment. The park also conducts regular awareness events for school children in the vicinity.
Going green with the red bag

In April 2007, being mindful of the growing threat of plastics and polythene to the environment, Keells Super became the pioneer supermarket chain in Sri Lanka to promote reusable shopping bags by launching an attractive Red Bag and encouraging customers to utilise the re-usable bag in place of polythene. The central purpose of the initiative was to reduce the usage of polythene bags which is heavily used within the industry. The bag is given to the customer at cost and the Keells Super customers have responded positively by subscribing to the initiative at most outlets. Based on customer feedback the chain recently introduced a bigger version of the Red Bag which could carry more items in it. Since the launch of the initiative 125,000 red bags have been sold of which, 8600 (or 7 per cent of those sold) are in re-use.
Preserving the sanctity of rural Sri Lanka

The village of Hiriwadune is three kilometers away from Cinnamon Lodge, Habarana and breath-takingly scenic trails have been developed by Nature Odyssey as a popular village trek for the visiting tourists, giving them an insight into the nature and culture of these surroundings and people. The programme is greatly welcomed by villagers who understand our efforts to create awareness among visitors in preserving the natural and cultural sanctity of these localities. This activity has helped many villagers economically, too, by enabling them to participate in our excursions as suppliers and guides.
Going green with Toshiba

The initiative was launched by John Keells Office Automation (JKOA) in order to collect all empty Toshiba toner cartridges and re-cycle or dispose of the same in an environmentally-friendly manner. The project was announced to our customers through paper advertisements, direct mailers, notices and awareness campaigns, creating awareness on the importance of using original toners, the consequences of using fake tones and the importance of protecting the environment, among others. The following benefits are awarded to customers participating in the programme: No of empty cartridges return 2 4 6 Discount % 5 7.5 10 or Voucher 250/500/1,000/-
Snake awareness at Yala

Since acquiring the Yala Village hotel in 2005/06, the Nature Odyssey team has discovered many species of snakes endemic to the dry zone wilderness. The team also discovered that many snakes faced serious injury with staff, guests and surrounding villagers reacting to them in fear. The group's naturalists commenced an awareness program that helped hotel staff and villagers identify many species of snakes and understand them, which helped to save dozens of snakes in the next two years. On the back of the success of these programmes, the team was invited by the Yala National Park warden to conduct a similar awareness event for the park rangers. In the past two years, 23 cat snakes, 16 cobras, 21 flying snakes, 3 sand boas and countless reptiles were saved and released back into the wilds.
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Cartridges thus collected are sent to Toshiba Singapore Pte Ltd, JKOA's principals and confirmation received via a certificate of environment friendly disposal from the re-cycling company. Results: Of 98,290 cartridges sold in the past three years, 5,476 or 6 per cent have been returned, and recycled.
Leading industry practices in environmental performance

Lanka Marine Services (LMS) has taken several initiatives to achieve leading industry practices in terms of quality and environmental performance. All products supplied by LMS have much lower sulphur content than internationally accepted levels, because LMS imports products directly from refineries rather than from traders. The company also continuously monitors and changes the bunker/lube delivery procedures to meet the requirements of customers and industrial standards. LMS was one of the first bunker suppliers in 2005 to comply with the Marpol Annexure VI requirements in the region and is now working on complying with the Singapore Standard CP 60 for delivery of bunkers. A six sigma programme, too is being considered in order to streamline LMS's processes and procedures.
SOCIAL PERFORMANCE
Management approach
The John Keells Social Responsibility Foundation (Foundation) is a registered voluntary social service organisation through which the John Keells Group has channelled its social responsibility activities since 2005. In 2007/08, the Foundation continued to dedicate itself to already undertaken commitments, as well as accept new ones that would contribute further towards sustainable social and economic goals. Chairman, John Keells Holdings, Susantha Ratnayake, heads the Executive Committee of the Foundation, while the three other executive directors of JKH PLC comprise the board. The Foundation's initiatives and activities are managed by the Foundation Management Committee (MC), composed of a cross-functional team of 18 senior executives drawn from various industry groups within the company. Each project is championed by a member of the MC and implemented by a sub-committee drawn from volunteers across the Group. The MC meets monthly and the Foundation's CSR projects are audited annually. The key focus areas of the Foundation are education, health, environment, community development, arts and culture and disaster relief.
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CSR road show

The John Keells Group launched the CSR exhibition road show titled I CAN make a difference to create awareness among staff about the CSR activities undertaken by the group and to enlist volunteers for the different CSR projects championed by the Foundation. The road show was launched in June 2007 at the head office complex and travelled to most business locations of the group covering 3,530 visitors in 45 locations across the island. Due to the prevailing security situation, Club Oceanic and Yala Village were not covered. As a result of the initiative, 1,913 employees volunteered to take part in the Foundation's various CSR activities.
based scholarship while the second, third and fourth year students will benefit from a merit-based scholarship. The recipients of the scholarships will also be encouraged to follow their industrial placement period at JKH; and JKH would annually offer employment within the John Keells Group to at least five students who graduate from the BSc T&LM degree. The Final Step, a five-day series of soft skills workshops for university undergraduates, was presented for the second time by the Foundation, in collaboration with the English language teaching unit (ELTU) of the university of Kelaniya. Designed to enhance the employability of graduates, the programme involved two panel discussions as well as three interactive workshops dealing with varied subjects such as Employer Expectations, Team Building and Leadership Skills, Adapting to the Corporate Environment, Personality Development and Confidence Building, Personal Grooming and Corporate Hospitality, with each day of the workshop attracting over 250 undergraduates. The Foundation was also instrumental in initiating the development of a comprehensive audio-visual career guidance programme targeting pre- and post-Ordinary Level school children. Supported by the Ceylon Chamber of Commerce, the programme covers over 100 career paths. It is intended for dissemination among all public schools in the island as well as through national television.
Education and development

One of the main projects in this area is the English language scholarship programme, commenced in 2004, in partnership with Gateway Language Centres, which has continued with its objective of contributing to English language teaching across the island. The categories of scholarships offered under the programme since its inception range from the internationally-recognised two-year Edexcel Diploma Program (offered to students showing a good aptitude for English), to the 4-month post-Advanced Level and pre-Ordinary Level English courses aimed at enhancing the employability of school leavers through better English language skills. The programme has also expanded to cater to communities with special needs. Accordingly, special programmes have been designed and conducted for trackers of the Yala National Park through a work-related English course and the undergraduates of the university of Moratuwa transportation and logistics degree programme through a customised English Course. The scholarship programme has, to date, empowered the lives of over 1,400 students in nearly all parts of the island, from areas as diverse as Colombo and its suburbs, Galle, Kandy, Matara, Bandarawela, Wellawaya, Habarana, Batticaloa and Vavuniya, and succeeded in creating an early and abiding interest in the English language among talented but less fortunate children across the country. In addition to the classes, the annual English Day was held on 12th May 2007 at the Bishop's College auditorium in Colombo. Over 250 scholars from each area in which the scholarship programmes were conducted during the past year - including Batticoloa - congregated in Colombo for this event where they were given an opportunity to showcase their newly-acquired skills by performing an item of their choice. Another initiative is the support of the honours degree of Bachelor of Science in transport and logistics management (BSc (T&LM) Hons.) at the university of Moratuwa. In addition to the existing English language training and mentoring programmes implemented by the Foundation, through the group's Transportation sector, a scholarship scheme was also launched to assist the undergraduates. A total of 26 scholarships will be awarded on both need-and merit-basis. The first year students will have access to a need-
Health and sanitation

The John Keells HIV/AIDS Awareness Programme continued with its second phase in 2007/08, carrying out its dual objectives of creating awareness amongst vulnerable groups as well as workplace education. A total number of 55 sessions were carried out during 2007/08, targeting 4,200 individuals. The sessions were carried out at a number of venues, including factories in the Biyagama Free Trade Zone, hotels in Beruwela, Hikkaduwa and the southern coast of the country, as well as the cultural triangle, the prison at Kalutara, Triad Advertising, Standard Chartered Bank, Colombo and HSBC Global Data Processing, Rajagiriya. John Keells Group employees were also part of the workplace education programme. 23 sessions were carried out at Cinnamon Grand and Trans Asia, Colombo and Chaaya Village, Habarana for a total of 1,485 employees. JKH was also the principal Sri Lankan corporate sponsor of the 8th ICAAP (International Congress on AIDS in Asia and the Pacific), held in Colombo in August 2007. Over 3,500 delegates from 60 countries attended the conference, which created dialogue on critical issues affecting the region, including awareness and education, improved access to care and treatment and support of the affected. Meanwhile, the John Keells Vision Project also flourished during this year, with 508 cataract operations being successfully carried out island wide. This brings the total number of operations to 1,931 since the launch of the
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initiative in 2004. Meanwhile, spectacles were given to 20 deserving individuals. The target for 2008/09 is to complete 700 cataract operations and donate 50 spectacles.
Economic and social uplifting Community development

Since the Foundation adopted the village of Halmillawe (20 km away from Habarana) in 2005, the development of the village has been positive and heartening. This has been particularly beneficial to the womenfolk, as a savings scheme called Diriyen Idiriyata (signifying that they are moving forward with courage) was initiated in June 2007, whereby the women save money and utilise it to supplement their familys income. The Foundation matches the women's savings one-for-one, in order to encourage them to be financially empowered. The women now save up to Rs.200 per month under this programme and have even taken a few loans from the scheme to finance their projects. The Foundation also purchased seeds for the women and encouraged them to grow vegetables in their gardens for their own consumption. This has given them the opportunity to save money as well as ensure nutritious meals for their families. Meanwhile, a new pre-school was also completed in September 2007, creating a safer environment for the tiny tots of the village to commence their eduction. Other plans for the future include entrepreneurial skills development programmes for the women to enhance their incomes. Assisting the Foundation in implementing these projects are members of the Wilpotha Kantha Ithurum Parishramaya, Puttalam, who have achieved outstanding success, unaided, in similar projects in their hometown. The Foundation embarked on an outstanding and visionary project in the e-village of Mahavilachchiya, close to Anuradhapura. Partnering with a newly-formed BPO company, On-Time Technologies, the Foundation launched a BPO operation unit that bridges the dichotomy between the city and the village. The John Keells Strategic Group IT division facilitated the set up of remote connectivity to JKH systems from Mahavilachchiya and On-Time's high speed internet links facilitate data access and transaction processing to InfoMate Ltd, a JKH Group company which is itself in the business of providing outsourced accounting services. A tripartite agreement between John Keells Holdings, Foundation for Advancing Rural Opportunity (FARO) and On-Time Technologies, was signed in May 2007 and commercial operations between InfoMate and On-Time commenced in the same month. Digitised images are currently electronically transmitted to On-Time Ltd and the On-Time team carries out invoices processing and document indexing based on the images.
InfoMate Ltd provides staff of On-Time with training in the BPO centre in Colombo. The trainees are taken through an induction programme as well as a structured training programme in the processing of accounting transactions. The Foundation provides the trainees with accommodation in Colombo for the duration of the training. The initial group of six has been carrying out work satisfactorily and InfoMate hopes to increase the number to 20 by the end of 2008/09. Other community development initiatives include the maintenance of the Masjidul Jalmiya Road in Colombo 2.
Disaster relief and philanthropic initiatives

The Foundation co-ordinated the following disaster relief and philanthropic initiatives in 2007/08: Donation of emergency non-food essential items to resettled families at Vakarai, Batticoloa on 27th April 2007. Opening of the 60 houses at Siribopura, Hambantota on 16th June 2007 (50 of which were sponsored through Galleon Tsunami Relief Fund and 10 by the Mayor of Champillion, France). Opening of the Bales pre-school in Viharagala, Hambantota on 11th November 2007, in partnership with Bales Worldwide Limited. Distribution of school requirements to needy children in the Galle district in December 2007. Donation of Rs.25,000 towards the Asia Foundation's Books for Asia programme in March 2008. Sponsorship of equipment at the cost of Rs. 80,000 for the Lady Ridgeway Children's Ophthalmic Unit in March 2008. Donation of funds to purchase books and stationery for deserving children in the Archdeaconry of Nuwara Eliya in March 2007.
Values and culture

Sri Lanka's highly popular open-air art gallery cum art fair, Kala Pola, came alive on Sunday, 20th January 2008 at the lush Exhibition Grounds of the Viharamahadevi Park. Conceived and organised by the George Keyt Foundation, the Kala Pola enjoyed the unbroken patronage of the John Keells Group for the 15th consecutive year. Over 250 artists and sculptors displayed their unbridled creativity to an increasingly appreciative clientele at this event.
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LABOUR PRACTICES AND HUMAN RIGHTS

Employment
The group actively engages in workforce planning to align with its strategic objectives. Implementing these plans have, at times, been difficult in Sri Lanka due to the stringent labour law regime of the country, with which we fully comply, despite the obvious drawbacks in terms of competitiveness. The group's constant vigil in ensuring that the group has a workforce that lends to its strategic objectives continues to add value. In this regard, the company has moved from traditional lifelong employment to fixed term contracts, in certain businesses, in line with the industry requirements and norms.
Employee composition - grade-wise

Industry group AVP & above Managers 12 22 6 14 2 12 26 94 97 37 70 9 60 3 44 42 265 311 Asst Non Total Total managers Executives executives 31 March 31 March 2008 2007 & other 41 57 8 93 5 50 38 292 275 216 621 26 198 14 509 94 1,678 1,641 414 3,384 69 2,531 85 1,180 7,663 7,379 720 4,154 118 2,896 24 700 1,380 9,992 632 4,231 149 2,567 27 735 1,362 9,703
Employee relations
Collective bargaining, formal and informal, is prevalent in the group and has worked well for all its stakeholders. We see a trend in formal institutionalised collective bargaining with the intervention of recognised trade unions, being replaced with one-on-one bargaining, such as between the employer and groups of employees. We believe that as the trust, transparency and effective communication in the company increases, this would be the norm, rather than the exception. All business units have direct access to HR personnel. There is continuous dialogue, facilitated by HR personnel where appropriate, regarding work-related matters, including productivity improvements, health and safety maintenance, training and education relating to work-related issues as well as pertaining to matters of general interest that could affect employees and their families. There are many people management policies and practices that contribute to building employee engagement. These effective "Employee Engagement" initiatives enable the creation of organisatonal citizenship and commitment which in return ensures the success of employee relations.
Transportation Leisure Property Consumer Foods & Retail Financial Services IT Centre & Other Total 31 March 2008 Total 31 March 2007
Employee composition - gender-wise

22%
78%
Male
Female
Learning and development

The function of Learning and Development (L&D) is to partner with the organisation towards achieving our vision of Building businesses that are leaders in the region by developing a pipeline of leaders at all levels and building the required competence in employees, so that they can perform their roles adequately to meet business challenges. Our competency framework captures the knowledge, skills and attitudes that have enabled our organisation to consistently grow and develop in the past, and would also be essential for survival and growth in the future. Therefore, the competency framework forms the basis of all our HR initiatives, including L&D, as human
Gender-wise composition of employees at industry groups

83% 17% 9% 18% 22% 33% 28% 58%
Transportation Leisure Property CF&R Financial Services IT Centre & Other

91% 82% 78% 67% 72% 42%
Male
Female
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resource competencies will be the only non-replicable sustainable competitive advantage we have in today's world, where all other enablers could be replicated by others over a period of time. To keep pace with the change in the business environment, L&D has become a continuous process. In addition to training away from work, training on the job and job rotation form part of the learning processes. Business results are impacted by the action people take. L&D supports this by building people's adaptive capacity for effective action to achieve the desired results. A few noteworthy events that showcase the group's commitment in this area have been highlighted below.
JKCS initially awarded work-study scholarships in December 2007. The programme is run with the participation of the Imperial Institute of Higher Education and in association with the University of Wales, in which required modules within the curriculum are specified by an MOU between JKCS and the institution. This four year work-study degree programme requires 32 hours of work per week. Work-study students recognise the challenge of balancing study time with work, as their demanding schedule requires a fine balance of time and energy, learning and work obligation. This initiative is aimed at addressing the known gap between the supply and demand of IT graduates in Sri Lanka. It results in an output of quality graduates who are immediately employable, having acquired four years of relevant work experience. The programme is a winwin proposition for all stakeholders: the student, the university, the government, the local IT industry and JKCS.
Retail academy
During the year, the Retail sector (of the CF&R industry group) formalised their ongoing training initiatives for employees with the establishment of a Retail Academy at Moratuwa. The academy is accredited by NAITA for NVQ training and by the City & Guilds Institute of UK as an approved training institution. Over 11,000 mandays of training to non-executive staff and 2,600 mandays of training to the executive staff were provided.
Diversity and equal opportunity

We are an equal opportunity employer and do not discriminate on any indicators of diversity. The performance oriented culture where promotions and remuneration are based on merit alone supports this. Further, the group values, which are integrated into every aspect of the group's processes and systems that touches employees and the whistle-blowing mechanism that is in place for transgression of JKH values, policies and grievance handling mechanisms that are in place to ensure that the opportunity to discriminate is minimised. The group has an anti-sexual harassment committee which is chaired by an executive member of the board, demonstrating the groups commitment to preserving the dignity of work for all employees. Our commitment to diversity has been further strengthened by the fact that the Employers Network on Disability of the Employers Federation of Ceylon, is also chaired by an executive memeber of the JKH board.
Leisure group employees bag numerous awards

In the Leisure industry group, consequent to the branding of properties, the focus has been on continuous improvement in the standards of services to deliver the brand promise. Members of our hotel staff have won numerous awards in competitions organised by the hotel industry in Sri Lanka, validating the effectiveness of our training efforts. Hotels in the group produced the winner and runner-up of the Marie Brizard bartender competition organised by the Sri Lanka Institute of Tourism and Hotel Management held in July 2007. At the Chefs' Guild competition in 2007, our resort hotel chefs bagged a total of 24 medals, including two gold and five silver. The Cinnamon Lodge produced the winner the of E&J Gallo wine appreciation competition held in February 2008.
Human rights
We subscribe to the UN Global Compact. The principles articulated therein are but an extension of our value system. We do not discriminate and actively promote nondiscrimination. We do not engage child labour, in forced or compulsory labour. Overtime work is based on the needs of the market. Due importance is given on ensuring a work-life balance.
Non-binding work-study scholarship programme

The John Keells Computer Services (JKCS) work-study scholarship is an award of access to a private institution offering IT degrees granted to individual scholars, both in terms of financial aid towards furthering their education as well as the chance to gain valuable work experience in the field of software development. There are many exceptionally competent students deserving of the opportunity who cannot afford a degree, and are enthusiastic recipients of work-study scholarships. This in turn would be a good investment for JKCS.
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ANNEXURE
Awards & certifications
Company/industry group
John Keells Holdings
Certifications
Awards/recognition received
LMD Sri Lankas most respected entities - ranked first Ceylon Chamber of Commerce Best Corporate Citizen award - ranked first SAFA award for Corporate Governance - ranked first ICASL Best Annual Report Awards - overall first runner up LMD 50 - ranked second Business Today top ten - ranked fourth
Transportation Walkers Air Services Mack Air DHL Keells ISO 9001: 2000 ISO 9001: 2000 TSP -Transport Standardization Process First Choice (in progress) APSP Asia Pacific Sales Process (in progress) TAPA (A Grade) ISO 8217: 2005 Delivery operations adhere to the latest Marpol Regulations Operations and tankers inside the Port of Colombo adhere to the International Safety and Port Security (ISPS) Standards relevant to the Colombo Port ISO 9001: 2000 Awarded Superbrand Status Regional DHL Customer Service Award
Lanka Marine Services
International Safety Management Certification (ISM)
Mackinnons American Express Travel
Qatar Airways Top Agents Award 06/07 Singapore Airlines Top Agents Award 06/07 Malaysian Airlines Top Agents Award 07/08
Leisure Cinnamon Grand ISO 14000, ISO 22000, OSHAS 18001 The Lagoon -selected as 'Sri Lanka's Favourite Restaurant" by the readers of Living/LMD Magazines The Food & Beverage team won 7 Gold, 16 Silver & 7 Bronze medals at the Culinary Art 2007 organised by the Chefs Guild of Lanka Presidential Tourism Award for the Best Five Star City Hotel & the Best Restaurant - The Lagoon Silver Award of the Human Resource Management Awards 2007 Good Food (One Rosette Award) from SAGA
Trans Asia Cinnamon Lodge Bentota Beach Hotel Chaaya Village
ISO 14000, ISO 22000, OSHAS 18001 ISO 14001, ISO 22000 & OSHAS 18001 ISO 14001, ISO 22000, OSHAS 18001 & HACCP ISO 14001, ISO 22000, OSHAS 18001
PATA Gold for Eco Tourism 2007 Kuoni Green Planet 2007 4 Star Clasification by Ceylon Tourist Board Presidential Awards for Travel & Tourism - CSR Kuoni Green Planet Award 2007 Virgin Holidys Bronze Award 2007 Neckermann Reisen Germany - Primo Award 2007 Holiday Check - One of the 99 most favourite hotels worldwide Gold Award of the Human Resource Management Awards 2007 PATA Gold - marketing media CD ROM category
Chaaya Citadel Chaaya Lagoon Velidhu Keells Hotel Management Services Chaaya Hotels & Resorts CF & R Keells Food Products
ISO 14001, ISO 22000 & OSHAS 18001
ISO 9001 & HACCP "SLS Mark" product certification-Comminuted meat products- (SLS 1218) ISO 22000 ( certification in progress) & HACCP SLS ( for ice creams & soft drinks) ISO 9001 :2000 SW-CMM Level 3 certification ISO 9001-2000 Silver Award at the Human Resource Management Awards 2007 Toshiba, Singapore Silver Award in Network category 2007 Toshiba, Singapore Silver Award in Distributor category 2007 Toshiba, Singapore award for market share growth in projectors in Sri Lanka 2007 (B) Toshiba, Singapore award for semester business growth in projectors for 2007 (A) Toshiba, Singapore Bronze Award for year on year sales growth for photocopier sales Riso Kagaku Corporation, Japan outstanding performance award for RISO duplicator sales in Asia Pacific region for 2007.
Ceylon Cold Stores Information Technology John Keells Computer Services John Keells Office Automation
InfoMate Plantations Tea Smallholder Factories
ISO 27001 (certification in progress) Accreditation as CIMA Training Partner
Ceylon Quality Certificate - One Star awarded by Sri Lanka Tea Board (for two factories) ISO 22000 & HACCP (for three factories) ISO 22000: 2005
John Keells Warehousing
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Financial Reports
23
45
678
Annual Report of the Board of Directors

The directors have pleasure in presenting the 29th annual report of your company together with the audited financial statements of John Keells Holdings PLC, and the audited consolidated financial statements of the group for the year ended 31 March 2008. FINANCIAL STATEMENTS & AUDITORS REPORT The complete financial statements duly signed by the directors and the auditors report thereon for the year ended 31 March 2008 are attached to this report. REVENUE Revenue generated by the company amounted to Rs. 604 mn (2007 - Rs. 482 mn), whilst group revenue amounted to Rs. 41,805 mn (2007 - Rs. 32,855 mn). Contribution to group revenue from the different business segments is provided in note 33 to the financial statements. RESULTS AND APPROPRIATIONS REVIEW OF BUSINESS SEGMENTS A review of the financial and operational performance and future business developments of the group, sectors, and its business units are described in the management discussion and analysis section of the annual report. These reports together with the audited financial statements reflect the state of the affairs of the company and the group. Segment wise contribution to group revenue, results, assets and liabilities is provided in note 33 to the financial statements. The group divested its investment in Unawatuna Walk Inn Ltd on 19 April 2007. On 6 May 2007, the group acquired controlling interest in Tranquility (Pte) Ltd via the purchase of a 100% equity stake by John Keells Maldivian Resorts (Pte) Ltd., at a purchase consideration of Rs. 554 mn. The results of Tranquility (Pte) Ltd., have been consolidated by the group from 6 May 2007. John Keells Hotels PLC (KHL) successfully completed a rights issue of ordinary shares in July 2007. Consequent to John Keells Holdings PLC (JKH) subscribing to additional shares of this rights issue, the group's effective holding in KHL increased to 92.69%. The group's effective holding in the subsidiaries of KHL also increased proportionately as a result of this additional subscription. In August 2007, John Keells Hotels PLC increased its stake in Yala Village (Pvt) Ltd. to 89.63% by subscribing to additional shares of its rights issue. Accordingly, the group's effective holding in Yala Village (Pvt) Ltd. increased to 83.08%. A major portion (74%) of the group's equity interest in Keells Business Systems Ltd (KBSL) was divested on 31 March 2008. The group ceased to have the power to participate in the financial and operating policy decisions of KBSL with effect from 1 April 2008. The profit after tax of the holding company was Rs. 3,803 mn (2007 - Rs. 2,145 mn) whilst the group profit attributable to equity holders of the parent for the year was Rs. 5,118 mn (2007 - Rs. 3,535 mn). Results of the company and of the group are given in the income statement. The final dividend of Rs. 1.00 (2007 - Rs. 1.00) per share for the financial year 2006/07 paid on 6 July 2007 together with the interim dividends (including a one off extraordinary dividend of Rs. 2.00) of Rs. 4.00 (2007 - Rs. 2.00) per share paid on 5 December 2007, 18 February 2008 and 31 March 2008 respectively, results in a total cash dividend pay out of Rs. 5.00 (2007 - Rs. 3.00) per share during the year amounting to Rs. 3,176 mn (2007 - Rs. 1,412 mn). Dividend per share has been computed based on the amount of dividends distributed to equity holders during the period. 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 7 of 2007, and have obtained a certificate from the auditors, prior to declaring a final dividend of Rs. 1.00 per share for this year. As already announced, the final dividend will be paid on 27 June 2008 to the shareholders of the company as at the close of trading on 13 June 2008. Detailed description of the results and appropriations are as follows.
PRINCIPAL ACTIVITIES John Keells Holdings PLC, the group's holding company, manages a portfolio of diverse businesses, which together constitute the John Keells group, and provides function based services to its subsidiaries and associates. The companies within the group and their principal business activities are described in the group directory.
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For the year ended 31st March In Rs. '000s Profit earned before interest after providing for all known liabilities, bad and doubtful debts and depreciation on property, plant and equipment Interest paid Profit on sale of investments Change in fair value of investment property Profit accruing to the company and subsidiaries Share of results of associates Profit before tax Provision for taxation including deferred tax Profit after tax Profit attributable to minority shareholders Amount available to the group's shareholders Other adjustments Balance brought forward from the previous year Amount available for appropriation Transfers to general reserve 1st interim dividend of Rs. 1.00 per share (2007- Rs. 1.00) paid out of dividend received.
2008
2007
and the liability recognized in the balance sheet reflects the present value of the defined benefit obligation at the balance sheet date using the projected unit credit method. Details of accounting policies have been discussed in note 1 of the financial statements.
5,898,939 (1,618,255) 4,280,684 55,151 4,335,835 2,242,713 6,578,548 (1,054,742) 5,523,806 (405,562) 5,118,244 (105,553) 7,701,281 12,713,972 12,713,972
4,239,719 (1,314,490) 2,925,229 58,952 109,612 3,093,793 1,700,992 4,794,785 (851,563) 3,943,222 (408,548) 3,534,674 961,686 5,349,754 9,846,114 (500,000) 9,346,114
DONATIONS Total donations made by the company and group during the year amounted to Rs. 0.8 mn (2007 - Rs. 0.5 mn) and Rs. 22 mn (2007 - Rs. 5.3 mn), respectively. Of these, the donations to approved charities were Rs. 0.1 mn (2007 - Rs. 0.03 mn) at company and Rs. 10 mn (2007 Rs. 2.5 mn) at group. The amounts do not include contributions on account of corporate social responsibility (CSR) initiatives. The John Keells Social Responsibility Foundation, which operates with funds contributed by each of the companies in the group, handles most of the group's CSR initiatives and activities. The Foundation manages a range of programmes that underpin its key principle of acting responsibly in all areas of business to bring about sustainable development. The CSR initiatives, including completed and on-going projects, are detailed in the sustainability report. In quantifying the group's contribution to charities no account has been taken of 'in-house' costs or management time. PROPERTY, PLANT AND EQUIPMENT The book value of property, plant and equipment as at the balance sheet date amounted to Rs. 289 mn (2007 - Rs. 380 mn) and Rs. 29,172 mn (2007 - Rs. 20,404 mn) for the company and group respectively. Capital expenditure for the company and group amounted to Rs. 20 mn (2007 - Rs. 125 mn) and Rs. 6,111 mn (2007 - Rs. 2,769 mn), respectively. Details of property, plant and equipment and their movements are given in note 2 to the financial statements. MARKET VALUE OF PROPERTIES
(635,742)
(459,442)
2nd interim dividend of Rs. 2.00 per share (2007- Rs. 1.00) paid out of dividend received. (1,271,896) 3rd interim dividend of Rs. 1.00 per share (2007-Nil) paid out of dividend received. Final dividend declared of Rs. 1.00 per share (2007-Rs. 1.00) paid out of dividend received. * Balance to be carried forward next year
(552,722)
(635,995) 10,170,339
8,333,950
(635,994) 9,534,345
(632,669) 7,701,281
All land and buildings owned by group companies were revalued as at 31-3-2008. Valuations were carried out by Mr. P B Kalugalgedera, Chartered Valuation Surveyor, Mr R.G Wijesinghe, Consultant Valuer and Assessor, Mr G.J Sumanasena, Consultant Valuer and Assessor, Mr H.R de Silva, Chartered Valuation Surveyor(UK) and M/s A.Y Daniel & Son, Certified Valuers. The group share of the revaluation surplus recorded amounted to Rs. 2,904 mn. All properties classified as investment property were valued in accordance with the requirements of SLAS 40 (2005). The carrying value of investment property of the company and group amounted to Rs. 832 mn (2007 - Rs. 800 mn) and Rs. 2,288 mn (2007 - Rs. 2,505 mn) respectively. The directors have decided to retain the fair values of investment property recognized previously as at the balance sheet date. Investment properties of business units, when significantly occupied by group companies, are classified as property, plant
* The final dividend declared for this financial year has not been recognised as at the balance sheet date in compliance with SLAS 12 (Revised 2005) - Events after the Balance Sheet Date. ACCOUNTING POLICIES The group decided on the early adoption of the Sri Lanka Accounting Standard 16 (revised 2006) on Employee Benefits
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and equipment in the consolidated financial statements in compliance with SLAS 40 (2005). This year, the land and building owned by John Keells Properties (Pvt) Ltd was reclassified as property, plant and equipment in the consolidated financial statements as a result of a total group occupation. Details of the revaluation of property, plant and equipment and investment property are provided in notes 2 and 4 to the financial statements. Details of group properties as at 31 March 2008 are disclosed in the real estate portfolio section of the comprehensive annual report. INVESTMENTS Investments of the company and the group in subsidiaries, associates, joint ventures and other external investments amounted to Rs. 23,768 mn (2007 - Rs. 20,548 mn) and Rs. 10,054 mn (2007 - Rs. 8,668 mn), respectively. Detailed description of the long term investments held as at the balance sheet date, are given in note 6 to the financial statements. STATED CAPITAL The Authorised Capital and Par Value concept in relation to share capital were abolished by the Companies Act No 07 of 2007. The total amounts received by the company in respect of the issue of shares are now referred to as stated capital. The total stated capital of the company as at 31 March 2008 was Rs. 22,464 mn (2007 - Rs. 22,246 mn). Options in respect of 4,094,227 shares (2007 - 3,666,283 shares) were exercised during the year under the employee share option plan, for a total consideration of Rs. 276 mn (2007 Rs. 247 mn). SHARE INFORMATION The distribution schedule and composition of shareholders and the information relating to earnings, dividend, net assets, market value per share and share trading are given under the investor information section of the comprehensive annual report. MAJOR SHAREHOLDERS Details of the twenty largest shareholders of the company and the percentages held by each of them are disclosed in the investor information section of the comprehensive annual report. RESERVES Total reserves as at 31 March 2008 (excluding share premium) for the company and group amounted to Rs. 6,343 mn (2007 Rs. 5,716 mn) and Rs. 21,753 mn (2007 - Rs. 16,989 mn), respectively. The movement and composition of the capital and revenue reserves are disclosed in the statement of changes in equity. DIRECTORS The Board of directors of the company as at 31 March 2008 and their brief profiles are given in the Board of directors section of the comprehensive annual report.
Mr. R S Captain resigned from the board with effect from 6 May 2008. In accordance with Article 84 of the Articles of Association of the company, Messrs G S A Gunesekera, E F G Amerasinghe and S Enderby retire by rotation and being eligible offer themselves for re-election. The group directory details the names of persons holding office as directors of the company and all its subsidiary and associate companies, as at 31 March 2008 and the names of persons who were appointed or who ceased to hold office as directors during the period. BOARD COMMITTEES The following members serve on the Audit, Remuneration and Nomination Committees of the Board; Audit Committee P D Rodrigo - Chairman E F G Amerasinghe S Enderby S S Tiruchelvam The report of the Audit Committee is given under the Board committee reports section of the comprehensive annual report. Remuneration Committee E F G Amerasinghe - Chairman M V Muhsin P D Rodrigo The report of the Remuneration Committee is given under the Board committee reports section of the comprehensive annual report and the remuneration policy is given in the corporate governance section. Nominations Committee T Das - Chairman S Enderby M V Muhsin S C Ratnayake S S Tiruchelvam The report of the Nominations Committee is given under the Board committee reports section of the comprehensive annual report. INTERESTS REGISTER The Company has maintained an Interests Register as contemplated by the Companies Act No 7 of 2007 and entries have been made therein from 3 May 2007 being the date on which the Companies Act No 7 of 2007 came into operation. In compliance with the requirements of the Companies Act No. 7 of 2007, this annual report also contains particulars of any entries made in the Interests Registers of subsidiaries which are public companies or private companies which have not dispensed with the requirement to maintain an Interests Register as permitted by Section 30 of the Companies Act No 7 of 2007.
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Particulars of entries in the JKH Interests Register a) Interests in contracts

