1694-jkplc cover ar_2016-c.pdf · 2016. 6. 6. · 2010 2007 prospects began to improve rapidly with...

JOHN KEELLS PLC 2

VISION

To be internationally recognised as the best

Produce Broker in the world.

MISSION To retain the pre-eminent position as Sri Lanka’s leading Tea

and Rubber broker; To uphold the traditions and ethics of the

Tea and Rubber trades; To ensure superior customer service

through a dedicated and motivated workforce.

VALUES We are committed to the highest level of integrity and ethical conduct in all

our business activities.

We will look towards exceeding shareholder and customer expectations by

achieving excellence in all areas of operations.

We recognise the right of every individual to be treated with fairness,

dignity and respect and assist our employees to improve their skills and

reward their accomplishments.

We will focus on corporate social responsibility and look to protect and

safeguard the environment.

Annual Report 2015/16 3

Contents 05

Financial Highlights

12Chairman’s Message 14 Board of Directors

JOHN KEELLS PLC 4

44Corporate

Governance

Enterprise Risk

Management76

Annual Report of

the85

Board of Directors

Group Structure 04

Financial Highlights 05

Milestones 06

Performance Highlights 08

An Introduction to this Report 10

Year at a Glance 11

Chairman’s Message 12

The Board of Directors 14

Senior Management Team 16

Management Discussion & Analysis 17

GRI Index 37

Corporate Governance 44

Enterprise Risk Management 76

Audit Committee Report 82

Annual Report of the Board of Directors 85

Statement of Directors Responsibility 91

Independent Auditor’s Report 93

Income Statement 94

Statement of Comprehensive Income 95

Statement of Financial Position 96

Statement of Changes in Equity 97

Cash Flow Statement 98

Notes to the Financial Statements 100

Information to Shareholders and Investors 146

Five Year Summary 148

Key Ratios and Information 150

Glossary of Financial Terminology 152

Notice of Meeting 153

Form of Proxy 155

G4-4

Annual Report 2015/16

5

Group Structure

Cataloguing Human Resources Research

Support Functions

Claim Settlements

Staff Provident Fund CSR Committee

Funds & Committees

Tea & Rubber

Shares

Sample Handling Finance IT services

Company Service Product

John Keells

Stock Brokers

Pvt) Ltd (

Inc 1979

John Keells

Warehousing

Pvt) Ltd (

Inc 2001

John Keells PLC

Inc 1960

Produce

Broking

Produce

Warehousing

Share

Broking

Ownership

100 %

76 %

JOHN KEELLS PLC

6

Staff Thrift Society Fund

Welfare & Recreation

Committee

Financial Highlights

Group Revenue

2014/2015 Rs.959.9 Mn

Group Profits 2014/2015 Rs.332.9 Mn

Group Assets 2014/2015 Rs.6,074 Mn

Share Broking

Share Broking 2015/2016

2015/20164,982 Warehousing

Produce BrokingRs. Mn

Rs.707 MnProduce Broking

Warehousing

Share Broking Warehousing

Share Broking

2015/2016 2015/2016 Share Broking 196 MT

814Produce Broking

Produce Broking Rs. Mn Associate

Produce Broking

Warehousing

Group Capital & Returns Group Assets Revenue Composition

Carbon Foot Print 2014/2015 185 MT

Economic Value added 2014/2015 Rs.1,014Mn

Employee Composition

2014/2015 Nos. 96

Warehousing

2015/2016

Rs. 63 Mn

Share Broking

Produce Broking

Warehousing

Associate

2015/2016

Nos. 96


7

Rs. Mn % Rs. Mn 4000

3500

3000

2500

2000

1500

1000

500

0 0 2016

2015

2014

2013

2012

Net current assets

Fixed assets and investment

Milestones

1870

Edwin John came to Ceylon,

as the Island was then called,

to join his brother George.

Together, they established

themselves as Produce and

Exchange Brokers.

1876

A partnership styled “John

Brothers and Company” was

formed with offices situated in

Colombo and Kandy.

1878

This partnership was dissolved and Edwin John started an

establishment of his own titled “E. John” and carried on the business

of produce and exchange broking. The first decade of business of E.

John was one of low activity. Villers records this period thus,

“Business in those days was very limited. Coffee had all but gone

out, Tea had not expanded sufficiently and the little business in

Chinchona was not enough to go around.” During this period,

Reginald, son of Edwin John, joined his father in Ceylon. K. Balendra took over as

Chairman, the first Sri Lankan to

hold this position. John Keells

PLC., acquired controlling

interests in John Keells Stock

Brokers (Pvt) Ltd.

Financial Statements of the

associates Keells Realtors

Ltd., and International

Tourists and Hoteliers Ltd.

were incorporated to the

Consolidated Accounts.

K. Balendra retired

as Chairman on 31st

December 2000

V. Lintotawela took over as

Chairman on 1st January, 2001.

John Keells PLC., incorporated

John Keells Warehousing (Pvt)

Ltd., a fully owned subsidiary

with B.O.I. status.

2015

In Compliance to the new Securities

Exchange Commission directive

which came in to effect from 1st

January 2016 the shares of the

company which were listed on the

Main Board was

transferred to the Diri Savi

Board of the Colombo

Stock Exchange.

Produce Broking and Warehousing

0 200 400 600 800 1,000

2016

2015

2014

2013

2012

Rs. Mn

Share Broking

Total shareholder funds

500

1000

1500

2000

2500

3000

3500

4000

2016 2015 2014 2013 2012

Profits after tax

Return on capital employed (%)

Growth in shareholder funds (%)

-2

4

10

16

23

29

35

41

48

JOHN KEELLS PLC

8

2013 The Company disposed of its land at

130, Glennie Street Colombo 2.

2011 The Board of Directors at a meeting held

on 11th May 2011 resolved to increase

the number of shares by way of a share

sub -division in the ratio of one (1) share

for every one (1) share held.

Consequently, the number of shares

after the sub – division increased to

60,800,000 shares from the previous

30,400,000 shares.

The initial step towards diversification of

the activities of the Company was taken

with the acquisition of Ceylon

Mineral Waters Ltd.

The firm moved to the sixth

floor of the then newly

constructed Ceylinco House.

1986

John Keells Holdings PLC, acquired

the controlling interest of John Keells

PLC., M.C. Bostock retired and D.J.M.

Blackler took over as the Chairman of the

Company.

1971

John Keells PLC.,

moved its offices to

Glennie Street, Slave

Island.

1976

John Keells PLC.,

became a People’s

Company.

1993 1990 2000 2001

1970

M.C. Bostock was

elected Chairman

of the Company.


9

E. John, Thompson, White and Co.

Ltd., amalgamated with Keells and

Waldock Ltd. The name was

changed to John Keells Thompson

White Ltd. This Company had its

office in the National

Mutual Insurance

Company building in

Chatham Street. The first

Chairman of the Company

was Douglas Armitage and on his retirement he

was succeeded by A.G.R. Willis. The Company

acquired its Glennie Street premises from

Dodwell and Company which were initially used

as a warehousing.

The Board of Directors at a meeting held on 20 th July 2010 resolved to

increase the number of shares by way of share sub – division in the ratio

of one (1) share for every one (1) share held. Consequently, the no of

shares after the sub – division increased to 30,400,000 shares from the

current 15,200,000 shares.

The name of the Company was

changed to John Keells PLC which is

a new requirement of the Companies

Act No. 7 of 2007.

G4-9

2003

The state of the art warehouse of John Keells

Warehousing (Pvt) Ltd., which is the largest

hi-tech tea warehouse in this part of the

region was commissioned for storing pre-

auctioned produce.

2004

The Company disposed its

Investment in International

Tourists and Hoteliers Ltd.

2005

V. Lintotawela retired as Chairman

on 31st December 2005 and S

Ratnayake took over as Chairman

on 01st January 2006.

2010 2007

Prospects began to

improve rapidly with

the approaching tea

business.

1890 Reginald John was taken

into the partnership of E.

John and Co. By this time,

business was growing

quite rapidly in tea, shares,

oil and exchange.

1895 E. John and Co., amalgamated with two London

Tea Broking firms, William Jas and Hy Thompson

and Co. and Geo White and Co. The firm was then

incorporated as a private limited liability company and

the name was changed to E. John, Thompson, White

and Co. Ltd.

1948

1960 1962 1966

JOHN KEELLS PLC

1

0

Performance Highlights

Financial Highlights – Three Year Performance

Year ended 31st March

Indicator

2015/2016 2014/2015 2013/2014

Earnings Highlights and Ratios

Group revenue Rs. 000's 706,664 959,925 874,797

Group profits before interest and tax (EBIT) Rs. 000's 128,648 410,622 418,499

Group profits before tax Rs. 000's 63,466 332,979 317,327

Group profits after tax Rs. 000's 54,213 231,847 215,473

Group profits attributable to shareholders Rs. 000's 52,746 217,401 150,251

Earnings per share Rs. 0.87 3.58 2.47

Interest cover No. of times 1.97 5.29 4.14

Return on equity % 1.62 7.06 6.66

Return on capital employed

Balance Sheet Highlights and Ratios

% 3.24 9.58 9.80

Total assets Rs. 000's 4,982,427 6,074,386 5,935,864

Total debt Rs. 000's 652,115 908,330 1,079,811

Number of shares in issue 000's 60,800 60,800 60,800

Total shareholder funds Rs. 000's 3,312,398 3,379,434 3,190,693

Net Assets per share Rs. 54.48 55.58 52.48

Debt/Equity % 19.68 26.88 33.84

Debt/Total assets

Market/ Shareholder information

% 13.09 14.95 18.19

Market price as at 31st March Rs. 70.00 92.00 70.00

Market capitalization Rs. 000's 4,256,000 5,593,600 4,256,000

Price earning ratio No. of times 80.69 25.73 28.34

Dividend paid Rs. 000's 228,000 206,720 212,800

Dividend per share Rs. 3.75 3.40 3.50

Dividend payout ratio % 432.26 95.09 141.70

Dividend yield % 5.36 3.70 5.00

G4-EN 29


1

1

Non-Financial Highlights - Three Year Performance

Year ended 31st March

Indicator

2015/2016 2014/2015 2013/2014

Economic Performance

Economic Value added Rs. 000's 814,121 1,014,564 997,171

Employee benefit liability Rs. 000's 72,126 68,305 66,074

Proportion of purchases from local suppliers within Sri Lanka

Environment Impact

% 100 100 100

Direct Energy consumption (GJ) GJ 386 426 440

Direct Energy (GJ) per Rs.Million of revenue No. of times 0.55 0.44 0.50

Indirect Energy Consumption (GJ) GJ 884 813 1,027

Total Carbon foot print (MT) MT 196 185 227

Total Carbon Foot print (MT) per Rs.million of revenue No. of times 0.28 0.19 0.26

Water withdrawal (m3) (m3) 3,208 4,448 5,672

Water withdrawal (m3) per Rs. million revenue No. of times 4.54 4.63 6.48

Significant environment fines*

Working Environment, Health and Safety

Rs. Nil Nil Nil

Total Employees Number 96 96 95

Number of injuries during work Number Nil Nil Nil

Total training hours Hours 760 620 737

Average training hours per employee Hours 14 25 22

Number of lost days Number Nil Nil Nil

Number of employees receiving performance review

Ethical Business

% 100 100 100

Incidence of child labour (below age 16) Number Nil Nil Nil

Incidence of young workers (age 16-18) Number Nil Nil Nil

Incidence of force labour during the year

Social Responsibility

Number Nil Nil Nil

Community engagement (number of persons impacted)** Number 726 866 300

Proportion of business analysed for risk of corruption % 100 100 100

Significant fines for violation of laws/regulations* Rs. Nil Nil Nil

Significant fines for product/service issues* Rs. Nil Nil Nil

* Significant fines are defined as fines over rupees one million

**Through eye camps & HIV Programmes conducted

G4-3, G4-17, G4-18, G4-28

JOHN KEELLS PLC

1

2

An Introduction to this Report We are pleased to present our second integrated

Annual Report to our stakeholders. This report covers

the activities and operation of John Keells PLC., John

Keells Warehousing (Pvt) Ltd., and John Keells Stock

Brokers (Pvt) Ltd., (herein referred to as “Group”) for

the period 1st April 2015 to 31st March 2016. Further

this report will describe and quantify how we create

financial and nonfinancial value to our stakeholders

to provide a longer-term view of the business.

This Integrated Annual report is broadly in line with the

“Preparer’s Guide to Integrated Corporate

Reporting”. The corporate governance aspects in

this report are based on the Code of Best Practice on

Corporate Governance issued jointly by the Institute

of Chartered

Accountants of Sri Lanka and the Securities

and Exchange Commission of Sri Lanka. Further the

Group has voluntarily adopted GRI G4 guidelines to

report sustainability information.

Being focused on transparency and

accountability, we confirm that the

statutory/obligations in the report is in compliance

with the laws and regulation of Chartered Accounting of

Sri Lanka, the Companies Act No. 7 of the 2007 and

Listing Rules of the Colombo Stock Exchange

(CSE).


1

3

Financial statements in this report have been prepared on

an accrual basis and under the historical cost

convention, unless otherwise specifically stated with

detailed discussions where applicable. In order to

ensure faithful representation, materiality, relevance,

accuracy and reliability this report has been audited

by Messrs. Ernst & Young whose independent

Auditor’s Report to the shareholders of the Group is

given on page 93.

In our effort to reduce

the carbon footprint of

our Group, we have

created this report in

the form of a CD-Rom

and made it available

to all shareholders.

This report is also

available online at

www.johnkeellstea.c

om. In addition, we

have taken measures

to post or deliver a

printed copy to any

shareholder upon

request.

Any feedback or inquiries

regarding the content of this

report can be directed to:

Financial Controller

John Keells PLC

No.186

Vauxhall

Street

Colombo 2.

E-mail: [email protected]

Year at a

Glance

JOHN KEELLS PLC

1

4

Year at a glance with operating

highlights and significant events • Galpaditenne Tea Factory sold 3.8

million kilograms (Jan–Dec.2015)

which is the highest quantity sold by a

single tea factory.

• Avissawella Tea Factory secured the

best average prices in the

Sabaragamuwa province. The average

of Rs.502.99 was Rs.87.04 above the

low grown net sale average for 2015.

• Berubela Tea Factory was able to

achieve a significant improvement in

the quality of the tea produced during

the year. They were able to secure a

rank of 25 for the year ended 2015 in

the Low Grown Category.

• Nawalakanda Tea Factory, a 100%

mark sold by John Keells PLC, had

manufactured 2.0million kilograms for

the year (Jan - Dec 2015). The factory

also managed to achieve 79 top prices

during the year.

• Ceciliyan Tea Factory sold 3.4 million

kilograms for the year 2015 which is the

third largest volume manufactured by a

single tea factory.

• Mr. S M Munasinghe the CEO of John

Keells PLC resigned during the year

and Mr. H G R De Mel was appointed

as Acting CEO of John Keells PLC.

• Bogoda Tea Factory achieved a

commendable sale average of

Rs.448.18 attaining a rank of 54 for

the year 2015 compared to the rank of

122 in 2014 in the Low Grown

Category.

• Kiruwanagala Estate secured the

highest average in the RPC category all

island, with an average of Rs.473.13

which was Rs.57.18 above the Low

Grown net sale average price.

• Hingalgoda Estate was able to achieve

the best average price of Rs.446.71

which was Rs.70.39 above the net sale

average for the CTC Low Grown

Category. The estate also obtained 93

top prices during the year.

• Watawala Plantations PLC recorded

the highest quantity sold amongst all

regional plantation companies.

Quantity sold was 9.6 million kilograms

for the year. (Jan- Dec 2015).

• Talawakelle Tea Estates PLC was

ranked first in all elevations amongst all

Regional Plantation Companies (RPC)

with an average price of Rs.459.84

(quantity sold 7,117,144 kilograms).

• Conducted eye camps in Nayabedde

Tea Estate and Derangala Hills Factory

with a total of 621 patients being

screened, donated spectacles and

directed patients to cataract

operations.

• Delta Estate achieved the first position

in the CTC Medium Grown Category.

• Rothschild Estate recorded the highest

quantity by a single tea factory amongst

the RPC factories from all elevations for

the year 2015 with a sold quantity of

1,602,746 kilograms.

• In order to ensure transparency and

accuracy on granting Advances and

Loans to Clients, John Keells PLC

successfully implemented an

automated Tea Advance System.

• John Keells PLC was lauded with a

Bronze award in the “Diversified

Holdings (Groups up to 5 Subsidiaries)”

category at the 51st Annual Report

Award competition conducted by the

Institute of Chartered Accountants of

Sri Lanka.

• John Keells Warehousing was

recertified for compliance of Health &

Safety Assessment Series (OHSAS)

and certification of ISO 22000:2005

Food and Safety Management Systems

during the year.

• John Keells Stock Brokers received the

“Best Stockbroking Research Team”

award at the Chartered Financial

Analyst Sri Lanka Capital Market

Awards 2015.

• Mattakelle Estates was able to secure

the number one position in the Western

High Grown elevation with an average

price of Rs.516.20 for the seventh

consecutive year.

• Pedro Estate achieved 154 top prices

for Nuwara Eliya Teas during the year.

• Kenilworth Estate achieved 100 top

prices, and was ranked second in the

Western Medium Grown elevation.

• Dunsinane Estate achieved 49 top

prices for CTC High Grown Category

during the year.

• Nuwara Eliya Estate achieved 64 top

prices in the category of Western High

Grown Teas.

• Carolina Estate achieved the second

position in the CTC Medium Grown

Category.

• The Group conducted a series of

awareness sessions to all staff

categories on “Working Against

Violence through Education” (WAVE).

Expanding the Code of conduct and the

Group Nondiscrimination policy to

cover Gender Identity.

G4-1, G4-15


1

5

I am pleased to present to you the

Integrated Annual Report and Financial

Statements for the year ended 31st

March 2016 of your Company in what has

been a challenging year for the entire

industry in terms of market conditions.

Your Company remained resilient during

the year, undertaking many initiatives to

improve its operations and efficiencies.

Underpinned by our emphasis on quality,

during the year, we initiated widespread

efforts to rally our growers and encourage

them to improve the quality of their output

in order to be able to command a

premium price at the auctions. Internally,

we simplified our cost structures to

become leaner whilst we also

implemented process improvements and

rationalized our warehousing operations

to improve capacity utilization for the

future.

Macro-economic Overview In 2015, Sri Lanka’s economy expanded

by 4.8 per cent, a marginal drop from the

4.9 per cent recorded in 2014. Although

the Agriculture sector expanded by 5.5

per cent for the year, both the Tea and

Rubber sectors contracted by 2.7 per

cent and 10.1 per cent respectively in

2015.

The improvement in the US economy

resulted in short-term capital outflows

from emerging markets, particularly in the

latter part of the year. This affected the

performance of the Colombo Stock

Exchange, which saw a net outflow of

foreign capital in 2015 together with a

noticeably lower level of foreign

participants in the market. Meanwhile, the

Rupee, which remained broadly stable

during the first eight months of the year,

depreciated at a faster pace from early

September 2015 following the Central

Bank of Sri Lanka’s decision to allow

greater flexibility in the determination of

the exchange rate.