The directors have all made a general disclosure to the Board of directors as permitted by Section 192 (2) of the Companies Act No 7 of 2007 and no additional interests have been disclosed by any director.
individual increments from 1 July 2007 based on individual performance matrices; short term variable incentives based on individual performance, organization performance and role responsibility; long term incentive in the nature of employee share options in John Keells Holdings PLC dependant on the aforesaid performance rating, organisational rating and role responsibility,
b) Relevant interests in shares and share dealings:

The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: John Keells Holdings PLC S C Ratnayake - 3,227,747 (2007 - 3,057,223) A D Gunewardene - 4, 018,568 (2007 - 3,749,192) G S A Gunesekera - 1,348,374 (2007 - 1,036,523) J R F Peiris - 3,428 (2007 - 3,000) E F G Amerasinghe - 4,136 (2007 - 3,619) T Das - Nil (2007 - Nil) S Enderby - Nil (2007 - Nil) M V Muhsin - 35,163 (2007 - 30,769) P D Rodrigo - Nil (2007 - Nil) S S Tiruchelvam - Nil (2007 - Nil) R S Captain - 124,234,951 (2007 - 124,789,380) Options available under the employee share option plan of John Keells Holdings PLC. S C Ratnayake - 1,931,981 (2007 - 1,389,159) A D Gunewardene - 1,759,824 (2007 - 1,352,302) G S A Gunesekera - 1,260,611 (2007 - 1,217,511) J R F Peiris - 1,587,617 (2007 - 883,667)
as recommended by the Remuneration Committee having conducted market surveys, spoken to experts and having taken into consideration the specific management complexities associated with the John Keells group and in keeping with the group remuneration policy.
Additional disclosures (not in Interests Register)

Given below, as additional disclosure, are the directors shareholding in group companies: Asian Hotels and Properties PLC S C Ratnayake - 10,000 (2007 - 10,000) M V Muhsin - 3,600 (2007 - 3,600) Associated Motorways PLC S C Ratnayake - 3,000 (2007 - 3,000) Ceylon Cold Stores PLC S C Ratnayake - 760 (2007 - 760) A D Gunewardene - 7,000 (2007 - 7,000) G S A Gunesekera - 3,812 (2007 - 3,812) J R F Peiris - 150 (2007 - 150) John Keells Hotels PLC S C Ratnayake - 468,984 (2007 - 255,810) A D Gunewardene - 62,480 (2007 - 62,480) G S A Gunesekera - 70,033 (2007 - 38,200) Keells Food Products PLC S C Ratnayake - 2,500 (2007 - 2,500) G S A Gunesekera - 1,666 (2007 - 1,666) Nations Trust Bank PLC A D Gunewardene - 3,281,933 (2007 - 1,118,001) G S A Gunesekera - 3,626 (2007 - 2,720) Tea Smallholder Factories PLC G S A Gunesekera - 1,000 (2007 - 1,000) Trans Asia Hotels PLC S C Ratnayake - 100 (2007 - 100) A D Gunewardene - 100 (2007 - 100) G S A Gunesekera - 100 (2007 - 100) J R F Peiris - 100 (2007 - 100) Union Assurance PLC A D Gunewardene - 3,746 (2007 - 2,498) Further, warrants held at Nations Trust Bank PLC are as follows.
Share dealings:
NAME OF DIRECTOR NATURE OF AGGREGATE SHARE DEALINGS FROM 3 MAY 2007 UPTO 31 MARCH 2008
Mr S C Ratnayake Mr A D Gunewardene Mr R S Captain Mr R S Captain Mr R S Captain Mr R S Captain Mr R S Captain Mr G S A Gunesekera
Sale of 680,000 shares of JKH Sale of 680,000 shares of JKH Sale of 3,721,600 shares of JKH by Paints & General Industries Limited Sale of 7,365,400 shares of JKH by CEI Plastics Limited Sale of 2,568,000 shares of JKH by Polypak Secco Limited Sale of 970,000 shares of JKH by Paints & General Industries (Exports) Limited Sale of 2,000,000 shares of JKH by Mr S E Captain Sale of 250,000 shares of JKH
c) Indemnities and remuneration

The Board approved the payment to executive directors of the company, namely S C Ratnayake, Chairman/CEO, A D Gunewardene, Deputy Chairman/President, G S A Gunasekera, President and J R F Peiris, Group Finance Director, remuneration for the period 1 April 2007 to 31 March 2008 comprising of;
A D Gunewardene 2,115,822 (Warrants 2010) 1,057,911 (Warrants 2011) G S A Gunesekera 906 (Warrants 2010) 453 (Warrants 2011)
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Particulars of entries in Interests Registers of subsidiaries Asian Hotels & Properties PLC a) Relevant interests in shares and share dealings:
The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: S C Ratnayake - 10,000 (2007 - 10,000) R J Karunarajah - 100 (2007 - 100) M T L Fernando - 5,001 (2007 - 5,001) B M Amerasekera - 70,700 (2007 - 70,700)
performance rating and the respective career levels of Mr J R Gunaratne and Mr M D De Silva in terms of the variable pay plan of John Keells Holdings PLC; and long term incentive in the nature of employee share options in John Keells Holdings PLC dependant on the aforesaid performance rating and the organisational rating,
b) Indemnities and remuneration

The Board approved the payment to the executive director of the company, namely Mr R J Karunarajah of remuneration for the period 1 April 2007 to 31 March 2008 comprising of:
as recommended by the Remuneration Committee of John Keells Holdings PLC (being the holding company of Ceylon Cold Stores PLC) in keeping with the group remuneration policy.
an increase in the monthly salary; a variable element, based on the individual performance and the performance of Cinnamon Grand for the period 1 April 2006 to 31 March 2007; long term incentive in the nature of employee share options in John Keells Holdings PLC dependant on individual performance and the performance of Cinnamon Grand,
International Tourists and Hoteliers Ltd. Relevant interests in shares and share dealings:
The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: J E P Kehelpannala - 50 (2007 - 50)
John Keells PLC Indemnities and remuneration

The Board approved the contract with and payment to Ms S T Ratwatte, non executive director of fees as recommended by the Remuneration Committee of John Keells Holdings PLC (being the holding company of John Keells PLC and as permitted by the rules of the Colombo Stock Exchange) commensurate with the market and complexities of the business of the company The Board also noted that Mr L D Ramanayake had resigned as an executive director with effect from 31 July 2007 and that prior to such resignation the Board had authorised payment to Mr L D Ramanayake of remuneration comprising of :
as recommended by the Remuneration Committee of John Keells Holdings PLC, (being the holding company of Asian Hotels & Properties PLC and as permitted by the rules of the Colombo Stock Exchange), in keeping with the JKH group remuneration policy.
Ceylon Cold Stores PLC a) Relevant interests in shares and share dealings:
The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: S C Ratnayake - 760 (2007 - 760) A D Gunewardene - 7,000 (2007 - 7,000) G S A Gunesekera - 3,812 (2007 - 3,812) J R F Peiris - 150 (2007 - 150) J R Gunaratne - 1,140 (2007 - 1,140) M D de Silva - 150 (2007 - 150) U P Liyanage - 300 (2007 - 300) P S Jayawardena - 300 (2007 - 300) A R Rasiah - 2,900 (2007 - 2,900)
an increment on his salary for July 2007 based on the individual performance rating obtained by Mr. L D Ramanayake in terms of the performance management system of the John Keells Group. a short term variable incentive for the period 1 April 2006 to 31 March 2007 based on the individual performance rating, organisation performance rating and the career level of Mr. L D Ramanayake in terms of the variable pay plan of John Keells Holdings PLC; and long term incentive in the nature of employee share options in John Keells Holdings PLC dependant on the aforesaid performance rating and the organisational rating,

The Board approved payment to the executive directors of the company, namely Mr J R Gunaratne and Mr M D De Silva of remuneration for the period 1 April 2007 to 31 March 2008 comprising of :
as recommended by the Remuneration Committee of John Keells Holdings PLC in keeping with the JKH group remuneration policy.
an increment from 1 July 2007 based on the individual performance rating obtained by Mr J R Gunaratne and Mr M D De Silva in terms of the performance management system of the John Keells Group; a short term variable incentive for the period 1 April 2006 to 31 March 2007 based on the individual performance rating, organisation
John Keells Hotels PLC Relevant interests in shares and share dealings:
The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: S C Ratnayake - 468,984 (2007 - 255,810) A D Gunewardene - 62,480 (2007 - 62,480) G S A Gunesekera - 70,033 (2007 - 38,200)
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Keells Food Products PLC a) Relevant interests in shares and share dealings:
The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: S C Ratnayake - 2,500 (2007 - 2,500)
payment of remuneration to Mr. R S Fernando (who subsequently resigned from the Board of directors with effect from 1 August 2007) comprising of; an increment on his salary for July 2007 based on the individual performance rating obtained by Mr. R S Fernando in terms of the performance management system of the John Keells Group. a short term variable incentive for the period 1 April 2006 to 31 March 2007 based on the individual performance rating, organisation performance rating and the career level of Mr. R S Fernando in terms of the variable pay plan of John Keells Holdings PLC; and long term incentive in the nature of employee share options in John Keells Holdings PLC dependant on the aforesaid performance rating and the organisational rating,

The Board approved the contract with and payment to Mr M P Jayawardene, non executive director, fees as recommended by the Remuneration Committee of John Keells Holdings PLC (being the holding company of Keells Food Products PLC and as permitted by the rules of the Colombo Stock Exchange) commensurate with the market and complexities of the business of the company.
Keells Hotel Management Services Ltd. Indemnities and remuneration

The Board approved payment to the executive director of the company Mr J E P Kehelpannala of remuneration, comprising of :
an increment from 1 July 2007 based on the individual performance rating obtained by Mr. J E P Kehelpannala in terms of the performance management system of the John Keells Group. A short term variable incentive for the period 1 April 2006 to 31 March 2007 based on the individual performance rating, organisation performance rating and the career level of Mr. J E P Kehelpannala in terms of the variable pay plan of John Keells Holdings PLC; and long term incentive in the nature of employee share options in John Keells Holdings PLC dependant on the aforesaid performance rating and the organisational rating, as recommended by the Remuneration Committee of John Keells Holdings PLC in keeping with the JKH group remuneration policy.
as recommended by the Remuneration Committee of John Keells Holdings PLC in keeping with the JKH group remuneration policy.
Tea Smallholder Factories PLC Relevant interests in shares and share dealings:
The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: G S A Gunesekera - 1,000 (2007 - 1,000) R E Rambukwella - 2,300 (2007 - 2,300) J S Ratwatte - 1,000 (2007 - 1,000)
Trans Asia Hotels PLC a) Relevant interests in shares and share dealings:
The relevant interest of the directors in the shares of the company as at 31 March 2008 are as follows: S C Ratnayake - 100 (2007 - 100) A D Gunewardene - 100 (2007 - 100) G S A Gunesekera - 100 (2007 - 100) J R F Peiris - 100 (2007 - 100) D S J Pelpola - 100 (2007 - 100) N L Gooneratne - 94,301 (2007 - 94,301) R L Nanayakkara - 100 (2007 - 100) A R Gunasekara - 1,000 (2007 - Nil) {Alt N Wijeyekoon 58,940 (2007 - 58,940)}
Lanka Marine Services (Private) Ltd. Indemnities and remuneration

The Board approved with effect from 1 August 2007
payment of remuneration to Mr. L D Ramanayake, comprising of: a fixed element; a variable element in the form of a short term incentive which is based on the individual performance and an organization performance which covers revenues and profit after tax; and long term incentive in the form of employee share options at John Keells Holdings PLC.
Share dealings:
NAME OF DIRECTOR Mr A R Gunasekara NATURE OF AGGREGATE SHARE DEALINGS FROM 3 MAY 2007 UPTO 31 MARCH 2008 Purchase of 1,000 shares by Mr A R Gunasekera and Mrs S R Gunasekera
as recommended by the Remuneration Committee of John Keells Holdings PLC in keeping with the group remuneration policy.
Further, the Board approved with effect from 1 July 2007

The Board approved the contract with and payment to Mr A R Gunasekera, non executive director, of fees as recommended by the Remuneration Committee of John Keells Holdings PLC (being the holding company of Trans
95
Asia Hotels PLC and as permitted by the rules of the Colombo Stock Exchange) commensurate with the market and complexities of the business of the company.
Walkers Tours Ltd. Indemnities and remuneration

The Board approved payment to the executive director of the company Mr V Leelananda of remuneration comprising of :
an increment from 1 July 2007 based on individual performance rating obtained by Mr. V. Leelananda in terms of the performance management system of the John Keells Group. a short term variable incentive for the period 1 April 2006 to 31 March 2007 based on individual performance, organisation performance rating and the career level of Mr V Leelananda in terms of the variable pay plan of John Keells Holdings PLC; and long term incentive in the nature of employee share options in John Keells Holdings PLC dependant on the aforesaid performance rating, organisational rating and role responsibility,
Under the second plan, the company was authorized to issue up to five per cent of the issued share capital, with an annual limit of up to two per cent, of non-transferable call share options. Options granted under this plan have to be exercised within five years of such grant. Under the third plan, the company was authorised to issue up to five per cent of the issued share capital within an annual limit of up to two per cent of non-transferable call share options and the options granted under this plan have to be exercised within five years of such grant. The options outstanding under the third award of plan 2 and all the awards of plan 3 are valid for exercise as at 31 March 2008. On 13 December 2007, the shareholders approved a fourth plan, whereby the company could issue non-transferable call share options, not exceeding in aggregate 0.85% of the shares in issue of the company as at the date of granting the award. Details of the options granted, options exercised, the grant price and the options cancelled / outstanding as at the date of the directors' report have been tabulated below. EMPLOYMENT The group has an equal opportunity policy and these principles are enshrined in specific selection, training, development and promotion policies, ensuring that all decisions are based on merit. The group practices equality of opportunity for all employees irrespective of ethnic origin, religion, political opinion, gender, marital status or physical disability. Employee ownership in the company is facilitated through the employee share option plan. Details of the group's human resource initiatives are detailed in the employees' section of the sustainability report. The number of persons employed by the company and group as at 31 March 2008 was 143 (2007 - 193) and 9,992 (2007 9,703), respectively.
as recommended by the Remuneration Committee of John Keells Holdings PLC in keeping with the group remuneration policy.
DIRECTORS' REMUNERATION
Details of the remuneration and other benefits received by the directors are set out in note 29 of the financial statements.
EMPLOYEE SHARE OPTION PLAN The current employee share option plan consists of the second, third and fourth plans approved by the shareholders on 29 June 2001, 28 June 2004 and 13 December 2007 respectively.
Date of Grant PLAN 2 Award 2 Award 3 PLAN 3 Award 1 Award 2 Award 3 PLAN 4 25.03.2008 Total 12.11.2002 23.01.2004
EMPLOYEE SHARE OPTION PLAN AS AT 31ST MARCH 2008 Option Shares Expiry Grant Shares ** Lapsed/ Granted Date Price Adjusted Exercised Cancelled Outstanding 3,728,580 11.11.2007 2,994,209 22.01.2009 6,722,789 5,503,850 28.03.2010 6,645,575 09.04.2011 10,551,062 27.05.2012 22,700,487 5,405,945 24.03.2013 34,829,221 76.00 104.25 6,810,320 5,129,406 11,939,726 6,679,392 2,051,778 8,731,170 2,247,494 502,319 2,749,813 130,928 115,605 246,533 387,905 519,046 448,520 1,355,471 2,962,023 2,962,023 7,111,424 9,280,494 10,102,542 26,494,460 5,405,945 11,480,983 1,602,004 34,862,428
Current Price ** 70.81
29.03.2005 10.04.2006 28.05.2007
136.00 9,746,823 157.25 10,301,859 146.00 10,551,062 30,599,744 120.00 5,405,945 47,945,415
92.72 120.74 146.00
120.00
** Adjusted for bonus issues and right issues
96
SUPPLIER POLICY The group applies an overall policy of agreeing and clearly communicating terms of payment as part of the commercial agreements negotiated with suppliers, and endeavors to pay for all items properly charged in accordance with these agreed terms. As at 31 March 2008 the trade and other payables of the company and group amounted to Rs. 314 mn (2007 - Rs. 345 mn) and Rs. 7,869 mn (2007 - Rs. 5,795 mn), respectively. ENVIRONMENTAL PROTECTION The group complies with the relevant environmental laws, regulations and endeavors to comply with best practices applicable in the country of operation. A summary of selected group activities in the above area is contained in the sustainability report. RESEARCH AND DEVELOPMENT The group has an active approach to research and development and recognises the contribution that it can make to the group's operations. Significant expenditure has taken place over the years and substantial efforts will continue to be made to introduce new products and processes and develop existing products and processes to improve operational efficiency. STATUTORY PAYMENTS The directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the company and its subsidiaries, all contributions, levies and taxes payable on behalf of, and in respect of the employees of the company and its subsidiaries, and all other known statutory dues as were due and payable by the company and its subsidiaries as at the balance sheet date have been paid or, where relevant provided for, except as specified in note 35 to the financial statements, covering contingent liabilities. RISK MANAGEMENT AND INTERNAL CONTROL The Board confirms that there is an ongoing process for identifying, evaluating and managing any significant risks faced by the group. Risk assessment and evaluation for each business unit takes place as an integral part of the annual strategic planning cycle and the principal risks and mitigating actions in place are reviewed regularly by the Board and the Audit Committee. The Board, through the involvement of the risk review and control department takes steps to gain assurance on the effectiveness of control systems in place. The Audit Committee receives reports on the results of internal control reviews and the head of the group risk review and control department has direct access to the chairman of the Audit Committee. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE There have been no events subsequent to the balance sheet date, which would have any material effect on the company or on the group other than those disclosed in this report and in note 39 to the financial statements.
GOING CONCERN The directors are satisfied that the company, its subsidiaries and associates, have adequate resources to continue in operational existence for the foreseeable future, to justify adopting the going concern basis in preparing these financial statements. AUDITORS Messrs Ernst & Young, Chartered Accountants, are willing to continue as Auditors of the company, and a resolution 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. The group works with many firms of Chartered Accountants in Sri Lanka and aboard, namely, Ernst & Young, KPMG Ford Rhodes Thornton and Co, PricewaterhouseCoopers, Someswaran Jayawickrama and Co, Deloitte Haskins & Sells and Luthra & Luthra. Details of audit fees are set out in note 29 of the financial statements. 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. ANNUAL REPORT The Board of directors approved the consolidated financial statements on 22 May 2008. The appropriate number of copies of this report will be submitted to the Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board on 30 May 2008. ANNUAL GENERAL MEETING The annual general meeting will be held at the Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha, Colombo 7, on Friday, 27 June 2008 at 09.30 a.m. The notice of the annual general meeting appears on page 162. This annual report is signed for and on behalf of the Board of directors.
Director
Director
Keells Consultants Ltd. Secretaries 22 May 2008
97
Statement of directors responsibility

The responsibility of the directors in relation to the financial statements is set out in the following statement. The responsibility of the auditors, in relation to the financial statements prepared in accordance with the provision of the Companies Act No 7 of 2007, is set out in the Report of the Auditors. The financial statements comprise of: a balance sheet, which presents a true and fair view of the state of affairs of the company and its subsidiaries as at the end of the financial year and an income statement, which presents a true and fair view of the profit and loss of the company and its subsidiaries for the financial year; which comply with the requirements of the act. The directors are required to ensure that, in preparing these financial statements: the appropriate accounting polices have been selected and applied in a consistent manner and material departures, if any, have been disclosed and explained; all applicable Accounting Standards, as relevant, have been followed; judgements and estimates have been made which are reasonable and prudent. The directors are also required to ensure that the company has adequate resources to continue in operation to justify applying the going concern basis in preparing these financial statements. Further, the directors have a responsibility to ensure that the company maintains sufficient accounting records to disclose, with reasonable accuracy the financial position of the company and of the group, and to ensure that the financial statements presented comply with the requirements of the act. The directors are also responsible for taking reasonable steps to safeguard the assets of the company and of the group and in this regard to give proper consideration to the establishment of appropriate 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 independent audit opinion. Further, as required by Section 56 (2) of the Companies Act No 7 of 2007, the Board of directors have confirmed that the company, based on the information available, satisfies the solvency test immediately after the distribution, in accordance with Section 57 of the Companies Act no 7 of 2007, and has obtained a certificate from the auditors, prior to declaring a final dividend of Rs 1.00 per share for this year, to be paid on 27 June 2008. The directors are of the view that they have discharged their responsibilities as set out in this statement. Compliance Report The directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the company and its subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the company and its subsidiaries, and all other known statutory dues as were due and payable by the company and its subsidiaries as at the balance sheet date have been paid, or where relevant provided for, except as specified in Note 35 to the financial statements covering contingent liabilities
By order of the Board
Keells Consultants Ltd Secretaries 22 May 2008
98
Report of the Auditors
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OF JOHN KEELLS HOLDINGS PLC Report on the Financial Statements We have audited the accompanying financial statements of John Keells Holdings PLC (Company), the consolidated financial statements of the Company and its subsidiaries which comprise the balance sheets as at 31 March 2008, and the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2008 and the financial statements give a true and fair view of the Company's state of affairs as at 31 March 2008 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 2008 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company. Report on Other Legal and Regulatory Requirements In our opinion, these financial statements also comply with the requirements of Sections 151(2) and 153(2) to 153(7) of the Companies Act No. 07 of 2007.
22 May 2008 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. Colombo.
99
Balance sheet
Group As at 31st March In Rs.'000s ASSETS Non-current assets Property, plant and equipment Leasehold property Investment property Intangible assets Investments in subsidiaries and joint ventures Investments in associates Other investments Deferred tax asset Other non-current assets Current assets Inventories Investments held for sale Trade and other receivables Amounts due from related parties Short term investments Cash in hand and at bank Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Stated capital Capital reserves Revenue reserves Minority interest Total equity Non-current liabilities Non-interest bearing borrowings Interest bearing borrowings Deferred tax liabilities Employee benefit liabilities Other deferred liabilities Other non-current liabilities Current liabilities Trade and other payables Amounts due to related parties Income tax liabilities Short term borrowings Current portion of interest bearing borrowings Bank overdrafts Total equity and liabilities 15 16 17 18 19 Note 2008 2007 Company 2008 2007
2 3 4 5 6 6 6 7 8
29,172,301 4,638,234 2,288,442 341,253 5,115 9,886,520 125,224 91,074 1,805,938 48,354,101 3,985,025 37,331 6,753,452 17,485 10,455,366 2,191,251 23,439,910 71,794,011
20,403,696 4,761,503 2,505,321 338,761 5,115 8,515,037 148,257 74,013 1,435,438 38,187,141 3,400,576 6,592,062 1,588 16,138,609 1,626,473 27,759,308 65,946,449
289,430 832,158 17,452,415 6,204,776 94,957 65,687 24,939,423 825 15,860 263,336 227,481 6,984,736 242,702 7,734,940 32,674,363
380,139 800,000 14,445,881 5,995,133 106,917 99,896 21,827,966 847 146,612 824,014 12,301,694 25,348 13,298,515 35,126,481
9 6 10 34 11
12 13 14
22,464,267 6,065,251 15,688,302 44,217,820 4,774,044 48,991,864 21,000 7,809,452 755,366 798,600 7,110 352,051 9,743,579 7,869,039 24,953 328,104 375,000 1,059,752 3,401,720 13,058,568 71,794,011
22,245,894 3,137,392 13,851,913 39,235,199 3,700,313 42,935,512 30,000 6,451,133 591,867 718,315 3,762 334,249 8,129,326 5,795,041 16,935 188,250 2,688,311 1,374,413 4,818,661 14,881,611 65,946,449
22,464,267 6,342,817 28,807,084 28,807,084 2,595,493 80,330 2,675,823 313,634 9,996 300,000 567,826 1,191,456 32,674,363
22,245,894 5,716,029 27,961,923 27,961,923 2,895,493 86,316 2,981,809 344,826 128,218 4,766 500,000 700,000 2,504,939 4,182,749 35,126,481
20 34 21 22 16
I certify that the financial statements comply with the requirements of the Companies Act No. 7 of 2007.
M.J.S. Rajakariar Group Financial Controller The Board of Directors is responsible for the preparation and presentation of these financial statements.
S.C. Ratnayake Chairman
J.R.F. Peiris Group Finance Director
The accounting policies and notes from pages 106 to 144 form an integral part of these financial statements. 22 May 2008
100
Income statement
Group For the year ended 31st March In Rs.'000s Revenue Cost of sales Gross profit Dividend income Other operating income Distribution expenses Administrative expenses Other operating expenses Finance expenses Change in fair value of investment property Share of results of associates Profit on sale of non-current investments Profit before tax Tax expense Profit for the year 28 29 30 26 27 4 24 25 Note 23 2008 41,805,343 (30,847,496) 10,957,847 93,405 2,716,887 (1,339,501) (5,121,517) (1,408,182) (1,618,255) 2,242,713 55,151 6,578,548 (1,054,742) 5,523,806 2007 32,855,021 (23,236,174) 9,618,847 48,634 1,180,285 (1,236,332) (4,261,210) (1,110,505) (1,314,490) 109,612 1,700,992 58,952 4,794,785 (851,563) 3,943,222 Company 2008 2007 603,665 (274,505) 329,160 3,159,389 1,644,114 (637,441) (36,872) (583,794) 41,236 3,915,792 (112,702) 3,803,090 481,637 (233,574) 248,063 2,894,213 214,755 (588,044) (21,299) (632,423) 37,039 2,152,304 (7,664) 2,144,640
Attributable to: Equity holders of the parent Minority interest
5,118,244 405,562 5,523,806
3,534,674 408,548 3,943,222
Rs. Earnings per share Basic Diluted Dividend per share 31 31 32 8.06 8.00 5.00
Rs. 6.13 6.04 3.00
Figures in brackets indicate deductions. The accounting policies and notes from pages 106 to 144 form an integral part of these financial statements.
22 May 2008
101
Cash flow statement