The Tea Industry: The prospects for Sri Lanka’s Tea

industry remained challenging for the

second consecutive year, amidst the

ongoing struggles faced by major Tea

buying nations across the globe. It was

yet again driven by the decline in oil

prices and political unrest that was the

main cause for the weak global demand

for Tea from countries such as Russia,

Ukraine and Turkey. Global Tea

consumption in 2015 declined by 2.89

per cent to 1,651 million kilograms

compared with 1,700 million kilograms in

2014.

The weak global demand compressed

prices at the Colombo Tea auction and

the total auction average per kilogram for

the calendar year 2015 was Rs. 402.14

compared to the Rs. 461.86 recorded in

the previous year. Of this, High-grown

teas and Mediums represented a decline

of Rs. 31.98 and Rs. 47.56 respectively,

although the sharpest decline was

observed in the Low-grown Teas which

fell by Rs. 71.74.

Trading volumes at the Colombo Tea

auction fell to the lowest in three years,

where a total of 317.1 million kilograms

were traded in 2015. Earnings from Tea

exports fell by 14.5 per cent from 2014

levels to register Rs. 182 billion in 2015.

The Rubber industry The global demand for natural Rubber

decelerated once again in 2015,

triggered by the lower demand from

vehicle tyre manufacturers in China,

Japan and South Korea who were

impacted by a drop in vehicle exports.

Meanwhile,

Going forward the

focus will be on

reaping the full

potential of the

technology platform

developed in the

prior financial year

and emphasis

placed on improving

efficiency of its

processes.

Annual Elevational Averages

High Grown

300

340

380

420

460

500

2015 2014 2013 2012 2011

Rs/kg

Medium Grown

Low Grown

JOHN KEELLS PLC

1

6

increased production from other Rubber

producing countries such as Thailand and

Vietnam created oversupply in the market

resulting in a buildup of stockpiles in the

market.

Resultantly, the price of all types of

Rubber declined steadily throughout 2015

with the average price per kilogram of

RSS at the Colombo auctions being Rs.

247.74 compared with Rs. 258.81 at the

end of 2014, while Crepe prices fell to Rs.

301.67 from Rs. 309.79.

Sri Lanka’s Rubber exports for 2015

declined by 5,900 metric tons compared

to the previous year, with the volume of

Sheet Rubber and Latex Crepe being the

lowest seen for the past 10 years.

Consequently, earnings from exports fell

by 36 per cent for the twelve months

ending 31st December 2015.

Stock Broking

The All Share Index (ASPI) fell by 12.2

per cent while the S&P SL20 index fell by

17.8 per cent during the financial year.

Average daily turnover volumes declined

by 35 per cent to Rs.962 million

compared to the previous financial year.

Market conditions were challenging

throughout the year with the reduced

activity concentrated among the leading

brokerage firms.Net foreign outflows

were Rs.9.3 billion for the financial year,

which was a reversal from the net foreign

inflows seen in FY 2014/15, as a

consequence of economic and currency

weakness in China as well as the

anticipation of the US Federal Reserve

tightening rates which eventually

happened in December 2015.

During the year, the Central Bank of

Sri Lanka commenced a process of

monetary tightening, raising the Statutory

Reserve Ratio (SRR) by 1.5 per cent to

7.5 per cent in December 2015 and the

benchmark interest rates by 50 basis

points to 8 per cent in February 2016.

Despite the higher interest rates, activity

on the Colombo Stock Exchange was

driven by local investors, primarily High

net worth individuals and Institutional

clients, as valuations of certain counters

were attractive.

Performance Summary Consolidated revenue, for the financial

year ended 31st March 2016, from Tea

and Rubber Broking, Warehousing and

Stock Broking activities declined by 26

per cent to Rs. 707 million as against Rs.

960 million recorded in the previous year.

Profit after tax (PAT) was Rs. 54 million,

77 per cent lower than the PAT recorded

in the previous financial year.

Future Outlook The demand for tea is expected to remain

subdued in the short term against the

backdrop of the uncertain political

environment in Russia and Ukraine,

turmoil in the Middle Eastern markets and

significant currency depreciation in key

tea importing countries. However, the

lifting of sanctions on Iran is expected to

augur well for Ceylon Tea and the Group

expects an uptick in the demand for low

grown tea in the near term.

Your Company will focus on reaping the

full potential of the technology platform

developed in the prior financial year and

also place emphasis on improving

efficiency of its processes.

Appreciations I wish to thank each and every member

of the JKPLC team as well as our

stakeholders, for their loyalty and

commitment that has been vital during

these challenging times.

Ms Y A. Hansen comes up for re-election

in terms of section 83 of the Articles of

Association. Having served the Board for

nine years, she has informed us that she

would not be seeking re-election. In a

similar vein, Mr. T De Zoysa and Ms S T

Ratwatte, having served the Board for

more than nine years from the date of

first appointment, have also informed us

that they would be resigning after the

Annual General Meeting of the

Company. I would like to place on record

our sincere appreciation to all of them for

the valuable contribution made during

their tenure and wish them all the best in

their future endeavors. I also take this

opportunity to welcome Mr V A A Perera

to the Board of Directors and thank my

colleagues on the Board for their

guidance and support.

.

S C Ratnayake

Chairman

27th May 2016

The Board of

Directors


1

7

Susantha Ratnayake Non Independent Non Executive Chairman

Susantha Ratnayake was appointed as

the Chairman and CEO of John Keells

Holdings PLC (JKH) in January 2006 and

has served on the JKH Board since

1992/1993 and has 38 years of

management experience, all of which is

within the John Keells Group. A past

Chairman of the Sri Lanka Tea Board and

Ceylon Chamber of Commerce, he is also

the Chairman of Employers’ Federation of

Ceylon.

Ajit Gunewardene Non-Independent Non-Executive Director

Ajit Gunewardene is the Deputy

Chairman of John Keells Holdings PLC

and has been a member of the Board for

over 21 years. He is a Director of several

companies in the John Keells Group and

is the Chairman of Union Assurance PLC.

He is a member of the Board of SLINTEC,

a company established for the

development of nanotechnology in Sri

Lanka under the auspices of the Ministry

of Science and Technology. He is also a

member of the Tourism Advisory

Committee appointed by the Minister of

Tourism Development, a member of the

advisory committee for Investment

Promotion appointed by the Minister of

Development Strategy and International

Trade and a member of the Steering

Committee for establishment of the

National Science Centre in Sri Lanka

appointed by the Minister of Science,

Technology and Research. He has also

served as the Chairman of the Colombo

Stock Exchange and Nations Trust Bank

PLC. Ajit has a Degree in Economics and

brings over 33 years of management

experience.

Ronnie Peiris Non-Independent Non-Executive Director

Appointed to the John Keells Holdings

PLC Board during 2002/03, Ronnie, as

Group Finance Director, has overall

responsibility for the Group’s Finance

and Accounting, Taxation, Corporate

Finance, Treasury, and the Information

Technology functions. He is also a

Director of several companies in the John

Keells Group. He was previously the

Managing Director of Anglo American

Corporation (Central Africa) Limited in

Zambia.

He has over 40 years of finance and

general management experience in Sri

Lanka and abroad. He is a Fellow of the

Chartered Institute of Management

Accountants, UK, Association of

Chartered Certified Accountants, UK,

and the Society of Certified Management

Accountants, Sri Lanka and holds an

MBA from the University of Cape Town,

South Africa. Previously, the Chairman of

the Sri Lanka Institute of Directors, he is

currently a member of the Committee of

the Ceylon Chamber of Commerce.

Sanjeeva Fernando Non-Independent Executive Director

Sanjeeva Fernando is responsible for the

IT industry group and the Plantation

Services sector. He possesses over 28

years of senior managerial experience in

diverse businesses and capacities. He

joined the John Keells Group in 1993 and

has headed the Group’s Printing and

Packaging businesses, Bunkering

businesses and has served as Head of

the Transportation and Logistics sector

overseeing the Group’s airline, travel,

freight forwarding, shipping and

bunkering businesses in Sri Lanka, India

and the Maldives. Sanjeeva was also

given the responsibility of setting up and

developing the Group’s IT Enabled

Services business (BPO) in Gurgaon,

India and resided in India from 2007 until

2012 whilst overlooking the rest of the IT

businesses in the Group. He is a Director

of John Keells PLC and Tea Smallholder

Factories PLC. A printer by profession,

Sanjeeva qualified from the London

School of Printing and is a member of the

London Institute of Printing.

Anil Perera Non-Independent Non-Executive Director Anil

Perera has over 37 years’ experience in

the Tea Industry having started his career

at the Janatha Estates Development

Board. He has served in the Plantation

Regions of Hatton, Avissawella, Kegalle

and Nawalapitiya.

He has held the positions of Operations

Director - Namunukula Plantations,

Deputy Chairman – Colombo Tea

Traders’ Association, Chairman – Sri

Lanka Tea Factory Owners Association

and Governor – National Institute of

Plantation Management. Currently he is

also the Chief Executive Officer of Tea

Smallholder Factories PLC and is a

Director of the Sri Lanka Tea Board.

Yolande Hansen Independent Non Executive Director

Yolande Hansen was appointed as an

Independent Non Executive Director to

the Board of John Keells PLC, in July

2005. She joined John Keells Group

(Walkers Tours) in June 1972, as one of

the pioneers in tourism, and worked for

16 years for the Group. She is presently

the CEO and Proprietor of Columbus

Tours Pvt Ltd., and has been for the past

25 years.

JOHN KEELLS PLC

1

8

Sharmini Ratwatte Independent Non Executive Director

Sharmini Ratwatte was appointed as an

Independent Non Executive Director to

the Board of John Keells PLC in May

2007.

She is a Fellow of the Chartered Institute

of Management Accountants, UK and

also holds a Masters in Business

Administration from the University of

Colombo.

She holds Non-Executive Directorships in

MAS Investments (Pvt) Ltd, the non-

apparel investment arm of the MAS

Group, is a Trustee of Sunera

Foundation, a non profit organization

empowering differently-abled persons

using the performing arts and is a Trustee

and Chairman of the Federation of

Environmental Organisations, which

works to support environmental

organizations operating in Sri Lanka.

Tilak de Zoysa Independent Non Executive Director

A well-known figure in the Sri Lankan

business community, Tilak de Zoysa,

FCMI (UK) FPRI (SL), Honorary Consul

for Croatia and Global Ambassador for

HelpAge International was conferred the

title of “Deshabandu” by His Excellency

the President of Sri Lanka, in recognition

of his services to the country and was the

recipient of “The Order of the Rising Sun.

Gold Rays with Neck Ribbon” conferred

by His Majesty the Emperor of Japan.

In addition to being the Chairman of the

Supervisory Board and Advisor to the

Al-Futtaim Group of Companies in Sri

Lanka, he chairs Carsons Cumberbatch

PLC, Associated CEAT (Pvt) Ltd., Amaya

Hotels and Resorts USA (Radisson),

AMW Capital Leasing and Finance PLC,

Jetwing Zinc Journey Lanka (Pvt) Ltd and

HelpAge Sri Lanka, Trinity Steel (Pvt)

Ltd., and CG Corp Global Sri Lanka.

He is also the Vice Chairman of Ceat

Kelani Holdings (Pvt) Ltd., Orient

Insurance Ltd. and serves on the boards

of several listed and private companies

which include John Keells PLC, Taj

Lanka Hotels PLC, TAL Hotels and

Resorts Ltd, Lanka Walltiles PLC,

Nawaloka Hospitals PLC, Dutch Lanka

Trailer Manufacturers (Tata Group),

Associated Electrical Corporation Ltd.,

Inoac Polymer Lanka

(Pvt) Ltd., Cinnovation INC., GVR Lanka

(Pvt) Ltd and Varun Beverages Lanka

(Pvt) Ltd (Pepsi).

Mr. Tilak de Zoysa is a past Chairman of

the Ceylon Chamber of Commerce, the

National Chamber of Commerce of Sri

Lanka, HelpAge International (UK) and

served as Member of the Monetary

Board of Sri Lanka (2003-2009).

Senior

Management Team


1

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John Keells PLC

Hishantha De Mel Assistant Vice President/ Acting Chief

Executive Officer

Asha Perera Assistant Vice President/Financial

Controller

Dasarath Dasanayaka Head of Manufacturing – High Grown

Sanjay Karunaratne

Manager, Tea

Kushani Daluwatte Manager, Tea

Ravin Vannitamby

Manager, Tea

Kumar Bhareti

Manager, Manufacturing

Vige Johnpillai

Manufacturing Consultant

Deshan Bandaranayake

Manager, Tea

Shehan Meegama

Manager, Rubber

Shane Ingram Manager,

Finance

Hisham Nazeem

Head of IT GRC, Head of Business

Systems Strategic Group IT

John Keells Stock Brokers

(Pvt) Ltd

Tivanka Ratnayake

Vice President Chief

Executive Officer

Suran Wijesinghe

Executive Vice President

Chief Financial Officer

Financial Services Sector

Akmal Mashoor Assistant Vice President

Head of Sales

Navin Ratnayake

Manager, Head

of Research

Chryshanthi Manuel Compliance Officer

Samantha Siriwardene

Head of Process and system

Nithila Talgaswatte

Manager, Foreign Sales

Marinus Fernando

Manager, IT

John Keells Warehousing

(Pvt) Ltd

Ashok Jayawickreme

Assistant Vice President/Head of

Operations

** Senior Management Team as at 31.03.2016

G4-8, G4-12, G4-13, G4-19, G4-27,

Management Discussion & Analysis

JOHN KEELLS PLC

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As a business entity, JK PLC’s fundamental purpose is to create value for all

stakeholders. Be it shareholders, clients, suppliers, employees, the regulator or the

communities impacted by our work, we strive, at all times, to exceed the expectations

of all these stakeholders. To do this we have adopted a broader management policy

framework, which underpins our role as core value creators for each stakeholder cluster.

At the same time, we remain committed to improve the manner in which we conduct our

business operations in order to benchmark the highest international standards for

corporate best practices and compliance.

Business Report - Tea Broking Global Market Conditions for 2015

The year 2015 was a very challenging time for the global Tea industry, with all major

Tea buying nations gripped by economic turmoil and/or political unrest, for instance,

Russia had to deal with impending economic sanctions, whilst many Middle East

countries continued to struggle with the ongoing decline in oil prices for the second year

running, once again prompting them to cut back on their Tea imports. Meanwhile, the

worsening political situation in Turkey and Syria had serious economic repercussion on

the gulf region, which translated into lower demand from these nations as well.

Overview of the Local Tea Industry

Sri Lanka’s Tea industry continued to

suffer for the second consecutive year, as

major Tea buying nations were forced to

make further cutbacks on their Tea

imports; Russia, the largest importer of

Ceylon Tea, reduced its purchases

significantly due to the effects of

sanctions, while exports to Turkey too

were affected due to the border controls

imposed in the latter part of 2015, which

curtailed access to the neighboring

countries. These factors meant, Sri

Lanka’s Tea exports for the twelve

months ending 31st December 2015,

amounted to only 306.94 million

kilograms, a decline of 20.40 million

kilograms (3.45%), compared to

corresponding period for the previous

year. Whilst these statistics clearly

demonstrate the strong correlation

between Sri Lanka’s tea exports and

movements in global oil markets, it also

points to the risks associated with the

country’s overdependence on gulf

countries for the export of Ceylon Tea.


1

However, during the period January to March 2016 Sri Lanka was able to benefit from

the lifting of US-led sanctions on Iran. This led to increase in export volumes to trading

centers in Dubai and India, both major Tea blending hubs, where Tea is blended and

re-exported to Iraq. Meanwhile, exports of specialty light liquoring High-grown Teas to

China also increased marginally during this period.

In general however, burdened by overall

weak global demand throughout, prices

recorded at the Colombo Tea auction

were considerably lower in 2015 than in

the previous year. The Freight On

ANNUAL ELEVATIONAL PRODUCTION (million kg)

Year High Grown Medium Low Grown Total

Grown

2011 79 52 196 327

2012 74 52 202 328

2013 76 56 208 340

2014 79 49 210 338

2015 75 52 202 329

Year

ANNUAL ELEVATIONAL SALE AVARAGES (Rs)

High Grown Medium Low Grown

Grown Average

2011 329.95 319.77 381.27 359.89

2012 375.53 351.08 407.14 391.64

2013 402.98 398.65 469.91 444.42

2014 420.36 410.13 488.06 461.86

2015 388.38 362.57 416.32 402.14

CATEGORY WISE TEA E XPORTS (201 4/2015)

Country Bulk Tea

Mn Kgs

Packeted

Tea Mn

Kgs

Tea

Bag Mn

Kgs

Green Tea

Mn Kgs

Total

2015 Mn

Kgs

Total

2014 Mn

Kgs

Russia 28.59 5.56 1.59 1.01 36.74 44.10

Turkey 2.12 31.17 0.40 0.03 33.71 44.75

Iraq 3.39 27.82 0.15 - 31.36 24.75

Iran 15.00 14.99 0.03 0.02 30.05 30.08

U.A.E. 10.45 11.97 0.51 0.51 23.44 19.81

Azerbaijan 10.77 0.39 - 0.01 11.18 11.15

Syria 0.57 9.76 0.76 - 11.09 12.92

Libya - 9.90 0.01 0.08 9.98 12.65

Kuwait 1.97 6.28 0.45 0.03 8.73 12.22

Japan 6.80 0.87 0.78 0.01 8.46 9.11

Board (FOB) average price per kilogram

for this period stood at Rs.593.08 in

contrast to Rs.649.37 a substantial deficit

of Rs.56.29 when compared to year 2014,

leading to a 8.6% drop in foreign

exchange income attributable to Tea.

Moreover, the depreciation of currencies

in Russia, Iran, Syria and Turkey meant

Sri Lanka’s Tea exports could not fully

benefit from the rupee devaluation

effective from September 2015. For the

first time in three years, the country also

had to deal with an oversupply situation

as well in 2015, as decline in exports was

greater than the decline in production

volumes.

Export Volumes and

Export Earnings Rs. Mn Kg. Mn 250,000 350

200,000 280

150,000 210

100,000 140

50,000 70

0 0 2016 2015 2014 2013 2012

Tea export quantity (million Kg.)

Tea export earnings (million Rs.)


JOHN KEELLS PLC

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Tea production volumes declined from 338.03 M Kg’s in 2014 to 328.96 M

Kg’s in 2015, a decline of 9.1 M Kg’s (2.74%). This was mainly due to

many producers’ seeking a strategy of improved quality to counter the

market conditions as well as inconsistent weather patterns that failed to

provide the required Tea cropping conditions. Intermittent rainy

weather from about August 2015, followed by severe drought

conditions in January – March 2016, not only meant lower yields but also

lower quality yields during this period.

Monthly Tea Sale

Averages

Meanwhile, the rapid decline in auction prices had a direct impact on the

small growers. Despite the government’s B60 subsidy programme where the

growers were offered a guaranteed price of Rs. 80/- per Kg, many factory

owners were forced to discontinue their operations, as their margins

evaporated. The B60 programme

was then discontinued in

August 2015. The Government also

issued a complete ban on the use of

Glyphosate, a herbicide essential for the

tea industry, with effect from April 2015.

Given that there is no alternative for

Glyphosate currently available in Sri

Lanka, the ban proved to be a severe

blow to the industry, where the only other

solution was to resort to manual weeding.