Group For the year ended 31st March In Rs.'000s CASH FLOWS FROM OPERATING ACTIVITIES Profit before working capital changes (Increase)/decrease in inventories (Increase)/decrease in receivables and prepayments (Increase)/decrease in other non-current assets Increase/(decrease) in creditors and accruals Cash generated from operations Interest received Finance expenses paid Dividend received Tax paid Gratuity paid Net cash flow from operating activities CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Purchase and construction of property, plant and equipment Addition to investment property Purchase of lease rights Advances paid on investment Acquisition of subsidiary Increase in interest in subsidiaries Acquisition of associate Increase in interest in associates Proceeds from sale of property, plant and equipment Proceeds from sale of investment property Proceeds from sale of non-current investments Proceeds from sale of other investments Addition to intangible assets Grants received for investing activities Net cash flow from / (used in) investing activities CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES Proceeds from issue of shares - company Proceeds from minority on issue of rights in subsidiaries Dividend paid to equity holders of parent Dividend paid to minority shareholders Proceeds from long term borrowings Repayment of long term borrowings Proceeds from/(repayment of) short term borrowings (net) Net cash flow from/(used in) financing activities NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING CASH AND CASH EQUIVALENTS AT THE END ANALYSIS OF CASH AND CASH EQUIVALENTS Favourable balances Cash in hand and at bank Short term investments Unfavourable balances Bank overdrafts Total cash and cash equivalents as previously reported Effect of exchange rate changes Cash and cash equivalents restated Note 2008 2007 Company 2008 2007
5,381,238 93,864 213,624 (1,044,783) 1,451,893 6,095,836 2,083,916 (1,618,255) 1,491,552 (1,061,346) (77,830) 6,913,873
4,827,013 (115,785) (1,469,655) (1,179,314) 891,505 2,953,764 493,759 (1,314,490) 1,301,400 (859,074) (52,824) 2,522,535
4,576,086 22 526,884 26,257 (154,269) 4,974,980 (583,794) (151,736) (13,704) 4,225,746
2,838,273 27 (462,443) 237,353 2,613,210 (632,423) (46,458) (2,203) 1,932,126
(2,778,167) (21,384) (615,358) (331,410) (1,952) (858,036) 105,107 137,706 4,970 (4,358,524)
(2,676,134) (238,263) (3,518,678) (5,325) (718,147) (3,623,729) 69,932 511,941 141,209 (31,060) (10,088,254)
(19,723) (32,158) (3,022,226) (209,643) 410 53,032 (3,230,308)
(100,705) (1,625,115) (705,457) (3,623,729) 9,375 60,079 9,100 (5,976,452)
218,373 86,900 (3,176,302) (205,304) 1,139,239 (2,011,519) (2,313,311) (6,261,924) (3,706,575) 12,951,472 9,244,897
13,040,621 (1,412,306) (282,794) 5,900,207 (545,366) 1,721,291 18,421,653 10,855,934 2,090,487 12,946,421
218,373 13,040,621 (3,176,302) (1,412,306) 2,995,493 (700,000) (164,974) (500,000) (4,157,929) 14,458,834 (3,162,491) 10,414,508 9,822,103 6,659,612 (592,405) 9,822,103
2,191,251 10,455,366 (3,401,720) 9,244,897 9,244,897
1,626,473 16,138,609 (4,818,661) 12,946,421 5,051 12,951,472
242,702 6,984,736 (567,826) 6,659,612 6,659,612
25,348 12,301,694 (2,504,939) 9,822,103 9,822,103
102
Cash flow statement
Group For the year ended 31st March In Rs.'000s A Profit before working capital changes Profit before tax Adjustments for: Interest income Dividend income Finance expenses Change in fair value of investment property Share of results of associates (Profit) / loss on sale of non-current investments Depreciation of property, plant and equipment Amortisation / depreciation of non-current assets Amortisation of other deferred liabilities Gratuity provision and related costs Impairment losses on property, plant & equipment and investments (Profit) / loss on sale of property, plant and equipment (Profit) / loss on sale of investment property (Profit) / loss on sale of other investments (Gain) / loss on foreign exchange (Gain) / loss on revaluation of property, plant and equipment Negative goodwill on acquisitions Unrealised profits 2008 2007
Company 2008 2007
6,578,548 (2,083,916) (93,405) 1,618,255 (2,242,713) (55,151) 1,444,165 178,420 (1,622) 165,417 3,283 (69,346) (5,051) (155) (56,625) 1,134 5,381,238
4,794,785 (493,759) (48,634) 1,314,490 (109,612) (1,700,992) (58,952) 1,124,116 133,553 (1,635) 152,815 11,678 (25,261) (201,941) (1,377) (66,531) 4,270 4,827,013
3,915,792 583,794 (41,236) 110,116 7,718 (94) (4) 4,576,086
2,152,304
632,423 (37,039) 91,244 14,685 (6,725) (8,619) 2,838,273
Acquisition of subsidiary The fair value of assets acquired and liabilities assumed of Tranquility (Pte) Ltd. were as follows. Property, plant and equipment Trade and other receivables Interest bearing borrowings Trade and other payables Cash and cash equivalents Total net assets Minority interest Negative goodwill Cash consideration paid on acquisition of subsidiary Cash and cash equivalents acquired Advances paid on investment Net cash outflow on acquisition of subsidiary (3,310,266) (23,092) 1,961,985 806,601 5,930 (558,842) 544 4,548 (553,750) (5,930) 228,270 (331,410)
Disposal of non current investments The fair value of net assets disposed of Unawatuna Walk Inn Ltd. and Keells Business Systems Ltd. were as follows. Property, plant and equipment Deferred tax assets Other non-current assets Inventories Trade and other receivables Employee benefit liabilities Trade and other payables Cash and cash equivalents Total net assets Minority interest Unamortised goodwill Transferred to other investments Profit on disposal of non current investments Cash consideration received on disposal of non current investments Cash and cash equivalents disposed Net cash inflow on disposal of non current investments 55,493 1,752 9,519 58,433 136,446 (7,695) (155,787) (4,288) 93,873 (1,774) 467 (14,299) 55,151 133,418 4,288 137,706
103
104
Share premium Total 22,801,106 20,900 3,633,759 5,205,203 (571,632) 11,872,838 210,085 (3,151) 187,667 943,624 6,837 (42,162) 418,640 500,000 5,517,963 3,534,674 (400,142) (1,012,164) 76,119 (500,000) 8,333,950 1,775,128 2,904,462 58,722 (12,981) 882,181 16,132 (1,775) (22,533) 11,562 882,181 (1,775) 165,134 11,562 3,534,674 (400,142) (1,012,164) 76,119 39,235,199 (58,036) 276,409 6,837 137,883 137,883 16,716,494 (58,036) (16,658,458) 276,409 22,187,858 12,793,873 246,748 1,778,279 618,074 418,640 5,030,944 5,749,896 Stated capital Attributable to equity holders of parent Exchange Other Revaluation translation capital reserve reserve reserves Other revenue reserves Accumulated profit Minority interest Total Equity 26,434,865 12,793,873 246,748 158,783 (5,958) 1,977 408,548 (358,913) 3,700,313 (5,122) 882,181 (7,733) 165,134 13,539 3,943,222 (400,142) (1,012,164) (282,794) 42,935,512 (58,036) 276,409 1,715 (628) (152,728) 5,118,244 22,464,267 4,738,312 908,299 418,640 5,517,963 (632,669) (2,543,633) 47,803 10,170,339 2,904,462 (628) (136,168) 5,118,244 (632,669) (2,543,633) 47,803 44,217,820 882,392 44,006 405,562 (253,107) 4,774,044 3,786,854 43,378 (136,168) 5,523,806 (632,669) (2,543,633) (205,304) 48,991,864
GROUP
In Rs.'000s
Share capital
As at 1 April 2006
4,000,070
Bonus issue of shares Right issue of shares Share options exercised
571,632 921,035 36,663
Currency translation differences
Net gain/(loss) recognised directly in equity Effect of adopting revised SLAS 25('2004) Revaluations / transfers Acquisitions, disposals and changes in holding Associate company share of net assets Others
Profit for the year
Final dividend paid - 2005/06 Interim dividend paid - 2006/07
Subsidiary dividend to minority shareholders
Reserved during the year
As at 31 March 2007
5,529,400
Share issue expenses (incurred prior to 3 May 2007)
Transfers
(5,529,400)
Share options exercised
Currency translation differences
Net gain / (loss) recognised directly in equity Surplus on revaluation Acquisitions, disposals and changes in holding Associate company share of net assets
Profit for the year
Subsidiary dividend to minority shareholders
As at 31 March 2008
Details of other revenue reserves have been disclosed in Note 14. Figures in brackets indicate deductions. The accounting policies and notes from pages 106 to 144 form an integral part of these financial statements.
COMPANY Share capital 4,000,070 571,632 921,035 36,663 22,187,858 276,409 2,600,000 1,519,322 500,000 75,000 2,144,640 (400,142) (1,012,164) (500,000) 1,521,707 3,803,090 (632,669) (2,543,633) 5,529,400 (5,529,400) (16,658,458) (58,036) 16,716,494 (571,632) 11,872,838 210,085 5,205,203 2,100,000 1,519,322 75,000 1,289,373 14,188,968 12,793,873 246,748 2,144,640 (400,142) (1,012,164) 27,961,923 (58,036) 276,409 3,803,090 (632,669) (2,543,633) Share premium Stated capital General reserve Dividend reserve Investment equalisation reserve Accumulated profit Total equity
In Rs.'000s
As at 1 April 2006
Bonus issue of shares Rights issue of shares Share options exercised
Profit for the year
Reserved during the year
As at 31 March 2007
Share issue expenses (incurred prior to 3 May 2007)
Transfers
Share options exercised
Profit for the year
As at 31 March 2008
22,464,267
2,600,000
1,519,322
75,000
2,148,495
28,807,084
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Notes to the financial statements

1. ACCOUNTING POLICIES John Keells Holdings 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. Global depository receipts (GDRs) of John Keells Holdings PLC. are listed on the Luxembourg Stock Exchange. In the annual report of the Board of directors and in the financial statements, the company refers to John Keells Holdings PLC. as the holding company and the group refers to the companies whose accounts have been consolidated therein. The financial statements for the year ended 31 March 2008 were authorised for issue by the directors on 22 May 2008. John Keells Holdings PLC. became the holding company of the group during the financial year ended 31 March 1986. The principal activities of the group are stated in the annual report of the Board of directors. All values presented in the financial statements are in Sri Lanka rupees thousands (Rs.'000s) unless otherwise indicated. The significant accounting policies are being discussed below. 1.1. 1.1.1. GENERAL POLICIES 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. 1.2.3. 1.1.2. Basis of preparation The financial statements, presented in Sri Lanka rupees, have been prepared on an accrual basis and under the historical cost convention unless stated otherwise. 1.1.3. Changes in accounting policies and adoption of new and revised Sri Lanka Accounting Standards during the year. The accounting policies adopted are consistent with those of the previous financial year except for the adoption of SLAS 16 (Revised 2006)-Employee Benefits. The group has elected to early adopt SLAS 16 (Revised 2006) on Employee Benefits, which requires the group to recognize a liability when an employee has provided a service in exchange for benefits to be paid in the future; and recognise an expense when the entity consumes the economic benefit arising from the service provided by an employee in exchange for employee benefits. 1.2.2. 1.1.5. 1.1.4. Comparative information The accounting policies applied by the group are, unless otherwise stated, consistent with those used in the previous year. Previous years figures and phrases have been re-arranged, wherever necessary, to conform to the current year's presentation. Events after the balance sheet date All material post balance sheet events have been considered and appropriate adjustments or disclosures have been made in the respective notes to the financial statements. 1.2. 1.2.1. CONSOLIDATION POLICY Basis of consolidation The consolidated financial statements include the financial statements of the company, its subsidiaries and other companies over which it has control. The group's financial statements comprise of the consolidated financial statements of the company and the group which have been prepared in compliance with the group's accounting policies. All intra group balances, income and expenses and profits and losses resulting from intra group transactions are eliminated in full. Acquisitions and divestments Acquisitions of subsidiaries are accounted for using the purchase method of accounting. The results of subsidiaries, joint ventures and associates acquired or incorporated during the year have been included from the date of acquisition, or incorporation while results of subsidiaries, joint ventures and associates disposed have been included up to the date of disposal. Subsidiaries Subsidiaries are those enterprises controlled by the parent. Control exists when the parent holds more than 50% of the voting rights or otherwise has a controlling interest. Subsidiaries are consolidated from the date the parent obtains control until the date that control ceases. Subsidiaries consolidated have been listed in the group directory. The following subsidiaries have been incorporated outside Sri Lanka:
106
Name Matheson Keells Air Services (Pvt) Limited Matheson Keells Enterprises (Pvt) Limited Auxicogent Alpha (Pvt) Limited Auxicogent Holdings (Pvt) Limited Auxicogent International (Pvt) Limited Auxicogent Investments Mauritius (Pvt) Limited Auxicogent US Inc. John Keells Maldivian Resorts (Pte) Limited Serene Holidays (Pvt) Limited. Travel Club (Pte) Limited Tranquility (Pte) Limited. Fantasea World Investments (Pte) Limited Mack Air Services Maldives (Pte) Limited John Keells Singapore (Pte) Limited John Keells Business Systems (UK) Limited
Country of incorporation India India Mauritius Mauritius Mauritius Mauritius USA Republic of Maldives India Republic of Maldives Republic of Maldives Republic of Maldives Republic of Maldives Singapore United Kingdom
Associate companies of the group which have been accounted for under the equity method of accounting are: Associated Motorways PLC. Auxicogent BPO Solutions (Pvt) Ltd. Maersk Lanka (Pvt) Ltd. Nations Trust Bank PLC. South Asia Gateway Terminals (Pvt) Ltd. Union Assurance PLC. All associates are incorporated in Sri Lanka, except for Auxicogent BPO Solutions (Pvt) Ltd. which is incorporated in India. The investments in associates are carried in the balance sheet at cost plus post acquisition changes in the group's share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment. After application of the equity method, the group determines whether it is necessary to recognise any additional impairment loss with respect to the group's net investment in the associate. The income statement reflects the share of the results of operations of the associate. Where there has been a change recognised directly in the equity of the associate, the group recognises its share of any changes in the statement of changes in equity. When the group's share of losses in an associate equals or exceeds the interest in the undertaking, the group does not recognise further losses unless it has incurred obligations or made payments on behalf of the entity. The group ceases to use the equity method of accounting on the date from which it no longer has significant influence in the associate. The accounting policies of associate companies conform to those used for similar transactions of the group. Accounting policies that are specific to the business of associate companies are discussed in note 1.8. 1.2.6. Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to groups of cash-generating units that are expected to benefit from the synergies of the combination.
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. Minority interests 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. 1.2.4. Joint venture A joint venture is a contractual arrangement, whereby the group and other parties undertake an economic activity that is subject to joint control. The group recognises its interest in the joint venture using the proportionate consolidation method. The group's share of each of the assets, liabilities, income and expenses of the joint venture are combined with the similar items, line by line, in the consolidated financial statements. Information Systems Associates (a joint venture) has been incorporated in United Arab Emirates. 1.2.5. Associates 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.
107
Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets pro-rata to the carrying amount of each asset in the unit. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. 1.2.7. Financial year As per the group policy, results of all subsidiaries, joint ventures and associates with alternate year ends are treated as follows: Subsidiaries: 12 month period drawn up to 31 March Joint ventures and associates: 12 month period using the associate's or joint venture's year end In the case of joint ventures and associates, where the reporting dates are different to group reporting dates, adjustments are made for any significant transactions or events upto 31 March.
1.3. 1.3.1.
FOREIGN CURRENCY TRANSLATION Foreign currency transactions The consolidated financial statements are presented in Sri Lanka rupees, which is the company's functional and presentation currency. The functional currency is the currency of the primary economic environment in which the entities of the group operate. All foreign exchange transactions are converted to Sri Lanka rupees, at the rates of exchange prevailing at the time the transactions are effected. Monetary assets and liabilities denominated in foreign currency are retranslated to Sri Lanka rupee equivalents at the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. The resulting gains and losses are accounted for in the income statement.
1.3.2.
Foreign operations The balance sheet and income statement of overseas subsidiaries and joint ventures which are deemed to be foreign operations are translated to Sri Lanka rupees at the rate of exchange prevailing as at the balance sheet date and at the average annual rate of exchange for the period respectively. The exchange differences arising on the translation are taken directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement. The exchange rates applicable during the period were as follows:
Balance sheet 2007/08 Rs. Singapore dollar Pound sterling US dollar Indian rupee UAE dhiram 78.16 215.01 107.78 2.72 29.35 2006/07 Rs. 71.99 214.32 109.20 2.52 29.74
Income statement average rate 2007/08 2006/07 Rs. Rs. 74.84 220.74 110.30 2.75 30.03 67.47 199.82 105.51 2.34 28.73
108
1.4. 1.4.1.
TAX Current tax Provision for income tax is based on the elements of income and expenditure as reported in the financial statements and is computed in accordance with the provisions of the relevant tax statutes.
circumstances indicate that the carrying value may not be recoverable. All items of property, plant and equipment are initially recorded at cost. Where items of property, plant and equipment are subsequently revalued, the entire class of such assets are revalued at fair value. The group has adopted a policy of revaluing assets every 5 years, except for properties held for rental and occupied mainly by group companies, which are revalued every 3 years. When an asset is revalued, any increase in the carrying amount is credited directly to a revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the income statement, in which case the increase is recognised in the income statement. Any revaluation deficit that offsets a previous surplus in the same asset is directly offset against the surplus in the revaluation reserve and any excess recognised as an expense. Upon disposal, any revaluation reserve relating to the asset sold is transferred to retained earnings. Items 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. a) Depreciation Provision for 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 are as follows:
1.4.2.
Deferred tax Deferred taxation is the tax attributable to the temporary differences that arise when taxation authorities recognize and measure assets and liabilities with rules, that differ from those of the consolidated financial statements. 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 assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at rates that are expected to apply to the year when asset is realised or liability is settled, based on the rates and tax laws that have been enacted substantively enacted as at the balance sheet date. tax the tax or
Assets Buildings (other than hotels) Hotel buildings Plant and machinery Equipment Furniture and fittings Motor vehicles
Years 50 60 - 75 10 - 20 3-8 8 - 15 5 - 10
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. Deferred tax relating to items recognised directly in equity is recognised in equity. 1.5. 1.5.1. VALUATION OF ASSETS AND THEIR BASES OF MEASUREMENT Property, plant and equipment Property, plant and equipment is stated at cost or fair value less accumulated depreciation and any accumulated impairment in value. The carrying values of property plant and equipment are reviewed for impairment when events or changes in
The useful life and residual value of assets are reviewed, and adjusted if required, at the end of each financial year. b) Finance leases Property, plant and equipment on finance leases, which effectively transfer to the group substantially all the risk and benefits incidental to ownership of the leased items, are capitalised and disclosed as finance leases at their cash price and depreciated over the period the group is expected to benefit from the use of the leased assets. The corresponding principal amount payable to the lessor is shown as a liability. Lease payments are apportioned between the finance charges and reduction
109
of the lease liability so as to achieve a constant rate of interest on the outstanding balance of the liability. The interest payable over the period of the lease is transferred to an interest in suspense account. The interest element of the rental obligations pertaining to each financial year is charged to the income statement over the period of lease. The cost of improvements to leasehold property is capitalised, disclosed as leasehold improvements, and depreciated over the unexpired period of the lease or the estimated useful life of the improvements, whichever is shorter. c) Operating leases Leases, where the lessor effectively retains substantially all of the risks and benefits of ownership over the term of the lease, are classified as operating leases. Lease payments are recognised as an expense in the income statement over the term of the lease. 1.5.2. 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 are tested for impairment annually and is written down where applicable. The impairment loss if any, is recognised in the income statement. 1.5.3. Investment property Properties held to earn rental income, and properties held for capital appreciation have been classified as investment property. Investment properties are initially recognised at cost. Subsequent to initial recognition the investment properties are stated at fair values, which reflect market conditions at the balance sheet date. Gains or losses arising from changes in fair value are included in the income statement in the year in which they arise. Investment properties are 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 investment property, when there is a change in use, evidenced by ending of owneroccupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property, when there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale. Where group companies occupy a significant portion of the investment property of a subsidiary, such investment properties are treated as property, plant and equipment
in the consolidated financial statements, and accounted for as per SLAS 18 (revised) Property, Plant and Equipment. 1.5.4. Intangible assets An intangible asset is initially recognised at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. 1.5.5. Investments All quoted and unquoted securities, which are held as non-current investments, are valued at cost. The cost of the investment is the cost of acquisition inclusive of brokerage and costs of transaction. The carrying amounts of long term investments are reduced to recognise a decline which is considered other than temporary, in the value of investments, determined on an individual investment basis. In the company's financial statements, investments in subsidiaries, joint ventures and associate companies have been accounted for at cost, net of any impairment losses which are charged to the income statement. Income from these investments are recognised only to the extent of dividends received. 1.5.6. Impairment of assets The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
110
Impairment losses are recognised in the income statement except for impairment losses in respect of property, plant and equipment which are recognised against the revaluation reserve to the extent that it reverses a previous revaluation surplus. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. Previously recognised impairment losses other than in respect of goodwill, are reversed only if there has been an increase in the recoverable amount of the asset. Such increase is recognised to the extent of the carrying amount had no impairment losses been recognised previously. 1.5.7. Other non-current assets Bottle depreciation of Ceylon Cold Stores PLC. Returnable glass bottles are reflected under non-current assets at cost less depreciation. Depreciation is provided over its useful life of 5 years up to the net realisable value. The net realisable value of returnable glass bottles equals to the deposits received by the company or cost whichever is lower. The written down value of bottle breakages during the financial year is written off to the income statement. Upon termination of dealership, the weighted average cost of bottles not returned less the deposit is written off to the income statement.
1.5.10. 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. 1.5.11. 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. 1.6. 1.6.1. LIABILITIES AND PROVISIONS 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. 1.6.2. 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. 1.6.3. Grants and subsidies Grants and subsidies are recognised at their fair value. A grant received to compensate an expense is credited to the income statement on a systematic basis to match the related costs. Grants and subsidies related to assets are deferred and credited to the income statement over the useful life of the asset. 1.6.4. Provisions, contingent assets and contingent liabilities Provisions are made for all obligations existing as at the balance sheet date when it is probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of the quantum of the outflow. All contingent liabilities are disclosed as a note to the financial statements unless the outflow of resources is remote. Contingent assets are disclosed, where inflow of economic benefit is probable. 1.7. 1.7.1. INCOME STATEMENT 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
1.5.8.
Inventories Inventories are valued at the lower of cost and net realizable value. 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 Finished goods and work-in-progress On a weighted average basis At the cost of direct materials direct labour and an appropriate proportion of fixed production overheads based on normal operating capacity; At since realised price; At actual cost.
Produce inventories Other inventories 1.5.9.
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.
111
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) Sale of goods Revenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to the buyer with the group retaining neither a continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold. b) Rendering of services Revenue from rendering of services is recognised in the accounting period in which the services are rendered or performed. c) Turnover based taxes Turnover based taxes include value added tax, economic service charge, turnover tax and tourism development levy. Companies in the group pay such taxes in accordance with the respective statutes. 1.7.2. Dividend Dividend income is recognised on a cash basis. 1.7.3. Rental income Rental income is recognised on an accrual basis over the term of the lease. 1.7.4. Gains and losses Net gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non-current assets, including investments, are accounted for in the income statement, after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses. Gains and losses arising from activities incidental to the main revenue generating activities and those arising from a group of similar transactions which are not material, are aggregated, reported and presented on a net basis. Any losses arising from guaranteed rentals are accounted for in the year of incurring the same. A provision is recognised if the best estimate indicates a loss. 1.7.5. Other income Other income is recognised on an accrual basis. 1.7.6. 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 (b) b) 1.7.7.
state of efficiency has been charged to the income statement. For the purpose of presentation of the income statement, the function of expenses method has been adopted, on the basis that it presents fairly the elements of the company and group's performance. Borrowing costs Borrowing costs are recognised as an expense in the period in which they are incurred, unless they are incurred in respect of qualifying assets in which case it is capitalised. 1.8. SIGNIFICANT ACCOUNTING POLICIES THAT ARE SPECIFIC TO THE BUSINESS OF ASSOCIATE COMPANIES Union Assurance PLC General Insurance Business - Gross Written Premium Gross written premium is generally recognised as written upon inception of the policy. Upon inception of the contract, premiums are recorded as written and are earned primarily on a pro-rata basis over the term of the related policy coverage. However, for those contracts for which the period of risk differs significantly from the contract period, premiums are earned over the period of risk in proportion to the amount of insurance protection provided. Earned premiums are computed on the 24th basis except for marine business, which is computed on a 60-40 basis. Life Insurance Business - Gross Written Premium Premiums from traditional life insurance contracts, including participating contracts and non participating contracts, are recognised as revenue when cash is received from the policyholder. 1.8.2. Nations Trust Bank PLC Revenue Recognition (a) Interest Income from Customer Advances In terms of the provisions of the Sri Lanka Accounting Standard No. 23 on Revenue Recognition and Disclosures in the Financial Statements of banks and the guidelines issued by the Central Bank of Sri Lanka, interest receivable is recognised on an accrual basis. Interest ceases to be taken into revenue when the recovery of interest or principal is in arrears for over three (3) months and interest accrued until such advances being classified as nonperforming are also eliminated from interest income and transferred to interest in suspense. The interest income on nonperforming advances is recognised on a cash basis. Income on Discounting of Bills of Exchange Income from discounting of Bills of Exchange is recognized proportionately over the period of the instrument.
1.8.1. a)
112
(c)
Income from Government and Other Discounted Securities Discounts on Treasury Bills, Treasury Bonds and Commercial Papers are recognised on a straight-line basis over the period to maturity as income. Premium on Treasury Bonds are accounted for on a similar basis. The discount and the premium are dealt within the Income Statement. Income from all other interest-bearing investments is recognised as revenue on an accrual basis.
30,599,744 of which 2,749,813 have been exercised, 1,355,471 have lapsed and 26,494,460 remain unexercised. On 13 December 2007, shareholders approved a fourth plan, whereby the company could issue non-transferable call share options, not exceeding in aggregate 0.85% of the shares in issue of the company as at the date of granting the award. Approvals of the CSE and SEC have been obtained for this plan. As at 31 March 2008, the total number of options granted under this plan, was 5,405,945. All of the options under this award remain unexercised. As at 31 March 2008, the total number of options granted under the second, third and fourth plans, after allowing for bonus issues and rights issues, was 47,945,415. Of this total, 11,480,983 options have been exercised, 1,602,004 options have lapsed and 34,862,428 remain unexercised. Of the 34,862,428 options unexercised and outstanding as at 31 March 2008 (2007 - 23,874,575), 2,962,023 are exercisable before 22 January 2009, 7,111,424 are exercisable before 28 March 2010, 9,280,494 are exercisable before 9 April 2011, 10,102,542 are exercisable before 27 May 2012 and 5,405,945 are exercisable before 24 March 2013. 1.10. SEGMENT INFORMATION
(d)
Fees and Commission Income Fees and commission income comprise mainly of fees receivable from customers for guarantees, factoring, credit cards and other services provided by the Bank together with foreign and domestic tariff. Such income is recognised as revenue as the services are provided.
(e)
Profit or Loss on Sale of Securities Profit or loss arising from the sale of marketable securities is accounted for on a cash basis and is categorised under other income.
(f)
Lease Income The Bank follows the finance method of accounting for lease income.
1.8.3.
South Asia Gateway Terminals (Pvt) Ltd. Revenue Recognition Stevedoring revenue is recognised on the berthing time of the vessel. Storage revenue is recognised on the issue of delivery advice.
1.10.1. 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. The secondary segments are determined based on the group's geographical spread of operations. The geographical analysis of turnover and profits are based on location of customers and assets respectively. The activities of each of the reported business segments of the group are detailed in the group directory. 1.10.2. 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.
1.9.
EMPLOYEE SHARE OPTION PLAN On 29 June 2001, shareholders approved a second plan, whereby the company could issue annually, non-transferable call share options, not exceeding in aggregate 2% of the total issued capital of the company as at the date of granting every award under this plan, to a total of 5% of the total issued share capital as at the date of the last award. Approvals of the CSE and the SEC have been obtained for this plan. As at 31 March 2008, the total number of options granted under this plan, after allowing for bonus issues and rights issues, was 11,939,726 of which 8,731,170 have been exercised, 246,533 have lapsed and 2,962,023 remained unexercised. On 28 June 2004, shareholders approved a third plan, whereby the company could issue annually nontransferable call share options, not exceeding in aggregate 2% of the total issued capital of the company as at the date of granting every award under this plan, to a total of 5% of the total issued share capital as at the date of the last award. Approvals of the CSE and SEC have been obtained for this plan. As at 31 March 2008, the total number of options granted under this plan, after allowing for bonus issues and rights issues, was
113
PROPERTY, PLANT AND EQUIPMENT 2.1 Group Land Buildings on Plant and and leasehold machinery buildings land Equipment, furniture and fittings Motor vehicles Others Capital work in progress Total 2008 Total 2007
In Rs. '000s Cost or valuation At the beginning of the year 10,793,808 Additions 72,887 Acquisition of subsidiary (2,789) Disposals Adjustment due to sale of non-current investments (30,962) Revaluations 3,170,858 Impairment (2,380) Reclassified as IP 238,263 Transfers 889,251 At the end of the year 15,128,936 Accumulated depreciation At the beginning of the year (158,082) Charge for the year (106,429) Disposals 1,675 Adjustment due to sale of non-current investments 61 Revaluations 373,031 Impairment 897 Transfers (151,377) At the end of the year (40,224) Carrying value As at 31 March 2008 As at 31 March 2007 15,088,712 10,635,726
5,276,300 3,893,818 221,692 585,173 2,744,381 217,930 (421,172) (180,565) 9,367 (293,003) (92,163) 87,231 7,738,405 4,310,584 (877,446) (2,029,777) (262,066) (245,099) 421,041 171,922 361,825 349,640 29,717 51,108 (326,929) (1,702,206) 7,411,476 2,608,378 4,398,854 1,864,041
3,703,079 408,755 291,066 (158,332) (28,436) (20,609) 1,106 296,678 4,493,307
477,267 2,453,071 187,453 26,784,796 24,717,639 61,734 189,617 1,260,978 2,800,836 2,768,945 35,292 21,597 - 3,310,266 (45,497) (57,123) (1,158) (866,636) (228,757) (889) (16,895) (77,182) (286,435) (4,113) - 2,862,500 (275) (237) (1,786) (13,918) 238,263 (10,256) 17,321 (1,200,438) (12,376) (172,678) 517,651 2,620,095 229,703 35,038,681 26,784,796 - (6,381,100) (5,573,915) - (1,444,165) (1,124,116) 830,876 184,086 21,689 130,717 - 1,098,729 (1,497) 2,394 9,088 (266) - (5,866,380) (6,381,100) 229,703 29,172,301 187,453 20,403,696
(1,727,143) (245,642) (1,343,010) (477,195) (47,114) (306,262) 150,765 34,459 51,014 20,739 889 10,736 3,497 (2,394) 63,225 (242) 16,657 (1,961,267) (257,650) (1,578,104) 2,532,040 1,975,936 260,001 231,625 1,041,991 1,110,061
2.2 Company Plant and Equipment, machinery furniture and fittings In Rs. '000s Cost At the beginning of the year Additions Disposals At the end of the year Accumulated depreciation At the beginning of the year Charge for the year Disposals At the end of the year Carrying value As at 31 March 2008 As at 31 March 2007 Motor vehicles Total 2008 Total 2007
30,678 1,117 31,795 (21,239) (1,230) (22,469) 9,326 9,438
581,778 18,606 (990) 599,394 (230,790) (107,473) 674 (337,589) 261,805 350,989
29,114 29,114 (9,402) (1,413) (10,815) 18,299 19,712
641,570 19,723 (990) 660,303 (261,431) (110,116) 674 (370,873) 289,430 380,139
530,149 124,671 (13,250) 641,570 (180,787) (91,244) 10,600 (261,431)
114
Group As at 31st March In Rs. '000s 2.3 Land and building At cost At valuation Net book value Carrying value At cost At valuation On finance lease 2008 2007
Company 2008 2007
3,721,230 18,778,958 22,500,188
6,131,501 8,903,079 15,034,580
2.4
16,234,301 12,909,282 28,718 29,172,301
10,551,261 9,827,672 24,763 20,403,696
289,430 289,430
380,139 380,139
Details of group land, building and other properties stated at valuation are indicated below Property
Leasehold land, buildings and other properties of Yala Village (Pvt) Ltd. Land and buildings of John Keells PLC. John Keells Holdings PLC. Whittall Boustead Ltd. Mattakuliya property of Keells Realtors Ltd. Land and buildings of Mackinnons and Keells Financial Services Ltd. Leasehold land, buildings and other properties of Tranquility (Pte) Ltd Land and buildings of Ceylon Cold Stores PLC Keells Food Products PLC Whittall Boustead Ltd. Land of Resort Hotels Ltd Land and buildings of Ceylon Holiday Resorts Ltd - Bentota Beach Hotel Habarana Lodge Ltd Habarana Walk Inn Ltd Kandy Walk Inn Ltd Transware Logistics (Pvt)Ltd Trinco Walk Inn Ltd Land and buildings, storage tanks of Lanka Marine Services (Pvt) Ltd. Land and buildings of Tea Smallholder Factories PLC Plant and machinery of Tea Smallholder Factories PLC Buildings of Trans Asia Hotels PLC Land, building and other properties of Ceylon Holiday Resort Ltd - Coral Gardens Hotel Land and buildings of Asian Hotels and Properties PLC
Method of valuation
Land and building method Open market value method
Effective date of valuation