However, manual weeding is a highly

expensive and unsustainable solution,

given that it also damages the soil and

accelerates soil erosion, thereby

disrupting growing patterns in the long

term. Furthermore, the government’s

decision to revise the fertilizer subsidy

scheme with effect from November 2015,

brought in further challenges to the

manufacture.

Performance of Tea Broking With all aspects of the Tea industry being

challenged, the company focused its

attention on advising all its producers on

improving quality by focusing on green

leaf intake and improving its

manufacturing processes. Given the

depressed market conditions, it was felt

that a better quality product would help

command a premium price at the

Colombo auction.

The move proved successful, as

evidenced by the record prices achieved

by the company on a number of

occasions in 2015 for its producer clients

at the Colombo auctions. The focus on

quality by clients and the closure of some

of the factories due to operational

constraints meant JKPLC had to contend

with lower volumes. Consequently,

volume-based market share as at 31st

March 2016 dropped to 16.17% from

17.72% a year ago.

In tandem with the depressed market

conditions, brokerage income from tea fell

by 22.55%, while PBIT contribution to the

bottom line dropped by 98.05% due to

increased bad debt provisions for clients

who had borrowed monies and closed

their factories due to operational

constraints during the year.

JOHN KEELLS PLC -ELEVATION WISE

MONTHLY TOP PRICES

Year Month High

Medium Low Tot

al

2015 Apr 35 25 31 91

2015 May 29 40 31 100

2015 Jun 40 33 52 125

2015 Jul 31 28 50 109

2015 Aug 31 15 47 93

2015 Sep 33 32 55 120

2015 Oct 29 38 61 128

2015 Nov 20 37 51 108

2015 Dec 32 32 38 102

2015

300

350

400

450

500

550 Rs./Kg.

2014


2

3

2016 Jan 31 26 38 95

2016 Feb 33 40 51 124

2016 Mar 35 40 57 132

Total 379 386 562 1,327

8

2 6

5

9

10

7 1

4 3

11

Matale 2015 - 3.03 / 2014 - 2.84

Kandy 2015 - 33.48 / 2014 - 32.87

Kegalle 2015 - 9.51 / 2014 - 9.28

Badulla 2015 - 28.59 / 2014 - 28.98

Colombo 2015 - 0.82 / 2014 - 0.68

Nuwara Eliya 2015 - 71.45 / 2014 - 73.52

Ratnapura 2015 - 73.36 / 2014 - 74.81

Kalutara 2015 - 18.28 / 2014 - 18.22

Hambantota 2015 - 0.25 / 2014 - 0.27

Matara 2015 - 41.54 / 2014 - 44.14

Galle 2015 - 48.65 / 2014 - 52.41

District wise Tea Production (MKg)


JOHN KEELLS PLC

2

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2

5

Responsible Sourcing: As in the past, efforts to develop the

quality of the produce continues to be a

key priority for JKPLC. As part of the

company’s responsible sourcing

practices, strengthening relationships

with established Tea Producers remain

critical to achieving this objective.

Frequent field visits by JKPLC

manufacturing advisers are aimed at

providing continuous management

advisory services to help growers

improve estate yields and develop a

sustainable framework for Growth.

Meanwhile regular technical training

workshops seek to enhance the quality of

each Tea grade in line with international

standards.

During the year estates which obtained

top prices at the weekly auctions were

acknowledged with a commendation

certificate.

Manufacturing, Tasting and

Marketing of Tea With the rapidly deteriorating market

conditions, the manufacturing strategy

shifted towards improving the quality of

tea produced rather than quantity as a

means of claiming a premium price at the

auctions. The JKPLC team, of

manufacturing advisers increased their

frequency of estate visits with the view of

advising, inspecting and implementing

improvements in the processes of green

leaf intake and other manufacturing

processes which were essential in

achieving success in this strategy. In

addition to these a number of workshops

were conducted for factory staff of

different categories in tea growing

regions with the view of giving the

necessary know how of current market

trends, practices and new processes

available in improving the quality of the

produce and the improvements in their

standard of living.

In addition reviews of performance were

presented to Plantation companies on a

quarterly basis.

Supplier Development As part of the multi faceted role

demanded of modern day brokers,

JKPLC is often called upon to function as

lead financier for estates with which the

company has established long standing

relationships. Governed by the lending

model mandated by the Colombo

Brokers Association all lending for the

year was done as per the minimum

lending rates stipulated by the

association. The ability to secure low-

cost borrowings by leveraging on low

interest rates at the beginning of the year

helped JKPLC maintain a healthy spread

in this business line initially although the

spread decreased marginally towards the

latter part of the year due to increase in

borrowing rates

Delivery and logistics JKPLC continues to be rated in the trade

as a top tier broking house who is at the

forefront of Sri Lanka’s Tea trade. It is

also recognized for its ethical standards

and fairness while embracing and

introducing innovative IT solutions which

have benefitted all stakeholders of the

Tea industry. As in the past the company

continues to look for new cutting edge

technology which will benefit the industry

wide growth and survival.

Innovation During the year a transparent, robust and

efficient new advance processing module

was implemented with different checks

and balances at different stages to

facilitate the timely and fair disbursement

of monies requested by clients for their

day to day working capital requirement

based on the stocks available for sale.

The Company also extended the

“mAuction” platform to some of its clients

enabling them to view online real time

information of the auction. This was an

interim step implemented by the

Company until the complete

implementation of the “mAuction’’ is

rolled out. “mAuction” as stated in our

previous year annual report is an

electronic auction platform that was a

collaborative effort between JKPLC and

Mobitel (Pvt) Ltd. Currently the industry is

awaiting the rolling out of the platform by

the relevant governing authorities.

Business Report-Rubber Broking Global Market Conditions for 2015

The global demand for natural rubber

declined for the second consecutive year,

as the demand from key rubber buying

markets, in India and China slowed

amidst signs of a serious economic

slowdown in these countries.

Meanwhile, higher yields emerging from

Thailand and Vietnam resulted in larger


JOHN KEELLS PLC

2

6

volumes of raw rubber coming into the

global market. With no ready takers, this

created a serious over supply situation

and only further depressed the market.

On the other hand, the rapid decline in

world crude oil prices meant synthetic

rubber became even cheaper. This was

yet another serious blow that caused a

drastic drop in the demand for natural

rubber as the year progressed.

Rubber market prices for 2015

Industry

Exports

3,500

Overview of the Local Rubber

It was a dismal year for Sri Lanka’s rubber

industry, having no choice but to contend

with the worsening conditions in the

global market. Reacting to the anemic

global demand, prices at the Colombo

rubber auctions tumbled, showing an

unprecedented decline over the twelve

months ending 31st December 2015.

Consequently rubber exports for the year

also dropped by 5,900 tons compared

to the previous year, foreign exchange

earnings attributable for rubber dropped

by 66.7%, from Rs 5,914.4 million in 2014

to Rs 3,548.03 million for 2015.

Rubber Exports for 2015

0

Kg.

Sole Crepe Latex Crepe

RSS

Total rubber production for 2015 declined

by 10% to 88.6 million kilograms

compared to the previous years’ 98.5

million kilo grams. This was the lowest

recorded for the past five years.

The lower volumes were due to a visible

drop in production from the smallholders,

the direct result of the low prices at the

Colombo auctions.

0

30

60

90

120

150

2016 2015 2014 2013 2012

hectares '000) (

Cultivation of Rubber

Total Extent Area Under

Tapping

Replanting New Planting

Squeezed by high labour costs, amidst

lower revenues, many small growers

gave up tapping entirely in an effort to

cut their losses as much as possible.

Meanwhile, smallholders who failed to

fertilize their cultivations were faced with

the prospect of lower yields, causing

them to sell their production even below

cost in most cases.

100

160

220

280

340

400 Rs./Kg.

L.CR.1X L.CR.1 OG

S.CR.3 RSS.1

0

300

600

900

1200

1500

1800

Yield (kg/Hectare)

Cost of Production (Rs/Kg)

Average Price - RSS 1 (Rs,Kg)

2015 2014 2013 2012 2011


2

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2,800

2,100

1,400

1,800,000 700

1,440,000 0

Rubber Yield and Price Comparison 1,080,000

720,000

360,000

Production


JOHN KEELLS PLC

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Sri Lankan Rubber Production

Performance of Rubber Broking

In what was clearly a challenging year,

the company was able to generate

sufficient volumes needed to maintain a

reasonable revenue. Strict cost control

measures and resource management

practices were applied throughout the

business, in order to streamline

operations wherever possible and reduce

the pressure on the bottom line.

From an operational perspective, the

focus was to improve quality of the rubber

sourced. It was hoped that a better quality

output would have the capacity to claim a

premium price at the Colombo auctions.

With this in mind, the company began to

extend support to growers through

knowledge sharing workshops which

encouraged them to improve the overall

efficiency of the tapping and collection

methods, ultimately leading to a better

quality output.

Value added Solutions –

Warehousing Warehousing requirements have always

been, largely, a derived demand that is

fueled by the performance of the Tea and

Rubber sectors. With both these sectors

experiencing a downturn for the past two

consecutive years, 2015/16 proved to be

another challenging year for the

warehouse operation. Despite these

setbacks however, average capacity

utilization stood at 75% for the first nine

months of the financial year, which

helped the warehouse to achieve

budgeted volumes for the first three

quarters of the financial year.

Performance in the January to March

2016 quarter however was much lower

than expected, as both Tea and Rubber

production quantities depleted amidst the

persistent countrywide drought. Average

capacity utilization at the warehouse

dropped to 54.3% during this period,

which had an adverse impact on the last

quarter revenue. Costs too escalated in

the final quarter, following the gazette

notification stipulating a mandatory pay

increase for the workforce from 01st May

2015. The provision for retrospective

payments for the May to December 2015

period, further pushed up costs by about

8.23% for the year, having a much larger

impact on the bottom line as at 31st

March 2016.

Despite these difficulties, the ongoing

focus on operational efficiency led to

certain infrastructure investments during

the year. A new energy efficient reach

truck was added, bringing the total fleet

to 5 reach trucks and 4 stackers. These

measures have delivered progressively

lower energy bills for the past few years,

with a YoY reduction of 29% for 2015/16.

Tea Arrival to Warehouse (Mn Kg)

5

4

3

2

1

0

2015/2016 2014/2015

Meanwhile, the ISO 22000 and HACCP

certifications were renewed during the

year, signaling the emphasis on

maintaining international food safety and

storage standards across the warehouse

facility.

Business Report – Stock Broking Overview of Stock Market

It was a slow-moving year in the Colombo

Stock Market where the All Share Index

(ASPI) fell by 12.2% while the S&P SL20

index fell by 17.8% during the financial

year. The ASPI crossed the 7000 mark in

May 2015, with the market advancing

ahead of the Parliamentary elections in

August 2015. While reaching its peak of

7498 in August 2015, the ASPI continued

to decline steadily thereafter, as the

conclusion of the Parliamentary elections

did not result in the expected upturn in the

market and turnover volumes.

Sheet Rubber Crepe Rubber

TSR Other

0

10

20

30

40

50

60

70

( Mn.Kg.)

2015 2014 2013 2012 2011


2

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Outflows of foreign funds for the year

were quite significant and appeared to be

a consequence of economic slowdown

and currency weakness in China as well

as the anticipation of rate hike by the US

Federal Reserve in December 2015. Net

foreign outflows were Rs.9.3 billion for the

financial year, in contrast to the Net

foreign inflows recorded in the previous

financial year.

A satisfactory level of local participation

was observed in the market, driven by

High net worth individuals and

Institutional investors. Notably, only a few

leading brokerage houses in the country

were responsible for the market activity

for the year. Meanwhile, the CBSL’s

decision to raise the Statutory Reserve

Ratio (SRR) by 1.5% (to 7.5% from 6%)

in the last monetary policy statement in

December 2015 followed by the increase

of the benchmark interest rates All

Share Price Index

9

by 50 basis points (from 7.5% to 8%) in

February 2016 had a negative impact on

the stock market. Average daily turnover

volumes dropped 36% year on year to

Rs.962 million as at 31st March 2016

Performance of Stock Broking Driven by weaker activity at the Colombo

Stock Exchange, stock broking sector

recorded a 35% decline in revenue,

which resulted in a 79% drop in the PBT

contribution to Group.

Membership in Trade and

Professional Bodies The Group and company

views memberships in various

trade and professional bodies as pivotal

to the business given the ability of such

bodies to recommend policy changes,

address industry concerns and lobby for

betterment of the industry as a whole. In

addition membership is also maintained

G4-16

in internationally recognized publications

with the view of receiving global updates

on the trade best practices and trends.

Given below are some of the trade,

professional bodies and publications in

which the Group and the Company held

membership during the year.

• Ceylon Chamber of Commerce

• Colombo Brokers Association

• Colombo Tea Traders’ Association

• Colombo Rubber Traders Association

• Kerawalapitiya Industrial Zone

Association

• Employer’ Federation of Ceylon

• Colombo Stock Brokers’ Association

• Colombo Stock Exchange

• Planters’ Association of Ceylon

• International Tea Committee Index

’000

G4-10, G4-LA1, G4-LA11, G4-LA12


JOHN KEELLS PLC

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Certification and Awards The Warehouse renewed the ISO 22000

and HACCP certifications during the year,

signaling the emphasis on maintaining

international food safety and storage

standards across the facility.

for The Annual report 2014/2015

received the Bronze award in the

category “Diversified Holdings (Up to 5

Subsidiaries)” at the annual competition

conducted by the Charted Accountants

Sri Lanka (CA).

John Keells Stock Brokers received the

award for the ‘Best Stockbroking Research

Team’. The company bagged the award,

having received the highest ranking in

a two-part evaluation process where;

(1) an independent four-man selection

panel was tasked with establishing

the Best Stockbroking Research Team

by evaluating the quality and extent

of the coverage, (2) an independent

survey was conducted among user

groups including registered investment

managers, licensed unit trusts and large

corporate investors. Further, a certificate

of commendation was presented to

Lourdeena Kudaliyanage of John Keells

Stock Brokers for her equity research

report on Ceylon Tobacco Company.

Management Approach- HR

Human Resources ( HR) JKPLC’s

function is responsible for all aspects

of attracting, developing and rewarding

employees. Given the high level of

employee commitment required in our

business, we at JKL in turn are equally

dedicated to making their experience

a rewarding one, through learning

opportunities, a strong framework for

career development, health and wellness

support and a commitment to diversity

HR

Model

Employee Goal

Congruence

Employee Well-being

Perforamnce Appraisal

Employee Relations

Rewards and

Recognition

Managing Talent

Succession Planning

Training and

Development

John Keells Stock Brokers receiving the award for the ‘Best Stockbroking Research Team’.

John Keells PLC receiving the Bronze award in the category “Diversified Holdings (Up to 5 Subsidiaries)” at the annual competition conducted by the Charted Accountants Sri Lanka


3

1

and inclusion. Our HR framework is

aligned to the JKH group Human Capital

Management practices that abide by the

following policy guidelines at all times;

• Equality and diversity should be

maintained at every stage of the

employment process including

recruitment, selection, evaluation,

promotion, training and development of

all employees.

• The remuneration and benefits offered

by the company to its employees will be

compettive, in line with industry

standards and will comply with the

statutory labour laws of the country.

• Employment should be at the free will

of the employee and no individual will

be forced to remain in employment

should they not wish to do so.

• Child labour will be strictly prohibited.

• Freedom of association is considered a

right of each individual and the

company will respect the individual’s

right to be a part of an association or

group as long as such a membership

does not violate the fundamental rights

of any other individual or group.

• The company will ensure the health and

safety of all employees, while safety

standards at the warehouse will be

maintained in accordance with

internationally accepted safety

benchmarks for Occupational Health

and Safety (ISO 18001).

• The company will ensure an active

feedback mechanism that will provde

the basis for a strong communicative

culture.

• All employees will be evaluated

regularly to assess their performance

and their capacity for progress within

the company. The results of these

evaluations will help identify the training

requirements and also highlight an

employeees’ potential for career

progression within the organization.

• The company will strive to develop

leardership qualities in employees, so

as to enable them to drive the future of

the company as well as the industry.

The JKH policies and proceedures

underpins our goal to create a work

environment based purely on

meritocracy.

As such, The Company does not tolerate

any form of harassment of its employees

in keeping with its values, and considers

any act of harassment as misconduct,

entitling the company to take appropriate

action. The JKH code of conduct &

sexual harassment policy introduced in

2008 continues to support this stance.

Further, a non-discriminatory approach

prevents discrimination based on any

status or condition proteted by law. In

2015, this policy was extended to cover

sexual orientation and gender identity, in

addition to the existing list of conditions

covering age, religion, gender,

nationality, social origin, disability,

political affiliation or opinion.

To coincide with these changes, a series

of awareness progrmmes were carried

out to educate employees regarding

these changes. During the year, the

company also rolled out the first phase of

the awareness campaign pertaining to

Project WAVE (Working Against

Violence through Education) to increase

awareness among staff on gender based

violence & child abuse.

JKPLC’s HR Model Our HR model is based on a highly

interactive template designed to promote

employee goal congruence. It is also one

that is geared to identify the needs of our

people and integrate these aspects as

part of the coordinated business strategy.

Promoting Employee Goal

Congruence By 31st March each year, all business

units formalize their annual plan for the

next financial year and set out

performance objectives for all employees

in Executive and above categories. Using

the balance score card methodology.

This is done using the Hoshin Kanri

model, where business goals cascade

down to departmental, team and

individual objectives and KPI’s.

In October the BU finanlises the

reforecast figures and a mid-year review

is conducted for all executive and above

staff to assess overall performance in

light of the performance of the SBU,

realign goals if necessary and relook at

the training needs for the next six months

of the financial year.

Performance Appraisal

Mechanism The performance of non-executive staff is

reviewed every March, to evaluate their

performance and determine their salary

increments for the next financial year.

All employees in executive grades and

above receive an annual performance

appraisal every May, following the

conclusion of the 31st March financial

year-end. The annual performance of

each employee is rated first by the

employee him/her self, the staff

supervisor and then discussed at the

Career


JOHN KEELLS PLC

3

2

12


3

3

0

to impact their short term incentives

(STI),which is the variable portion of their

remuneration package. All managers are

also subjected to a 3600 evaluation

process, which helps to ascertain the

views of the employees within the

immediate work circle. A strictly

confidential process, the results of the

3600 survey is discussed with the

respective Manager at their annual

appraisal and used as a development tool

to motivate Managers to address possible

improvement areas.

Employee Composition

Rewards and Recognition The performance appraisal mechanism

also functions as the basis for the annual

rewards and recognition agenda.

“Employee of the Year Awards” for

executive and assistant managers, the

“Chairman’s Award” for Managers and

the “Champion of the Year Awards” for

non-executives are finalized during this

process.

Managing Talent Building a reliable talent pipeline is seen

as a major priority for JKL and indeed to

the JKH Group. Once more it is the

Performance Appraisal mechanism that

underpins our efforts to nurture talent.

Those employees whose appraisal rating

is consistently above 4 are earmarked for

further development in cognizance with

the Group talent management initiatives.

Employees identified in this manner

meets the President of the Sector to

determine personal vulnerability levels

and identify areas for development.

All those earmarked for development are

then expected to participate in the “The

Young forum” initiative, an annual

programme that provides an opportunity

for identified staff from the Business Units

to meet with the Chairman, Deputy

Chairman, Group Finance Director and

Head of HR. Convened every two

months, “The Young forum” is not a

structured dicussion but more an open

forum for employees to absorb the JKH

value culture and gain insights from

senior decision makers within the group.

In the current financial year, three

employees from the group participated in

“The Young Forum”.

Training and Development Training & Development needs are

identified in relation to our competency

framework and is a critical component of

our HR Management Model. Employee

training needs are identified at the annual

performance appraisal and revisited

during mid year review. The competency

gaps identified through this process are

then addressed by providing the required

Technical and Soft skill training. This

helps to build a pipeline of leaders at all

levels within the company and develop

the required competencies in employees

so that they can perform their roles

adequately and meet business

challenges.

G4-LA 9

Employee Training Hours

400 No. of Hours.

320

240

160

80

0 Male Female Male Female 2016 2015

AVP & Above Managers Assistant Managers Executives Non

Executives

Succession Planning Having identified that Career

development is a lifelong process of

learning, a dedicated Career Support

Panel (CSP) was set up during the year,

to manage the career prospects of JKH

employees. Through regular interaction

and communication, the CSP provides

employees with personal support in

reviewing career options available within

the group. To help convert these choices

into action, the CSP enables employees

to directly access the JKH Group Career

Support Panel as well for further

guidance. JKH’s “Internal Job Posting

Programme” (IJPP), is yet another

initiative designed to retain talented staff

within the group.

A motivational speaker Mr Niraj de Mel

addressed staff for “Career Week”. He

further enhanced the knowledge of the

participants with regards to career goals,

mapping of development and

achievement of said goals.

0

5

10

15

20

25

Male Female Male Female

2015 2016

AVP & Above Managers Assistant Managers Executive s Non Executives

No.


JOHN KEELLS PLC

3

4

G4-11, G4-LA

6

PROBLEM SOLVING PROCEDURE

Employee registers the issue with immediate

superior and HR on the prescribed form

Employee discusses the issue with immediate

superior (Level 1)

If not solved within working days 2

HR channels the issue to the employees

immediate supervisor’s

Supervisor (Level 2)

If solved inform

employee within next

working day


HR channels the issue to the problem solving

committee (MC) (Levdl 3)

If solved inform

employee within next

working day


HR channels the issue to the sector head

4) Level (

Employee is informed of the decision or outcome

withing 3 working days

A motivational speaker Mr Niraj de Mel addressed staff for Career Week

Lakshman Kannangara receiving his award as employee of the year

P L A Shantha receiving his award as champion of the year

Ajith Kumara receiving his award for 25 years service

Shehan Meegama receiving his award for 25 years service

Jagath Dhanansuriya receiving his award for 25 years service


3

5


JOHN KEELLS PLC

3

6

Corporate Social Responsibility Environmental Performance Review.

We strongly believe that the manner in

which we manage the environmental

impact of our business and has a direct

bearing on the company’s bottom line.

In this regard, we have identified three

main areas we need to focus on; energy

conservation, reduction of paper waste

and control of water usage. Accordingly,

we have established policies and

procedures that will help us manage our

business in a more sustainable manner,

which in turn will have a positive impact

on our profits in the long term.

Social Responsibility Focus To us, Corporate Social Responsibility

(CSR) means developing policies that

integrate responsible practices into our

day-to-day business operations, so that

we can connect with and work towards

the betterment of the people impacted by

our activities. Our CSR initiatives also

encourage employee volunteerism,

through which our employees are able to

gain an insight into the critical

socioeconomic constraints that hinders

the progress of modern society. Guided

by this philosophy, the Company

embarked on many projects which could

be listed as below;

G4-EN 3, G4-EN 8, G4-EN 15, G4-EN 16,

G4-EN 29, G4-SO 1, G4-SO 3, G4-SO 8

Environment Impact

Assessment

2015/16 2014/15 2013/14

Direct Energy consumption (GJ) GJ 386 426 440

Direct Energy (GJ) per Rs. Million of

revenue

No. of

times

0.55 0.44 0.50

Indirect Energy Consumption (GJ) GJ 884 813 1,027


3

7

Total Carbon foot print (MT) MT 196 185 227

Total Carbon Foot print (MT) per

Rs. Million of revenue

No. of

times

0.28 0.19 0.26

Water withdrawal (m3) (m3) 3,208 4,448 5,672

Water withdrawal (m3) per

Rs. million revenue

No. of

times

4.54 4.63 6.48

Significant environment fines Rs. Nil Nil Nil

Social Responsibility

Community engagement

(number of persons impacted)

Number 726 866 300

Proportion of business analyzed for risk

of corruption

% 100 100 100

Significant fines for violation of laws/

regulations

Rs. Nil Nil Nil

Significant fines for product/ service

issues

Rs. Nil Nil Nil

Projects for 2015/16

Programme Objective: To create HIV/AIDS awareness in Sri

Lanka

Resource Person: Ms. Samanthika

Jayasinghe, Master Trainer and

Executive at JK PLC

Date Location Sessions Participants

4th November 2015 University of Kelaniya- Hostel 1 26

20th November 2015 Jetwing Hotel- Negombo 2 79

Programme Scope: Conduct eye camps

across the island under the JKH Vision

project, a commitment made by the group

towards the WHO’s Vision 2020 initiative

Programme Objective: To determine those in need of cataract surgery

Date Location No. of

patients

screened

No. of

Spectacles

given

No. of corrective

surgeries

identified

13th June 2015 Nayabedde Estate,

Bandarawela

279 121 52

24th July 2015 Deraniyagla Hills,

Morawaka

342 296 32

Revenue The Group recorded consolidated revenue of Rs 707 million for the year under review,

26 percent lower than the 960 million recorded in the previous financial year. The drop

in revenue was mainly due to adverse global conditions during the year under review,

which affected both the produce broking and share broking segments. The warehousing

segment revenue too was impacted, though to a lesser degree.

Revenue Composition A change in the revenue composition was observed during the year under review, with

Produce Broking contributing 60 percent to the total revenue, share broking 27 percent

and the warehousing operation accounting for the balance 13 percent. This was a shift

from the previous year mix, where produce broking, share broking and warehousing

accounted for 59 percent, 31 percent and 10 percent respectively, of the total revenue

for that year.

Revenue Composition

Produce Brokering Revenue Revenue generated from produce brokering was Rs 425 million for the year. This was a

decline of 24 percent from the Rs. 559 million recorded in the previous year. This was

mainly due to the significant drop in average selling price of a kilogram of Tea, which

was the result of demand volatility in all major Tea exporting destinations during the

year. The average selling price achieved by John Keells brokers (JK) was Rs 401.45

per kilogram of Tea, a decrease of 9.6 percent from the Rs 444.04 average recorded in

the previous year. The revenue decline was made sharper by a 14.4 percent drop in the

Tea sale volumes handled as many of JK clients were found opting for a high quality:

low volume strategy to counter negative

G4-22, G4-23

Financial Review

2015/2016

Warehousing

Produce broking

Share broking


JOHN KEELLS PLC

3

8

market conditions. Consequently, Tea 500

sales volumes handled by JK stood at

50.95 Million kilograms for the year. This

constitutes a market share of 16.19

percent as against a 17.70 percent

market share recorded for the

corresponding period in the previous

year.

Broker Market Share-

Tea Qty Sold

% 25

20

15

10

5

0

and the Rubber sales volumes handled,

by JK fell by a 1.98 percent to 3.55 million

kilograms for the year ended 31st March

2016.

Warehousing Revenue The decrease in Sri Lanka’s tea crops as

well as lower volumes of both tea and

rubber handled by JK for the period under

review had a negative impact on

warehouse, revenue. Consequently, the

revenue recorded for the year was Rs 89

million an 11 percent decrease, as

against Rs 100 million recorded for

previous year.

The utilization of the warehouse space

during the year on an average was 65

percent of capacity compared with 72

percent in the previous year. 36.5 million

kilograms of tea were stored during the

year in comparison to the 44 million

kilograms during 2014/15. The volume of

Rubber stored also declined by 4 percent

from 2.5 million kilograms in the previous

year to 2.4 million kilograms in the current

year.

Store rent Income

Rs.Mn.Rs/kg

Share Broking Revenue The ASPI peaked at 7498 in August but

the conclusion of the Parliamentary

elections did not result in the expected

upturn in the market and turnover

volumes and the share indexes have

continuously declined since then.

The process of monetary tightening by

the Central Bank of Sri Lanka by raising

the Statutory Reserve Ratio (SRR) by 1.5

percent (to 7.5 percent from 6 percent)

towards the end of 2015, the out flows of

foreign funds as a result of economic and

currency weakness in China and the

anticipated tightening of rates by the United States Federal Reserve towards end 2015

resulted in lower revenue from the stock Broking business

Tea Average Sale Prices

Trade JKPLC

0 100 200 300 400

2016

2015

2014

2013

2012

Rs

Rubber continued to experience low

prices during the year due to a sharp

decline in global demand for natural

rubber. JK thus recorded an average

price of Rs 254.92 per kilogram in

comparison to the previous year‘s

average of Rs 255.53 per kilogram.

Alongside this 0.24 percent drop in

prices, Rubber production also declined

as a result of inclement weather patterns

0

125

250

375

500

JKPLC Rubber sale

Qty and Prices

Average Price Quantity Sold

3

4

5

6

2015 2014 2013 2012 2011

Kg. Mn Rs.

Tea Store Rent

Rubber Store rent

0

1

2

3

4

5

6

0

20

40

60

80

100

120

2015 2014 2013 2012 2011


3

9

During the financial year, the market

environment was a difficult one with

reduced activity concentrated among the

leading brokerage firms. The revenue

generated by JKSB was Rs 193 million,

which is a 36 percent decrease from the

previous years’ revenue of Rs 301 million.

Income and Expenditure

Distribution

2016 2015

Rs.’000

%

Rs.’000 %

Revenue 706,664 100 959,925 100

Cost of sales 251,190 36 283,398 30

Gross profit 455,474 64 676,527 70

Other operating income 3,030 0.4 2,921 0.3

Administrative expenses 238,153 34 251,718 26

Sales and Marketing expenses 196,130 28 68,826 7

Results from operations 24,221 3 358,904 37

increased to Rs 196 million from Rs 69

million the previous year, a year-on-year

Cost of Sales and Gross Profits

Direct cost of sales of the Group

decreased by 11 percent compared with

the previous year. This is mainly due to a

23 percent reduction in JKSB’s costs, on

account of lesser commissions and

incentives paid and a 7 percent reduction

in JKL’s costs owing to reduced finance

VAT charges paid during the year. The 11

percent reduction in cost of sales together

with the 26 percent reduction in revenue

led to a year-on-year decrease of 33

percent in the gross profit margin for

2015/16.

Administrative Expenses

Group administration expenses

decreased by 5 percent to Rs 238 million

from the Rs 252 million recorded in the

previous year. The decrease is mainly

attributed to a 4 percent, 3 percent and 20

percent decrease in costs from JKL,

JKSB and JKW respectively, which was

the result of efficient and effective cost

management strategies implemented by

all Company’s in the Group.

Sales and Marketing Expenses The overall selling and distribution costs


JOHN KEELLS PLC

4

0

increase of 185 percent. The main cause

for the increase was the doubtful debts

provision of Rs 179 million made by JKL,

on account of advances granted to tea

clients who were forced to shut down

during the year, amidst severe market

adversity. While the group prudency

policy ensures that adequate provisions

are made for such eventualities, the

company remains hopeful that with

favorable market conditions the clients

will be able to recommence operations

and settle their dues in due course.

Finance Income Finance income consists of interest

income and dividend income from

shareholdings in Group companies. The

Group’s surplus cash flows during the

year reduced in comparison to the

previous year, mainly due to reduced

activity in the stock market, but despite a

lower cash surplus, the higher overnight

interest rates contributed to a marginally

higher interest income.

Dividend income of the group includes the

dividends received from Keells Food

Products PLC (KFP) and the higher

dividend income received from KFP led to

a 50 percent increase in finance income

during the year.

Finance Expenses (Net) A reduction in the loans and advances

granted to tea clients coupled with

focused cash management strategies

resulted in lowering finance expenses by

16 percent, when compared with the

previous year. Accordingly, net interest

expenses also reduced by 69 percent

when compared with the previous year.

The interest cover for the year was 0.37

compared to the 4.62 recorded in the

previous year. This is attributed to the

reduced profit due to lower revenue and

increase selling and distribution

expenses.

Profitability The macro economic factors continued to

cause both direct and indirect impacts on

the profitability of all segments of the

Group in varying degrees. The continuing

volatility in Sri Lanka’s main tea export

markets contributed negatively to the

broking and warehousing segment, while

the CBSL’s tightening of monetary policy

and the US Federal Bank rate increases

had an adverse impact on the stock

broking segment. Consequently the

Group profit before tax decreased by 81

percent from Rs 333 million recorded in

the previous year, to Rs. 64 million for the

current financial year. PBT for the current

year includes Rs 45 million fair value

adjustment of investment properties in

comparison to the Rs 15 million recorded

in the previous year.

Change in Fair Value of

Investment Property The Investment properties were valued

by Mr P B Kalugalagedera using the

open market value method and the

change in value was a positive of Rs 45

million as at 31st March 2016, as against

Rs 15 million at the end of the previous

year.

Taxation As per the current tax regulations,

Produce brokering and Stock brokering

income are subject to a tax of 28 percent

whilst the tax bracket for the warehousing

operation reduced to 10 percent from the

previous 12 percent. However, the

reduction in profits had a direct impact on

the amount of taxes paid to the

government during the year.

Statement of Financial Position Revenue Reserve

The Group revenue reserve reduced by 9

percent to 2,603 million from the Rs

2,860 million recorded in the previous

year. This was on account of profit for the

current year reducing by 76 percent over

the previous year, the payment of super

gains tax of Rs. 93.9 million and increase

in dividend payout by 10 percent over the

previous year.

Available for Sale Reserve The “Available for Sale Reserve” balance

increased by 110 percent to Rs 304

million from the Rs 145 million recorded

last year. This was mainly due to Fair

value increase of investments held in

Keells Food Products PLC by Rs 159

million during the year.

Non- Controlling Interest The Non- controlling interest decreased

by 49 percent to 24 million from the Rs 47

million recorded in the previous year, on

account of higher dividend payout by

John Keells Stock Brokers (Pvt) Ltd

(JKSB) during the year. The Non –

controlling interest in JKSB is 24 percent.

Cash Flow The net movement in cash and cash

equivalents for the year under review was

an outflow of Rs. 516 million. This was an

increase of Rs 383 million when

compared to the previous years’ Rs 132

million. The main reasons for this

increase was the lower cash generated

from operations amounting to Rs. 416

million, an increase in the amount paid as

income tax by Rs 57 million and increase


4

1

of Rs 38 million on account of dividend

paid out by the Group.

Statement of Changes in Equity The opening balance of the revenue

reserve as at 1st April 2015 was adjusted

on account of fully depreciated assets of

the warehouse being reinstated by Rs 12

million based on SLFRS 1.

Net Assets per Share The net assets per share reduced

marginally by 2 percent to Rs 54.48 from

the previous years’ Rs 55.58. The Group

continued to report a strong financial

position for the year ended 31st March

2016 due to the sound fundamentals built

over the years, supported by sustainable

business practices. Return on Equity

(ROE) for the year under review

decreased from 7.06 percent the previous

year to 1.62 percent mainly due to

increase in provisioning for doubtful

debts, while the Return of Capital

Employed (ROCE) for the year also

showed a decrease from 9.58 percent

recorded last year to 3.24 percent.

Working Capital/Liquidity Net working capital of the Group

decreased to 318 million as at 31st March

2016 (2014/2015 – Rs. 591 million), due

to the reduction in current assets. The

decrease in current assets is attributed to

two reasons, namely the decrease in

trade and other receivables by Rs. 968

million and the drop in favourable cash

balances by Rs. 322 million. The

decrease in trade and other receivables

was mainly due to a reduction in

advances and loans granted to tea

producers by the parent company,

JKPLC, and the decrease of trade and

other receivables of JKSB owing to lower

sales volumes. The current liabilities too

decreased by Rs 715 million on account

of lower trade and other payables and

short term and bank borrowing by 256

million. The reduction in borrowings by

the Group was mainly due to lesser fund

requirements by JKPLC to fund the

lending to tea producers as advances

and loans, while the decrease in trade

and other payables were due to reduction

of sale volumes of JKSB and settlement

of prompt payments to tea producers by

JKPLC as at 31st March 2016.

Leverage and Capital Structure Total assets of Rs. 4.98 billion were

funded by Shareholders funds (66.51

percent) non – controlling interest (0.48

percent), non- current liabilities (2.13

percent) and current liabilities 30.88

percent. The long term funding was Rs

3.44 billion or 69.12 percent of total

assets.

Share Price and Market

Capitalisation The Colombo Stock

Exchange experienced a

downward trend during the year under

review with the All Share Price Index

(ASPI) decreasing to 6,089 as at 31st

March 2016, a decrease of 11 percent

from the beginning of the year. The

performance of the Company’s shares

also mirrored this trend, losing 24 percent

during the year with the lowest trading

price of Rs 68.00 per share recorded on

29th March 2016.

Due to the decrease in profit after tax,

Earnings per Share (EPS) for the year,

decreased significantly by 76 percent to

Rs 0.87 per share from Rs 3.58 per share

the preceding year. The Price earnings

ratio (PER) for the year under review was

80.69 times, a significant increase from

the previous years’ value of 25.73 times.

Meanwhile the net assets per share

decreased to Rs 54.48 per share as at

31st March 2016 from Rs 55.58 per share

reported the previous year.

G4-EC 1

The total Market Capitalization as at 31st

March 2016 was Rs 4,256 million. This is

a decrease of 24 percent from the

previous years’ Market Capitalization

which stood at Rs 5,595 million, with a

share issue of

60.8 million.

Dividend The dividend policy of the Group seeks to

ensure the dividend payout correlates

with profits, while ensuring sufficient

funds are retained for future

developments that will deliver

sustainable value to shareholders in the

short, medium and long term.

During the year under review the Group

paid a Dividend of Rs 3.75 per share

resulting in a total cash outflow of Rs 228

million. The dividend payout ratio stood at

a healthy 4.32 whilst the dividend yield

was at 5.36 percent. The Directors also

recommend a final dividend of Rs 1.00


JOHN KEELLS PLC

4

2

per share payable on the 16th of June

2016.

Economic Value Statement The economic value addition statement

depicts the generation of wealth and its

distribution among the stakeholders in all

business/social activities throughout the

entire value chain. It also reveals the

amounts reinvested for the replacement

of assets and retained for the growth and

development of operations.