20 October 2005 31 March 2006
Property valuer
Mr. R.G Wijesinghe, Consultant Valuer and Assessor Mr. G.J Sumanasena, Incorporated Valuer
Open market value method Contractors test method Open market value method Open market value method
31 March 2006 31 March 2006 04 May 2007 31 March 2008
Mr. G.J Sumanasena, Incorporated Valuer Mr. G.J Sumanasena, Incorporated Valuer Mr. Haleen Gouse Incorporated Valuer Mr. P.B Kalugalgedara, Chartered Valuation Surveyor.
Land and building method Land and building method
31 March 2008 31 March 2008
Mr. R.G Wijesinghe, Consultant Valuer and Assessor Mr. R.G Wijesinghe, Consultant Valuer and Assessor
Open market value method Land and building method, Contractors test method Land and building method Land and building method
31 March 2008 31 March 2008 31 March 2008 31 March 2008 31 March 2008
Mr. G.J Sumanasena, Consultant Valuer Mr. G.J Sumanasena, Consultant Valuer Mr. G.J Sumanasena, Consultant Valuer M/s A.Y.Daniel & Son Certified Valuer Mr. H.R de Silva, Chartered Valuation Surveyor (UK) M/s A.Y.Daniel & Son Certified Valuer
Contractors (cost) Summation basis
31 March 2008
115
The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows Group As at 31st March In Rs. '000s Cost Accumulated depreciation Carrying value 2008 2007
9,609,211 (1,658,641) 7,950,570
7,534,917 (1,425,083) 6,109,834
2.5
Finance leases Property plant and equipment include capitalised finance leases. The carrying value of these assets are as follows: Accumulated depreciation (5,689) (5,689) Group 2008 28,718 28,718 2007 928 23,835 24,763
Cost Plant and machinery Motor vehicles Equipment, furniture and fittings 34,407 34,407
2.6
Exchange gain / (loss) Additions to property, plant and equipment include exchange differences arising from the transalation of balances to Sri Lanka rupees. Group
As at 31st March In Rs. '000s Land and buildings Plant and machinery Equipment, furniture and fittings Motor vehicles Other assets
2008
2007
(88,475) (7,361) 40,471 52,073 (4,770) (8,062)
40,841 3,040 7,009 931 727 52,548
2.7
Group land and buildings with a carrying value of Rs. 1,348 mn (2007 - Rs. 1,682 mn) have been pledged as security for term loans obtained, details of which are disclosed in Note 16.3. Group property, plant and equipment with a cost of Rs. 1,476 mn (2007 - Rs. 775.8 mn) have been fully depreciated and continue to be in use by the group. The cost of fully depreciated assets of the company amounts to Rs. 59 mn (2007 - Rs. 57 mn).
2.8
116
Group As at 31st March In Rs. '000s 3 LEASEHOLD PROPERTY Cost Accumulated amortisation Exchange gain / (loss) 2008 2007
4,803,400 (115,014) (50,152) 4,638,234
4,656,821 (76,074) 180,756 4,761,503
Lease rentals prepaid to acquire land use rights in John Keells Maldivian Resorts (Pte) Ltd and Travel Club (Pte) Ltd, which was previously shown under other non current assets have now been re-classified under 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. 3.1 Details of leasehold property Amount Property John Keells Maldivian Resorts (Pte.) Ltd Dhonveli Beach & Spa Resort, Republic of Maldives John Keells Warehousing (Pvt) Ltd. Muthurajawela Rajawella Hotels Ltd. Tea Smallholder Factories PLC. Karawita tea factory Trans Asia Hotels PLC. Colombo Travel Club (Pte) Ltd. Ellaidhoo Island Resort, Republic of Maldives Yala Village (Pvt) Ltd. Land extent (in acres) Lease period 2008 2007
36.96
15 years from 16-5-2006
2,205,367
2,270,093
6 10.00
50 years from 19-9-2001 95 years and 10 months from 2-2-2000 50 years from 15-8-1997 from 2001/2002 99 years from 7-8-1981 14 years from 4-8-2006
45,647 36,294 12,893 893,088 1,359,369 85,576 4,638,234
46,736 36,690 13,201 905,492 1,400,721 88,570 4,761,503
4.99 7.20 13.75 10
30 years from 27-11-1997
Group As at 31st March In Rs. '000s 4 INVESTMENT PROPERTY At the beginning of the year Additions Reclassified as property, plant and equipment Disposals Change in fair value during the year At the end of the year 2008 2007
Company 2008 2007
2,505,321 21,384 (238,263) 2,288,442
2,467,446 238,263 (310,000) 109,612 2,505,321
800,000 32,158 832,158
800,000 800,000
Having studied the current income levels and market conditions of similar properties situated within close proximity, the directors of the company confirm that the value of investment property as at 31 March 2008 is Rs. 2,288 mn for the group and Rs. 832 mn for the company.
117
4.1
Valuation details of investment property (IP) The investment properties were valued by qualified professional valuers in 2006, details of which are as follows. Property Group Asian Hotels and Properties PLC. Crescat Boulevard, Colombo 3 Tea Smallholder Factories PLC. Stores Complex, Peliyagoda Trans Asia Hotels PLC. Commercial Centre, Colombo 2 Company John Keells Holdings PLC. Galaha Building, Colombo 2 Open market value Mr. G.J. Sumanasena, Incorporated Valuer Investment method Investment method Accredited contractor basis Mr. P.B. Kalugalagedera, Chartered Valuation Surveyor Mr. G.J. Sumanasena, Incorporated Valuer M/S A.Y.Daniel & Son, Incorporated Valuer Method of valuation Valuer
Rental income earned from investment property by the group and company amount to Rs. 239 mn (2007 - Rs. 191 mn) and Rs. 36 mn. (2007 - Rs. 34 mn) respectively. Direct operating expenses incurred by the group and company amounted to Rs. 50 mn (2007 - Rs. 65 mn) and Rs. 3 mn (2007 - Rs. 5 mn) respectively.
Group As at 31st March In Rs. '000s 5 INTANGIBLE ASSETS Cost/carrying value At the beginning of the year Additions / transfers Adjustment due to sale of non-current investments At the end of the year Accumulated amortisation At the beginning of the year Amortisation Adjustment due to sale of non-current investments Exchange translation difference At the end of the year Net carrying value Software Goodwill 2008 2007
26,831 26,831
318,680 11,676 (467) 329,889
345,511 11,676 (467) 356,720
853,795 (466,622) (41,662) 345,511
(6,750) (8,717) (15,467) 11,364
329,889
(6,750) (8,717) (15,467) 341,253
(10,257) (13,376) 16,862 21 (6,750) 338,761
Software with a finite life is amortised over the period of the expected economic benefit. As from 1 April 2006, goodwill is no longer amortised but tested for impairment annually. Goodwill acquired through business combinations have been allocated to seven (07) cash generating units (CGU's) for impairment testing as follows: Chaaya Hotels and Resorts Logistics, Ports and Shipping Cinnamon Hotels and Resorts Property Airlines Destination Management Food and Beverage Net Carrying Value of Goodwill 148,000 126,888 40,116 13,874 468 408 135 329,889
The recoverable amount of all CGUs have been determined based on the fair value less cost to sell or the value in use (VIU) calculation.
118
Key assumptions used in the VIU calculations Gross margins The basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceeding the budgeted year adjusted for projected market conditions. Discount rates The discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium. Inflation The basis used to determine the value assigned to the budgeted cost inflation is the inflation rate based on projected economic conditions. Volume growth Volume growth has been budgeted on a reasonable and realistic basis by taking into account the growth rates of the two years immediately preceeding the budgeted year and future industry growth rates. Cashflows beyond the five year period are extrapolated using a zero growth rate.
Group At at 31st March In Rs.'000s 6 6.1 INVESTMENTS Carrying value Investments in subsidiaries Investments consolidated Quoted Unquoted Investments not consolidated Unquoted Investments in joint ventures Investments in subsidiaries and joint ventures Investments in associates Other investments Quoted Unquoted Investments held for sale Note 2008 2007
Company 2008 2007
6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9
5,115 5,115 5,115 9,886,520 30 125,194 125,224 37,331 10,054,190
5,115 5,115 5,115 8,515,037 30 148,227 148,257 8,668,409
13,126,857 4,273,961 5,115 17,405,933 46,482 17,452,415 6,204,776 94,957 94,957 15,860 23,768,008
10,241,005 4,169,600 5,115 14,415,720 30,161 14,445,881 5,995,133 106,917 106,917 20,547,931
Group At at 31st March In Rs.'000s 6.2 Group quoted investments Asian Hotels and Properties PLC. 185,530,612 Ceylon Cold Stores PLC. 12,331,038 Ceylon Cold Stores PLC.- preference shares 118 John Keells Hotels PLC. 1,012,239,871 John Keells PLC. 11,551,396 Keells Food Products PLC. 3,784,755 Tea Smallholder Factories PLC. 5,643,000 Trans Asia Hotels PLC. 46,026,821 Number of shares 2008 2007 Number of shares
Company 2008 2007
5,564,807 190,599 1 5,381,179 294,174 77,648 63,466 2,254,710 13,826,584
5,564,807 185,530,612 190,599 10,010,111 1 118 2,611,753 1,012,239,871 177,748 11,551,396 77,711 2,553,420 63,466 5,643,000 2,254,710 24,321,064 10,940,795
5,564,807 177,562 1 5,381,179 294,174 51,003 63,466 1,594,665 13,126,857
5,564,807 177,562 1 2,611,753 177,748 51,003 63,466 1,594,665 10,241,005
Market value of these quoted investments were Rs. 21,319 mn (2007 - Rs. 20,555 mn) and Rs. 19,240 mn (2007 - Rs. 17,958 mn) for the group and company respectively.
119
Group As at 31st March In Rs.'000s 6.3 Number of shares 2008 2007 Number of shares
Company 2008 2007
Group unquoted investments Auxicogent Alpha (Pvt) Ltd. 7,350 Auxicogent Alpha (Pvt) Ltd. - Preference A 57,200,000 Auxicogent Holdings (Pvt) Ltd. 15,000,000 Auxicogent International (Pvt) Ltd. 1,500,000,000 Auxicogent International Lanka (Pvt) Ltd. 15,950,000 Auxicogent Investment Mauritius (Pvt) Ltd. 14,700 Auxicogent Investment Mauritius (Pvt) Ltd. - Preference A 57,200,000 Ceylon Holiday Resorts Ltd. 7,734,544 1,000,000 DHL Keells (Pvt) Ltd. Elephant House Farms Ltd. 400,000 Fantasea World Investments (Pte) Ltd. 7,297 Habarana Lodge Ltd. 12,981,548 Habarana Walk Inn Ltd. 4,321,381 InfoMate (Pvt) Ltd. 2,000,000 International Tourists and Hoteliers Ltd. 7,545,593 J K Packaging (Pvt) Ltd. 1,450,000 J K Properties (Pvt) Ltd. 24,000,000 JayKay Marketing Services (Pvt) Ltd. 49,800,000 John Keells Business Systems (UK) Ltd. 98 John Keells Computer Services (Pvt) Ltd. 9,650,000 John Keells Conventions (Pvt) Ltd. 50,000 John Keells International (Pvt) Ltd. 154,500,000 John Keells Logistics (Pvt) Ltd. 20,000,000 John Keells Maldivian Resorts (Pte) Ltd. 31,321,738 John Keells Office Automation (Pvt) Ltd. 500,000 John Keells Singapore (Pte) Ltd. 160,000 John Keells Software Technologies (Pvt) Ltd. 800,000 John Keells Stock Brokers (Pvt) Ltd. 750,000 John Keells Teas (Pvt) Ltd. 12,000 John Keells Warehousing (Pvt) Ltd. 12,000,000 Kandy Walk Inn Ltd. 5,160,309 Keells Business Systems Ltd. Keells Consultants Ltd. 15,700 Keells Hotel Management Services Ltd. 1,000,000 Keells Realtors Ltd. 7,500,000 Keells Shipping (Pvt) Ltd. 50,000 Keells Tours (Pvt) Ltd. Lanka Marine Services (Pvt) Ltd. 34,805,470 Mack Air Ltd. 500,000 Mack Air Services Maldives (Pte) Ltd. 4,900 Mack International Freight (Pvt) Ltd. 2,500,000 Mackinnon & Keells Financial Services Ltd. 1,080,000 Mackinnon Mackenzie and Company (Shipping) Ltd. 500,000 Mackinnon Mackenzie and Company of Ceylon Ltd. 9,000 Mackinnons American Express Travel (Pvt) Ltd. 350,000 Mackinnons Tours (Pvt) Ltd. Matheson Keells Air Services (Pvt) Ltd. 94,921 Matheson Keells Enterprises (Pvt) Ltd. 627,999
792 615,358 1,543,353 1,615,204 160,352 1,584 615,358 566,571 10,000 4,000 433,708 695,082 311,981 20,000 247,495 240,000 522,892 9 96,500 1,545,000 200,000 3,172,350 5,000 4,209 500 120 120,000 367,324 1,299 19,055 75,000 502 1,325,218 60 2,035 69 12,806 14,200 161 -
1,543,353 50,000 566,096 10,000 4,000 433,708 470,419 211,315 20,000 247,495 240,000 522,892 9 96,500 500 1,545,000 80,000 2,222,348 5,000 4,209 500 120 120,000 367,295 15,000 1,299 19,055 75,000 502 5,500 1,325,218 60 2,035 69 12,806 14,200 161 3,000 -
1,000,000 2,000,000 1,450,000 24,000,000 98 9,650,000 154,500,000 20,000,000 500,000 160,000 800,000 180,000 12,000 15,700 1,000,000 3,000,000 50,000 34,805,470 500,000 4,700 2,500,000 972,000 6,600 350,000 94,921 627,999
10,000 20,000 240,000 9 96,500 1,545,000 200,000 5,000 4,209 120 120 1,299 19,055 30,000 502 1,325,218 60 2,021 69 11,912 161 -
10,000 20,000 240,000 9 96,500 1,545,000 80,000 5,000 4,209 120 120 15,000 1,299 19,055 30,000 502 1,325,218 60 2,021 69 11,912 161 -
120
Group As at 31st March In Rs.'000s Number of shares 2008 2007 Number of shares 2008
Company 2007
Matheson Keells Enterprises (Pvt) Ltd. - Redeemable non voting preference shares Mortlake Ltd. Nature Odyssey (Pvt) Ltd. Nexus Networks (Pvt) Ltd. Rajawella Hotels Ltd. Resort Hotels Ltd. Serene Holidays (Pvt) Ltd. Tranquility (Pte) Ltd. Transware Logistics (Pvt) Ltd. Travel Club (Pte) Ltd. Trinco Walk Inn Ltd. Unawatuna Walk Inn Ltd. Walkers Air Services Ltd. Walkers Tours Ltd. Whittall Boustead (Travel) Ltd. Whittall Boustead (Pvt) Ltd. Whittall Boustead (Pvt) Ltd. - Preference A Whittall Boustead (Pvt) Ltd. - Preference B Wirawila Walk Inn Ltd. Yala Village (Pvt) Ltd. Yala Village (Pvt) Ltd.- non voting preference shares
2,600,000 300 10,000 2,000,000 75,007 250,000 10,000 11,000,000 29,059 3,000,000 750,000 4,925,577 750,000 9,918,880 1,500,000 16,210,800 10,000,000
41,098 327,240 100 20,000 750 6,385 553,750 111,100 302,640 95,940 7,503 128,140 40,984 133,382 21,885 200,000 100,000 16,656,044
41,098 327,240 100 100 20,000 750 6,385 111,100 302,640 95,940 40,155 7,503 128,088 40,984 133,382 152 539 21,885 75,000 100,000 11,687,705
2,600,000 300 10,000 11,000,000 750,000 4,925,577 675,000 7,258,264 -
41,097 327,240 100 111,100 7,503 128,141 40,935 106,590 4,273,961
41,098 327,240 100 111,100 7,503 128,088 40,935 106,590 152 539 4,169,600
Directors' valuation of unquoted investments amount to Rs. 16,656 mn (2007 - Rs. 11,688 mn ) and Rs. 4,274 mn (2007 - Rs. 4,170 mn) for the group and company respectively. Group As at 31st March In Rs.'000s 6.4 Number of shares 2008 2007 Number of shares 2008 Company 2007
Investments in subsidiaries not consolidated Keells Systems Integrators Ltd.
500,000
5,115 5,115
5,115 5,115
500,000
5,115 5,115
5,115 5,115
Keells System Integrators Ltd. is a non-operating subsidiary, currently under liquidation, with a net asset value that equals the book value of investments. 6.5 Investments in joint ventures Information Systems Associates
73
46,482 46,482
30,161 30,161
73
46,482 46,482
30,161 30,161
The directors' valuation of the unquoted investments referred to in notes 6.4 and 6.5 amount to Rs 52 mn (2007 - Rs. 35 mn)
121
Group As at 31st March In Rs.'000s 6.6 Investments in associates Quoted Nations Trust Bank PLC. Union Assurance PLC. Associated Motorways PLC. Number of shares 2008 2007 Number of shares 2008
Company 2007
50,146,685 13,863,163 11,138,808
965,863 275,886 705,458 4,647,103 150 12,689 544,620 2,087,288 560,434 92,433 (5,404) 9,886,520
652,447 275,886 705,458 4,647,103 150 12,689 1,436,543 696,598 92,433 (4,270) 8,515,037
33,542,933 9,840,685 11,138,808 127,861,400 30,000 -
612,730 268,232 705,458 4,618,206 150 6,204,776
403,087 268,232 705,458 4,618,206 150 5,995,133
Unquoted South Asia Gateway Terminals (Pvt) Ltd. 127,861,400 Maersk Lanka (Pvt) Ltd. 30,000 Auxicogent BPO Solutions (Pvt) Ltd. 49,000 Auxicogent BPO Solutions (Pvt) Ltd. - Preference A 12,593,506 Profit accruing to the group net of dividend Adjustment on account of associate company share of net assets Negative goodwill on acquisition of associates Unrealised profit on transactions with associate companies
Summarised financial information of associates Group share of balance sheet Total assets Total liabilities Net assets Goodwill Unrealised profits on transactions with associates 29,197,055 24,806,076 (22,408,157) (19,389,795) 6,788,898 5,416,281 3,103,026 3,103,026 (5,404) (4,270) 9,886,520 8,515,037
Group share of revenue and profit Revenue Profit
9,623,341 2,250,048
5,650,596 1,700,992
Market value of quoted associate investments were Rs. 3,663 mn (2007 - Rs.3,730 mn) and Rs.2,940 mn (2007 - Rs. 3,082 mn) for the group and company respectively. The directors' valuation of unquoted associate investments amounts to Rs 7,171 mn (2007- Rs 6,277 mn) and Rs 4,618 mn (2007 - Rs 4,618 mn) for the group and company respectively. 6.7 Other quoted investments Ceylon Hotels Corporation
500
30 30
30 30
Market value of other quoted investments were Rs. 0.01 mn (2007 - Rs. 0.1 mn)
122
Group As at 31st March In Rs.'000s 6.8 Number of shares 2008 2007 Number of shares 2008
Company 2007
Other unquoted investments ACW Insurance Co. Ltd. Asia Power (Pvt) Ltd. Crescat Restaurants (Pvt) Ltd Facets (Pvt) Ltd. Keells Restaurants (Pvt) Ltd Pyramid Unit Trust Rainforest Ecolodge (Pvt) Ltd. Rajawella Holdings Ltd. SLFFA Cargo Services Ltd. Sri Lanka Hotel Tourism Training Institute Sri Lanka Port Management & Consultancy Services Ltd. The York Company Ltd.
450,000 777,055 15,000 310,000 2,500,000 3,000,000 64,642 15,004 100 100
1,269 79,507 450 3,100 25,000 15,000 716 150 1 1 125,194
1,269 79,507 6,494 450 16,539 3,100 25,000 15,000 716 150 1 1 148,227
777,055 15,000 1,196,000 3,000,000 -
79,507 450 15,000 94,957
79,507 450 11,960 15,000 106,917
6.9
Investments held for sale Crescat Restaurants (Pvt) Ltd Keells Business Systems Ltd Keells Restaurants (Pvt) Ltd
104,000 390,000 1,196,000
6,494 14,299 16,538 37,331
3,900 11,960 15,860 23,768,008 23,768,008
20,547,931 20,547,931
Total value of investments including subsidiaries Group investments Total value of investments
40,583,300 31,327,070 (30,529,110) (22,658,661) 10,054,190 8,668,409
The director's valuation of other unquoted investments and investments held for sale, referred to in Note 6.8 and 6.9 amounts to Rs. 162 mn (2007 - Rs. 148 mn) and Rs. 110 mn (2007 - Rs. 107 mn) for the group and company respectively.
Group As at 31st March In Rs.'000s 6.10 Movement in total investments At the beginning of the year Additions New acquisitions Disposals and transfers Net movement in fall in value of investments / impairment Adjustment on account of associate company share of net assets Share of results of associates net of dividend (Goodwill) / negative goodwill on associate companies Unrealised profit on transactions with associate companies At the end of the year 2008 2007
Company 2008 2007
8,668,409 858,036 14,299 (136,164) 650,744 (1,134) 10,054,190
3,700,943 4,341,876 (7,128) (154) 182,092 291,859 163,191 (4,270) 8,668,409
20,547,931 14,617,151 3,231,869 3,623,844 2,330,457 (11,792) (23,521) 23,768,008 20,547,931
123
Group As at 31st March In Rs.'000s 7 DEFERRED TAX ASSET At the beginning of the year Credit / (release) Adjustment due to sale of non-current investments Transfers / exchange translation difference At the end of the year The closing deferred tax asset balance relates to the following: Accelerated depreciation for tax purposes Adjustment relating to land and building Employee benefit liability Losses available for offset against future taxable income Others 2008 2007
74,013 23,143 (1,752) (4,330) 91,074
65,004 12,266 (3,257) 74,013
(73,763) 50,160 102,374 12,303 91,074
(65,741) (5,657) 42,781 92,181 10,449 74,013
The group has tax losses amounting to Rs. 2,648 (2007 - Rs. 2,580 mn) that are available indefinitely for offset against future taxable profits of the companies in which the tax losses arose. Deferred tax assets amounting to Rs. 210 mn (2007- 267 mn) for the group and Rs. 575 mn (2007 - Rs. 741 mn) for the company have not been recognized since the companies do not expect these assets to reverse in the forseeable future.
Group As at 31st March In Rs.'000s 8 OTHER NON-CURRENT ASSETS Loans and advances Bottle stocks Loans to executives Treasury bonds Work-in-progress and unsold apartments Others Loans to subsidiaries Note 2008 2007
Company 2008 2007
8.1
649,485 490,273 266,089 202,192 192,899 5,000 1,805,938
245,270 477,706 230,454 203,840 258,158 20,010 1,435,438
44,687 21,000 65,687
61,944 37,952 99,896
124
Group As at 31st March In Rs.'000s 8.1 Loans to executives At the beginning of the year Loans granted / transfers Loans recovered Adjustment due to sale of non-current investments At the end of the year Receivable within one year Receivable after one year 2008 2007
Company 2008 2007
400,145 167,943 (191,638) (12,354) 364,096 98,007 266,089 364,096
300,179 475,756 (370,455) (5,335) 400,145 169,691 230,454 400,145
72,116 26,022 (39,598) 58,540 13,853 44,687 58,540
251,242 151,393 (330,519) 72,116 10,172 61,944 72,116
Group As at 31st March In Rs.'000s 9 INVENTORIES Raw materials Work-in-progress Finished goods Produce stocks Other stocks 2008 2007
Company 2008 2007
188,313 776,382 2,399,708 249,628 370,994 3,985,025
194,226 1,247,892 1,491,147 134,152 333,159 3,400,576
825 825
847 847
Group inventories with a carrying value of Rs. 44 mn (2007 - Rs. 51 mn) have been pledged as security for term loans obtained, details of which are disclosed in note 16.3.
Group As at 31st March In Rs.'000s 10 TRADE AND OTHER RECEIVABLES Trade and other receivables Tax refunds Loans to executives Note 2008 2007
Company 2008 2007
8.1
5,466,539 1,188,906 98,007 6,753,452
5,179,151 1,243,220 169,691 6,592,062
235,342 14,141 13,853 263,336
122,299 14,141 10,172 146,612
Group As at 31st March In Rs.'000s 11 SHORT TERM INVESTMENTS Treasury bills Commercial papers Fixed and call deposits 2008 2007
Company 2008 2007
6,262,114 1,222,182 2,971,070 10,455,366
4,898,168 1,068,479 10,171,962 16,138,609
5,444,836 1,214,900 325,000 6,984,736
3,500,000 1,068,479 7,733,215 12,301,694
125
As at 31st March Number of shares in '000s 12 Stated Capital Fully paid ordinary shares At the beginning of the year Share options exercised Bonus issue /share issue expenses Rights issue At the end of the year
2008 Value of shares in Rs. '000s Number of shares in '000s
2007 Value of shares in Rs. '000s
552,940 4,094 78,960 635,994
22,245,894 276,409 (58,036) 22,464,267
400,007 3,666 57,163 92,104 552,940
9,205,273 246,748 12,793,873 22,245,894
The composition of shares in issue is given under the investor information section of the comprehensive annual report. 34,862,428 shares (2007 - 23,874,575) have been reserved to be issued under the employee share option plan as at 31 March 2008. The number of issued and fully paid shares is disclosed in the report of the Board of directors. The authorised capital and par value concept in relation to share capital were abolished by the Companies Act No 07 of 2007. The total amount received by the company in respect of the issue of shares are referred to as stated capital. Comparative figures have been restated accordingly.
Group As at 31st March In Rs.'000s 13 CAPITAL RESERVES Revaluation reserve Exchange translation reserve Other capital reserves Note 2008 2007
13.1 13.2 13.3
4,738,312 908,299 418,640 6,065,251
1,775,128 943,624 418,640 3,137,392
13.1 Revaluation reserve consists of the net surplus on the revaluation of property, plant and equipment as described in note 2. 13.2 Exchange translation reserve comprises the net exchange movement arising on the translation of net equity investments of overseas subsidiaries, joint venture and associates into Sri Lankan rupees. 13.3 Other capital reserves comprises of capital redemption reserve funds arising from the redemption of preference shares of subsidiaries.
Group As at 31st March In Rs.'000s 14 REVENUE RESERVES General reserves Dividend reserve Investment equalisation reserve Other revenue reserves Accumulated profit Note 2008 2007
Company 2008 2007
14.1 14.2 14.3
3,870,775 1,572,188 75,000 5,517,963 10,170,339 15,688,302
3,870,775 1,572,188 75,000 5,517,963 8,333,950 13,851,913
2,600,000 1,519,322 75,000 4,194,322 2,148,495 6,342,817
2,600,000 1,519,322 75,000 4,194,322 1,521,707 5,716,029
14.1 General reserve represents amounts set aside by the directors for future expansion, and to meet any contingencies. 14.2 Dividend reserve represents dividend received and available for distribution 14.3 Investment equalisation reserve comprises amounts set aside by the directors for impairment of long term investments of the company.
126
As at 31st March In Rs. '000s 15 NON-INTEREST BEARING BORROWINGS At the beginning of the year Repayments At the end of the year Repayable within one year Repayable after one year
Group 2008
2007
30,000 (9,000) 21,000 21,000 21,000
35,000 (5,000) 30,000 30,000 30,000
Group As at 31st March In Rs. '000s 16 INTEREST BEARING BORROWINGS 7,825,546 1,153,846 1,961,985 (2,002,519) (69,654) 8,869,204 1,059,752 7,809,452 8,869,204 2,488,880 5,925,365 (48,333) (540,366) 7,825,546 1,374,413 6,451,133 7,825,546 2008 2007
Company 2008 2007
16.1 Movement At the beginning of the year Additions Adjustment due to sale of non-current investments Repayments Adjustments / exchange difference At the end of the year Repayable within one year Repayable after one year
3,595,493 (700,000) 2,895,493 300,000 2,595,493 2,895,493
764,974 2,995,493 (164,974) 3,595,493 700,000 2,895,493 3,595,493
Group interest bearing borrowings include finance lease obligations amounting to Rs. 40 mn (2007 - Rs. 34 mn), details of which are disclosed in note 16.2
As at 31st March In Rs. '000s 16.2 Finance leases At the beginning of the year Additions Repayments At the end of the year Finance lease obligations repayable within 1 year Gross liability Finance charges Net lease obligation Finance lease obligations repayable between 1 and 5 years Gross liability Finance charges Net lease obligation Finance lease obligations repayable after 5 years Gross liability Finance charges Net lease obligation
Group 2008
2007
34,223 14,607 (8,836) 39,994
13,520 25,158 (4,455) 34,223
8,408 (2,009) 6,399
8,427 (2,026) 6,401
35,936 (5,194) 30,742
30,737 (7,203) 23,534
2,853 2,853
4,288 4,288
127
16.3 Security and repayment terms Lending institution John Keells Holdings PLC Nature of facility Debentures Interest rate and security Fixed, semi fixed & floating AWPLR+0.25% revised quarterly 10.6%, unsecured Repayment terms 2008 2007
Bullet repayment at end 1,995,493 1,995,493 of tenure of 4 years, Bi-annual repayments. Quarterly installments over 5 years with a grace period of 6 months. On 29-7-2008 800,000 1,000,000
DFCC
Term loan
HNB pension & Fixed rate retirement fund note ETF EPF WML Fixed rate note Fixed rate note Term loan note
100,000 -
100,000 200,000 200,000 100,000
2,895,493 3,595,493 Group companies Asian Hotels and Properties PLC Cinnamon Grand Commercial Bank HNB
Term loan
AWPLR, revised quarterly unsecured AWPLR, unsecured
13 quarterly installments with a grace period of 18 months 24 monthly installments with a grace period of 18 months
573,291
755,018
Term loan
557,980
728,000
Crescat Division Ceylon Cold Stores PLC.
NDB NDB NDB
Finance lease Term loan E Friendly loan Project loan 10.5%, unsecured 6.5%, Kaduwela land, building and machinery of soft drink plant 10.5%, Kaduwela land, building and machinery of soft drink plant 10.5%, Kaduwela land, building and machinery of soft drink plant 18.25%, Kaduwela land, building and machinery of soft drink plant 60 monthly installments commencing Aug 2004 60 monthly installments commencing March 2008 60 monthly installments commencing Aug 2007 48 monthly installments commencing Nov 2007 48 monthly installments commencing July 2008
16,996
3 33,333 17,284
NDB
194,135
198,396
DFCC
Project loan
223,958
198,396
DFCC
Term loan
120,000
Ceylon Holiday Resorts Ltd. NTB Habarana Lodge Ltd. Habarana Walk Inn Ltd. NTB HNB
Finance lease Finance lease Term loan AWPLR -0.15%, revised quarterly, corporate guarantee of John Keells Hotels PLC. Bi-annual repayment commencing June 2007
5,082 2,541 -
6,500 3,250 140,000
NTB
Finance Leas
2,541
3,250
128
16.3 Security and Repayment Terms Lending institution Jaykay Marketing Services (Pvt) Ltd. HNB Nature of facility Term loan Interest rate and security Repayment terms 2008 19,250 2007 40,160
6 month TB rate+1.35%, 60 monthly installments negative pledge of stocks commencing March 2004 and debtors of Keells Super Mt. Lavinia, Nugegoda and Borella
John Keells Hotels PLC.
Commercial Bank NTB
Term loan
417,000
John Keells Logistics (Pvt) Ltd. John Keells Maldivian Resorts (Pte) Ltd.
Finance lease
12,173
Sampath Bank
Term loan
3 months LIBOR + 1.3% 30 quarterly installments 1,293,360 1,310,400 for first two years and commencing after a grace LIBOR + 1.5% thereafter, period of 18 months revised quarterly Repayment over 10 years commencing May 2003 75,483 80,120
John Keells Warehousing (Pvt) Ltd.
Deutsche Bank
Asset backed 21.98%, corporate notes guarantee of John Keells PLC. Finance lease Term loan 6 monthTB Rate +1.75% p.a to be reviewed bi-annually, negative pledge over land and building at Ekala, Ja-Ela 8.5%, unsecured
Kandy Walk Inn Ltd.
NTB
2,541 36 monthly installments 3,700 commencing June 2004, with a grace period of 1 year
3,250 27,100
Keells Foods Products PLC. HNB
Mackinnon and Keells Financial Services Ltd. Tea Smallholder Factories PLC Trans Asia Hotels PLC.
NDB
Term loan
60 monthly installments commencing May 2002
13
People's bank
Term loan
9%
83 equal monthly payments 14,953
Sampath Bank UDA
Term loan
AWPLR, unsecured
48 monthly installments commencing Nov. 2007
90,411
125,415
Finance lease Finance lease Term loan LIBOR + 2% 28 equal quarterly installments 5 years
10,034 2,541 916,130
11,470 3,250 -
Trinco Walk Inn Ltd. Travel Club (Pte) Ltd
NTB BOC Maldives
Tranquility (Pte) Ltd
BOC Maldives
Term loan
LIBOR + 1.5%, leased back security 7.5%, unsecured
1,833,925
Whittal Boustead Ltd. Yala Village (Pvt) Ltd. BOC
Debenture Term loan
145 -
195 125,000
AWPLR-1.0%, unsecured Bi-annual repayment over 5 years commencing June 2007, with a grace period of 1 year
NTB
Finance lease
2,541
3,250
8,869,204 7,825,546
129
Group As at 31st March In Rs.'000s 17 DEFERRED TAX LIABILITIES At the beginning of the year Charge Adjustment due to sale of non-current investments Transfers/ exchange translation difference At the end of the year The closing deferred tax liability balance relates to the following: Accelerated depreciation for tax purposes Revaluation of land and building to fair value Revaluation of investment property to fair value Employee benefit liability Losses available for offset against future taxable income Deferred tax effect on consolidation adjustments & others 2008 2007
591,867 167,807 (4,308) 755,366
541,664 73,522 (20,181) (3,138) 591,867
685,953 203,538 36,427 (112,331) (83,799) 25,578 755,366
462,290 213,367 36,427 (90,899) (42,862) 13,544 591,867
17.1 Deferred tax for tax holiday companies Sri Lanka Accounting Standard 14 - Income Taxes does not specify the recognition and measurement of deferred tax for companies which enjoy tax holidays under local jurisdictions. Section 17 of the Board of Investment Law No 4 of 1978, under which The Board of Investment (BOI) in Sri Lanka is set up, has given the Board the power to grant exemptions from the Inland Revenue Act. The Board on entering into agreement with entities in the group has stated that the provisions of the respective Inland Revenue Acts relating to the imposition, payment and recovery of income tax in respect of the profits and income of the enterprise shall not apply during the period of the tax exemption. For certain companies the BOI has given the option to pay tax as a percentage of turnover or at a concessionary rate after the expiration of the tax holiday period. The Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka is at present interpreting the applicability of SLAS 14 to companies under BOI tax holidays and if deemed applicable will specify the method of computing and the timing of accounting for deferred tax during the tax holiday period. The group awaits the ruling of the UITF to determine the accounting for deferred tax in relation to tax holiday companies.
Group As at 31st March In Rs.'000s 18 EMPLOYEE BENEFIT LIABILITIES At the beginning of the year Charge Transfers Interest cost (Gain)/Loss arising from changes in assumptions or due to (over)/under provision in the previous year Payments Adjustment due to sale of non-current investments Exchange translation difference At the end of the year 2008 2007
Company 2008 2007
718,315 105,040 71,831 (11,454) (77,830) (7,695) 393 798,600
624,473 152,815 (52,824) (6,575) 426 718,315
86,316 6,229 (4,173) 8,631 (2,969) (13,704) 80,330
73,834 16,805 (2,120) (2,203) 86,316
The employee benefit liability of listed companies with more than 100 employees is based on the actuarial valuation carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd., actuaries. With the exception of Jaykay Marketing Services (Pvt) Ltd, the employee benefit liability of all other companies in the group are based on the gratuity formula in appendix E of SLAS 16 - Employee Benefits. The principal assumptions used in determining the cost of employee benefits were: Discount rate Future salary increases
10% 10%
130
Group As at 31st March In Rs.'000s 19 OTHER DEFERRED LIABILITIES At the beginning of the year Grants received Amortisation At the end of the year Amounts expected to be amortised within 1 year Amounts expected to be amortised after 1 year Basis of amortisation Tea Smallholder Factories PLC. Plantations Housing and Social Welfare Trust Sri Lanka Tea Board Subsidy Yala Village (Pvt) Ltd Ceylon Chamber of Commerce grant 2.5% p.a. 10% p.a. 10% p.a. 3,887 3,223 7,110 726 3,036 3,762 2008 2007
3,762 4,970 (1,622) 7,110 2,078 5,032 7,110
5,397 (1,635) 3,762 2,182 1,580 3,762
Group As at 31st March In Rs.'000s 20 TRADE AND OTHER PAYABLES Trade payables Advances and deposits Sundry creditors including accrued expenses Other payables 2008 2007
Company 2008 2007
3,813,965 1,348,782 2,139,094 567,198 7,869,039
2,614,725 1,003,023 1,591,369 585,924 5,795,041
313,634 313,634
344,826 344,826
Group As at 31st March In Rs.'000s 21 INCOME TAX LIABILITIES At the beginning of the year Provision Payments and set off against refunds Adjustment due to sale of non-current investments At the end of the year 2008 2007
Company 2008 2007
188,250 744,550 (604,696) 328,104
212,484 503,067 (522,450) (4,851) 188,250
4,766 136,419 (141,185) -
30,519 (25,753) 4,766
Group As at 31st March In Rs.'000s 22 SHORT TERM BORROWINGS Loans 2008 2007
Company 2008 2007
375,000 375,000
2,688,311 2,688,311
500,000 500,000
131
Group For the year ended 31st March In Rs.'000s 23 REVENUE 42,181,917 (376,574) 41,805,343 33,496,604 (641,583) 32,855,021 2008 2007
Company 2008 2007
23.1 Gross revenue Gross revenue Turnover tax Net revenue
603,665 603,665
481,637 481,637
Value added tax of Rs. 2,287 mn (2007 - Rs.2,189 mn) for the group and Rs. 73 mn (2007 - Rs.56 mn) for the company has been deducted in arriving at gross revenue. 2008 Sale of Rendering of goods services 23.2 Business segment analysis Transportation Leisure Property Consumer Foods & Retail Financial Services Information Technology Others Group revenue 11,310,964 5,548,617 1,466,723 18,326,304 1,708,045 9,791,701 2,617,565 5,835,326 163,284 621,089 2,742,029 23,479,039 Group external revenue 13,019,009 9,791,701 2,617,565 11,383,943 163,284 2,087,812 2,742,029 41,805,343 Sale of goods 7,947,957 5,343,032 1,878,701 1,733,374 16,903,064 2007 Rendering of services 1,628,333 7,589,264 1,462,514 4,447,626 191,972 547,602 84,646 15,951,957 Group external revenue 9,576,290 7,589,264 1,462,514 9,790,658 191,972 2,426,303 1,818,020 32,855,021 Group 2008 23.3 Geographical segment analysis (by location of customers) Sri Lanka Asia (excluding Sri Lanka) Europe Others Total group external revenue 34,967,270 4,900,930 392,395 1,544,748 41,805,343 2007 27,803,196 3,700,254 1,181,781 169,790 32,855,021
Group For the year ended 31st March In Rs.'000s 24 DIVIDEND INCOME Income from investments in related parties Income from other investments 93,405 93,405 48,634 48,634 2008 2007
Company 2008 2007
3,067,373 92,016 3,159,389
2,846,968 47,245 2,894,213
Group For the year ended 31st March In Rs.'000s 25 OTHER OPERATING INCOME Interest income Exchange gain Profit on sale of property, plant and equipment Profit on sale of investment property Profit on sale of other investments Negative goodwill on acquisitions Sundry income 2008 2007
Company 2008 2007
2,083,916 274,510 69,346 4 56,625 232,486 2,716,887
493,759 243,496 25,261 201,941 66,531 149,297 1,180,285
1,633,980 94 4 10,036 1,644,114
190,622 474 6,725 8,619 8,315 214,755
132
26
OTHER OPERATING EXPENSES Other operating expenses consists mainly of power and energy costs, repairs and maintenance expenditure of the group.
Group For the year ended 31st March In Rs.'000s 27 FINANCE EXPENSES Interest expense on borrowings Long term Short term 2008 2007
Company 2008 2007
961,825 656,430 1,618,255
571,894 742,596 1,314,490
505,326 78,468 583,794
341,493 290,930 632,423
Group For the year ended 31st March In Rs.'000s 28 PROFIT ON SALE OF NON-CURRENT INVESTMENTS Crescat Restaurants (Pvt) Ltd Keells Business Systems Ltd Keells Restaurants (Pvt) Ltd Unawatuna Walk Inn Ltd 2008 2007
Company 2008 2007
11,601 43,550 55,151
9,321 49,631 58,952
41,236 41,236
37,039 37,039
The Group disposed its investment in Unawatuna Walk Inn Ltd (UWI) for a total consideration of Rs. 81 mn on 19 April 2007 and 74% of its investment in Keells Business Systems Ltd (KBSL) for a total consideration of Rs. 52 mn on 31 March 2008. KBSL contributed Rs. 380 mn to group revenue and Rs. 19.4 mn to the group profit before tax up to the date of disposal. The remaining 26% of the investment in KBSL, has been classified as "investments held for sale".
Group For the year ended 31st March In Rs.'000s 29 PROFIT BEFORE TAX Profit before tax is stated after charging all expenses including the following Remuneration to executive directors Remuneration to non executive directors Auditors remuneration Audit Non-audit Costs of defined employee benefits Defined benefit plan cost Defined contribution plan cost - EPF and ETF Staff expenses Depreciation Amortisation of finite life intangible assets Impairment losses Operating lease payments Donations 2008 2007
Company 2008 2007
191,431 23,142 32,173 479 165,417 339,593 3,649,785 1,444,165 8,717 3,283 525,344 21,823
184,280 20,251 24,713 5,961 152,815 335,156 3,397,229 1,124,116 13,376 11,678 436,424 5,306
100,026 12,476 4,033 260 7,718 40,980 278,193 110,116 797
93,554 10,749 2,600 5,545 14,685 43,377 265,636 91,244 487
133
Group For the year ended 31st March In Rs.'000s 30 TAX EXPENSE Current income tax Current tax charge (Over)/under provision of current tax of previous years Economic service charge 30.2 10% Withholding tax on inter company dividends Deferred income tax Relating to origination and reversal of temporary differences 30.3 2008 2007
Company 2008 2007
948,573 (5,157) (40,843) 184,203 (32,034) 1,054,742
653,680 1,252 1,612 139,969 55,050 851,563
136,419 (23,717) 112,702
7,664
7,664
30.1 Reconciliation between tax expense and the product of accounting profit Profit before tax Dividend income from group companies Share of results of associates Other consolidation adjustments Exempt profits Profits not charged to income tax Resident dividend Accounting profit / (loss) chargable to income taxes Tax effect on chargeable profits Tax effect on non deductible expenses Tax effect on deductions claimed Net tax effect of unrecognised deferred tax assets for the year Net tax effect of unrecognised deferred tax assets for prior years Tax effect on rate differentials Consolidation adjustments (Over)/under provision for previous years Other income based taxes Economic service charge Social responsibility levy Fringe benefit tax (indian companies) 10% WHT on inter company dividends Current and deferred tax share of associates Income tax charged at Standard rate 35% Standard rate 35% (2007-15% where taxable income < Rs. 5 mn) Concessionary Rate of 15% Off-Shore dividend 10% Off-Shore profits at varying rates (Over)/under provision for previous years Deferred tax charge / (reversal) Other income based taxes Economic service charge Social responsibility levy Fringe benefit tax (indian companies) 10% WHT on inter company dividends Current and deferred tax share of associates Total income tax expense
6,578,548 4,087,683 (2,242,713) (7,070) 8,416,448 (1,967,851) (821,735) (3,505,174) 2,121,688 727,456 79,730 (36,746) 53,398 (110,265) (6,815) 11,974 (5,157) (32,790) 8,190 2,209 184,203 179,355 1,054,742 654,711 11,038 80,722 324 1,493 (5,157) 743,131 (29,556) (32,790) 8,190 2,209 184,203 179,355 1,054,742
4,794,785 3,407,096 (1,700,992) 41,248 6,542,137 (1,909,243) (981,000) (3,103,544) 548,350 203,628 100,669 (11,059) 266,825 (11,508) (329) 14,845 1,252 (6,459) 4,896 1,430 139,969 147,404 851,563 479,191 5,429 12,439 12 4,744 1,252 503,067 61,256 (6,459) 4,896 1,430 139,969 147,404 851,563
3,915,792 3,915,792 (41,241) (3,156,274) 718,277 250,664 21,243 (34,580) (102,259) (23,717) 1,351 112,702 134,757 311 135,068 (23,717) 1,351 112,702
2,152,304 2,152,304 (48,725) (2,875,217) (771,638) (270,073) 20,669 249,404 7,664 7,664 7,664 7,664
Group tax expense is based on the taxable profit of individual companies within the group. At present the tax laws of Sri Lanka do not provide for group taxation.
134
Group For the year ended 31st March In Rs.'000s 30.2 Economic service charge (ESC) ESC written-off/(written back) Share of associate company ESC 2008 2007
Company 2008 2007
(32,790) (8,053) (40,843)
(6,459) 8,071 1,612
(23,717) (23,717)
7,664 7,664
Group For the year ended 31st March In Rs.'000s 30.3 Deferred tax expense Income statement Deferred tax expense arising from Accelerated depreciation for tax purposes Retirement benefit obligations Benefit arising from tax losses Others Share of associate company deferred tax Deferred tax charge Statement of changes in equity Deferred tax expense arising from Revaluation of land and building to fair value Total deferred tax charge 2008 2007
Company 2008 2007
(12,160) (22,364) (4,849) 9,817 (29,556) (2,478) (32,034)
40,672 (20,342) 22,694 18,232 61,256 (6,206) 55,050
174,220 142,186
55,050
Deferred tax has been computed taking into consideration the revised tax rates effective from 1 April 2007, which are 35% for all standard rate companies (including listed companies) and at rates as disclosed in note 30.6 and 30.7. Temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not been recognised, amounts to Rs. 1,220 mn (2007 - Rs. 1,090 mn). The deferred tax effect on undistributed reserves of subsidiaries has not been recognised since the parent can control the timing of the reversal of these temporary differences. The deferred tax liability on temporary differences relating to undistributed profits of associates has not been recognised as there is no current intention of distributing retained earnings to the holding company. However, the group has recognised the deferred tax impact pertaining to the current year on declared dividends of subsidiaries and associates amounting to Rs. 34 mn.
Group For the year ended 31st March In Rs.'000s 30.4 Tax losses carried forward Tax losses brought forward Adjustments on finalization of liability Tax losses arising during the year Utilisation of tax losses Adjustments due to acquisitions / disposals / mergers 2008 2007
Company 2008 2007
2,579,686 129,009 437,338 (463,695) (34,317) 2,648,021
1,601,537 31,708 1,203,903 (257,462) 2,579,686
1,439,750 62,110 (261,312) 1,240,548
699,215 740,535 1,439,750
135
Year of investment 30.5 Details of investment relief Company
Cost of approved investment
Relief claimed
Liability to additional tax on disposal of investments
1999/2000
579,036
175,015
The company is eligible for qualifying payment relief granted under Section 31(2)(s) of the Inland Revenue Act, No.28 of 1979 and the transitional provisions at Section 218 of the Inland Revenue Act No. 10 of 2006. The company had claimed qualifying payment relief of Rs. 97 mn for the year and the balance investment relief has been carried forward for set off in future years. 30.6 Applicable rates of income tax The tax liability of resident companies are computed at the standard rate of 35% except for the following companies which enjoy full or partial exemptions and concessions. Company / Sector Basis Exemptions/ concessions Period
Exemptions / concessions granted under the Inland Revenue Act Ceylon Cold Stores PLC John Keells Computer Services (Pvt) Ltd John Keels Office Automation (Pvt) Ltd Keells Hotel Management Services Ltd. Walkers Tours Ltd. Ceylon Cold Stores PLC Leisure Sector Mackinnons American Express Travels (Pvt.) Ltd. Consumer Foods and Retail Sector John Keells Computer Services (Pvt) Ltd. Off-Shore activities for payment in foreign currency - do - do - do - do Manufacture of dairy produce Promotion of tourism - do Qualified export profits - do Exempt - do - do - do - do Exempt 15% - do 15% - do Open-ended - do - do - do - do Upto 31 March 2011 Open-ended - do Upto 31 March 2014 - do -
Exemptions / concessions granted under the Board of Investment Law Asian Hotels and Properties PLC. Construction and operation of office and apartment complex Business / knowledge process outsourcing centre Provision of IT enabled services Regional operating headquarters Integrated supply chain management Supply of petroleum / bunkering and marine lubricants "Port Services" at Queen Elizabeth Quay Construction and operation of warehouse complex Construction and operation of safari-styled tourist hotel Exempt 15 years from April 1996 with a 3 year extension on merger 8 years from 1st year of profit or 2 years from operations 3 years from April 2007 3 years from April 2006 5 years from 1st year of profit or 2 years from operations 5 year concession upto December 2007 15% thereafter 20 years from September 1999
Auxicogent International Lanka (Pvt) Ltd.
Exempt
InfoMate (Pvt) Ltd. John Keells International (Pvt) Ltd John Keells Logistics (Pvt) Ltd
Exempt Exempt Exempt
Lanka Marine Services Ltd.
Exempt
South Asia Gateway Terminals (Pvt) Ltd.
Exempt
John Keells Warehousing (Pvt) Ltd
15%
7 years from April 2003
Yala Village (Pvt) Ltd
15%
15 years from September 2003
136
Other miscellaneous concessions Exemption on interest income earned from foreign currency denominated accounts. Gains from sale of shares held for less than two years and / or not charged with share transaction levy, are subject to an income tax at the rate of 15%. Income / profits from off-shore dividends are taxed at a rate of 10% 30.7 Income tax rates of off-shore subsidiaries Country of incorporation Auxicogent Alpha (Pvt) Ltd. Auxicogent Holdings (Pvt) Ltd. Auxicogent International (Pvt) Ltd. Auxicogent US Inc. Auxicogent Investments Mauritius (Pvt) Ltd. Fantasea World Investments (Pte) Ltd. Information System Associates John Keells Business Systems (UK) Ltd. John Keells Maldivian Resorts (Pte) Ltd. John Keells Singapore (Pte) Ltd. Mack Air Services Maldives (Pte) Ltd. Matheson Keells Air Services (Pvt) Ltd. Matheson Keells Enterprises (Pvt) Ltd. Serene Holidays (Pvt) Ltd. Tranquility (Pte) Ltd. Travel Club (Pte) Ltd. Mauritius Mauritius Mauritius USA Mauritius Republic of Maldives United Arab Emirates United Kingdom Republic of Maldives Singapore Republic of Maldives India India India Republic of Maldives Republic of Maldives Rate 3% (Effective) 3% (Effective) 3% (Effective) 35% (Max) 3% (Effective) Nil Nil 35% Nil 18% Nil 33.99% (Effective) 33.99% (Effective) 33.99% (Effective) Nil Nil
Companies incorporated in India are subject to a Fringe Benefit Tax (FBT), charged on selected expenses at specified rates, against each item of expense. Applicable rates of FBT vary from 5%-100% depending on the item of expense.
Group For the year ended 31st March In Rs.'000s 31 EARNINGS PER SHARE Profit attributable to equity holders of the parent Weighted average number of ordinary shares Basic earnings per share 31.2 Diluted earnings per share Profit attributable to equity holders of the parent Adjusted weighted average number of ordinary shares Diluted earnings per share In '000s 31.3 Amount used as denominator Ordinary shares at the beginning of the year Bonus shares issued Bonus element of rights issue Effect of share options exercised and rights issue of shares Weighted average number of ordinary shares in issue before dilution Number of shares outstanding under the share option scheme Number of shares that would have been issued at fair value Adjusted weighted average number of ordinary shares 552,940 78,960 3,294 635,194 30,941 (26,364) 639,771 400,007 136,123 30,267 10,052 576,449 19,283 (10,850) 584,882 31.3 5,118,244 639,771 8.00 3,534,674 584,882 6.04 5,118,244 635,194 8.06 3,534,674 576,449 6.13 2008 2007
31.1 Basic earnings per share 31.3
137
For the year ended 31st March In Rs.'000s 32 DIVIDEND PER SHARE Equity dividend on ordinary shares Declared and paid during the year Final dividend* Interim dividend Total dividend *Previous years' final dividend paid in the current year.
2008 Rs. Rs.
2007
1.00 4.00 5.00
632,669 2,543,633 3,176,302
1.00 2.00 3.00
400,142 1,012,164 1,412,306
138
33
SEGMENT INFORMATION
33.1 Primary segments (business segments)
For the year ended 31st March In Rs. 000s
Transportation 2008 2007 2008
2008
Leisure 2007
Property 2008 2007
Consumer Food & Retail Financial Services 2008 2007 2008 2007
Information Technology 2008 2007
Others 2007
Group Total 2008 2007
Total revenue Intra segment revenue 7,642,201 (52,937) 7,589,264 1,025,852 823,821 720,326 567,345 632,065 50,994 93,473 66,846 131,132 (29,050) 2,617,565 1,462,514 11,383,943 9,790,658 163,284 191,972 2,087,812 2,426,303 2,742,029 (150,994) (117,013) (33,340) (48,003) (198,002) (216,316) (513,177) 2,768,559 1,579,527 11,417,283 9,838,661 163,284 191,972 2,285,814 2,642,619 3,255,206
13,204,489 9,686,562 10,471,506

8,176,210 2,771,080 (534,009) (2,521) 1,579,527 11,673,728 10,093,670 (256,445) (255,009) 163,284 191,972 2,295,228 (9,414) 2,650,047 3,318,869 (7,428) (63,663)
(607,835)
2,213,276 43,898,184 34,591,264 (39,961) (939,878) (836,407) 2,173,315 42,958,306 33,754,857 (355,295) (1,152,963) (899,836)
Segment revenue
13,204,489 9,686,562 9,863,671
Inter segment revenue
(185,480)
(110,272)
(71,970)
Revenue
13,019,009 9,576,290 9,791,701
1,818,020 41,805,343 32,855,021
Segment results
1,098,993 1,447,897 1,033,739
Eliminations/unallocated
(273,414) 3,612,688 2,286,251 5,898,939 (549,357) 127,158
3,777,331 462,388 4,239,719 (591,344) (1,618,255) (1,314,490) 107,344 2,242,713 109,612 1,700,992
(46,886) 518,549 (18,814) 499,735 785,401 813,437 248,462 313,120 292,051 (55,449) (30,425) (138,861) (226,804) (129,860) 840,850 843,862 387,323 539,924 421,911 337,459 (112,293) 225,166 89,729 (46,340) 43,389 109,612 347,814 227,116 (98,267)
(18,745) (760,312)
(570,330)
(61,395)
(26,260)
(192,445)
(104,721)
(44)
(608)
(7,816)
(2,482) (12,484) 99,962 (43,810) 56,152
Finance expenses Change in fair value of investment properties Share of results of associate Profit on sale of non current investments
1,866,008 1,379,016
55,151 1,420,426 (516,526) 903,900
58,952
55,151 (432,242) 6,578,548 (288,996) (1,054,742) (721,238) 5,523,806
58,952 4,794,785 (851,563) 3,943,222
Profit / (loss) before tax
3,054,403 2,887,271
363,906
Tax expense
(150,807)
(130,421)
(16,899)
Profit/ (loss) for the year
2,903,596 2,756,850
347,007
Attributable to:
445,235 54,500 499,735 785,401 813,437 248,462 313,120 663,900 121,501 699,149 114,288 153,601 94,861 181,944 131,176 283,469 8,582 292,051 212,203 12,963 225,166 43,389 43,389 56,152 56,152 777,029 126,871 903,900 (779,576) 5,118,244 58,338 405,562 (721,238) 5,523,806 3,534,674 408,548 3,943,222
Equity holders of the parent Minority interest
2,863,808 2,719,567 39,788 37,283
333,048 13,959
2,903,596 2,756,850
347,007
Purchase of property, plant & 244,087 equipment Depreciation 84,325 Gratuity provision and related costs 21,392 1,395,107 609,679 44,301 60,888 26,928 2,248 63,016 39,791 3,646
151,183 1,580,135 54,684 821,516 14,025 44,713
753,688 311,702 56,300
926,039 261,259 47,534
290 2,670 1,726
4,755 1,950 1,546
118,573 26,320 17,896
46,161 10,577 12,858
43,175 170,704 21,142
182,684 2,800,836 146,176 1,444,165 28,905 165,417
2,768,945 1,124,116 152,815
In addition to segment results other information such as finance expenses, tax expenses have been allocated to segments for better presentation.
139
33.2 Primary segments (business segments) 2008