Economic Value Statement - Group 2015/2016 2014/2015

Rs.’000 Rs.’000

Direct economic value generated - Group %

2015

2016

80 82 84 86 88 90 92 94 96 98 100

Revenue Finance income

Share of results of associate

Profit

on

sale

of

asset

Direct economic value generated

Revenue 706,664 959,925

Finance income 51,589 34,330

Share of results of associates 7,546 2,290

Profit on sale of assets and other income 3,030 2,921

Valuation Gain on Investment Property 45,292 15,098

814,121 1,014,564

Economic value distributed

Operating costs 661,779 540,409

Employee wages & benefits 204,303 213,647

Payments to providers of funds 65,182 92,089

Payments to Government 23,928 119,625

Community investments 8,300 14,800

963,492 980,570

Economic value retained

Depreciation 22,940 20,822

Amortization 2,941 2,491

Profit/ (Loss) after dividends (175,252) 10,681

(149,371) 33,994

As noted above, even though the

economic value retained for the years

shows a negative, due to lower

profitability, the group has contributed Rs

964 million to varied stakeholders.

Subsequent Events

There are no further matters or

circumstances arising since 31st March

2016, not otherwise dealt with in the

financial statements that would materially


4

3

s and other income Valuation Gain on Investment

Property

affect the operations or results of the

Group.

G4-14, G4-15

Outlook Tea & Rubber Broking

Following is a discussion on the anticipated outlook for the Company based on the

current Global economic outlook and that of Sri Lanka . It is anticipated that all tea

growing elevations would experience a marginal increase in prices during the financial

year 2016/17 when compared to the reporting year. It is expected that the production

volumes would decrease further due to agro climatic changes that would be

experienced in the tea and rubber growing area’s. The change in manufacturing strategy

of major tea manufacturers to a quality

drive rather than a volume strategy is also

expected to continue during the coming

year as well. The Company has identified

and is in the process of executing many

sustainable strategies that are expected

to marginally increase its market share.

Share Broking The outlook for the Colombo Stock

Exchange (CSE) is expected to be mixed

over the coming financial year. While the

weakness which existed in the external

accounts of Sri Lanka has stabilized after

the announcement of an International

Monetary Fund (IMF) facility, the market

should trade in a narrow band with

earnings growth expected to be impacted

by revised taxation and slowing credit

growth going forward.

G4-32, G4-33

GRI Index * The GRI are adopted on voluntary basis without external assurance and where relevant GRI reporting measurements are reported.

GENERAL STANDARD DISCLOSURES

General

Standard

Disclosures

Description Location of Disclosure Page

Number/

Reference

External

Assurance

STRATEGY AND ANALYSIS

G4-1 Statement from the Chairman Chairman’s Message 12 No

ORGANIZATIONAL PROFILE

G4-3 Name of the organisation An Introduction to this report, Corporate

Information

10 , Inner

back cover

No


JOHN KEELLS PLC

4

4

G4-4 Primary brands, products and / or

services

Group Structure 4 No

G4-5 Location of organisation’s headquarters Corporate Information Inner back

cover

No

G4-6 Number of countries where the

organisation operates

Corporate Information Inner back

cover

No

G4-7 Nature of ownership and legal form Corporate Information Inner back

cover

No

G4-8 Markets served Management Discussion & Analysis 17 No

G4-9 Scale of the organisation Performance Highlights 8 No

G4-10 Total workforce by employment type,

employment contract and region, broken

down by gender

Management Discussion & Analysis 25 No

G4-11 Percentage of employees covered by

collective bargaining agreements.


G4-12 Organisation supply chain Management Discussion & Analysis 17 No

G4-13 Significant changes during the reporting

period regarding the organisation’s size,

structure, ownership, or supply chain

Management Discussion & Analysis,

Annual Report of the Board of Directors,

Financial Statements & Notes

17, 85, 94 No

G4-14 Explanation of whether and how the

precautionary approach or principle is

addressed by the organisation


Annual Report of the Board of Directors

36, 85 No

G4-15 Externally developed economic,

environmental and social charters and

principles, or other initiatives to which the

organisation subscribes or endorses

Chairman Messeage, Management

Discussion & Analysis

12, 36 No


5

General

Standard

Disclosures


Number/

Reference

External

Assurance

G4-16 Memberships in associations and / or

national /international advocacy

organisations


IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4-17 Organisation’s entities covered by the

report and entities not covered by the

report

An Introduction to this report, Financial

Statements & Notes

10, 94 No

G4-18 Process of defining the report content

and the aspect boundaries

An Introduction to this report 10 No

G4-19 Material aspects identified for report

content


G4-20 Aspect boundary for identified material

aspects within the organisation

Corporate Governance 60 No

G4-21 Aspect boundary for identified material

aspects outside the organisation


G4-22 Explanation of the effect of any

restatements of information provided in

previous reports and the reasons for

such restatements


Financial Statements & Notes

32, 94 No

G4-23 Significant changes from previous

reporting periods in the scope and

aspect boundaries


STAKEHOLDER ENGAGEMENT

G4-24 List of stakeholder groups engaged by

the organisation


G4-25 Basis for identification and selection of

stakeholders with whom to engage


G4-26 Approach to stakeholder engagement,

including frequency of engagement by

type and by stakeholder group


G4-27 Key topics and concerns raised through

stakeholder engagement, and how the

organisation has responded to them


Corporate Governance

17, 60 No

REPORT PROFILE

G4-28 Reporting period An Introduction to this report 10 No

GRI Index

JOHN KEELLS PLC 4

6

G4-29 Date of most recent previous report Financial Calander 92 No

G4-30 Reporting cycle Financial Calander 92 No

G4-31 Contact point for questions regarding the

report or its contents

Corporate Information Inner Back

Cover

No

General

Standard

Disclosures


Number/

Reference

External

Assurance

G4-32 Compliance with GRI G4 Content Index

guidelines

GRI Index 37 No

G4-33 Policy and current practice with regard to

seeking external assurance for the report

GRI Index 37 No

GOVERNANCE

G4-34 Governance structure of the organisation,

including committees


ETHICS AND INTEGRITY

G4-56 The values, principles, standards and

norms of behaviour


DMA and Description Location of Disclosure

Indicators

Page External

NumberAssurance

MATERIAL ASPECT: ECONOMIC PERFORMANCE

G4-DMA

G4-EC1 Direct economic value generated, distributed

and retained

Financial review 35 No

G4-EC3 Coverage of the organisation’s defined

benefit plan obligations

Notes to the Financial Statements 140 No

MATERIAL ASPECT: INDIRECT ECONOMIC IMPACTS

G4-DMA

G4-EC7 Development and impact of infrastructure

investments and services supported

N/A - No

MATERIAL ASPECT: PROCUREMENT PRACTICES

G4-DMA


7

G4-EC9 Proportion of spending on local suppliers at

significant locations of operation

N/A - No

CATEGORY: ENVIRONMENTAL

MATERIAL ASPECT: ENERGY

G4-DMA

G4-EN3 Energy consumption within the organisation Management Discussion & Analysis 31 No

MATERIAL ASPECT: WATER

G4-DMA

G4-EN8 Total water withdrawal by source Management Discussion & Analysis 31 No

DMA and Description Location of DisclosurePage External

IndicatorsNumberAssurance

MATERIAL ASPECT: BIODIVERSITY

G4-DMA

G4-EN11 Operational sites owned, leased, managed

in, or adjacent to, protected areas and areas

of high biodiversity value outside protected

areas

N/A - No

MATERIAL ASPECT: EMISSIONS

G4-DMA

G4-EN15 Direct greenhouse gas (ghg) emissions

(scope 1)


G4-EN16 Energy indirect greenhouse gas (ghg)

emissions (scope 2)


MATERIAL ASPECT: EFFLUENTS AND WASTE

G4-DMA

G4-EN22 Total water discharge by quality and

destination

N/A - No

G4-EN23 Total weight of waste by type and disposal

method

N/A - No

G4-EN24 Total number and volume of significant

spills

N/A - No

MATERIAL ASPECT: COMPLIANCE

G4-DMA

GRI Index

JOHN KEELLS PLC 4

8

G4-EN29 Monetary value of significant fines and total

number of nonmonetary sanctions for

noncompliance with environmental laws and

regulations

Performance Highlights, Management

Discussion & Analysis

9, 31 No

MATERIAL ASPECT: SUPPLIER ENVIRONMENTAL ASSESSMENT

G4-DMA

G4-EN32 Percentage of new suppliers that were

screened using environmental criteria

N/A - No

MATERIAL ASPECT: EMPLOYMENT

G4-DMA

G4-LA1 Total number and rates of new employee

hires and employee turnover by age group,

gender and region




MATERIAL ASPECT: OCCUPATIONAL HEALTH AND SAFETY

G4-DMA

G4-LA6 Type of injury and rates of injury,

occupational diseases, lost days, and

absenteeism, and total number of

workrelated fatalities, by region and by

gender


MATERIAL ASPECT: TRAINING AND EDUCATION

G4-DMA

G4-LA9 Average hours of training per year per

employee by gender, and by employee

category


G4-LA11 Percentage of employees receiving regular

performance and career development

reviews, by gender and by employee

category

Management Discussion & Analysis, 25 No

MATERIAL ASPECT: DIVERSITY AND EQUAL OPPORTUNITY

G4-DMA

G4-LA12 Composition of governance bodies and

breakdown of employees per employee

category according to gender, age group,

minority group membership, and other

indicators of diversity.

Management Discussion & Analysis &


25, 53 No

MATERIAL ASPECT: SUPPLIER ASSESSMENT FOR LABOR PRACTICES


9

G4-DMA

G4-LA14 Percentage of new suppliers that were

screened using labour practices criteria

N/A - No

MATERIAL ASPECT: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

G4-DMA

G4-HR4 Operations and suppliers identified in

which the right to exercise freedom of

association and collective bargaining may

be violated or at significant risk, and

measures taken to support these rights

N/A - No

MATERIAL ASPECT: CHILD LABOR

G4-DMA

G4-HR5 Operations and suppliers identified as

having significant risk for incidents of child

labour, and measures taken to contribute to

the effective abolition of child labour

N/A - No



MATERIAL ASPECT: FORCED OR COMPULSORY LABOR

G4-DMA

G4-HR6 Operations and suppliers identified as

having significant risk for incidents of forced

or compulsory labour, and measures to

contribute to the elimination of all forms of

forced or compulsory labour

N/A - No

MATERIAL ASPECT: SUPPLIER HUMAN RIGHTS ASSESSMENT

G4-DMA

G4-HR10 Percentage of new suppliers that were

screened using human rights criteria

N/A - No

MATERIAL ASPECT: LOCAL COMMUNITIES

G4-DMA

G4-SO1 Percentage of operations with implemented

local community engagement, impact

assessments, and development

programmes


MATERIAL ASPECT: ANTI-CORRUPTION

G4-DMA

GRI Index

JOHN KEELLS PLC 5

0

G4-SO3 Total number and percentage of operations

assessed for risks related to corruption and

the significant risks identified



G4-DMA

G4-SO8 Monetary value of significant fines and total

number of nonmonetary sanctions for

noncompliance with laws and regulations


MATERIAL ASPECT: CUSTOMER HEALTH AND SAFETY

G4-DMA

G4-PR1 Percentage of significant product and

service categories for which health and

safety impacts are assessed for

improvement

N/A - No

MATERIAL ASPECT: PRODUCT AND SERVICE LABELING

G4-DMA

G4-PR3 Type of product and service information

required by the organization’s procedures

for product and service information and

labeling, and percentage of significant

product and service categories subject to

such information requirements

N/A - No



MATERIAL ASPECT: MARKETING COMMUNICATIONS

G4-DMA

G4-PR7 Total number of incidents of

noncompliance with regulations and

voluntary codes concerning marketing

communications, including advertising,

promotion, and sponsorship, by type of

outcomes

N/A - No


G4-DMA

G4-PR9 Monetary value of significant fines for non-

compliance with laws and regulations

concerning the provision and use of

products and services

N/A - No

JOHN KEELLS PLC 5

1

G4-56

Corporate Governance Key actions taken in financial year 2015/2016 to enhance John Keells PLC

Corporate governance:

August Board Audit committee (BAC) was presented with the IT governance

framework on the new advance process system

October The advance process presented to the BAC went on live enhancing

governance among John Keells PLC clients

November Business Continuity and disaster recovery testing was carried out for all

critical business processes.

December Formally included Sexual Orientation and Gender Identity to the

company’s non-discrimination policy and code of conduct.

January John Keells PLC BAC introduced a check list for BAC meetings to ensure

compliance with John Keells PLC compliance and governance

framework

John Keells PLC introduced an online system to check real time

pricing for the key clients

Corporate

Governance

JOHN KEELLS PLC

5

2

in the performance of their official duties.

The behavior of the senior management

group is monitored through an annual

360 degree feedback programme. As a

subsidiary of John Keells Holdings PLC

(JKH) - the ultimate parent company, the

Company displays these values and

policies in its day-to-day activities as a

fundamental requirement at all times,

following the best practices of the parent

company.

It is against this backdrop that John

Keells PLC is pleased to state that it is

fully compliant with the mandatory

provisions of the Companies Act No. 07

of 2007, Listing rules of the Colombo

Stock Exchange (“CSE”) and rules of the

Securities and Exchange Commission of

Sri Lanka (“SEC”) and our practices are

in line with the Code of Best Practices on

Corporate Governance (‘Code’) jointly

issued by the SEC and the Institute of

Chartered Accountants of Sri Lanka (“CA

Sri Lanka”). The system is continuously

reviewed to provide transparency and

accountability.

The Group is committed to the highest

standards of business integrity, ethical

values and professionalism in all its

activities towards rewarding all its

stakeholders with greater creation of

value, year-on-year. Our governance

framework which has been

communicated to all levels of

Management and staff in individual

functional units is based on the following

• The Board is responsible to the

shareholders to fulfil its stewardship

obligations, in the best interest of the

Group and its stakeholders.

“The Success of the Company relies on

its proven track record in upholding high

standards of corporate governance and

the Board of John Keells PLC is

committed to ensure that the governance,

policies and processes are sufficiently

robust and relevant in a fast changing

operating environment.”

This report provides an insight how John

Keells PLC discharges this key

responsibility.

John Keells PLC (JKL), its subsidiary

companies John Keells Warehousing

(Pvt) Ltd (JKWL), John Keells Stock

Brokers (Pvt) Ltd (JKSB) & associate

company Keells Realtors Limited (KRL)

referred to as the “Group”, has a

Corporate Governance philosophy

founded to maintain the highest level of

transparency when reporting on both

financial and non-financial compliances

which has facilitated and enhanced the

trust stakeholders have in the Group. The

Group has been structured and controlled

internally through a process of continuous

review in facilitating the observance of the

key principles of corporate governance to

succeed in today’s competitive business

environments.

Whilst the Group is governed by an

internal process which ensures integrity

and professionalism in all its activities and

relationships, ethical values are also lived

through every day in a constant effort to

set high standards of social responsibility.

This philosophy has been ingrained

through the Group by means of a strong

set of corporate values and a formal Code

of Conduct and all employees, senior

management and the Board of Directors

are required to embrace this philosophy


5

3

• Maximising shareholder wealth

creation on a sustainable basis while

safeguarding the rights of multiple

stakeholders.

• The methods we employ to achieve our

goals are as important to us as the

goals themselves.

• No one person has unfettered powers

of decision making.

• Building and improving stakeholder

relationships is an integral aspect of

Board effectiveness and a responsible

approach to business.

• Opting, when practical, for early

adoption of Best Practice Governance

Regulations and Accounting

Standards.

• Our resolve to maintain

strong

Governance Practices which present

strong commercial advantages

especially through a lowering of our

cost of capital as a result of the

strengthened stakeholder confidence,

particularly the confidence of our

investors, both institutional and

individual.

• The making of business decisions, and

resource allocations, in an efficient and

timely manner, within a framework that

ensure transparent and ethical dealings

which are compliant with the laws of the

country and the standards of

governance our stakeholders expect of

us.

Integrated Corporate

Governance Framework Only the key components are depicted in

the diagram below:

• The Audit Committee is chaired by an

Independent Director and comprises all

Non-Executive Independent Directors

and is appointed by the Board. The

Audit Committee is attended by the

CEO, Financial Controller, Head of

Group Business Process Review of

JKH and External Auditors and Internal

Auditors by invitation.

• As permitted by the Listing Rules of the

Colombo Stock Exchange the Human

Resources and Compensation

Committee, the Nominations

Committee and the Related Party

Transactions Review Committee of

John Keells Holdings PLC, the Parent

Company of John Keells PLC function

in those respective capacities of the

Group. All the Committees are headed

by Independent Directors and are

appointed by the John Keells Holdings

PLC Board of Directors.

Internal governance

structure Assurance Mechanisms Key Components

The integrated Corporate Governance Regulatory Framework

Framework of the Group entails three From an external perspective, adherence key

components as summarised below to laws and best practices plays a and the

discussion within this report pivotal role in directing the Group is sequenced to highlight

the different towards conforming with established elements that combine to ensure a

robust governance related laws, regulations and a sound governance framework. and

best practices. The Group’s governance

philosophy is practiced in Internal

Governance Structure full

compliance with the following Acts,

Strategy Formulation and Decision Making

Process

Human Resource Governance

Integrated Risk Management

Stakeholder Management and

Effective Communication

IT Governance

CEO

Management Committee (MC)

Employees Empowerment

Human Resources

and Compensation Committee

Nominations Committee

Audit Committee

Related Party Transaction Review Committee

Level Integrated Governance Systems and Procedures

Board of Directors and Senior Management Committees

Independent Director

Audit Committee

Employee Participation

Internal Control

JKH Code of Conduct

Ombudsman

External Control

Companies Act No. of 2007 Corporate 07

Governance rules published by CSE

Listing rules of the Colombo Stock Exchange (CSE)

The Code of best practice on Corporate Governance as published by the Securities and Exchange Commision and the Institute of Charterd Accountants Sri Lanka

Chairman and the Board of

Directors


JOHN KEELLS PLC

5

4

This comprises the Committees which rules and regulations;formulate, execute and

monitor Group related strategies and initiatives and - Companies Act No. 07 of 2007 the

Integrated Governance Systems Corporate Governance Rules and Procedures which

support these published by CSE

Committees to perform their roles - Listing Rules of the Colombo Stock

effectively. Exchange (CSE)

Assurance Mechanisms - The Code of Best Practice on Corporate

This comprises the ‘bodies and Governance issued by the Securities mechanisms’

which are employed in and Exchange Commission (SEC) and enabling regular review

of progress the Institute of Chartered Accountants, against objectives with a view to Sri

Lanka

highlighting deviations and quick redress

and in providing assurance that actual

outcomes are in line with expectations.

Code of Best

Practice on

Corporate

Governance

The Company Shareholders Sustainability

> Directors > Institutional Investors

> Directors’ Remuneration > Other Shareholders

> Relations with

Shareholders

> Accountability & Audit

JKL Corporate Governance

1. INTERNAL GOVERNANCE STRUCTURE John Keells PLC’s internal governance structure is designed in such a way that the

executive authority is well delegated through committees with clearly defined authority

limits, responsibilities and accountability

which are agreed upon in advance to

achieve greater operating efficiency and

freedom of decision making. The internal

governance structure encompasses two

main pillars as illustrated in the diagram

on page 47.

• Board of Directors & Senior

Management Committees.

Executive authority is well devolved

through a committee structure ensuring

that the President of the Plantation

Services Sector, Chief Executive Officers

(CEO) of JKL and JKSB, and profit

center/ functional managers are

accountable for the Group and the

business units/subfunctions respectively.