1,129,247
As at 31st March In Rs. 000s 58,540

1,793,095 168,134 11,364 649,908
Transportation 2008 2007 2008
Leisure 2007
Property 2008 2007
Consumer Foods & Retail Financial Services 2008 2007 2008 2007
Information Technology 2008 2007
Others 2007
Group Total 2008 2007
140
759,031 2,378,928 12,445 199,348 3,349,752 276,828 2,597,605 8,114 1,047,227 3,929,774 3,678,995 3,100 580,288 4,262,383 2,437,567 3,100 477,706 2,918,373 6,272 10,106 16,378 8,651 20,000 28,651
Property, plant and equipment Lease hold property Investment properties Intangible assets Other investments Other non-current assets Intercompany lending
Segment non-current assets

841,833 425,406 525 860,493 812,693 1,860,674 1,426,649
1,729,622 1,276,460 18,813,835 12,626,220 - 4,579,694 4,701,567 - 1,130,755 1,110,870 715 465 25,083 25,083 58,800 30,501 248,473 469,138 43,950 43,950 2,535,597 1,462,251 1,833,087 1,351,376 27,333,437 20,395,129
12,427
100,798 20,081 33,700 154,579 100,782 59,015 21,000 3,161,679 9,886,520 8,515,037 5,115 5,115 91,074 74,013 329,889 318,680 (2,757,046) (2,453,099) 48,354,101 38,187,141
1,059,165 26,285,136 17,785,689 59,936 4,638,234 4,761,503 1,534,730 5,302,778 5,243,205 11,364 20,081 111,496 142,125 148,258 146,234 1,805,938 2,224,506, 37,952 2,612,974 1,544,153 2,949,513 40,798,549 31,727,395
Investments in associates 6,739,947 6,275,170 Investment in subsidiaries and joint venture Deferred tax assets Goodwill Eliminations/ adjustments 1,234,338 181,909 916,346 79,942 2,412,535 1,459,140 88,720 2,396,192 1,148,694 1,060,317 5,800 87,893 2,302,704 802,418 1,097,422 1,800 172,530 2,074,170 528,654 143,000 3,763 675,417 149,353 119,400 9,603 278,356 74,538 458,894 145,403 249,984 928,819 172,147 676,185
Total non-current assets
Inventories Trade & other receivables Investments held for sale Short term investments Cash in hand and at bank
Segment current assets
1,535,431 846,206 228,330 1,125,106 1,225,928 3,884,819 1,398,167 1,139,676 250,129 633,877 489,287 746,475 4,692,581 3,701,097 5,109,753
199,138 740,125 3,544,192 120,015 6,494 96,009 1,098,425 612,934 (6,771) 4,452,273 1,958,288
Tax refunds Eliminations/ adjustments
Total current assets
268,292 153,534 3,995,410 1,095,404 1,194,453 8,273,209 30,837 37,331 7,414,443 12,406,238 10,455,367 445,589 173,457 2,160,810 9,254,565 13,927,682 24,922,127 1,188,906 (2,671,123) 23,439,910
3,407,781 8,069,442 16,138,609 1,626,473 29,242,305 1,243,220 (2,726,217) 27,759,308 71,794,011 65,946,449
Total assets
2,853,975 3,102,359 205,076 6,161,410 9,865 9,865 (774,049) 24,000 (750,049) 208 12,929 13,137 421,831 256,828 352,051 1,030,710 377,590 217,129 334,249 928,968 8,304 8,304 60,453 60,453 57,574 57,574 2,674,710 135,954 3,887 2,814,551
Non interest bearing borrowings Interest bearing borrowings Employee benefit liability Other deferred liabilities Other non current liabilities
85,950 12,173 78,957 Segment non-current liabilities 177,080 Deferred tax liabilities Eliminations/adjustments 3,156,564 1,841,730 532,694 1,269,042 6,800,030 497,787 56,000 81,868 955,808 46,581 3 180,616 1,183,008 1,564,225 473,077 156,207 618,730 2,812,239 887,878 300,000 137,080 511,338 1,836,296 535,945 12,353 548,298
133,950 3,394,442 - 4,700,738 64,386 232,543 3,223 198,336 8,330,946
Total non-current liabilities

152,373 46,707 199,080 321,673 1,712 323,385 634,259 16,495 650,754 926,470 39,387 311,365 694,619 1,971,841
- 2,706,343 2,987,925 2,970,976 7,809,452 6,451,133 152,917 798,600 718,315 3,762 7,110 3,762 352,051 334,249 3,127,655 11,673,556 10,495,384 755,366 591,867 (2,685,343) (2,957,925) 9,743,579 8,129,326
Trade & other payables Short term borrowings Current portion of interest bearing borrowings Bank overdrafts
Segment current liabilities
2,325,210 1,480,929 2,764,564 90,958 - 1,362,551 592,180 238,593 149,484 1,753,845 2,654,761 1,630,413 6,473,140
635,655
Income tax liabilities Eliminations/ adjustments
Total current liabilities Total liabilities

5,308,040 (114,394) 6,342,309 1,196,145 6,565,087 3,842,949 4,992,543 2,765,264 691,795 558,163 307,007 207,384 1,770,652 383,838
734,472 8,935,874 500,000 2,021,973 704,636 1,059,752 2,644,979 3,401,720 4,584,087 15,419,319 328,104 (2,688,855) 13,058,568 22,802,147
8,002,283 2,688,311 1,374,413 4,818,661 16,883,668 188,250 (2,190,307) 14,881,611 23,010,937 2,550,771 12,416,244 16,877,195 65,720,676 60,969,700 708,328 4,786,392 7,711,742 27,092,875 27,379,052
Total segment assets Total segment liabilities
6,525,668 5,052,473 32,443,190 24,847,402 2,831,841 1,828,749 14,804,086 12,961,440
33.3 Secondary segments (geographical segments, based on the location of assets) Sri Lanka 2008 2007 Asia (excluding Sri Lanka) 2008 2007 Others 2008 2007 Group Total 2008 2007
Segment revenue 38,216,931 30,674,219 4,704,444 3,040,881 Segment results 3,161,569 2,954,471 492,142 791,333 Segment assets 49,933,192 50,063,059 14,321,458 10,862,009 Segment liabilities 16,453,744 20,690,877 10,586,619 6,671,408 Investment in associates 9,461,114 8,514,512 525 Purchase of property, plant and equipment 1,495,096 2,540,482 1,305,594 220,622 Depreciation 1,125,351 948,436 315,989 175,619 Gratuity provision and related costs 165,748 148,500 (331) 3,979 Impairment losses 3,283 11,678 1,635 Grants and subsidies amortised 1,622
36,931 (41,023) 1,466,026 52,512 425,406 146 2,825 -
39,757 42,958,306 33,754,857 31,527 3,612,688 3,777,331 44,632 65,720,676 60,969,700 16,767 27,092,875 27,379,052 - 9,886,520 8,515,037 7,841 61 336 2,800,836 1,444,165 165,417 3,283 1,622 2,768,945 1,124,116 152,815 11,678 1,635
34
RELATED PARTY TRANSACTIONS The company carried out transactions in the ordinary course of business at commercial rates with the following related entities. The list of directors at each of the subsidiary and associate companies have been disclosed in the group directory. Group 2008 2007 1,588 1,588 16,935 16,935 Group For the year ended 31st March In Rs.'000s 2008 2007 Company 2008 2007 227,276 205 227,481 9,996 9,996 822,616 1,398 824,014 128,218 128,218
34.1 Amounts due from related parties Subsidiaries Joint ventures Associates Companies under common control Key management personnel (KMP) Close family members of KMP Companies controlled / jointly controlled / significantly influenced by KMP and their close family members Post employment benefit plan 34.2 Amounts due to related parties Subsidiaries Joint ventures Associates Companies under common control Key management personnel Close family members of KMP Companies controlled / jointly controlled / significantly influenced by KMP and their close family members Post Employment Benefit Plan
13,171 4,314 17,485 692 24,261 24,953
Company 2008 2007
34.3 Transactions with related parties Subsidiaries (Purchases) / Sales of goods (Receiving) / Rendering of services (Purchases of property plant & equipment) (Loans taken) / Loans given Interest received / (Interest paid) Rent (taken) / Given (Guarantees taken) / Guarantees given
(3,042) (436,845) 410 308,000 47,728 (17,330) 859
(82,286) (326,541) (46,866) 55,712 (17,719) 1,371
141
Group For the year ended 31st March In Rs.'000s Joint Ventures (Receiving) / Rendering of services Associates (Purchases) / Sales of goods (Receiving) / Rendering of services (Loans taken) / Loans given Interest received / (Interest paid) (Leases taken) Key management personnel (Receiving) / Rendering of services Close family members of KMP (Receiving) / Rendering of services Companies controlled / jointly controlled / significantly influenced by KMP and their close family members (Purchases) / Sales of goods (Receiving) / Rendering of services Post employment benefit plan Contributions to the provident fund 2008 2007
Company 2008 2007
13,338 (396) (311,856) 1,345,788 (12,173) 4,592 1,893
56,216 5,467 (416,302) (100,000) 77,068 (22,750) 4,244 1,691
(2,149) 365,161 -
(4,795) (1,676) -
(76,522) 4,781 165,825
(104,493) 5493 133,052
35,668
38,236
34.4 Terms and conditions of transactions with related parties Transactions with related parties are carried out in the ordinary course of the business. Outstanding balances at year end are unsecured, interest free and settlement occurs in cash. 34.5 Compensation of key management personnel Key management personnel include members of the Board of directors of John Keells Holdings PLC and its subsidiary companies. Group For the year ended 31st March In Rs.'000s Short-term employee benefits Post employment benefits Other long-term benefits Termination benefits Share based payments 2008 2007 Company 2008 2007
214,573 214,573
204,531 204,531
112,502 112,502
104,303 104,303
Directors' interest in the employee share option plan of the company As at 31 March 2008, the executive members of the Board of directors held options to purchase ordinary shares under the employee share option plan as follows 744,800 Ordinary Shares at a price of Rs. 70.81 each, exercisable before 22-1-2009 1,504,648 Ordinary Shares at a price of Rs. 92.72 each, exercisable before 28-3-2010 1,369,897 Ordinary Shares at a price of Rs. 120.74 each, exercisable before 9-4-2011 1,380,403 Ordinary Shares at a price of Rs. 146.00 each, exercisable before 27-5-2012 1,540,325 Ordinary Shares at a price of Rs. 120.00 each, exercisable before 23-3-2013 No share options have been granted to the non-executive members of the Board of directors under the employee share option plan.
142
35
CONTINGENT LIABILITIES John Keells Holdings PLC. - Goods and Services Tax (GST) / Value Added Tax (VAT) The company has been issued with assessments under the Goods and Services Tax Act and the Value Added Tax Act in relation to taxable periods April to July 2002 and August 2002 to March 2003, respectively, against which appeals have been filed. In hearing the appeals, the Commissioner General of Inland Revenue has determined a liability of Rs. 16.2 million and 53.2 million for GST and VAT, respectively. The company's appeal against the Commissioner General's determination is to be heard before the Board of Review contsituted under the Inland Revenue Act. Based on the information available and on expert advice, the directors are confident that the ultimate resolution of the above contingency is unlikely to have a material adverse effect on the financial position of the company. Lanka Marine Services Ltd. (LMS) Value Added Tax (VAT) refunds amounting to Rs. 355 mn are in dispute with the Department of Inland Revenue. The company contends that the supply of bunkers to ships constitutes an export that qualifies for zero rating and that it is entitled to a refund of VAT paid on inputs. The Department of Inland Revenue, which earlier accepted the company's claim, has now reversed its position. Legal opinions from independent tax consultants and independent legal counsel all support the company's position and the company intends to pursue its claim in accordance with the provisions in the Value Added Tax Act, No. 14 of 2002 for resolution of disputes. The appeals made by the company are currently with the Board of Review of the Department of Inland Revenue. The company has appealed against income tax assessments relating to years of assessments 2001/02 and 2002/03, where refunds have been claimed on the basis that its business activity is that of an export, which has been disputed by the Department of Inland Revenue. Taxes assessed amount to Rs. 92 mn. The appeal made by the company is currently with the Board of Review of the Department of Inland Revenue. The company has also disputed a post privatisation turnover tax to the value of Rs. 64 mn levied by the Western Provincial Council on the basis that its business activity is that of an export. The appeal made by the company is pending further review by the Western Provincial Council. Sri Lanka Customs have claimed Rs. 38 million as Excise Duty and VAT on a single gas procurement from Ceylon Petroleum Corporation. The customs inquiry was held and the show-cause letter has been issued. However, LMS made an application to the court of appeal to quash the order made by the inquiring officer. The matter is pending before the court of appeal. Two petitions have been filed in the Supreme Court of Sri Lanka by a member of the public, to set aside the privatisation by the Government of Sri Lanka of LMS and to set aside the concessions granted by the Board of Investment of Sri Lanka to LMS. The hearing before the Supreme Court commenced in January 2008, in the first case and hearings in the second case is due to commence on 5 May 2008. John Keells Holdings PLC and LMS have been advised that due process has been followed by them and the law has been duly and properly complied with. Tea Smallholder Factories PLC During the year 2006/07 the company was issued with assessments in respect of income tax, disallowing the management fee in excess of Rs. 1 mn for the years 2003/04, 2004/05 and 2005/06 for an aggregate additional amount of Rs. 16 mn. While appeals have been lodged against the assessment, the company will contest the validity of such assessments in accordance with the provisions in the income tax law. Based on the information available, the directors are confident the the ultimate resolution of the above contingency is not likely to have a material adverse effect on the financial position of the company. Other contingent liabilities - group Other contingent liabilities of the group as at the balance sheet date, on account of guarantees issued to or on behalf of associate companies and other third parties amounted to Rs.421 mn (2007 - Rs. 287.7 mn).
36
CAPITAL COMMITMENTS Group Capital commitments approved and contracted as at the balance sheet date, not provided for in financial statements amounts to Rs. 3,917 mn. Details are given below. As at 31st March In Rs. '000s Asian Hotels and Properties PLC. - Crescat Division Asian Hotels and Properties PLC.- Cinnamon Grand AuxiCogent International Lanka (Pvt) Ltd. Ceylon Cold Stores PLC. Lanka Marine Services Ltd. Mackinnons American Express Travel (Pvt) Ltd. Tea Smallholder Factories PLC. Trans Asia Hotels PLC. Company The company does not have significant capital committments as at the balance sheet date
2008
2007
3,782,710 32,105 30,971 66,088 4,848
3,276,389 28,833 23,537 241,000 7,735 3,246 1,562
143
Group As at 31st March In Rs. '000s 37 LEASE COMMITMENTS Lease rentals due on non-cancellable operating leases: Within one year Between one and five years After 5 years 2008 2007
1,052,888 4,436,478 16,916,811 22,406,177
649,416 2,721,832 6,427,598 9,798,846
37.1 Details of leases Company Ceylon Cold Stores PLC Ceylon Holiday Resorts Ltd. Bentota Beach Hotel Coral Gardens Hotel. Fantasea World Investment (Pte) Ltd. Habarana Lodge Ltd. Habarana Walk Inn Ltd. John Keells Maldivian Resorts (Pte) Ltd Jaykay Marketing Services (Pvt) Ltd. John Keells PLC. John Keells Singapore (Pte) Ltd. Mack Air Services Maldives (Pte) Ltd Travel Club (Pte) Ltd. Tranquility (Pte) Ltd Yala Village ( Pvt) Ltd. Lessor Colombo Divisional Secretariat Sri Lanka Tourist board Sri Lanka Tourist board Government of Maldives Kekirawa Divisional Secretariat Kekirawa Divisional Secretariat Government of Maldives R.J. S. Exports (Pvt) Ltd/Mr. Ramesh Abeywardena Divisional Secretariat Mengiwa (Pvt) Limited State Trading Organization PLC. Government of Maldives & a Sub Lease with Government of Maldives Yacht Tours Maldives (Pvt) Ltd. Sri Lanka Tourist board Leased properties Land occupied. Land occupied. Land occupied. Land occupied. Land occupied. Land occupied. Land occupied. Land occupied. Land occupied. Office space occupied. Office space occupied. Land occupied. Land occupied. Land occupied.
38
ASSETS PLEDGED Share certificates pledged by John Keells Holdings PLC

Pledged to Share certificates of No of shares
Bankers Trustee Company Limited International Finance Corporation International Finance Corporation
South Asia Gateway Terminals (Pvt) Ltd Asian Hotels and Properties PLC John Keells Hotels PLC
99,447,756 185,530,612 1,012,239,871
39
POST BALANCE SHEET EVENTS The standby loan granted by International Finance Corporation for USD 75 mn was drawn down on 4 April 2008. In April 2008, JKH announced an investment of USD 5.72 mn for a 44% equity stake in Quatrro Finance and Accounting Solutions (Pvt) Ltd, the India based finance and accounting (F&A) business of the Quatrro group. The group invested in John Keells Foods India (Pvt) Ltd, a company incorporated in India to manufacture and market processed meats. The company recently entered into a memorandum of understanding with Associated Motorways PLC and James Finlay & Company (Colombo) PLC to develop a contiguous 6.6 acre block of land in Colombo under a City within City theme. As required by Section 56(2) of the Companies Act No. 07 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. 7 of 2007, and has obtained a certificate from the auditors, prior to declaring a final dividend of Rs. 1.00 per share for this year, to be paid on 27 June 2008. In accordance with the Sri Lankan Accounting Standard 12 (revised 2005), Events after the Balance sheet date, the final dividend declared has not been recognised as a liability in the financial statements as at 31 March 2008.
144
Consolidated value added statement

For the year ended 31st March In Rs. '000s Value Added Revenue Other operating income Cost of materials and services 2008 2007 2006 2005 2004
41,805,343 2,716,887 44,522,230 (28,295,386) 16,226,844
32,855,021 1,180,285 34,035,306 (21,235,283) 12,800,023
29,462,674 453,594 29,916,268 (18,680,747) 11,235,521
23,232,371 441,917 23,674,288 (14,102,568) 9,571,720
21,865,844 367,197 22,233,041 (14,478,886) 7,754,155
Distribution of value added % To employees Salaries and other benefits To government revenue Taxes To providers of capital Dividends to shareholders Minority interest Interest on borrowings To maintain operations Depreciation Retained within the business Reserves 4,369,368 27 4,089,731 % 32 4,191,174 % 37 3,909,896 % 41 3,131,835 % 40
3,271,250
20
2,328,464
18
1,943,929
17
1,492,417
16
1,211,406
16
3,176,302 405,562 1,618,255
20 2 10
1,412,306 408,548 1,314,490
11 3 10
1,197,481 441,480 525,339
11 4 5
1,075,253 413,692 403,903
11 4 4
459,936 201,685 457,708
6 3 6
1,444,165
1,124,116
1,083,459
10
1,074,559
11
862,596
11
1,941,942 16,226,844
12 100
2,122,368 12,800,023
17 100
1,852,659 11,235,521
16 100
1,202,000 9,571,720
13 100
1,428,989 7,754,155
18 100
2007/08
12% 27% 9% 9%
2006/07
17% 32%
To Employees To Government Revenue To providers of capital To maintain operations Retained within the business
32%
20%
24%
17%
145
Times treasured in history

Edwin John set out to Ceylon to join his brother George, a produce and exchange broker. On 1 January 1901, the company became E. John & Co., produce, exchange and share brokers. The business remained a partnership until 1948 when it amalgamated with two London tea broking firms, William Jas and Hy Thompson and Co., and Geo White and Co., and renamed itself E. John, Thompson, White & Co., Ltd, evolving into a private limited liability company.
1870-1948
JKH acquired the Whittall Boustead & Co. Ltd in the largest ever deal at the time; a purchase that brought with it a vast amount of real estate in Colombo, Ceylon Cold Stores Ltd., Ceylon Holiday Resorts which owned Coral Gardens Hotel, Bentota Beach Hotel, a land in Trincomalee and a stake in Union Assurance. In 1992, the company entered into a joint venture with DHL International to form DHL Keells, the first fully represented Air Express company in Sri Lanka.
1991-1993
E. John, Thompson, White & Co., Ltd. then sought to expand its activities and in 1960 merged with Keell & Waldock Ltd., another long established company engaged in produce, share and freight broking. The new entity John Keells Thompson White Ltd. marked its entry into the leisure industry with the acquisition of Walkers Tours and Travels Ceylon Ltd. one of country's leading tour operators in 1973.
1949-1973
1994 - 1995
In 1994, John Keells Holdings became the first Sri Lankan entity to make a global issue of shares; with 2.25 million global depository receipts listed on the Luxembourg Stock Exchange and traded over the counter (OTC) world-wide. In the same year Waldock Mackenzie Ltd., an investment bank wholly owned by John Keells Holdings Ltd., began operations. In a 50-50 joint venture with Richard Pieris & Co. Ltd., RPK Management Services (PVT) Ltd., was incorporated. This company acquired a controlling interest in Kegalle Plantations Ltd., and Maskeliya Plantations Ltd., in the privatization of regional plantation companies. The John Keells Group with the National Development Bank and the Central Finance Co. Ltd. also had a controlling stake in Tea Smallholders Factories Ltd., which was offered on sale by the Government.
In 1974, the firm became John Keells Ltd, a rupee quoted public company. In 1979, John Keels Holdings Ltd (JKH) was incorporated to hold, control and manage the many companies under the Keells umbrella. Mackinnons group of companies was brought into the John Keells fold bringing with it, the agencies for P&O and British Steam Navigation Co. With both Walkers and Mackinnons already engaged in tourism, John Keells invested heavily between 1978 and 1983 in the hotel and travel industry which was set to become a high growth sector.
1974-1985
In October 1986, John Keells Holdings Ltd., having acquired controlling interests in John Keells Ltd., and its subsidiary and associate companies, was quoted on the Colombo Stock Exchange following a doubly oversubscribed public share issue of 4,968,400 ten rupee ordinary shares. The group made steady inroads into other key areas of the economy, moving in 1987 into the export sector with Keells Diamonds Ltd. Another export venture, Keells Aquariums Ltd., was established in 1990 for the breeding of ornamental fish.
1986-1990
In 1996, in the group's first major investment overseas, it acquired a lease on Velidhu Island Resort in the Maldives. Keells Plantations Management Services acquires a controlling interest in Namunukula Plantations which owns 12,000 hectares of tea and rubber. John Keells Holdings was the first Sri Lankan company to post pre tax profits of over a billion rupees in the financial year 1997/08. A year later, Fortune magazine named JKH One of the ten best Asian stocks to buy. John Keells Computer Services was established to takeover the operations of John Keells Software. In 1998 Nations Trust Bank (NTB) was established in a joint venture with the IFC and Central Finance. NTB subsequently acquired the business of the Colombo branch of Overseas Trust Bank of Hong Kong. During the year JKH also began operating a second Maldivian resort, Hakuraa Club.
1996-1999
146
Decade at a glance
Goup milestones
1999-2000
The group became the largest local shareholder of South Asia Gateway Terminals-a massive infrastructure project to own, operate and develop the Queen Elizabeth quay of the port of Colombo. The project was the largest private sector investment in Sri Lanka and was launched in alliance with several international and multilateral organizations.
2004-2005
In restructuring the Resort Hotel Sector of the group, John Keells Hotels Limited (KHL) made a voluntary offer to acquire the shares of all group resort companies. JKH acquired a controlling stake in Mercantile Leasing Limited (MLL). The John Keells Social Responsibility Foundation, the group's CSR arm, was established as a charitable company and registered as a voluntary social service organization.
JKH was rated among the best 300 small companies in the world by Forbes Global magazine, the only Sri Lankan company to be among the list. JKH also became the first company in Sri Lanka; to obtain the SLAAA rating from Fitch Rating Ltd. Moreover, JKH was the only Sri Lankan company to be admitted as a full member of the World Economic Forum. During this period two international operations were launched-Matheson Keells Enterprises in Cochin, India (the shipping agent for PIL) and Mack Air Services, Maldives (the GSA for American Airlines, Gulf Air, Leisure Cargo and Jet Airways in the Maldives). Pizza Hut Sri Lanka was named the Franchisee of the Year for the Indian sub continent.
2000-2001
The group entered into a MOU to develop a third resort in the Maldives on Alidhoo Island. JKH acquired 80% of Yala Village Hotel. With the sale of Keells plantations, the group exited from the ownership of plantations. JKH entered into the BPO space through a joint venture with Raman Roy Associates. The group also launched its new hotel brands Cinnamon and Chaaya. NTB merged with Mercantile Leasing Limited. John Keells Social Responsibility Foundation, the Corporate Social Responsibility vehicle of the Group, obtained formal Charity status.
2005-2006
JKH continued to be the highest capitalized company on the Colombo Stock Exchange for the fifth successive year. JKH was ranked one of the world's best 200 small companies, the only Sri Lankan entity to be named in the list by Forbes global magazine.
2001-2002
The group acquired a lease on Dhonveli Beach and Spa in the Maldives and Ellaidhoo Tourist Resort in the Maldives, further enhancing its regional presence. Furthermore, JKH acquired 20 per cent of Associated Motorways PLC. JKH increased its stake in South Asia Gateway Terminals (Pvt) Limited by 7.5 per cent to 33.75 per cent. The group exited its restaurant businesses with the sale of Keells Restaurants (Pvt) Limited and Crescat Restaurants (Pvt) Limited.
2006-2007
JKH acquired Lanka Marine Services, the only bunkering facility at the port of Colombo. Nations Trust Bank acquired the local operations of American Express. During the year the group exited from its vegetarian food franchise Komala's. Elephant House Super-Pola is added to the group's supermarket network.
2002-2003
Please refer operating highlights in the Profile and Discussion section.
2007-2008
In the largest ever transaction on the Colombo Stock Exchange, JKH acquired Asian Hotels & Properties, an acquisition that brought with it 40% of the five star room capacity in Colombo. The group sold its 50% stake in RPK Management Services (Pvt) Ltd.
2003-2004
147
Decade at a glance - Selected goup financial data

31st March Rs.000s OPERATING RESULTS Group revenue EBIT Finance expenses Share of results of associates Profit before tax Tax expense Profit after tax Extra-ordinary item Profit for the year Attributable to: Minority interest Equity holders of the parent 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999
41,805,343 32,855,021 29,462,674 23,232,371 22,284,764 16,784,203 11,777,320 11,821,849 10,461,949 9,453,237 8,196,803 2,242,713 6,578,548 (1,054,742) 5,523,806 5,523,806 405,562 5,118,244 5,523,806 6,109,275 1,700,992 4,794,785 (851,563) 3,943,222 3,943,222 408,548 3,534,674 3,943,222 4,835,800 (525,339) 957,958 4,310,461 (818,841) 3,491,620 3,491,620 441,480 3,050,140 3,491,620 3,554,938 (403,903) 832,856 3,151,035 (645,517) 2,505,518 185,427 2,690,945 413,692 2,277,253 2,690,945 3,441,746 (457,708) 703,378 2,376,191 (285,581) 2,090,610 2,090,610 201,685 1,888,925 2,090,610 2,183,333 (329,478) 451,015 1,808,855 (315,837) 1,493,018 1,493,018 169,593 1,323,425 1,493,018 1,206,287 (323,732) 321,753 882,555 (290,208) 592,347 592,347 48,966 543,381 592,347 1,527,182 (221,806) 265,750 1,305,376 (304,262) 1,001,114 1,001,114 221,428 779,686 1,001,114 1,696,337 1,317,700 (246,241) (142,925) 152,604 131,844 1,450,096 1,174,775 (285,375) (274,191) 1,164,721 1,164,721 246,778 917,943 1,164,721 900,584 900,584 176,576 724,008 900,584 (1,618,255) (1,314,490)
CAPITAL EMPLOYED Stated capital Capital reserves Revenue reserves
22,464,267 22,245,894 9,205,277 9,095,136 9,004,501 6,065,251 3,137,392 2,814,989 2,115,481 1,892,398 15,688,302 13,851,913 10,780,840 7,461,581 6,330,723 44,217,820 39,235,199 22,801,106 18,672,198 17,227,622 4,774,044 3,700,313 3,633,759 3,715,890 4,939,611
2,793,623 1,937,943 5,082,482 9,814,048 2,061,439
2,690,739 1,631,936 3,961,474 8,284,149 1,801,799
2,619,983 1,787,526 3,772,915 8,180,424 1,959,408
2,619,108 1,570,605 3,351,356 7,541,069
2,574,106 1,586,292 2,629,585 6,789,983
Minority interest Total equity Total debt
2,058,045 1,961,806 9,599,114 8,751,789
48,991,864 42,935,512 26,434,865 22,388,088 22,167,233 11,875,487 10,085,948 10,139,832
12,666,924 15,362,518 5,327,263 9,104,658 4,055,555 4,120,606 3,568,460 2,587,777 2,266,597 1,891,989 61,658,788 58,298,030 31,762,128 31,492,746 26,222,788 15,996,093 13,654,408 12,727,609 11,865,711 10,643,778
ASSETS EMPLOYED Property, plant and equipment Other non-current assets Current assets Liabilities net of debt
29,172,301 20,403,696 19,143,724 20,017,707 18,824,542 10,172,219 8,928,274 9,135,100 3,962,923 4,107,527 19,181,800 17,783,445 8,903,699 6,093,532 3,717,326 3,797,260 2,972,882 2,203,266 6,602,139 5,121,637 23,439,910 27,759,308 11,478,005 13,588,612 9,797,444 6,134,068 9,242,458 8,304,191 7,993,422 7,491,176 (10,135,223) (7,648,419) (7,763,300) (8,207,105) (6,116,524) (4,107,454) (7,489,206) (6,914,948) (6,692,773) (6,076,562) 61,658,788 58,298,030 31,762,128 31,492,746 26,222,788 15,996,093 13,654,408 12,727,609 11,865,711 10,643,778
CASH FLOW Cash flows from operating activities Cash flows from / (used in) investing activities Cashflows from / (used in) financing activities Net increase / (decrease) in cash and cash equivalents KEY INDICATORS Basic earnings per share (Rs.) Interest cover (no. of times) Net assets per share (Rs.) * Enterprise value (Rs. 000s) EV / EBITDA Debt / equity ratio (%) Net dividend payout Current ratio (no. of times) Market price per share (Rs.) * Bonus issues (ratio) Rights issues (ratio) Rights price (Rs.) * Adjusted for dilution.
6,913,873
2,522,535
2,664,316
4,619,654
3,138,269
1,891,398
1,148,559
1,638,322
2,154,065 1,779,377
(4,358,524) (10,088,254) (2,847,880) (4,482,420) (6,745,616) (2,002,460) (1,000,606) (1,261,461) (1,848,091) (1,454,607) (6,261,924) 18,421,653 (1,027,361) (3,706,575) 10,855,934 (1,210,925) 271,430 408,664 5,414,227 1,806,880 (31,311) (142,373) (330,360) (182,407) (644,611) (267,750) 518,189 824,163 (94,505) 230,265
8.1 5.1
6.1 4.6
5.3 9.2
4.0 8.8
3.5 6.2
2.6 6.5
1.1 3.7 16.2 9,968,310 5.1 35.4 329,869 1.1 33.4 -
1.5 6.9 16.1 4,424,421 2.0 26.1 353,128 1.1 19.3 2:1 -
1.8 6.9
1.4 9.2
69.6 68.1 40.0 27.4 31.6 18.9 76,180,588 95,961,715 64,389,111 46,559,017 33,578,080 15,841,225 7.8 13.0 10.7 10.0 9.1 5.5 25.9 35.8 20.2 27.8 18.3 34.7 3,176,302 1,412,306 1,197,481 1,075,253 725,783 342,203 1.8 1.9 1.4 1.2 1.6 1.2 119.8 155.0 1:7 1:5 140.00 157.8 135.5 84.1 1:5 1:4 & 1:10 1:7 7.5 40.8 -
14.8 13.2 5,511,554 5,454,801 2.5 3.1 23.8 21.9 168,150 151,343 1.2 1.2 23.4 1:4 & 1:5 23.0 -
148
Indicative US dollar financial statements

Balance sheet
For information purposes only
Group As at 31st March In USD'000s ASSETS Non-current assets Property, plant and equipment Leasehold property Investment property Intangible assets Investments in subsidiaries and joint ventures Investments in associates Other investments Deferred tax asset Other non-current assets Current assets Inventories Investments held for sale Trade and other receivable Amounts due from related parties Short term investments Cash in hand and at bank 2008 2007
Company 2008 2007
270,665 43,034 21,233 3,166 47 91,729 1,162 845 16,756 448,637 36,974 346 62,660 162 97,007 20,331 217,480 666,117
186,845 43,604 22,943 3,102 47 77,977 1,358 678 13,145 349,699 31,141 60,367 15 147,789 14,894 254,206 603,905
2,685 7,721 161,926 57,569 881 609 231,391 8 147 2,443 2,111 64,805 2,252 71,766 303,157
3,482 7,326 132,288 54,900 979 915 199,890 8 1,343 7,546 112,653 232 121,782 321,672
Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Stated capital Capital reserves Revenue reserves
208,427 56,274 145,559 410,260 44,294 454,554
203,717 28,731 126,849 359,297 33,886 393,183
208,427 58,850 267,277 267,277
203,717 52,345 256,062 256,062
Minority interest Total equity Non-current liabilities Non-interest bearing borrowings Interest bearing borrowings Deferred tax liabilities Employee benefit liabilities Other deferred liabilities Other non-current liabilities
195 72,457 7,008 7,410 66 3,266 90,402
275 59,076 5,420 6,578 34 3,061 74,444
24,081 745 24,826
31,415 790 32,205
Current liabilities Trade and other payables Amounts due to related parties Income tax liabilities Short term borrowings Current portion of interest bearing borrowings Bank overdrafts
73,011 232 3,044 3,479 9,833 31,562 121,161 666,117 107.78
53,068 155 1,724 24,618 12,586 44,127 136,278 603,905 109.20
2,910 93 2,783 5,268 11,054 303,157 107.78
3,158 1,174 44 4,579 1,511 22,939 33,405 321,672 109.20
Total equity and liabilities Exchange rate
149
Indicative US dollar financial statements

Income statement
For information purposes only
Group For the year ended 31st March In USD'000s Revenue Cost of sales Gross profit Dividend income Other operating income Distribution expenses Administrative expenses Other operating expenses Finance expenses Change in fair value of investment property Share of results of associates Profit on sale of non-current investments Profit before tax Tax expense Profit for the year Attributable to: Equity holders of the parent Minority interest 47,490 3,763 51,253 32,369 3,742 36,111 2008 2007
Company 2008 2007
387,877 (286,208) 101,669 867 25,208 (12,428) (47,518) (13,065) (15,014) 20,808 512 61,039 (9,786) 51,253
300,870 (212,785) 88,085 445 10,808 (11,322) (39,022) (10,169) (12,037) 1,004 15,577 540 43,909 (7,798) 36,111
5,601 (2,547) 3,054 29,313 15,254 (5,914) (342) (5,417) 383 36,331 (1,046) 35,285
4,411 (2,139) 2,272 26,504 1,967 (5,385) (195) (5,791) 339 19,711 (70) 19,641
Exchange rate
107.78
109.20
107.78
109.20
This information does not constitute a full set of financial statements in compliance with SLAS. The financial statements should be read together with the Auditors' opinion and the financial statements from pages 106 to 144. Exchange rates prevailing at each year end have been used to convert the income statement and balance sheet.
150
Group real estate portfolio

Net book value 2008 2007 Rs. '000s Rs. '000s
Owning company and location
Buildings in (Sq. Ft)
Land in acres Freehold Leasehold
PROPERTIES IN COLOMBO
Ceylon Cold Stores PLC. Slave Island Complex, Colombo 2. John Keells Holdings PLC. 320,320/1, Colvin R. De Silva Mawatha, Colombo 2. John Keells PLC. 130 , Glennie Street , Colombo 2. 56/1, 58, 58 1/1 Kirulapone Avenue, Colombo 5. John Keells Properties (Pvt) Ltd 125, Glennie Street, Colombo 2. Keells Realtors Ltd. 427 & 429, Ferguson Road, Colombo 15 Lanka Marine Services Ltd. 69, Walls Lane, Colombo 15. Mackinnon & Keells Financial Services Ltd. Leyden Bastian Road, York Street, Colombo 01. Whittall Boustead Ltd. 148, Vauxhall Street, Colombo 2. 94,655 86,600 119,286 4.97 1.94 1.78 0.08 0.49 1.29 8.64 0.45 3.07 22.71 3.16 0.58 933,259 822,376 606,018 1,250 237,463 97,014 785,279 296,548 875,303 4,654,510 490,690 792,974 604,965 1,250 238,263 97,714 715,384 297,652 875,869 4,114,761
30,000 27,750 33,566 34,733 61,044 487,634
3.74
PROPERTIES OUTSIDE COLOMBO

Ceylon Cold Stores PLC. Kaduwela Trincomalee Jaykay Marketing Services (Pvt) Ltd. 385, Negombo Road, Wattala. Liberty Plaza, Colombo 3. 388, Galle Road, Mount Lavinia. John Keells PLC. 17/1, Temple Road, Ekala, Ja-Ela. John Keells Warehousing (Pvt) Ltd. Muthurajawela. Keells Food Products PLC. 41, Temple Road, Ekala, Ja-Ela. Tea Smallholder Factories PLC. Peliyagoda. Neluwa. Hingalgoda. Halwitigala. Kurupanawa. Pasgoda. New Panawenna. Randola. Broadlands. Raxawa. Karawita. Hindul Oya. Transware-Logistics ( Pvt) Ltd. Tudella, Ja-Ela. Whittall Boustead Ltd. 150, Badulla Road, Nuwara Eliya. 242,439 24,906 12,820 10,000 6,000 3,180 141,276 50,199 31,633 46,706 56,796 56,686 62,401 40,354 41,772 47,596 58,063 24,623 66,874 10,500 65,000 4,346 1,104,170 26.15 1.14 3.25 3.00 18.27 12.52 12.27 12.40 5.41 10.59 15.58 4.14 1.22 0.97 22.00 0.46 149.37 0.30 0.24 6.00 3.26 0.99 4.99 15.78 517,846 30,021 10,909 9,070 42,190 152,984 126,282 79,000 32,186 35,934 31,426 40,069 22,222 30,272 18,798 35,946 11,860 93,854 1,819 427,763 70,000 1,820,451 225,854 30,021 12,262 10,524 42,190 156,456 57,336 77,500 22,275 31,222 23,193 23,198 17,704 18,628 16,633 35,548 7,122 84,016 1,986 197,615 2,512 1,093,795
151
Group real estate portfolio
Owning company and location
Buildings in (Sq. Ft)
Land in acres Freehold Leasehold
Net book value 2008 2007 Rs. '000s Rs. '000s
HOTEL PROPERTIES
Asian Hotels and Properties PLC. Cinnamon Grand Premises, Colombo 2. Crescat Boulevard, Colombo 2. Ceylon Holiday Resorts Ltd. Bentota Beach Hotel & Club Intersport, Bentota. Coral Gardens Hotel , Hikkaduwa. Central Laundary. Fantasea World Investments (Pte) Ltd. Club Hakururaa, Republic of Maldives. Habarana Lodge Ltd. The Lodge, Habarana. Habarana Walk Inn Ltd. Chaaya Village, Habarana. International Tourists and Hoteliers Ltd. Hotel Bayroo, Beruwela. John Keells Maldivian Resorts (Pte) Ltd Dhonveli, Republic of Maldives. Kandy Walk Inn Ltd. The Citadel, Kandy. Resort Hotels Ltd. Nilaveli. Rajawella Hotels Ltd. Trans Asia Hotels PLC. 115, Sir Chittampalam A Gardiner Mawatha, Colombo 2. Tranquility (Pvt) Ltd Alidhoo, Republic of Maldives. Travel Club (Pte) Ltd. Ellidhoo, Republic of Maldives. Velidhu, Republic of Maldives. Trinco Walk Inn Ltd. Club Oceanic, Trincomalee. Unawatuna Walk Inn Ltd. Unawatuna Wirawila Walk Inn Ltd. Randunukelle Estate, Wirawila. Yala Village (Pvt) Ltd. The Village, Yala. 648,813 180,144 201,356 167,350 16,110 66,759 194,606 162,323 216,114 116,725 4,485 3,700 425,386 19,973 159,815 86,960 67,330 2,737,949 4,329,753 11.04 0.70 1.40 6.55 5.79 44.37 28.24 25.15 11.02 4.36 13.42 25.47 9.34 36.96 10.00 7.20 13.75 10.00 141.52 161.04 8,212,004 1,078,688 456,151 175,000 30,073 559,846 489,238 209,846 50,800 2,382,860 311,831 107,900 36,889 3,688,842 2,732,224 1,951,615 220,718 20,120 237,258 22,951,903 29,426,864 5,790,801 1,296,914 476,565 231,163 26,418 573,419 346,577 210,281 50,875 2,270,093 257,154 84,666 36,860 3,418,744 1,400,721 160,708 169,857 30,899 20,120 240,013 17,092,848 22,301,404
123.24 295.32
Consolidated Value of Land and Buildings
152
Group directory
TRANSPORTATION GROUP Ports and Shipping Keells Shipping (Pvt) Ltd (100%)
Shipping Agency Representation and Logistics Services No. 11, York Street, Colombo 1. : 2475200 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, R S Fernando (Resigned w.e.f 01.08.2007), L D Ramanayake (appointed w.e.f 01.08.2007) Stated capital: Rs. 500,000
Mack International Freight (Pvt) Ltd (100%)

International Freight Forwarder and Logistics Services No. 11, York Street, Colombo 01. : 2475200 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, R S Fernando (resigned w.e.f 01.08.2007), L D Ramanayake (appointed w.e.f 01.08.2007) Stated capital: Rs. 25,000,000
Mackinnon Mackenzie & Co (Shipping) Ltd (99.69%)

Shipping Agency Representation and Logistics Services No. 148, Vauxhall Street, Colombo 02. : 2307526 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, R S Fernando (resigned w.e.f 01.08.2007) L D Ramanayake (appointed w.e.f 01.08.2007) Stated capital: Rs. 5,000,000
Lanka Marine Services Ltd (99.44%)

Importer and Supplier of Heavy Marine Fuel Oils and Lubricants No. 69, Walls Lane, Colombo 15. : 2522494, 2524531 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, R M David, R S Fernando (resigned w.e.f 01.08.2007) L D Ramanayake (appointed w.e.f 01.08.2007) Stated capital: Rs. 350,000,000
Mackinnon Mackenzie & Co of Ceylon Ltd (99.5%)

Foreign Recruitment Agents and Consultants No. 11, York Street, Colombo 01. : 2475200 Directors: S C Ratnayake Chairman, J R F Peiris, R M David Stated capital: Rs. 90,000
Maersk Lanka (Pvt) Ltd (30%)

Shipping Agency Representation and Logistics Services No. 36, D. R Wijewardene Mawatha, Colombo 10. : 0112423700 Directors: W T Ellawala, H O Madsen, Dinesh Lal, Hariharan Iyer, R M David Stated capital: Rs. 10,000,000
Matheson Keells Enterprises (Pvt) Ltd (51%)

Shipping Agency Representation and Logistics Services No. 3627A, 7th Cross 13th Main, HAL 2nd Stage Indiranagar, Bangalore - 560008, India. : +91(080)25201926 / 25201927 Directors: S C Ratnayake Chairman, R M David, R S Fernando, A Poddar, B K Sarronwala, B K Poddar, S R Kalyanam, L D Ramanayake (appointed w.e.f 24.09.2007) Share capital: Rs. 78,103,873
South Asia Gateway Terminals (Pvt) Ltd (33.75%)

Ports and Shipping Services Port of Colombo, P.O. Box 141, Colombo 01. : 2457500 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, R M David, C Kuo Cheng, D Duff H O Madsen, R Vokes, R S Fernando (resigned w.e.f 01.08.2007), C J Childs (resigned w.e.f 10.04.2007), N A West (resigned w.e.f 22.05.2007), N M Naik (resigned w.e.f 22.05.2007), S Wickramasuriya (resigned w.e.f 12.06.2007), L D Ramanayake (appointed w.e.f 01.08.2007), H M Jepsen (appointed w.e.f 22.05.2007), H G Wieske (appointed w.e.f 22.05.2007), S Senerath (appointed w.e.f 23.05.2007), W G Samaratunge (appointed w.e.f 16.10.2007), J H Madsen (appointed w.e.f 12.11.2007) Stated capital: Rs. 3,788,485,900
Trans-ware Logistics (Pvt) Ltd (50%)

Integrated Container Depot. Operations and Logistics Services No. 150, 150/1, Pamunugama Road, Thudella, Ja-Ela. : 2232577 - 87 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, Q K Liang, H B M Nashir, R S Fernando (resigned w.e.f 01.08.2007), R Sundaralingam (resigned w.e.f 01.04.2007), Z M Amin (appointed w.e.f 01.04.2007) Stated capital: Rs. 220,000,000
Whittall Boustead (Pvt) Ltd - Cargo Division (99.96%)

International Freight Forwarder and Logistics Services No. 11, York Street, Colombo 01. : 2475299 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, R M David, S Rajendra, R S Fernando (resigned w.e.f 01.08.2007) Stated capital: Rs. 99,304,300
Logistics DHL Keells (Pvt) Ltd (50%)

Express Courier Services No. 148, Vauxhall Street, Colombo 02. : 2304304 / 4798600 Directors: S C Ratnayake Chairman, R M David, J R F Peiris, G K A Tanner, R S Fernando (resigned w.e.f 01.08.2007), M A Monteiro (appointed w.e.f 05.09.2007) Stated capital: Rs. 20,000,020
Airlines Mack Air (Pvt) Ltd (100%)

General Sales Agents for Airlines No. 01, Justice Akbar Mawatha, Colombo 02. : Jet Airways - 2318770 Gulf Air - 2318749 / 750 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, C N Lawrence, R S Fernando (resigned w.e.f 01.08.2007), L D Ramanayake (appointed w.e.f 01.08.2007) Stated capital: Rs. 5,000,000
John Keells Logistics (Pvt) Ltd (100%)

Integrated Supply Chain and Third Party Logistics Solutions No. 11, York Street, Colombo 1. : 2475200 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, R S Fernando (resigned w.e.f 01.08.2007), A D Gunawardene (appointed w.e.f 09.04.2007), L D Ramanayake (appointed w.e.f 01.08.2007) Stated capital: Rs. 80,000,000
Mack Air Services Maldives (Pte) Ltd (49%)

General Sales Agents for Airlines in the Maldives 4th Floor, STO Aifaanu Building, Boduthakurufaanu Magu, Male 20-05, Republic of Maldives.
153
Group directory
: +9603334708 - 09 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, S Hameed, A Shihab Share capital: Rs. 677,891
Cinnamon Hotels and Resorts Asian Hotels and Properties PLC - Cinnamon Grand (83.80%)
Owner and Operator of the Five Star City Hotel "Cinnamon Grand" 77, Galle Road, Colombo 3. : 2437437 /2497442 Directors: S C Ratnayake - Chairman, A D Gunewardene, J R F Peiris, R J Karunarajah, M T L Fernando, B M Amarasekera, I Samarawickrama, S Rajendra Stated capital: Rs. 3,345,118,112
Mackinnons American Express Travel (Pvt) Ltd (70%)

IATA Accredited Travel Agent and Travel related Services Ceylon Cold Stores Building No. 1 Justice Akbar Mawatha, Colombo 02. : 2318600 - 2318619 Directors: S C Ratnayake Chairman, R M David, K K Mukerji, S S Ahmed, R S Fernando (resigned w.e.f 01.08.2007) Stated capital: Rs. 5,000,000
Ceylon Holiday Resorts Ltd - Bentota Beach Hotel (90.77%)

Owner and Operator of "Bentota Beach Hotel" in Bentota Galle Road, Bentota. : 034 2275176 / 034 2275266 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Stated capital: Rs. 258,803,341
Matheson Keells Air Services (Pvt) Ltd ( 51%)

General Sales Agents for Airlines in India. Off 1 & 2 F.X Towers Swatantra Path, Opp. MPT Institute Vasco-da-Gama - 403 802 : 0832 2501425/ 2501426 Directors: S C Ratnayake Chairman, R M David, A Poddar, B K Sarronwala, S R Kalyanam L D Ramanayake (appointed w.e.f 24.09.2007) Share capital: Rs. 3,179,899
Habarana Lodge Ltd (91.15%)

Owner and Operator of "The Lodge" in Habarana P.O. Box2, Habarana. : 066 2270011-2/ 066 2270072 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala, G S A Gunasekara (appointed w.e.f 24.07.2007) Stated capital: Rs. 116,555,262
Walkers Air Services (Pvt) Ltd (100%)

General Sales Agents for Airlines No. 11A, York Street, Colombo 01. : 2422903/ 2422590 Directors: S C Ratnayake Chairman, J R F Peiris, R M David, R S Fernando (resigned w.e.f 01.08.2007) L D Ramanayake (appointed w.e.f 01.08.2007) Stated capital: Rs. 7,500,000
Trans Asia Hotels PLC (85.02%)

Owner and Operator of the Five Star City Hotel "Trans Asia". No. 115, Sir Chittampalam A. Gardiner Mawatha, Colombo 02. : 2491000 Directors: S C Ratnayake Chairman, G S A Gunesekera, A D Gunewardene, J R F Peiris, D S J Pelpola, N L Gooneratne, R L Nanayakkara, A R Gunasekara (appointed w.e.f 01.09.2007) Stated capital: Rs. 1,112,879,750
LEISURE GROUP Hotel Management John Keells Hotels PLC (92.69%)

Holding Company of Group Resort Hotel Companies in Sri Lanka and the Maldives No.130, Glennie Street, Colombo 02. : 2421101-8 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala, M A Omar, R T Wijesinha, D A Cabraal, R J Karunarajah (resigned w.e.f 24.07.2007), G S A Gunasekara (appointed w.e.f 24.07.2007) Stated capital: Rs. 5,859,879,989
Chaaya Hotels and Resorts Ceylon Holiday Resorts Ltd - Coral Gardens Hotel (90.77%)
Owner and Operator of "Coral Gardens Hotel" in Hikkaduwa P.O. Box 1, Galle Road, Hikkaduwa : 091 2277023/ 091 2277421 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Stated capital: Rs. 258,803,341
Keells Hotel Management Services Ltd (100%)

Manager and Marketer of Resort Hotels No.130, Glennie Street, Colombo 02. : 2421101-8 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Stated capital: Rs. 19,520,000
Fantasea World Investments (Pte) Ltd (92.69%)

Owner and Operator of "Chaaya Lagoon Hakuraa Huraa" in the Maldives. Meemu Atoll, Republic of Maldives. : 00960 6720014 /00960 6720065 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Share capital: Rs. 341,573,190
John Keells Maldivian Resorts (Pte) Ltd (92.69%)

Hotel Holding Company in the Maldives 4th Floor, STO Aifaanu Building, Boduthakurufaanu Magu, Male. : 00960 3313738 /00960 3332867 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Share capital: Rs. 2,411,168,681
Habarana Walk Inn Ltd (91.55%)

Owner and Operator of "Chaaya Village Habarana" P.O Box1, Habarana. : 066 2270046-7/ 066 2270077 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Stated capital: Rs. 25,475,000
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International Tourists and Hoteliers Ltd (90.24%)

Owner and Operator of "Beach Hotel Bayroo" in Beruwela No.130, Glennie street, Colombo 02. : 2421101-8 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala, H G Arrawawala, W M S Fernando, D C Alagaratnam Stated capital: Rs. 89,525,925
: 047 2239449-52 Directors: M A Perera - Chairman, S C Ratnayake Deputy Chairman, A D Gunewardene, J R F Peiris, J A Davis, J E P Kehelpannala Stated capital: Rs. 318.749,980
Tranquility (Pte) Ltd (92.69%)

Owner and Operator of "Cinnamon Island Alidhoo" in the Maldives 7th Floor, HOSAWA Building (MAAFANNU), Bodhuthakurufaanu Magu, Male' 20252, Republic of Maldives. Directors: S C Ratnayake Chairman (appointed w.e.f 05.05.2007), A D Gunewardene (appointed w.e.f 05.05.2007), J E P Kehelpannala (appointed w.e.f 05.05.2007) Share capital: Rs. 8,686,233
John Keells Maldivian Resorts (Pte) Ltd (92.69%)

Operator of "Chaaya Island Dhonveli " in the Maldives 4th Floor, STO Aifaanu Building, Boduthakurufaanu Magu, Male. : 00960 3313738 /00960 3332867 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Share capital: Rs. 2,411,168,681
Destination Management Serene Holidays (Pvt) Ltd (99.24%)

Tour Operators 421, Midas, Shar plaza, JB Cpitals Nagar, Andheri, kurla road, andheri(East), Mumbai 400 059, India. : 091+2240053036-8 Directors: A D Gunewardene - Chairman, V Leelananda Share capital: Rs. 6,250,000
Kandy Walk Inn Ltd (91.1%)

Owner and Operator of "The Citadel" in Kandy No.124, Srimath Kuda Ratwatte Mawatha, Kandy. : 081 2234365-6/ 081 2237273-4 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala, R T Molligoda Stated capital: Rs. 73,182,009
Rajawella Hotels Ltd (92.69%)

Owner of Real Estate No.130, Glennie street, Colombo 02. : 2306780 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris Stated capital: Rs. 20,000,000
Walkers Tours Ltd (98.51%)

Inbound Tour Operators No.130, Glennie street, Colombo 02. : 2421101-9 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, V Leelananda Stated capital: Rs. 51,374,200
Resort Hotels Ltd (90.77%)

Owner of Real Estate No.130, Glennie street, Colombo 02. : 2306780 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris Stated capital: Rs. 750,070
Whittall Boustead (Travel) Ltd (100%)

Inbound Tour Operators No. 148, Vauxhall Street, Colombo 02. : 2496700 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, V Leelananda Stated capital: Rs. 7,500,000
Travel Club (Pte) Ltd (92.69%)

Operator of "Chaaya Reef Ellaidhoo" in the Maldives North Air Atoll, Republic of Maldives. : 00960 6660595 /00960 6660551 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Share capital: Rs. 143,172,000
PROPERTY GROUP Asian Hotels and Properties Ltd - Crescat Residencies/Crescat Boulevard(83.8%)
Developer and Manager of Integrated Properties No.77, Galle Road, Colombo 03. : 5540404 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, R J Karunarajah, M T L Fernando, B M Amarasekera, I Samarawickrama, S Rajendra Stated capital: Rs. 3,345,118,012
Trinco Walk Inn Ltd (92.69%)

Owner and Operator of "The Club Oceanic Hotel" in Trincomalee Alles Garden, Uppuveli,Sampathiv Post, Trincomalee. : 026 2222307 /026 2221611 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J E P Kehelpannala Stated capital: Rs. 119,850,070
John Keells Properties (Pvt) Ltd (100%)

Property Developers No.130, Glennie street, Colombo 02. : 2306000 /2421101-9 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris Stated capital: Rs. 240,000,030
Wirawila Walk Inn Ltd (92.69%)

Owner of Real Estate No.130, Glennie street, Colombo 02. : 2306780 Directors: S C Ratnayake Chairman, A D Gunewardene, G S A Gunasekara Stated capital: Rs. 15,000,000
Keells Realtors Ltd (92.07%)

Owner of Land and Building No.130, Glennie street, Colombo 02. : 2306000 /2421101-9 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, S Rajendra Stated capital: Rs. 75,000,000
Yala Village (Pvt) Ltd (83.08%)

Owner and Operator of "Yala Village" in Yala P.O Box 1, Kirinda, Tissamaharama.
155
Group directory
CONSUMER FOODS AND RETAIL GROUP Manufacturing Ceylon Cold Stores PLC (57.08%)
Beverages, Frozen Confectionery, Processed Meats, Dairy Products and Holding company of JayKay Marketing Services (Pvt) Ltd. No. 1, Justice Akbar Mawatha, Colombo 02. : 2328221/7, 2318798 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J R Gunaratne, M D de Silva, U P Liyanage, P S Jayawardena, A R Rasiah Stated capital: Rs. 270,200,000
INFORMATION TECHNOLOGY GROUP Auxicogent BPO Solutions (Pvt) Ltd (49%)

BPO Operations 267, Udyog Vihar Phase II, Gurgaon, Haryana 2, India. : +91 124 4561000 Directors: R Roy - Chairman, J R F Peiris, R M David, R Dutta, Sunil Rawal (appointed w.e.f. 07.01.2008) Upendra Singh (appointed w.e.f. 07.01.2008) Share capital: Rs. 22,500,000
Auxicogent Holdings (Pvt) Ltd.(100%)

Holdong company of Auxi group companies No.4, Leyden Bastian Road, Colombo 01. : 2475375 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, R M David, K D Joory, F Soreefan, A R Muttiah (resigned w.e.f. 31.07.2007), R Roy (resigned w.e.f 04.02.2008) D Rajorshi (resigned w.e.f. 04.02.2008) Share capital: 15,000,000
Keells Food Products PLC (73.32%)

Manufacturer and Distributor of Branded Meat and Convenience Food Products. P.O Box 10,No.16, Minuwangoda Road, Ekala, Ja-Ela. : 2236317/ 2236364 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, J R Gunaratne, M D de Silva, R Pieris , S H Amarasekera, A D E I Perera, M P Jayawardena (appointed w.e.f 10.05.2007), Stated capital: Rs. 99,815,000
Auxicogent International (Pvt) Ltd (100%)

BPO Operations IFS Court, TwentyEight, Cybercity, Ebene, Mauritius. : (230) 467 3000 Directors: S C Ratnayake Chairman, A D, Gunewardene, J R F Peiris, R M David, K D Joory, F Soreefan (appointed 23.04.2007, R Roy (resigned w.e.f 08.02.2008), R Dutta (resigned w.e.f. 08.02.2008) Share capital: Rs. 1,541,700,000
Retail JayKay Marketing Services (Pvt) Ltd (57.08%)

Operator of "Keells Super" chain of Supermarkets No.125, Glennie Street, Colombo 02. : 2343792 / 2343794-98 Directors: S C Ratnayake (Chairman), J R F Peiris, J R Gunaratne, M R N Jayasundera-Moraes Stated capital: Rs. 498,000,000
Auxicogent International Lanka (Pvt) Ltd.(100%)

BPO Operations No.4, Leyden Bastian Road, Colombo 01. : 2475375 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, R M David, A R M Muttiah (resigned w.e.f 31.07.2007), R S Fernando (appointed w.e.f 01.08.2007) Stated capital: Rs. 159,500,000
FINANCIAL SERVICES GROUP John Keells Stock Brokers (Pvt) Ltd (81.74%)
Share Broking Services No.130, Glennie Street, Colombo 02. : 2446694-5 /2338066 / 4710721-4 Directors: A D Gunewardene - Chairman, S C Ratnayake, J R F Peiris, K N J Balendra (appointed w.e.f 07.05.2007) Stated capital: Rs. 7,500,000
Auxicogent Investments Mauritius Pvt Ltd (100%)