Clear definitions of authority limits,

responsibilities and accountabilities are

set and agreed upon in advance to

achieve greater operating efficiency,

expediency, healthy debate and freedom

of decision making.

• Integrated governance

systems and procedures

Promote good governance within the

wider context of achieving sustainable

success which is beyond mere

conformance with regulations. Below

mechanisms, within the internal

governance structure, ensure

implementation and execution towards

upholding the Group’s Corporate

Governance framework

- Strategy formulation and decision

making

- Human resource governance

- People and talent management

Annual

Report

2015/16

5

5

Delegated

authority

Manageme

nt

delegated

authority

Chairman

CEO

Board of Directors

Audit Committee

Nominations Committee

Human Resources & Compensation

Committee

Related Party Transaction Review

Committee

President of Plantation

Service Sector

Senior Management

Team

Group Business Process Review

Division

Sustainability and Enterprise Risk

Management Division

Availability of independent advice and assurance

Provides advice to the General Manager on key decisions made under management delegation

Accountability through reporting obligations

Internal governance structure


JOHN KEELLS PLC

5

6

- Stakeholder management and

Effective and transparent

communication

- Integrated risk management

- IT Governance

Chairman and the Board of

Directors Role of Chairman

The Chairman is a Non-Executive, Non

Independent Director whose main

responsibility is to lead and manage the

Board and its Committees so that they

can function effectively. He represents

the Company externally and is the focal

point of contact for shareholders on all

aspects of corporate governance.

While leading the Board, effectively

executing its duties towards all

stakeholders, the Chairman, with the

assistance of the Board Secretaries,

Keells Consultants (Private) Limited,

ensures that:

• Board procedures and duties are

followed. The agenda for the Board

meeting, reports and papers for

discussion are dispatched at least one

week in advance so that the Directors

are in a position to study the material

and arrive at sound decisions.

• Directors receive timely, accurate and

clear information and updates on

matters arising between meetings.

• A proper record of all proceedings of

Board meetings is maintained.

The Chairman also sets the tone for the

governance and ethical framework of the

Group, facilitates and solicits the views of

all Directors and by keeping in touch with

local and global industry developments,

ensures that the Board is alert to its

obligations to the Company’s

shareholders and other stakeholders.

The Board of Directors The Board of John Keells PLC holds

responsibility to shareholders of the

Group to discharge its stewardship

obligations, in the best interests of the

Group and its stakeholders. This is

achieved by,

• Maximizing shareholder wealthcreation

on a sustainable basis while

safeguarding the rights of multiple

stakeholders

• Building and enhancing stakeholder

relationships which are considered an

integral aspect of Board effectiveness

and a responsible approach to

business

• Ensuring that one person does not

have unfettered powers of decision

making

• Ensuring that the methods employed to

achieve goals are as important as the

goals themselves

• Making 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

• Actively participating in discussions

with the relevant regulatory bodies in

the formation and implementation of

governance regulations, accounting

standards, and economic reforms.

• Opting for the early adoption of

accounting standards and best

practices in governance regulations,

when practical.

• Resolving to maintain strong

governance practices which result in

strengthened stakeholder confidence,

particularly that of both institutional and

individual investors.

The Board of John Keells PLC has,

subject to pre-defined limits, delegated its

executive authority to the President of the

Plantation Services Sector for the

implementation of strategies approved by

the Board and developing and

recommending to the Board the business

plans and budgets in keeping with group

strategy.


5

7

Board responsibilities and

decision rights


JOHN KEELLS PLC

5

8

Notwithstanding the functioning of the


5

9

Board Committees, the Board of

Directors is collectively responsible for

the decisions and actions taken. The

John Keells Group Corporate

Governance Framework expects the

Board of Directors to:

• Provide direction and guidance to the

Company in the formulation of its high-

level strategies, with emphasis on the

medium and long term, in the pursuance

of its sustainable development goals

• Reviewing and approving annual plans

and longer term business plans

• Tracking actual progress against plans

• Reviewing HR processes with

emphasis on top management

succession planning

• Reviewing the performance of the

Executive Director

• Monitoring systems of governance and

compliance

• Overseeing systems of internal control,

risk management and establishing

whistleblowing conduits

• Determining any changes to the

discretions/authorities delegated from

the Board to the executive levels

• Reviewing and approving major

acquisitions, disposals and capital

expenditure

• Approving any amendments to

constitutional documents

• Adopting voluntarily, best practices

where relevant and applicable.

Board composition and Director

Independence At the last Annual General Meeting

(AGM) of John Keells PLC, held on 30th

June 2015, the Board consisted of seven

Directors comprising of;

- Three Non-Executive, Non-

Independent Directors, (NED/NID)

including the Chairman

- Three Non-Executive, Independent

Directors (NED/ID)

- One Executive, Non-Independent

Director (ED/NID)

As at 31st March 2016 the Board

comprised of,

- Four Non-Executive, Non-Independent

Directors, (NED/NID) including the

Chairman

- Three Non-Executive, Independent

Directors (NED/ID)

- One Executive, Non-Independent

Director (ED/NID)

In accordance with the criteria for

“Independence” specified by section

7.10.4 of the listing rules of the Colombo

Stock Exchange and as identified by the

Code, the Board affirms that the aforesaid

four Non-Executive

Independent Directors satisfy the criteria

for independence and have satisfied the

requirements under clause 7.10.2 (b).

The Board has determined that, although

Mr. T de Zoysa and Ms. Y A Hansen have

been members of the Board for a period

exceeding 9 years and do not satisfy the

“number of years on the Board” criteria,

given all the circumstances, Mr. T de

Zoysa and Ms. Y A Hansen are

Independent especially as they satisfy the

other qualifying criteria in terms of

independence.

Non-Executive/Independent Directors and Board Balance The Board is of a view that its present composition ensures a healthy balance between executive expediency and independent

judgment. This is based on the following:-

- Collectively, the Non-Executive Directors possess proven business experience and expertise in their respective fields.

- The present composition of the Board represents an appropriate mix of skills and experience

- The Independent Directors possess strong financial acumen and by virtue of their membership on external boards, are able to

assess the integrity of the group’s financial reporting systems and internal controls, continually review, critique and suggest changes

in keeping with best practice.


JOHN KEELLS PLC

6

0

Name of Director/

Capacity

Shareholding (i) Management/

Director (ii)

Material

Business

relationship (iii)

Employee of

company (iv)

Family Member

a Director of the

CEO (v)

Continued

service for more

than Nine years

(vi)

Non Executive, Non Independent Director

Mr. S C Ratnayake No Yes No No No N/A

Mr. A D Gunewardena No Yes No No No N/A

Mr. J R F Peiris No Yes No No No N/A

Mr. V A A Perera No Yes No No No N/A

Non Executive, Independent Director

Mr. T De Zoysa No No No No No Yes

Ms. Y A Hansen No No No No No Yes

Ms. S T Ratwatte No No No No No Yes*

Executive, Non Independent Director

Mr. R S Fernando No Yes No Yes No N/A

* Mrs. S T Ratwatte completed nine years on 08th May 2016

Definitions

i. Shareholding in the company

ii. Director of a listed Company in which they are employed, or having a significant shareholding or have a material business

relationship iii. Income/Non cash benefits derived from the Company is equivalent to 20% of the director’s annual income iv.

Director is employed by the Company two years immediately preceding appointment

v. Immediate family member who is a director or General Manager vi.

Has served the Board for a continuous period exceeding 9 years


6

1

Board Skills The Directors at John Keells PLC who are

profiled on page 14 and 15 of the annual

report have a wide range of expertise as

well as significant experience in

commercial and financial activities

enabling them to discharge their

governance duties in an effective

manner.

The Group is over conscious of the need

to maintain an appropriate mix of skills

and experience in the Board through a

regular review of its composition in

ensuring that the skills representation is

in sync with current and future needs.

Conflicts of interest and

independence Each Director holds continuous

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.

Details of companies in which Board

members hold board or board committee

membership is available with the

Company for inspection by shareholders

on request. Refer Note 35 to the financial

statements for details on related party

transactions.

In order to mitigate any potential or actual

conflict of interest or independence of

directors throughout the term of their

membership on the Board, the Company

has adopted the following processes,

which is given on page 51.

Board tenure, retirement and

reelection • The Executive Directors are appointed

and recommended for re-election

subject to their prescribed Company

retirement age whilst Non-Executive

Directors are appointed and

recommended for re-election subject to

the age limit as per statutory provisions

at the time of reappointment.

• The re-election of Directors ensures

that shareholders have an opportunity

to reassess the composition of the

Board. The names of the Directors

submitted for re-election are provided

to the shareholders in advance to

enable them to make an informed

decision on their election.

Access to independent

professional advice In order to preserve the independence of

the Board, and to strengthen the decision

making, the Board seeks independent

professional advice when deemed

necessary.

Accordingly, the Board obtains

independent professional advice

covering areas such as;

• Impacts on business operations of the

current and emerging economic and

geo-political shifts.

• Legal, tax and accounting aspects,

particularly where independent external

advice is deemed necessary in

ensuring the integrity of the subject

decision.

• Market surveys, architectural and

engineering advisory services as

necessary for business operations

• Actuarial valuation of retirement

benefits and valuation of property

including that of investment property.

• Information technology consultancy

services pertaining to enterprise

resource planning system, distributor

management system or other major

projects.

• Specific technical know-how and

domain knowledge for identified

project feasibilities and evaluations

Additionally, individual Directors are

encouraged to seek expert opinion and/

or professional advice on matters where

they may not have full knowledge or

expertise.

Board meetings Regularity of meeting

The Board meets at least, once every

quarter. Any absences are excused in

advance and duly recorded in the

minutes. The absent members are

immediately briefed on the discussions

and actions taken during the meeting.

Directors are provided with the necessary

information well in advance (at least one

week prior to the Board meeting) in order

to facilitate more informed decision

making. Board information packs

supplied to the Directors include the

Board Resolutions and other functional

areas such as tax, human resources,

treasury and corporate social

responsibility. Dates and attendance of

Board of Directors to the quarterly Board

meetings is given on page 51.

Mitigating process of potential conflict or independence of directors


JOHN KEELLS PLC

6

2

Nominees are requested to make known their various interests that could potentially conflict with

the interests of the Company

Directors obtain Board clearance prior to:

• Accepting a new position.

• Engaging in any transaction that could create a potential conflict of interest.

All NEDs notify the Chairman of any changes to their current Board representations or interests.

Directors who have an interest in a matter under discussion.

• Excuse themselves from deliberations on the subject matter.

• Refrain from voting on the subject matter (such abstentions from Board decision are duly

recorded)

Attendance at Meetings

Name of Director 24/04/2015 24/07/2015 23/10/2015 27/01/2016 Eligible no.

of Meetings

Meeting

Attended

Mr. S C Ratnayake NED/NID

4 4/4

Mr. A D Gunewardene NED/NID

4 4/4

Mr. J R F Peiris NED/NID

4 4/4

Mr. V A A Perera* NED/NID - -

2 2/2

T De Zoysa NED/ID

4 4/4

Ms. Y A Hansen NED/ID

4 4/4

Ms. S T Ratwatte NED/ID

4 4/4

Mr. R S Fernando ED/NID

4 4/4

* Mr. V A A Perera was appointed to the Board of Directors on 20th August 2015

Supply of information

When the Directors are newly appointed

to the Board, they undergo a

comprehensive induction where they are apprised, inter-alia, of;

- The operations of the Group and its strategies

- The operating model of the Group

- Group values and culture

Board agenda

A typical Board agenda in 2015/16 was;

- Confirmation of previous minutes

- Matters arising from the previous minutes

- Status updates of major projects

- Review of performance – in summary and

in detail, including high level commentary

on actuals and outlook

- Summation of strategic

issues discussed at pre-Board

meetings

- Approval of Quarterly and Annual financial

statements

- Board subcommittee reports and other

matters exclusive to the Board

- Ratification of capital expenditure, disposal

of fixed assets and donations

- Ratification of the use of the Company seal

and share certificates issued

- Ratification of Circular resolutions

- New resolutions

- Report on corporate

social responsibility

- Review of risks,

sustainability development, HR

practices/updates, etc…

- Any other business

Prior

to

Appoinment <

Once

Appointed <

During

Board

Meeting <


6

3

- Group policies, governance framework

and processes

- Their responsibilities as Directors in

terms of prevailing legislation

- The Code of Conduct expected by the

Group

Additionally, the newly appointed

Directors have access to relevant parts of

the business and are availed the

opportunities to meet with key

management personnel and other key

third party service providers such as

external auditors, Risk consultants etc.

The Directors devote sufficient time and

make every effort to ensure that in

proportion with their knowledge and

experience, they discharge their

responsibilities to the Company. This is

achieved by reviewing Board papers,

business visits to understand risk

exposures and operating conditions,

attending Board meetings and

participating in discussions with the

Senior Management of the Group. Senior

management of the Group on invitation

attends Board meetings and updates the

Board on the performance of the Group.

Board Secretary Keells Consultants (Pvt) Ltd functions as

the Secretaries and Registrars of the

Company and provides the secretarial

input for Board proceedings in addition to

maintaining Board minutes and Board

records.

Board evaluationto give the Board an indication of its

The Board conducts Board performance effectiveness as well as areas that

require appraisal annually. This is a formalized addressing and/or

strengthening.

process of self-appraisal which enables

each member to self-appraise on an The Non Independent, Non-Executive

anonymous basis, the performance of the Chairman of the Audit Committee Board,

using a very detailed checklist/ evaluates the effectiveness of the Audit

questionnaire, under the areas of;Committee based on feedback from

- Role clarity and effective discharge of Committee Members and regular invitees

responsibilitiesto the Committee.

- People mix and structures The annual appraisal of the Chief - System and procedures

Executive Officer is carried out at

- Quality of participation

parent level and is based on pre-agreed

- Board imageperformance criteria, covering the

following broad aspects:-

The scoring and open comments are collated and

the results are analyzed

Chairman’s Role Chief Executive Officer’s Role

• Leads the Board for its • Implementation of policies effectiveness and achieving

of strategic

• Sets the tone for the objectives of the company. governance and ethical

framework

• Sets the tone for the • Ensures that the operating governance and ethical

model of the Group is

framework aligned to the short term

and long term strategies

pursued by the Group

• Ensures that constructive Chairman - • Optimising the use of

working relations are CEO Company’s resources within maintained between

the the framework of corporate executive and Non-Executive and financial

strategies,

members of the Board annual corporate plans and

budget

• Ensures with the assistance • Working closely with of the Board Secretary that;

the senior management

- Board procedures are in identifying risks and

followed initiating prompt action to

- Information is disseminated mitigate such risks in a timely manner to

the

Board


JOHN KEELLS PLC

6

4

delegation of authority Certain functions of the Board are

delegated through Board Committees,

enabling the Committee members to

focus of their designated areas of

responsibility and impart knowledge in

areas where they have greatest

expertise. As permitted by the listing

rules, Nomination Committee, Human

Resources Compensation Committee

and Related Party Transaction Review

Committee of the ultimate Parent

Company, JKH, and the Audit Committee

of John Keells PLC also function in the

capacity of Board Committees of the

Group. Notwithstanding functioning of the

Board Committees the Board of Directors

are collectively responsible for the

decision taken by these sub Committees.

Nomination Committee and Board

appointments The Nomination Committee of the

ultimate Parent Company JKH functions

as the nomination committee of the

Company. The Nomination

Committee holds responsibility to

identify and propose suitable candidates

for appointment as Non-Executive

Directors to the Board of JKH, in keeping

with the target Board composition and

skill requirements. The Board of JKH

after due consideration of such

recommendations, determines and

appoints the new director.

Shareholders must formally approve all

new appointments at the first opportunity

after their appointment, as provided by

Article 90 of the Articles of Association of

the Company.

The Nominations Committee of JKH comprises five Independent Directors and one

Non Independent Director namely:

Mr. T Das Chairman

Mr. S C Ratnayake

Mr. M A Omar

Mr. E F G Amerasinghe

Mr. D A Cabraal

Ms. M P Perera

The composition, mandate & scope of the

committee is presented below

G4-34, G4-LA 12

Board Committees and

Composition The Chairperson must be a Non-Executive Director. The

Chief Executive Officer should be a member.

Mandate Define and establish nomination process for NEDs, lead the

process of Board appointments and make

recommendations to the Board on the appointment of Non-

Executive Directors

Scope a. Assess skills required on the Board given the need of the

businesses

b. From time to time assess the extent to which required

skills are represented on Board

c. Prepare a clear description of the role and capabilities

required for a particular appointment

d. Identify and recommend suitable candidates for

appointments to the Board

e. Ensure, on appointment to Board, NEDs receive a formal

letter of appointment specifying clearly

• Expectation in terms of time commitment

• Involvement outside of the formal Board meetings

• Participation in Committees

(The appointment of Chairperson and EDs is a collective

decision of the Board)

Human Resources &

Compensation Committee

The Human Resources and

Compensation Committee of the Parent

The Human Resources and

Compensation Committee of the Parent

company consists of following five

NonExecutive Independent Directors:

Mr. E F G Amerasinghe Chairman

Dr. I Coomaraswamy

Mr. M A Omar

Mr. A N Fonseka

Mr. D A Cabraal


6

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company John Keells Holdings PLC

functions as the Human Resources and

Compensation Committee of John Keells

PLC and conform to the requirements of

the Listing Rules of the CSE.

and organizational performance rating is

in place for all group employees at

Audit Committee The Audit Committee comprises solely of Non-Executive, Independent Directors and

conforms to the requirements of the Listing Rules of the Colombo Stock Exchange. It is

governed by a Charter, which inter alia, covers the reviewing of policies and procedures

of internal control, business risk management, compliance with laws and Group policies

and independent audit function.

The compensation and benefit policy

adopted by the Company as

recommended by the Human Resources

and Compensation Committee of its

parent company JKH is formulated to

attract and retain high caliber Executives

and motivate them to develop and

implement the business strategy in order

to optimize long term shareholder value

creation. A customized “pay for

performance” scheme based on the

pillars of individual performance rating

Manager Level and above and based

purely on individual performance rating

for all group employees at Assistance

Manager and Executive levels. The

rational for the exclusion of organizational

rating in linking pay to performance at the

lower levels was that the individuals at

those levels had little direct influence on

the bottom line of their organizations.

(Determining compensation of the

NonExecutive Directors will not be under

the scope of this committee).


JOHN KEELLS PLC

6

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The Committee is also responsible for the consideration and recommendation

The composition, mandate & scope of the committee is presented below:

Composition The Chairperson must be a Non-Executive Director.

Committee should comprise exclusively of Non-Executive

Directors, a majority of whom shall be independent.

The Chairman-CEO and Group Finance Director are

present at all Committee meetings unless the Chairman-

CEO or Executive Director Remuneration is under

discussion respectively. The President, Human Resources

and Legal, is also present at all meetings

Mandate Determine the quantum of compensation (including stock

options) for Chairman and Executive Directors, conduct

performance evaluation of Chairman-CEO, review

performance evaluation of the other Executive Directors and

establish a Group Remuneration Policy

Scope a. Determine and agree with the Board a framework for

remuneration of Chairman and Executive Directors

b. Consider targets, and benchmark principles, for any

performance related pay schemes

c. Within terms of agreed framework, determine total

remuneration package of each Executive Director,

keeping in view

d. Performance

e. Industry trends

f. Past remuneration

g. Succession planning of Key Management Personnel

h. Determining compensation of Non-Executive Directors

will not be under the scope of this Committee

of the 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 program that

requires the President of the Plantation

Services Sector, CEO of John Keells

PLC and JKSB, Head of Finance of JKSB

and the Financial Controller (FC)

confirms compliance, on a quarterly

basis, with statutory requirements and

key control procedures and to identify

any deviations from the set requirements.