Investment holding IFS Court, TwentyEight, Cybercity, Ebene, Mauritius. : (230) 467 3000 Directors: S C Ratnayake Chairman (appointed w.e.f 23.04.2007), A D Gunewardene (appointed w.e.f 23.04.2007), J R F Peiris (appointed w.e.f 23.04.2007), R M David (appointed w.e.f 23.04.2007), K D Joory (appointed w.e.f 23.04.2007), F Soreefan (appointed w.e.f 23.04.2007), Share Capital: USD 14,000
Nations Trust Bank PLC (29.9%)

Commercial Banking and Leasing Operations No. 242, Union Place, Colombo 02. : 4313131 Directors:A D Gunewardene - Chairman S C Ratnayake, J R F Peiris, A K Gunaratne, E H Wijenaike, Z H Zavahir, C H S K Piyaratna, A R Rasiah, D Weerakoon M E Wickremesinghe Stated capital as at 31.12.2007: Rs. 2,061,553,991
Auxicogent Alpha Pvt Ltd (100%)

Investment holding IFS Court, TwentyEight, Cybercity, Ebene, Mauritius. : (230) 467 3000 Directors: S C Ratnayake Chairman (appointed w.e.f 23.04.2007), A D Gunewardene (appointed w.e.f 23.04.2007), J R F Peiris (appointed w.e.f 23.04.2007), R M David (appointed w.e.f 23.04.2007), K D Joory (appointed w.e.f 23.04.2007), F Soreefan (appointed w.e.f 23.04.2007), Share Capital: USD 7.350
Union Assurance PLC (36.96 %)

Life and General Insurance Underwriters No.20, St. Michaels' Road, Colombo 03. : 2428428 Directors:A D Gunewardene - Chairman, H Selvanathan (resigned w.e.f 01.04.2007) S C Ratnayake (resigned w.e.f 01.04.2007), D C R Gunawardena, H A Rehmanjee, J R F Peiris, P C P Tissera, M A Tharmaratnam, J D Bandaranayake (appointed w.e.f 01.04.2007) Stated capital: Rs. 388,433,000
InfoMate (Pvt) Ltd (100%)

IT Enabled Services No. 320/1, Union Place, Colombo 02. : 2318224 /2318240 Directors: S C Ratnayake - Chairman, J R F Peiris, M J S Rajakariar Stated capital: Rs. 20,000,000
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Group directory
Information Systems Associates (49%)

Software Development Services (Bahrain) PO Box. 132, Sajaah, UAE. : 97165088810 Directors: A Ali - Chairman, D Hubbarb, A Hamdany, J R F Peiris, R M David, G S Dewaraja Stated capital: Rs. 97,594,274
John Keells (Teas) Ltd (100%)

Manager of Bought Tea Factories and Others No.130, Glennie street, Colombo 02. : 2335880 Directors: S C Ratnayake Chairman, G S A Gunesekera, J R F Peiris, L D Ramanayake (resigned w.e.f 01.08.2007) Stated capital: Rs. 120,000
John Keells Business Systems (UK) Ltd (100%)

Software Development Services (UK) Thompson House 42-44 Dolben Street, London. SC1 0UQ : 2300770 -606 Directors: A D Gunewardene - Chairman, G S Dewaraja , R M David Stated capital: Rs. 9,507
John Keells Holdings PLC

Group Holding Company and Function Based Services No. 130, Glennie street, Colombo 02. : 2306000 /2421101-9 Directors: S C Ratnayake Chairman, A D Gunewardene - Deputy Chairman, G S A Gunesekera, J R F Peiris, E F G Amerasinghe T Das, Steven Enderby, M V Muhsin, P D Rodrigo, S S Thiruchelvam, R S Captain (resigned w.e.f 06.05.2008) Stated capital: Rs. 22,464,268,185
John Keells Computer Services (Pvt) Ltd (100%)

Software Services No. 148, Vauxhall Street, Colombo 02. : 2300770 Directors: A D Gunewardene - Chairman, S C Ratnayake, J R F Peiris, G S Dewaraja, R M David Stated capital: Rs. 96,500,000
John Keells Office Automation (Pvt) Ltd (100%)

Dealers in Office Automation Equipment No.320/1, Union Place, Colombo 02 : 2431576 / 4702611 Directors: A D Gunewardene - Chairman, J R F Peiris, G S Dewaraja, R M David Stated capital: Rs. 5,000,000
John Keells International (Pvt) Ltd(100%)

Regional Holding Company providing Administrative and Function based services No. 130, Glennie street, Colombo 02. : 2306000 /2421101-9 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris Stated capital: Rs. 1,545,000,000
John Keells Software Technologies (Pvt) Ltd (100%)

Marketer of Software Packages No. 148, Vauxhall Street, Colombo 02. : 2300770 -606 Directors: A D Gunewardene - Chairman, J R F Peiris, G S Dewaraja, R M David Stated capital: Rs. 8,000,000
John Keells PLC (76%)

Commodity Brokers No.130, Glennie street, Colombo 02. : 2306000 /2421101-9 Directors: S C Ratnayake Chairman, A D Gunewardene, G S A Gunesekera, J R F Peiris, K D W Ratnayake, T de Zoysa, Y A Jordon Hansen, L D Ramanayake (resigned w.e.f 31.07 2007), S.T. Ratwatte (appointed w.e.f. 09.05. 2007 ) Stated capital: Rs. 152,000,000
OTHERS Associated Motorways PLC (20.02%)

Sales, repairs and servicing of motor vehicles. Rebuilding of tyres and marketing, trading and export of rubber goods No.185, Union Place, Colombo 02. : 2309300 /2433371-6 Directors:A de Zoysa- Chairman,T de Zoyza J B L de Silva, G B R de Silva H S A K Caldera, A R Peiris, D A de Zoysa, A S de Zoysa, S C Rathnayake, K Kanag Isvaran, A A De Silva (resigned w.e.f. 31.12.2007), L J de Alwis (appointed w.e.f 01.01.2008) Stated capital: Rs. 55,647,600
John Keells Singapore (Pte) Ltd (80%)

International Trading Services No. 30, Bideford Road, Thongsia Building, Singapore-2. : 65 67329636 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, R M David, R Ponnampalam, R S Fernando (resigned w.e.f 01.08.2007) Stated capital: Rs. 9,638,000
John Keells Warehousing (Pvt) Ltd (76%)

Warehousing of Rubber and Tea No. 93,1st Lane,Kerawalapitiya, Wattala, Muturajawala. : 4819560 Directors: S C Ratnayake Chairman, G S A Gunesekera, J R F Peiris, L D Ramanayake (resigned w.e.f 01.08.2007) Stated capital: Rs. 120,000,000
J K Packaging (Pvt) Ltd (100%)

Printing and Packaging Services Provider for the Export Market No. 148, Vauxhall Street,Colombo 02. : 2475308 Directors: S C Ratnayake (Chairman), R M David, R S Fernando Stated capital: Rs. 14,500,000
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Group directory
Keells Consultants Ltd (98.13%)

Company Secretarial Services to the Group No.130, Glennie street, Colombo 02. : 2421101-9 Directors: S C Ratnayake Chairman, A D Gunewardene, J R F Peiris, D C Alagaratnam Stated capital: Rs. 160,000
Tea Smallholder Factories Ltd (37.62%)

Owner and Operator of Factories for Tea Smallholders 320/1, Union Place,Colombo 02. : 2335880 / 5332071 Directors: S C Ratnayake - Chairman, J R Guneratne, A D Gunewardene, G S A Gunesekera, J R F Peiris, E H Wijenaike R Seevaratnam, R E Rambukwella A S Jayatilleke, J S Ratwatte, L D Ramanayake (resigned w.e.f 01.08.2007) Stated capital: Rs. 150,000,000
Mackinnon and Keells Financial Services Ltd (99.81%)

Rental of Office Space No. 4, Layden Bastian Road, Colombo 01. : 2475102-3 Directors: S C Ratnayake Chairman, A.D Gunewardene, J R F Peiris, S Rajendra Stated capital: Rs. 10,800,000
Whittall Boustead Ltd - Printing Division (99.96%)

Printing and Packaging Services Provider for the Local Market Directors: S C Ratnayake, A D Gunewardene, J R F Peiris, R M David , S Rajendra, R S Fernando (resigned) Stated capital: Rs.99,304,300
Mortlake Ltd (100%)

Investment Company No. 148, Vauxhall Street,Colombo 02. : 2475308 Directors: S C Ratnayake Chairman, A.D Gunewardene, G S A Gunesekera, J R F Peiris Stated capital: Rs. 3,000
Whittall Boustead Ltd - Real Estate Division (99.96%)

Company Secretarial Services and Renting of Office Space No. 148, Vauxhall Street,Colombo 02. : 2329161 /2327805 Directors: S C Ratnayake, A D Gunewardene, J R F Peiris, R M David, S Rajendra, R S Fernando (resigned) Stated capital: Rs. 99,304,400
Nexus Networks (Pvt) Ltd (99.99%)

Operator of a Loyalty Card Programme No. 125, Glennie Street, Colombo 02. : 2343792 / 2343794-98 Directors: S C Ratnayake - Chairman, J R F Peiris , J R Gunaratne, M R N Jayasundera- Moraes Stated capital: Rs. 100,000
Effective holding percentags indicated in brackets.
158
Macro snapshot
Summary Indicator Units GDP Growth Per cent GDP(current prices) Rs. Billion GDP(current prices) USD Billion GDP per Capita (USD) Growth Per cent GDP per Capita USD Inflation (CCPI- Old ) YoY Per cent Current Account Balance USD Billion Current Account % of GDP Per cent Population Million Exchange Rate (Annual Average) USD/Rs. Exchange Rate Change (Annual Average) Per cent 12m T-Bill yield (yr-end) Per cent Prime Lending Rate (yr-end) Per cent M2b Money supply growth Per cent Exports USD Billion Imports USD Billion Balance of Payments Per cent of GDP Budget Deficit Per cent of GDP Unemployment Rate Per cent All Share Index (yr-end) Points Tourist Arrivals No.' 000 1998 4.7 1,018 15.8 3.4 881 9.4 -0.2 -1.4 18.8 64.59 9.5 12.6 14.9 13.2 4.8 5.9 0.2 -9.2 9.2 597 381 1999 4.3 1,106 15.7 -2.4 860 4.7 -0.6 -3.6 19.0 70.4 9.0 12.8 15.9 13.4 4.6 6.0 -1.7 -7.5 8.9 573 436 2000 6.0 1,258 16.6 4.5 899 6.2 -1.1 -6.4 19.1 75.8 7.7 18.2 21.5 12.9 5.5 7.3 -3.1 -9.9 7.6 448 400 2001 -1.5 1,407 15.7 -6.5 841 14.2 -0.2 -1.4 18.8 89.4 17.9 13.7 14.3 13.6 4.8 6.0 1.3 -10.8 7.9 621 337 2002 4.0 1,582 16.5 3.5 870 9.6 -0.2 -1.4 19.0 95.7 7.0 9.9 12.2 13.4 4.7 6.1 2.0 -8.9 8.8 815 393 2003 5.9 1,822 18.9 12.8 981 6.3 -0.07 -0.4 19.3 96.5 0.9 8.0 9.3 15.3 5.1 6.7 2.7 -7.7 8.4 1,062 501 2004 5.4 2,091 20.7 8.3 1,062 7.6 -0.6 -3.1 19.5 101.2 4.8 8.9 10.2 19.6 5.8 8.0 -1.0 -7.9 8.3 1,507 566 2005 6.2 2,453 24.4 16.9 1,241 11.6 -0.7 -2.7 19.7 100.5 -0.7 10.4 12.2 19.1 6.3 8.9 2.1 -8.4 7.2 1,922 549 2006 7.7 2,939 28.3 14.5 1,421 13.7 -1.5 -5.3 19.9 104.0 3.4 13.0 15.2 17.8 6.7 10.3 0.7 -8.0 6.5 2,722 560 2007 6.8 3,578 32.3 13.8 1,617 17.5 -1.4 -4.2 20.0 110.6 6.4 20.0 18.0 16.6 7.7 11.3 1.6 -7.7 6.0 2,541 494
Macro economic outlook - 2008 Despite hopes that inflation would reduce from the elevated levels it had hit in the previous year, it accelerated further. However, though headline economic growth slowed, it still remained at a relatively high level and for the first time growth exceeded 6per cent for three consecutive years. Apart from the usual concerns with regard to the war, poor infrastructure and timely implementation of appropriate macro and sector policies, in the year ahead, the Sri Lankan economy will also have to face the impact of a global slowdown and recession in the US. Globally increasing food and commodity prices are also likely to affect Sri Lanka's economic prospects though agricultural exports benefit from the trend of higher commodity prices. Though the Balance of Payments was positive for the third successive year, the current account deficit was only bridged through an increased reliance on commercial and short term borrowing. Both rating agencies have highlighted risks of this dependence in recent negative outlooks on the economy. Therefore in the coming years there is an increasing risk on the stability of the balance of payments should the flows of commercial capital reverse or slow down sharply. The economic growth forecast for 2008 at 6.4 per cent by the IMF and 6 per cent by the ADB are lower than that achieved in 2007 while the CBSL forecasts a 7per cent growth for 2008. However, agency forecasts do see a moderation in inflation pressures with the CCPI annual average reducing to 11 per cent as per the IMF and 16.2 per cent as per the ADB. Year that Was The GDP growth slowed to 6.8 per cent in 2007, a drop from the previous year's 7.7 per cent. Growth in all three sectors declined, with services, the largest component of the economy, growing by 7.1 per cent compared to 7.7 per cent last year. This growth was led by posts & telecommunications, cargo handling, transport and financial services segments. The hotels and restaurants segment contracted chiefly due to the country's security situation and the slowdown in import and domestic trade activities. The industrial sector grew by 7.6 per cent compared to 8.1 per cent last year with the factory industry sector growing by 6.7 per cent. Construction, export manufacturing, and mining & quarrying activities also performed well in this sector. Growth in the Agriculture sector fell to 3.3 per cent from 6.3 per cent last year. The sharp drop was primarily on account of 2006 growth been boosted by the post tsunami rebound of fisheries. A drop in production in tea, paddy and tobacco also negatively affected the agricultural sector. The annual unemployment rate fell further to 6.0 per cent, the lowest reported unemployment rate, whilst the per capita income rose to US dollars 1,617. Gross National Product grew by 7.1 per cent yoy in 2007. Over the year, there was a slowdown in real domestic aggregate demand, with growth in consumption and investment demand in
real terms reducing to 4.9 per cent and 8.7 per cent in 2007 from 7.1 per cent and 13.4 per cent respectively in 2006. However the export of goods and services increased by 6.8 per cent in real terms compared to 3.8 per cent in 2006 The New Colombo Consumers' Price Index (CCPI(N)) continued its climb, with an annual average increase of 15.8 and a point to point percentage change of 18.8 per cent in 2007, compared to 10 per cent in 2006. By March 2008 the yoy growth had reached 23.8 per cent while on the old CCPI the yoy increase was 28.1per cent. The government attributed the soaring inflation to the result of global fuel and food price increases, while some outside agencies placed government borrowing from the banking system in the middle of the year as a possible factor. Interest rates in all markets increased in line with a tightening of monetary policy. Call money rates fluctuated widely ranging from a low of 12.36 per cent to a high of 42.25 per cent during 2007. Export earnings in 2007 increased by 12.5per cent to USD 7.74 billion. Agricultural and industrial exports grew by 16.6 per cent and 10.0 per cent respectively over the previous year. Industrial exports continued to be dominated by textiles & garments, but stronger growth in other industrial exports led to continuation of the recent trend of falling reliance on garment exports. Other categories of industrial exports that grew within the year were food, beverages & tobacco, rubber products, diamonds & jewellery and machinery & equipment. Tea export earnings surpassed USD 1 billion in 2007. Imports increased by 10.2 per cent to USD 11.3 billion, mainly on account of import of investments goods, petroleum, textiles, clothing and chemicals. Petroleum contributed to 40 per cent of the growth in imports over the previous year. However, exports outgrew imports and this helped limit the expansion of the trade deficit. Despite the widened current account deficit, the balance of payments recorded a surplus of USD 531 million largely due to the sovereign bond issue of USD 500 million. The gross official reserves excluding ACU receipts rose to USD 3.06 billion . About 70 per cent of the trade deficit was financed by continued strong worker remittances. This combined with the increase in services account surplus helped contain the current account deficit. Gross FDI inflows rose to USD 734 million. Tourist arrivals during 2007 fell significantly by 11.7 per cent to 494,008 from 559,603 in 2006. The ongoing security situation and unfavourable travel advisories from the main tourism generating countries led to the poor performance in this sector. Though gross tourist receipts remained flat when compared against 2006, earnings from tourism fell to USD 385 million in 2007. Of the tourists, 67 per cent came for holiday purposes followed by 11per cent for business purposes. The All Share Price Index (ASPI) declined by 6.7 per cent yoy to 2,541.0 points from 2,722.4 points in 2006, whilst the Milanka Price Index (MPI) fell by 11.3 per cent yoy to 3,292 points. During the first three months of 2008, despite global markets falling sharply, the ASPI ended the quarter slightly higher at 2,550 though the MPI lost ground to end at 3,181.
159
Glossary of financial terms

Accrual basis Recording revenues & expenses in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. Capital employed Shareholders funds plus minority interest and debt. Capital structure leverage Average total assets divided by average shareholders equity. Cash earnings per share Profit after tax adjusted for non cash items minus share of associate company profits plus dividends from associate companies divided by the weighted average number of ordinary shares in issue during the period. Cash to price earnings Diluted market price per share divided by diluted cash earnings per share. Cash interest cover Cash flow from operations before working capital changes divided by cash interest payment. Cash interest and tax cover Cash flow from operations before working capital changes divided by cash interest and tax payments. Cash ratio Cash plus short term investments divided by current liabilities. Capital employed turnover Capital structure leverage into common earnings leverage. Common earnings leverage Profit attributable to equity holders of the parent divided by profit after tax. Contingent liabilities A condition or situation existing at the balance sheet date due to past events, where the financial effect is not recognised because: 1. 2. 3. the obligation is crystalised by the occurrence or non occurrence of one or more future events or, a probable outflow of economic resources is not expected or, it is unable to be measured with sufficient reliability. Interest cover Consolidated profit before interest and tax over finance expenses. Long term debt to total debt Long term loans as a percentage of total debt. Market capitalisation Number of shares in issue at the end of period multiplied by the market price at end of period. Market value added Market capitalisation minus shareholders funds. Net assets Total assets minus current liabilities minus long term liabilities minus minority interest. Net assets per share Net assets over weighted average number of ordinary shares in issue during the period adjusted for options granted but not exercised. Net debt Total debt minus (cash plus short term deposits). Net profit margin Profit after tax divided by turnover inclusive of share of associate company turnover. Net working capital Current assets minus current liabilities. Pre-tax return on capital employed Consolidated profit before interest and tax as a percentage of average capital employed. Price earnings ratio Market price per share (diluted) over diluted earnings per share. Price to book ratio Market price per share (diluted) over net asset value per share. Property, plant and equipment turnover Turnover excluding share of associate company turnover divided by average property, plant and equipment balances. Quick ratio Cash plus short term investments plus receivables, divided by current liabilities. Return on assets Profit after tax divided by the average total assets. Return on equity Profit attributable to shareholders as a percentage of average shareholders funds. Sales to assets ratio/total asset turnover Turnover including share of associate company turnover divided by average total assets. Share turn ratio Total volume of shares traded during the year divided by average number of shares in issue. Shareholders funds Total of issued and fully paid share capital, capital reserves and revenue reserves. Total debt Long term loans plus short term loans and overdrafts. Total equity Shareholders funds plus minority interest. Total shareholder return (P1 - P0 +D) / P0 x 100 P1 = Market price at the end of the financial year P0 = Diluted market price at the end of the previous financial year D = Adjusted dividend for the year Total value added The difference between net revenue (including other income) and expenses, cost of materials & services purchased from external sources.
Current ratio Current assets divided by current liabilities. Debt/equity ratio Debt as a percentage of shareholders funds and minority interest. Diluted EPS Profit attributable to equity holders of the parent divided by the weighted average number of ordinary shares in issue during the period adjusted for options granted but not exercised. Dividend payout ratio Total dividend as a percentage of company profits adjusted for non cash gains/losses. Dividend yield Dividend per share as a percentage of the share price at the end of the period. Earnings per share Profit attributable to equity holders of the parent divided by the weighted average number of ordinary shares in issue during the period. EBIT Earnings before interest and tax (includes other operating income). EBIT margin EBIT divided by turnover inclusive of share of associate company turnover. EBITDA Earnings before interest, tax, depreciation and amortisation. Effective rate of taxation Tax expense divided by profit before tax. EV (enterprise value) Market capitalisation plus net debt. Financial leverage multiplier Total assets divided by the shareholders funds plus minority interest.
160
Corporate information
Name of company
John Keells Holdings PLC
Bankers
Bank of Ceylon CitiBank N.A Commercial Bank Deutsche Bank A.G DFCC Bank DFCC Vardhana Bank Hatton National Bank Hongkong and Shanghai Banking Corporation ICICI Bank Nations Trust Bank NDB Bank Peoples Bank Sampath Bank Seylan Bank Standard Chartered Bank
Legal form
Public Limited Liability Company Incorporated in Sri Lanka in 1979 Ordinary Shares listed on the Colombo Stock Exchange GDRs listed on the Luxembourg Stock Exchange
Company registration no.

PQ 14
Directors
Mr S C Ratnayake Chairman Mr A D Gunewardene Deputy Chairman Mr G S A Gunesekera Mr J R F Peiris Mr E F G Amerasinghe Mr T Das Mr S Enderby Mr M V Muhsin Mr P D Rodrigo Ms S S Tiruchelvam Mr R S Captain (resigned w.e.f. 6 May 2008)
Depository for GDRs

CitiBank NA New York
Registered office of the company

130 Glennie Street Colombo 2 Sri Lanka
Audit Committee
Mr P D Rodrigo Chairman Mr E F G Amerasinghe Mr S Enderby Ms S S Tiruchelvam
Contact details
P.O. Box 76 130 Glennie Street Colombo 2 Sri Lanka Telephone : +(94) 11 230 6000 Facsimile : +(94) 11 244 7087 Internet Email : www.keells.com : jkh@keells.com
Remuneration Committee
Mr E F G Amerasinghe Chairman Mr M V Muhsin Mr P D Rodrigo
Nominations Committee
Mr T Das Chairman Mr S Enderby Mr M V Muhsin Mr S C Ratnayake Ms S S Tiruchelvam
Secretaries and registrars

Keells Consultants Limited 130 Glennie Street Colombo 2 Sri Lanka
Auditors
Ernst & Young Chartered Accountants P.O. Box 101 Colombo Sri Lanka
161
Notice of meeting
Notice is hereby given that the Twenty Ninth Annual General Meeting of John Keells Holdings PLC will be held on 27th June 2008 at 9.30 a.m. at The Auditorium, The Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha (Longdon Place), Colombo 7. The business to be brought before the meeting will be: to read the notice convening the meeting. to receive and consider the Annual Report and Financial Statements of the Company for the Financial Year ended 31st March 2008 with the Report of the Auditors thereon. to re-elect as Director, Mr. G S A Gunesekera, who retires in terms of Article 84 of the Articles of Association of the Company. to re-elect as Director, Mr. E F G Amerasinghe, who retires in terms of Article 84 of the Articles of Association of the Company. to re-elect as Director, Mr. S Enderby, who retires in terms of Article 84 of the Article of Association of the Company. to authorise the Directors to determine and make donations. to re-appoint Auditors and to authorise the Directors to determine their remuneration. to consider any other business of which due notice has been given.
By Order of the Board JOHN KEELLS HOLDINGS PLC Keells Consultants Limited Secretaries 30 May 2008
Notes: i. A member unable to attend is entitled to appoint a Proxy to attend and vote in his/her place. ii. A Proxy need not be a member of the Company. iii. A member wishing to vote by Proxy at the Meeting may use the Proxy Form enclosed. iv. In order 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.
162
Form of proxy
I/We ........................................................ of ......................................................... being a member/s of John Keells Holdings PLC hereby appoint ..........................................of ....................................... or failing him/her MR. SUSANTHA CHAMINDA RATNAYAKE MR. AJIT DAMON GUNEWARDENE MR. GERARD SUMITHRA ABEYWARDENE GUNESEKERA MR. JAMES RONNIE FELITUS PEIRIS MR. EMMANUEL FRANKLYN GAMINI AMERASINGHE MR. TARUN DAS MR. STEVEN ENDERBY MR. MOHAMED VAZIR MUHSIN MR. PARAKRAMA DEVASIRI RODRIGO MRS. SITHIE SUBAHNIYA TIRUCHELVAM of Colombo, or failing him of Colombo, or failing him of Colombo, or failing him of Colombo, or failing him of Colombo, or failing him of India, or failing him of India, or failing him of USA, or failing him of Colombo, or failing him of Colombo
as my/our proxy to represent me/us and vote on my/our behalf at the Twenty Ninth Annual General Meeting of the Company to be held on 27th June 2008 at 9.30 a.m. and at any adjournment thereof, and at every poll which may be taken in consequence thereof.
Signed on this day of Two Thousand and Eight.
................................................. Signature/s of Shareholder/s
NOTE: INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.
163
INSTRUCTIONS AS TO COMPLETION OF PROXY 1. Please perfect the Form of Proxy by filling in legibly your full name and address, signing in the space provided and filling in the date of signature. The completed Form of Proxy should be deposited at the Registered Office of the Company at No. 130, Glennie Street, Colombo 2, not later than 48 hours before the time appointed for the holding of the Meeting. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should accompany the completed Form of Proxy for registration, if such Power of Attorney has not already been registered with the Company. If the appointer is a company or Corporation, the Form of Proxy should be executed under its Common Seal or by a duly authorised officer of the company or Corporation in accordance with its Articles of Association or Constitution. If this Form of Proxy is returned without any indication of how the person appointed as Proxy shall vote, then the Proxy shall exercise his/her discretion as to how he/she votes or, whether or not he/she abstains from voting.
2.
3.
4.
5.
Please fill in the following details: Name Address : : . . Jointly with :
Share Folio No. :
164
22 May 2008
Dear Shareholder,
JKH Annual Report 2007/08

The printed report enclosed herewith is an abridged version of the Annual Report of John Keells Holdings PLC for the financial year 2007/08. This report has been produced mainly for ease of reference and is a compilation of the most popularly accessed material of the main Annual Report. The Compact Disk (CD) found on the back cover of this report, contains the comprehensive Annual Report, including board committee reports, Annual Report of the Board of Directors, statement of directors responsibility as well as complete financial reports and notes. It also contains the full corporate governance, sustainability and risk management reports. The comprehensive Annual Report is also featured on the Investor Relations page of www.keells.com. Should you experience any difficulty in accessing the information on the CD or website, or wish to request a printed copy of the full report, please contact The Head of Investor Relations John Keells Holdings PLC 130, Glennie Street Colombo 02 Sri Lanka Tel: +94 11 2306739, 2306809 Fax: +94 11 2306160 E mail: investor.relations@keells.com A printed Request Form has been provided overleaf for your convenience. An on-line request may also be submitted on the aforementioned website. Yours faithfully,
For John Keells Holdings PLC
Keells Consultants Limited

Secretaries
REQUEST FORM
The Head of Investor Relations John Keells Holdings PLC 130, Glennie Street Colombo 02 Sri Lanka I wish to request for a copy of the comprehensive Annual Report of John Keells Holdings PLC for the financial year 2007/08. Please mark (x) as appropriate. 1. I will collect a copy from your office 2. Please hand over a copy to bearer of this form Full name of bearer: ............................................................................................................................. 3. Please mail it to my address given below
Please fill all fields given below. Full name of shareholder : ......................................................................................................................... Mailing address : ........................................................................................................................ : ........................................................................................................................ City Country Contact telephone no. E-mail address (Optional) : ....................... (country code) ....................................................................... : ........................................................................................................................

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At JKH, we continuously seek to improve the manner in which we report to you, our stakeholders.

Profile and discussion

Management discussion and analysis

Sustainability report 2007/08

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Our industry groups

John Keells Holdings

Consumer Foods & Retail

Ports & Shipping Sectors Transportation

Banking & Leasing

IT Services & Office Automation

John Keells Social Responsibility Foundation

Legal & Secretarial

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

summarise below the progress made on each of these priorities.

Internationalisation and geographical diversification in identified core segments of our businesses

Progress on strategic initiatives/priorities

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Focus on selected large local industries

Divest businesses that contribute disproportionately to management time

Building organisational capability

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Susantha Ratnayake Chairman 22 May 2008

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Operating highlights and significant events

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Group financial highlights

Earnings highlights and ratios

Balance sheet highlights and ratios

Monarch and Emperor customer advances have been excluded.

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Industry group financial highlights

2008 16.7 9.8 2.6 11.4 4.8 2.2 2.7

2007 12.4 7.6 1.5 9.8 3.5 2.4 1.8

2006 10.5 5.4 2.4 7.8 2.7 1.7 2.5

Rs. billion Transportation

2008 3.1 1.1 0.9 0.6 0.4 0.1 2.0

2007 2.9 1.1 0.9 0.6 0.3 0.1 0.2

2006 2.4 0.8 0.8 0.4 0.4 0.1 (0.1)

Leisure Property CF & R Financial Services IT Others

Rs. billion Transportation Leisure Property CF & R Financial Services IT

2008 11.5 25.3 4.8 4.3 2.0 1.8 12.0

2007 10.5 20.5 4.6 3.1 1.6 1.9 16.3

2006 5.3 14.3 6.0 2.4 1.4 0.3 2.0

Rs. billion Transportation Leisure Property CF & R Financial Services IT Others

2008 13.9 28.1 5.4 6.6 2.6 2.1 13.2

2007 11.8 22.4 5.5 5.0 1.7 2.5 17.1

2006 7.1 16.1 6.5 3.7 1.5 0.7 4.0

Number Transportation Leisure Property CF & R Financial Services

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

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

2006 687 3,862 162 3,020 24 583 1,477

Annual Report 2007/08 - JOHN KEELLS HOLDINGS PLC

Financial achievements and goals

Growth in earnings and cash earnings per share