6

7

In addition the President of the Plantation

Services Sector, CEO of John Keells

PLC and JKSB and the Operational

Heads of the different business units are

also required to confirm operational

compliance with statutory and other

regulations and key control procedures,

coupled with the identification of any

deviations from the expected norms.

These have significantly aided the

committee in its efforts in ensuring

correct financial reporting and effective

internal control and risk management.

Ms. S T Ratwatte Chairman

Mr. T De Zoysa

Ms. Y A Hansen


JOHN KEELLS PLC

6

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The Audit Committee had four (4) meetings during the year and attendance of the Audit


6

9

Committee members are indicated in the Audit Committee Report on page 82.

The President of the Plantation Services Sector, CEO of John Keells PLC and JKSB,

the FC, the Head of Finance and other operational heads are invited to the meetings of

the Audit Committee. The detailed Audit committee report including areas reviewed

during the financial year 2015/16 is given on pages 82 to 84 of the Annual Report.

The composition, mandate & scope of the committee is presented below:

The Related Party Transaction Review Committee of JKH comprises four Non Executive

Independent Directors and one Executive Non Independent Directors namely:

Mr. A N Fonseka Chairman


Mr. D A Cabraal

Mr. S C Ratnayake

Ms. M P Perera

The Group Finance Director-JKH attends

Composition All members to be exclusively Non-Executive, Independent

Directors with at least one member having significant, recent

and relevant financial management and accounting

experience and a professional accounting qualification.

The CEO, Financial Controller are permanent invitees for all

Committee meetings.

Mandate Monitor and supervise management’s financial reporting

process in ensuring;

- Accurate and timely disclosure

- Transparency, integrity and quality of financial reporting

Scope a. Confirm and assure;

- Independence of External Auditor

- Objectivity of Internal Auditor

b. Review with independent Auditors adequacy of internal

controls and quality of financial reporting

c. Regular review meetings with management, Internal

Auditor and External Auditors in seeking assurance on

various matters

meetings by invitation and the Head of Group

Business process Review serves as the

Secretary to the Committee.

The mandate of the Committee to ensure on

behalf of the Board, that all related party

transactions of JKH and its listed subsidiaries

are consisted with the Code of Best Practices

on Related Party Transactions issues by the

Securities Exchange Commission of Sri

Lanka.

While the above requisitions is the minimum

required by the Code, the Group has

broadened the mandate to include senior

decision makers in the list of key management

personnel, whose transactions with the Group

companies also reviewed by the committee.

The scope of this sub-committee in broad

terms is:

Related Party Transaction Review

Committee

The Board of the Parent Company JKH

established a Related Party Transaction

(RPT) Review Committee with effect 1st

April 2014 to review all the related party

transactions of the listed companies

within the Group. This move also

complies with the early adoption of the

Code of Best Practice on Related Party

Transactions issued by the Securities

Exchange Commission (SEC).On the

basis that the Parent company is also a

listed company, the SEC has permitted

the Related Party Transaction Review

Committee of the parent company, to

represent the listed companies in the JKH

group.

• Develop and recommend for adoption

by the Board of Directors of JKH and its

listed subsidies, a Related Party

Transaction Policy which is consistent

with the operating model and the

delegated decision rights of the JKH

group.


JOHN KEELLS PLC

7

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• Updating the Board of Directors on the related party transaction of each of the listed


7

1

companies of the Group on a quarterly basis.

• Define and establish the threshold values for each of the subject listed companies in

setting a benchmark for related party transactions, which have to be pre-approved by

the Board, related party transactions which require to be reviewed annually and

similar issues relating to listed companies.

The Group Finance Director-JKH attends meetings by invitation and the Head of Group

Business process Review serves as the Secretary to the Committee

The composition, mandate & scope of the committee is presented below

Composition The Chairperson must be a Non-Executive Director. Must

include at least one Executive Director.

Mandate To ensure on behalf of the Board, that all Related Party

Transactions of John Keells Holdings PLC and its Listed

Subsidiaries are consistent with the Code of Best Practices

on Related Party Transactions issued by the Securities &

Exchange Commission of Sri Lanka.

Scope a. Develop and recommend for adoption by the Board of

Directors of John Keells Holdings PL C and its Listed

subsidiaries, a Related Party Transaction Policy which is

consistent with the Operating Model and the Delegated

Decision Rights of the JKH Group.

b. Update the Board of Directors the Related Party

Transaction of each of the listed Companies of the JKH

Group on a quarterly basis.

c. Define and establish the threshold values for each of the

subject listed companies in the setting a benchmark for

related party transactions, related party transactions

which have to be pre-approved by the Board, related

party transactions which require to be reviewed annually

and similar issues relating to listed companies.

The Committee in discharging its

functions introduced processes and

periodic reporting by the relevant entities

with a view to ensure that;

- There is compliance with the Code

- Shareholders interest are protected

and

- Fairness and transparency

are maintained.

doing so, transaction threshold values

The Committee recommended and the

Board adopted criteria for designing JKH

Key Management Personnel (KMP). All

Presidents, Executive Vice Presidents,

Chief Executive Officers, Chief Financial

Officers and Sector Financial Controllers

of their respective company’s in addition

to the Directors were designated as

KMPs in order to increase transparency

and enhance governance. Further

The Policies and Procedures adopted by the

Committee for reviewing Related

Party Transactions

The committee formulated

and recommended a policy for

adoption of RPT transactions for JKH and

its subsidiaries which is consistent with

operating model and the delegated

decision rights of the JKH group. In

which require discussion in detail, RPT’s

which require pre – approval by the

Board, RPT’s which require to be

reviewed annually were established and

reporting templates were designed and

approved by the Committee. Further, the

guidelines which senior management

must follow in dealing with related parties,

including pricing were applicable, were

documented.

Corporate

Governance

JOHN KEELLS PLC

7

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processes were introduced to obtain

annual disclosures from all KMPs so

designated.

The activities and views of the Committee

have been communicated to the Board of

Directors quarterly through verbal

briefings, and by tabling the minutes of

the Committee meetings.

Directors Remuneration Executive Directors Remuneration

The remuneration of the Executive

Director is determined in line with the

remuneration policies of the Group. The

remuneration policy is formulated to

attract and retain high calibre executives

and motivate them to develop and

implement the business strategy in order

to optimise long term shareholder value

creation. The Group has adopted a

remuneration policy designed to provide


7

3

an appropriate balance between fixed

remuneration and variable ‘risk’ reward

which includes a fixed and variable

element. The variable element is based

on both individual performance and an

organisational performance matrix which

covers revenue and after tax profit.

In addition, a long term incentive in the

form of employee share options (ESOP)

in the stated capital of the ultimate parent

company is granted based on actual

performance. As prescribed by the Sri

Lanka Accounting Standards (SLFRS /

LKAS) all ESOPs of the respective

employees are charged to the income

statement of the relevant subsidiaries

with effect from 01st July 2013 being the

date of the first award after the

introduction of the accounting standard.

Total aggregated of Executive Directors

Remuneration for the year was Rs

23.77Mn of which Rs. 14.07 was variable

based on performance.

Non-Executive Directors

Remuneration

Compensation of Non-Executive,

Independent Directors is determined with

reference to fees paid to other NED/ IDs

of comparable companies and is adjusted

where necessary. The fees received by

NED/IDs are determined by the Board

and reviewed annually. NED/ IDs do not

receive any performance/ incentive

payments and are not eligible to

participate in any of the Group’s share

option plans. The NED/IDs fees are not

subject to time spent or defined by a

maximum/minimum number of hours

committed to the Group per annum, and

hence are not subject to additional/lower

fees for additional/lesser time devoted.

Director’s fees applicable to NED/NIDs

nominated by John Keells Holdings PLC

are paid directly to the Parent company.

The aggregate of NEDs Remuneration

for the year was Rs. 10.99Mn and Rs.

7.20Mn for Group and Company

respectively

Compensation for early

termination In the event of an early termination of a

Director there are no compensation

commitments other than for;

1. Executive Director; as per

employment contract like any other

employee.

2. NEDs; Director Fees if any, payable in

terms of his/her contract.

Chief Executive Officer and the

Senior Management Committee The Chief Executive Officer (CEO) of the

Company serves as the business unit

head and is responsible to the Board for

the attainment of the Company’s overall

objectives and formulation of strategy.

The Chief Executive Officer coordinates

and guides the different functional heads

of the Company to streamline the

different functional units and achieve

goal congruence.

The Senior Management team consists

of the Heads of the different functional

units of the Company and holds

responsibility to the Chief Executive

Officer for attainment of functional

objectives through effective utilization of

resources and competencies.

Scope and Key responsibilities of the

CEO and the Senior Management

Committee;

- Strategy plan and formulation

- Monitoring and achieving plans

- Career management of Non-

Executives

- Departmental budget monitoring

- Operating business decisions

- Execution of strategic and operational

priorities

2. INTEGRATED

GOVERNANCE SYSTEMS AND

PROCEDURES Listed below are the main governance

systems and procedures of the Group.

These systems and procedures

strengthen the elements of the JKH

Internal Governance Structure and are

benchmarked against industry best

practices.

Strategy formulation and

Decision Making Process

Human Resource Governance


JOHN KEELLS PLC

7

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Integrated Risk Management

IT Governance

Stakeholder Management And

Effective Communication

2.1 Strategy formulation and

Decision Making Process

Step 1

The Group carries out a detailed analysis

on the following aspects when

formulating strategies for the forthcoming

financial year,

- customer and stakeholder needs and

the expectations of the society as a

whole

- organisation’s capabilities to generate

the required products and services

- opportunities and threats that arise

from competitive environments

- risks associated with the operating

landscape

Formulated strategies are presented to the Board of Directors of the Company and the

Group Executive Committee of JKH by the management of John Keells PLC for

approval, and the approved strategies are then translated into numbers where annual

plans, key performance indicators (KPI) and targets for each business units are set.

Step 2

The Board and the Group Executive Committee ensure that the key enablers of

performance, together with organizational structures and processes are defined and are

in place to ensure the delivery of its goals and objectives and approve annual plans.

Strategy Formulation and Decision Making Process

5. Performance evaluation 1. Formulating

business of the second half/full strategy, objectives and

year risk management for each BU for the financial year

months against target

2 . Board and GEC approval

3 . Business performance evaluation of the first six

4 . Reforecasting the targets for the second half of the year and GEC approval

Continuous performance monitoring at

BU level


7

5

Step 5

Business performance during the second half of the financial year as well as the full

financial year is evaluated against the reforecast plans and targets at the end of the

financial year.

In addition to the periodic performance

review by the Board and the Group

Executive Committee, more frequent and

detailed performance evaluations are

taking place at regular intervals at


JOHN KEELLS PLC

7

6

business unit and Group Management Committee levels. The outcome of such

performance evaluations acts as a key determinant in awarding short term incentives to

respective employees.

2.2 Human Resource Governance

A proven Performance Management System and other supporting Human Resource

Management Processes are essential in entrenching a culture of performance within a

framework of compliance, conformance and sustainable development

The Performance Management System is

depicted on page 59.

2.3 Integrated Risk Management

The Group has adopted a wide risk

action

.

management programme which focus on wider sustainability development, to identify, evaluate and manage significant risks and to

stress-test various risk scenarios. The programme ensures that a multitude of risks, arising as a result of the Group’s operations, are

effectively managed in creating and preserving shareholder and other stakeholder wealth.

The steps taken towards promoting the integrated risk management process are;

Performance management system

Pay decisions are based on:

Performance rating,

Competency rating, Ease of

replacement rating

Identification of : Long term

development plans,

Competency based training

needs, Business focused training

needs

Identification of : Promotions,

Inter Company transfers,

Inter department

transfers

Step 3

Upon the completion of the first half of the

financial year the Board and the Group

Executive Committee

evaluates the performance

of the businesses against the plan with

deviations being noted along with the

identification of corrective

Step 4

Reforecast of the Annual Plan for the

second half of the financial year is

presented to the Board and the Group

Executive Committee for approval having

taken into consideration changes taking

place at both a macro and micro levels.


7

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Identification of : Jobs at

risk, Suitable successors,

Readiness level of

successors, Development

plans, External recruitment

Identification of : High

performance, Group talents

Nomination for Awards:

Chairman’s award,

Employee of the year,

Champion of the year

- Integrating and aligning activities and

processes related to planning, policies

/ procedures, culture, competency,

internal audit, financial management,

monitoring and reporting with risk

management.

- Supporting executives / managers in

moving the organization forward in a

cohesive integrated and aligned

manner to improve performance, while

operating effectively, efficiently,

ethically and legally within the

established limits for risk taking.

Please refer the Enterprise Risk

Management section of the Annual

Report in pages 76 to 81 for a detailed

discussion on company’s Integrated Risk

management which covers the risk

management process and the key risks

identified in achieving the company’s

strategic business objectives

2.4 IT Governance

The Group believes that ‘Information

Technology’ is a Strategic Asset and as

such it needs to be managed to leverage

competitive business benefits for the

Group.

The IT Governance frame work is built

upon the following set of primal

objectives:

- Leverage IT as a Strategic Asset.

- Ensuring agility, in a fast moving

environment.

- Create better Alignment between

business and IT.

- Create greater business value with our

investments in IT.

- Create a strong IT governance and

regulatory framework through a

coherent set of policies, processes and

adoption of best practices in line with

world-class organizations.

Compensation & Benefits

Learning and Development

Career Development

Succession Planning

Talent Management Rewards and

Recognition

Performance Management System


JOHN KEELLS PLC

7

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• Group Strategy

• Industry

strategies•

Business/IT

strategies

Stakeholder Management and

Effective Communication The Company follows a stakeholder

model of governance adopted by the

John Keells Group. Following are the key

stakeholder management methodologies

adopted by the John Keells Group.

Shareholders / Investors

- Dialogue with Shareholders

The Group has opened up several

channels to ensure sound communication

with the shareholders and the details are

found in the relevant sections of this

report.

- Release of Information to the Public

and CSE

The Board of Directors, in conjunction

with the Audit Committee, is responsible

for 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.

All other material and price sensitive

information about the Company is

Governance Scope

Business/IT Alignment

Management & Accountability

Value Management

Risk Management

Structure role and responsibilities

promptly communicated to the CSE,

where the shares of the Company are

listed, and such information is also

released to the employees, press and

shareholders.

- Annual General Meeting (AGM)

The Company makes use of the AGMs

constructively towards enhancing

relationship with the shareholders and

towards this end the following procedures

are followed;

• Notice of the AGM and related

documents are sent to

shareholders along with the

Annual Report within the specified

period

• Summary of procedures governing

voting at General meetings are

clearly communicated

• All the Directors are available to

answer queries

• The Chairman ensures that the

relevant senior managers are

available at the AGM to answer

specific queries

• Principles

• Best Practices

• Standards

• Structures

• Policies

• Processes

• Procedures, Etc

• Separate resolutions are proposed

for each item

• Proxy votes are counted

- Serious Loss of Capital

In the unlikely event that the net assets of

the Company fall below a half of the

stated capital of the Company,

shareholders would be notified of an

Extraordinary General Meeting in terms

of Section 220 of the Companies Act No.

07 of 2007.

Customers / Suppliers

The Group works towards meeting the

customer expectations by ensuring the

quality of its services. The Group being

mainly in the Tea and Rubber brokering

business is committed to timeliness,

prompt service, seeking better prices for

produce, assisting producers with

G4-20, G4-21, G4-24, G4-25, G4-26, G4-27

IT Governance Structure

• PEST Governance Drivers Governance Enabbles • Frameworks


7

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technical “know how” and up-dating to

best trade practices.

The Group fosters long term business

relations with suppliers by adhering to

contractual obligations and knowledge

sharing.

- Communicating with employees

The Company recognizes that employee

involvement is a critical pre-requisite

towards ensuring the effectiveness of the

corporate governance system and

therefore attaches great importance to

employee communications and

employee awareness of key events and

significant developments. The necessity

of sincere and regular communication; -

top-down, bottom-up, and lateral, in

gaining employee commitment to

organizational goals and values is

stressed extensively and intensively

through various communiqués issued by

the senior management.

3. ASSURANCE MECHANISMS

The “Assurance Mechanisms” comprise,

in the main, of the various supervisory,

monitoring and benchmarking elements

of the Company’s corporate governance

system which are used to measure

“actuals” against “plan” on, in most

instances, a pre-determined time table

The with a view to signaling the need for

quick corrective action, when necessary,

on a timely basis. These mechanisms

also act as “safety nets”, “buffer

mechanisms” and internal checks in the

governance system.

- Employee participation in

Assurance

Whistleblower policy - The employees

can report to the Chairman through a

communication link named “Chairman

Direct”, on any concerns about unethical

behavior and any violation of John Keells

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.


JOHN KEELLS PLC

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Skip level meetings- Employees at

Assistant Manager and all levels above

can discuss matters of concern with

superiors who are at a level higher than

their own immediate supervisor in an

open but confidential environment

Exit interviews - This is mandated for all

Executive and above level. All such

reports are forwarded to the Sector Head

of the Plantation Services Sector of JKH.

Securities trading policy - JKH, the parent

company securities trading policy

prohibits all employees and agents

engaged by the company who are in

possession of unpublished price sensitive

information from trading in the company’s

shares.

The John Keells Group adopts a zero

tolerance policy against any employee

who is found to be in violation of this

policy.

360 degree evaluation - All employees at

Manager and above levels, including the

Chairman (direct report evaluation only)

are subject to a 360 degree evaluation

conducted by an independent 3rd party.


8

1

Great Place to Work Survey – These


JOHN KEELLS PLC

8

2

anonymous surveys are aimed at

knowing, at regular intervals, whether

employees consider the companies

under the John Keells Group as ‘great’.

These surveys highlight visible areas of

employee concerns. Following such

surveys, the John Keells Group engages

focussed Discussion Groups in reviewing

the highlighted areas of concern and

considers the Discussion Group’s

suggestions where relevant and

appropriate. Experience has confirmed

that this has contributed to significant

improvements in the employee

perceptions of the John Keells Group,

particularly in respect of practices,

policies and behaviors that build

credibility, respect and fairness.

Voice of Employee Survey - These are dip

stick surveys done at regular intervals to

assess employee satisfaction.

- Internal control

The Board has taken necessary steps to

ensure the integrity of the Company’s

accounting and financial reporting

systems and internal control systems

remain effective via the review and

monitoring of such systems on a periodic

basis.

• Internal compliance

A quarterly self-certification programme

requires the Sector Head of the

Plantation Services Sector of JKH and the

Financial Controller of the Company to

confirm compliance with financial

standards and regulations. The Sector

Head of the Plantation Services Sector of

JKH and the CEO of the Company are

required to confirm operational

compliance with statutory and other

regulations and key control procedures,

and also identify any significant

deviations from the expected norms.

• System of internal control

The Board has through the involvement of

the Group Business Process Review

(Group BPR) division of JKH, taken steps

to obtain assurance that systems

designed to safeguard the Company’s

assets, maintain proper accounting

records and provide management

information, are in place and are

functioning according to expectations.

The risk review programme covering the

internal audit of the Company is

outsourced.

Reports arising out of such audits are in

the first instance, considered and

discussed at the company level and after

review by the Sector Head of the

Plantation Services Sector/ President

JKH and forwarded to the relevant Audit

Committee, through the Group Finance

Director, on a quarterly basis. Further, the

Audit Committees also assess the

effectiveness of the risk review process

and systems of internal control

periodically.

The Internal Audit function of the

Company is not outsourced to the

external auditor in a further attempt to

ensure external auditor independence.

The Auditors’ report on the financial

statements of the Company for the year

under review is found in the Financial

Information section of the Annual Report

in page 93.

The role of the Internal Auditor has

transformed into a value adding function

instead of a mere ‘policing’ function,

where audit findings form an integral input

in modifying and improving internal

processes. Thereby, the Group Business

Process Review (Group BPR) division of

JKH is a key contributor in achieving

operational excellence and value addition

of the Company.

- The Code of conduct

The Company follows the JKH Code of

Conduct and is summated as follows;

JKH Code of Conduct

• Allegiance to the Company and the

Group


8

3

• Compliance with rules and regulations

applying in the territories that the Group

operate in

• Conduct of business in an ethical

manner at all times an in keeping with

acceptable business practices

• Exercise of professionalism and

integrity in all business and “public”

personal transactions.

The objectives of the Code of Conduct

are further affirmed by a strong set of

corporate values which are well

institutionalized at all levels within the

company through structured

communication. The degree of employee

conformance with corporate values and

their degree of adherence to the JKH

Code of Conduct are key elements of

reward and recognition schemes.

- Ombudsperson - In order to deal with a

situation in which an employee or group

of employees feel that an alleged

violation has not been addressed

satisfactorily using the available/existing

procedures and processes, an

Ombudsperson has been appointed by

JKH being the ultimate Parent Company

to entertain such concerns.

The Ombudsperson’s duty ceases upon

the confidential written communication of

the findings of the Ombudsperson and

recommendations to the Chairman or the

Senior Independent Director of JKH, as

the case may be.

The Chairman or the Senior Independent

Director, as the case may be, will place

before the Board.

• The decision and the recommendations

of the Ombudsperson

• The action taken based on the

recommendations

• The areas of disagreement and the

reasons adduced in instances where

the Chairman or the Senior

Independent Director disagrees with

any or all of the findings and/ or

recommendations. In such cases, the

Board shall consider the areas of

disagreement and determine the way

forward.

The Chairman or the Senior Independent

Director is expected to take such steps

as are necessary to ensure that the

complainant is not victimized for having

invoked this process.

These open door policies facilitate

constant dialogue, communication,

transparency and ultimately employee

confidence, which would help retain

existing talent whilst attracting new.

- External Control

Messrs. Ernst & Young, Chartered

Accountants are the External Auditors of

the Company and also the principal

Group Auditor of JKH.

In addition to the external auditor

services, Messrs. Ernst & Young, also

provide certain Non-Audit services to the

Company. However, the Principal /

Consolidator Auditor would not engage in

any services which are in the restricted

category as defined by the CSE for

External Auditors. All such services have

been provided with the full knowledge of

the Audit Committee and are assessed to

ensure that External Auditor

independence is not compromised.

The Board has agreed that, such

NonAudit services should not exceed a

specified percentage of the value of the

total audit fees charged by the subject

auditor. The External Auditors also

provide a certificate of independence on

an annual basis.

The Audit and Non-Audit fees paid by the

Company to its Auditors are separately

classified in the Notes to the Financial

Statements of the Annual Report in page

115.

4. EXTERNAL GOVERNANCE

STRUCTURE

Regulatory Benchmarks

The Board through the JKH Legal

division, strives to ensure that the

Company complies with the laws and

regulations of the country.

The Board of Directors has also taken all

reasonable steps in ensuring that all

financial statements are prepared in

accordance with the Sri Lanka

Accounting Standards (SLFRS / LKAS)

issued by the ICASL and the

requirements of the CSE and other

applicable authorities.

The Board is aware of the growing

importance of the disclosure of critical

accounting policies as a part of good

governance and opines that there are no

instances where the use of such

concepts would have a material impact

on the Company’s financial performance.

The Company is fully compliant with all

the mandatory rules and regulations


JOHN KEELLS PLC

8

4

stipulated by the Corporate Governance

Listing Rules published by the CSE and

also by the Companies Act No. 07 of

2007. The Company has also given due

consideration to the Best Practice on

Corporate Governance Reporting

guidelines jointly set out by the ICASL

and the SEC, and have in all instances,

barring a few, embraced such practices,

voluntarily, particularly if such practices

have been identified as relevant and

value adding. In the instances where the

company has not adopted such best

practice, the rationale for such non

adoption is articulated.

Conclusion The Company’s robust and sound

governance helps it to create and

maintain trust with employees, investors,

government, business partners, guests

and other stakeholders. Within this

framework, John Keells PLC’s goal is to

run its business sustainably, engaging

with society in a way that leads to the

creation of shared value over the long

term.

A detailed report on the extent of our

adherence to best practices with

appropriate reference is given below;

Statement of compliance under Section 7.10 of the Rules of the Colombo Stock Exchange (CSE) on Corporate

Governance (Mandatory provisions – Fully Complied)

Compliant Non-Compliant

Rule No. Subject Applicable requirement Compliance

Status

Applicable Section in the

Annual Report

7.10 Compliance

a./b./c. Compliance with


Rules

The Company in compliance with the Corporate

Governance Rules and any deviations are

explained where applicable


7.10.1 Non-Executive Directors

a./b./c. Non-Executive Directors

(NED)

2 or at least 1/3 of the total number (whichever

is higher) of Directors should be NEDs


7.10.2 Independent Directors

a. Independent Directors

(ID)

2 or1/3 of NEDs, whichever is higher, should be

independent


b. Independent Directors Each NED should submit a signed and dated

declaration of independence or

nonindependence

Available with the

Secretaries for review

7.10.3 Disclosures relating to Directors

a./b. Disclosure relating to

Directors

The Board shall annually determine the

independence or otherwise of the NEDs



8

5

c. Disclosure relating to

Directors

A brief resume of each Director should be

included in the Annual Report (AR) including the

Director’s areas of expertise

Board of Directors (profile)

section in the Annual

Report


Status


Annual Report

d. Disclosure relating to

Directors

Provide a brief resume of new Directors

appointed to the Board along with details


7.10.4 Criteria for defining independence

(a-h) Determination of

Independence

Requirements for meeting criteria to be an



7.10.5 Remuneration Committee

7.10.5 Remuneration Committee

(RC)

The RC of the listed parent company may

function as the RC


a. Composition of RC 1 Shall comprise of NEDs, a majority of whom

shall be independent

2 One NED shall be appointed as Chairman of

the Committee by the Board of Directors


b. Functions of RC The RC shall recommend the remuneration of

the Executive Directors and the Chief Executive

Officer (CEO)


c. Disclosure in the Annual

Report relating to RC

1 Names of Directors comprising the RC

2 Statement of Remuneration Policy

3 Aggregated remuneration paid to ED and

NED

Corporate Governance,

Corporate Governance of

Holding Company and

Notes to the Financials.

7.10.6 Audit Committee

a. Composition of Audit

Committee (AC)

• Shall comprise of NEDs a majority of whom

shall be Independent

• A NED shall be appointed as the Chairman of

the Committee

• CEO and Financial Controller should attend

AC meetings

• The Chairman of the AC or one member

should be a member of a professional

accounting body

Corporate Governance and

the Board Committee

Reports


Status


Annual Report


JOHN KEELLS PLC

8

6

b. AC Functions Overseeing of the –

• Preparation, presentation and adequacy of

disclosures in the financial statements in

accordance with Sri Lanka Accounting

Standards (SLFRS/LKAS) Compliance with

financial reporting requirements, information

requirements as per the laws and regulations

• Ensuring that internal controls and risk

management are adequate to meet the

requirements of the SLFRS/LKAS

• Assessment of the independence and

performance of the external auditors

• Make recommendations to the Board

pertaining to appointment, re-appointment and

removal of external auditors, and approve the

remuneration and terms of engagement of the

external auditor


the Board Committee

Reports

c Disclosure in Annual

Report relating to AC

• Names of Directors comprising the AC

• The AC shall make a determination of the

independence of the Auditors and disclose the

basis for such determination

• The AR shall contain a Report of the AC

setting out the manner of compliance with

their functions


the Board Committee

Reports

Code of Best Practice of Corporate Governance issued jointly by the Securities and Exchange Commission of Sri

Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (ICASL)

Code Ref. Subject Applicable requirement Adoption

Status


Annual Report

A. 1 DIRECTORS – Board

A.1 The Board Company to be headed by an effective

Board to direct and control the

Company

Yes Corporate Governance

A.1.1 Frequency of Board

Meetings

Board should meet regularly, at least

once in every quarter

Yes Corporate Governance /

Director’s Report


Status


Annual Report


8

7

A.1.2 Responsibilities of the

Board

• Formulation and implementation of

strategy,

• Skill adequacy of management and

succession,

• Integrity of information, internal

controls and risk management

• Compliance with laws, regulations and

ethical standards

• Code of conduct

• Adoption of appropriate accounting

policies

• Financial regulations and fulfilling other

Board functions


A.1.3 Access to professional

advice

Act in accordance with the laws of the

country and implement procedures to

obtain independent professional advice


A.1.4 Company Secretary Ensure adherence to board procedures

and applicable rules and regulations

Procedure for Directors to access

services of Company Secretary


A.1.5 Independent judgement Directors should exercise independent

judgement on issues of strategy,

resources, performance and standards of

business judgement


A.1.6 Dedication of adequate

time and effort by

Directors

Directors should devote adequate time

and effort to discharge their

responsibilities to the Company

satisfactorily


A.1.7 Training for Directors Directors should receive appropriate

induction ,training, hone skills and

expand knowledge to more effectively

perform duties



Status


Annual Report

A. 2 DIRECTORS - Chairman & Chief Executive Officer

A.2. Division of responsibilities

to ensure no individual has

unfettered powers of

decision

A balance of power and authority to be

maintained by separating responsibility for

conducting Board business from that of

executive decision making


A. 3 DIRECTORS - Role of Chairman


JOHN KEELLS PLC

8

8

A.3 Ensure good corporate

governance

Chairman to preserve order and facilitate

effective discharge of Board functions by

proper conduct of Board meetings


A. 4 DIRECTORS - Financial Acumen

A.4 Possession of adequate

financial acumen

Board to ensure the availability within it of

those with sufficient financial acumen and

knowledge to offer guidance on matters of

finance


A. 5 DIRECTORS – Board Balance

A.5.1 Composition of Board The Board should include a sufficient number

of Non-Executive, Independent

Directors

N/A Corporate Governance

A.5.2 Proportion of Independent

Directors

Two or one third of the Non-Executive

Directors should be independent

N/A Corporate Governance

A.5.3 Definition of

independence

Independent Directors should be

independent of management and free of any

business or other relationship that could

materially interfere with the exercise of

unfettered and independent judgement


A.5.4 Declaration of

independence

Non-Executive Directors should submit a

signed and dated declaration of their

independence / non-independence


Director’s Report

A.5.5 Annual determination of

criteria of independence /

non-independence and

declaration of same by

Board

The Board should annually determine and

disclose the names of directors deemed to be

independent


A.5.6 Appointment of an

Alternate Director

If an Alternate Director is appointed by a

Non-Executive director, such alternate

director should not be an executive of the

Company

Yes


Status


Annual Report

A.5.7 Appointment of Senior


(SID)

If the roles of Chairman / CEO are combined,

a Non-Executive Director should be

appointed as a Senior Independent

Director

N/A N/A

A.5.8 Availability of Senior

Independent Director to

other Directors

If warranted, the SID should be available to

the other Directors for confidential

discussions.

N/A N/A


8

9

A.5.9 Interaction between

Chairman and Non-

Executive, Independent

Directors

The Chairman should meet the

NonExecutive, independent Directors at least

once a year


A.5.10 Directors concerns to be

recorded

When matters are not unanimously resolved,

Directors to ensure their concerns are

recorded in Board minutes

N/A N/A

A. 6 DIRECTORS - Supply of Information

A.6.1 Provision of adequate

information to Board

Management to ensure the Board is provided

with timely and appropriate information


A.6.2 Adequacy of Notice and

formal agenda to be

discussed at Board

meetings

Board minutes, agenda and papers should

be circulated at least seven days before the

Board meeting


A. 7 DIRECTORS - Appointments to the Board

A.7 Appointments to the

Board

Formal & transparent procedure for Board

appointments


A.7.1 Nomination Committee Nomination committee may make

recommendations to the Board on new

Board appointments


A.7.2 Annual assessment of

Board composition

Nomination committee or Board should

annually assess the composition of Board


A.7.3 Disclosure of new Board

appointments

Profiles of new Board appointments to be

communicated to Shareholders


Notice of Meeting

A. 8 DIRECTORS – Re-election

A.8.1/ A.8.2 Appointment of

nonexecutive Directors

Re-election at regular intervals and should

be subject to election and re-election by

shareholders


Director’s Report


Status


Annual Report

A. 9 DIRECTORS - Appraisal of Board Performance

A.9.1 Annual appraisal of Board

performance

The Board should annually appraise how

effectively it has discharged its key

responsibilities


A.9.2 Self evaluation of Board

and Board Committees

The board should evaluate its performance

and that of its committees annually


Audit Committee Report


JOHN KEELLS PLC

9

0

A.9.3 Declaration of basis of

performance evaluation

The Board should disclose how performance

evaluations have been carried out


A. 10 DIRECTORS - Disclosure of information in respect of Directors

A.10.1 Biographical profiles and

relevant details of

Directors to be disclosed

Annual Report should disclose the

biographical details of Directors and

attendance at Board/committee meetings

Yes Board of Directors

Corporate Governance /


A. 11 DIRECTORS - Appraisal of Chief Executive Officer

A.11.1 Short, medium and long

term objectives, financial

and non-financial

objectives to be set

The Board should set out the short, medium

and long term objectives, financial and

nonfinancial objectives at the

commencement of each year


A.11.2 Evaluation of CEO

performance

The performance of the CEO should be

evaluated by the Board at the end of the year


B. 1 DIRECTORS REMUNERATION - Remuneration Procedure

B.1.1 Appointment of

Remuneration Committee

Remuneration Committee may function as

such for the Company to make

recommendations on Directors remuneration


B.1.2 Composition of


Board to appoint only Non-Executive

Directors to serve on Remuneration

Committee


B.1.3 Disclosure of members of


The Annual Report should disclose the

chairman and directors who serve on the



B.1.4 Remuneration of

nonexecutive directors

Board to determine the level of remuneration

of Non-Executive Directors


B.1.5 Access to professional

advice

Remuneration Committee should have

access to professional advice in order to

determine appropriate remuneration for

Executive Directors


B. 2 DIRECTORS REMUNERATION - Level and Make up of Remuneration

B.2.1 Remuneration packages

for Executive Directors

Packages should be structured to attract,

retain and motivate Executive Directors



Status


Annual Report


to be appropriately

positioned

Packages should be comparable and relative

to that of other companies as well as the

relative performance of the Company



9

1

B.2.3 Appropriateness of

remuneration and

conditions in relation to

other Group companies

When determining annual increases

remuneration committee should be sensitive

to that of other Group companies


B.2.4 Performance related

elements of remuneration

Performance related elements of

remuneration should be aligned with

interests of Company


B.2.5 Share options Executive share options should not be

offered at a discount


B.2.6 Designing skills of

performance related

remuneration

When determining remuneration it shall be

as per the scheme’s designed for

performance related remuneration


B.2.7 / B.2.8 Compensation

commitments in the event

of early termination of the

Directors

Remuneration committee should consider

the advantages of providing explicitly for

such compensation commitments to apply

other than in the case of removal for

misconduct in initial contracts



for Non-Executive

Directors

Should reflect time commitment and

responsibilities of role and in line with

existing market practice


B. 3 DIRECTORS REMUNERATION - Disclosure of Remuneration

B.3.1 Disclosure of details of

remuneration

The Annual Report should disclose the

remuneration paid to Directors

Yes

Financial Statements -

Note 8

C. 1 RELATIONS WITH SHAREOLDERS – Constructive use and conduct of Annual General Meeting

C.1.1 Proxy votes to be counted The Company should count and indicate the

level of proxies lodged for and against in

respect of each resolution Yes


C.1.2 Separate resolutions Separate resolutions should be proposed for

substantially separate issues Yes


Notice of Meeting

C.1.3 Availability of Committee

Chairmen at AGM

The Chairmen of Board committees should

be available to answer any queries at AGM Yes


C.1.4 Notice of AGM 15 calendar days notice to be given to

shareholders

Yes Notice of Meeting

C.1.5 Procedure for voting at

meetings

Company to circulate the procedure for

voting with Notice of Meeting

Yes Notice of Meeting


Status


Annual Report

C.2 Communication with Shareholders


JOHN KEELLS PLC

9

2

C.2.1 Chanel of Communication Channel to reach all shareholders to

disseminate timely information Yes


C.2.2 –C.2.7 Policy and Methodology of

Communication

Policy and Methodology of

communication with shareholders and

implementation


C.3 Major and Material Transactions including major related party transactions

C.3.1 Disclosure of Material

Transactions

Disclosure for all material facts

involving all material transactions

including related party transactions

Yes Notes to Financial

Statements

D.1 ACCOUNTABILITY AND AUDIT - Financial Reporting

D.1.1 Presentation of public reports Should be balanced, understandable

and comply with statutory and

regulatory requirements

Yes Management Discussion,


Risk Management

Financial Statements

D.1.2 Directors Report The Director’s Report should be

included in the Annual Report and

confirm that;

• the Company has not contravened

laws or regulations in conducting its

activities

• Material interests in contracts have

been declared by Directors

• the Company has endeavoured to

ensure equitable treatment of

shareholders

• that the business is a “going

concern”

• that there is reasonable assurance

of the effectiveness of the existing

business systems following a review

of the internal controls covering

financial, operational and

compliance

Yes

Yes

Yes

Yes

Yes

Yes

Director’s Report


Director’s Report

Financial Statements


Director’s Report


Risk Management

D.1.3 Respective responsibilities of

Directors and Auditors

The Annual Report should contain

separate statements setting out the

responsibilities of the Directors for

the preparation and presentation of

the financial statements and the

reporting responsibilities of the

Auditors

Yes Respective

responsibilities of

Directors and Auditors


Status


Annual Report


9

3

D.1.4 Management Discussion and

Analysis

Annual Report to include section on

Management Discussion and

Analysis

Yes Management Discussion

D.1.5 Going Concern Directors to substantiate and report

that the business is a going concern or

qualify accordingly Yes

Annual Report of the

Board of Directors

D.1.6 Serious Loss of Capital Directors to summon an Extraordinary

General Meeting in the event that the

net assets of the company falls below

50% of the value of Shareholders

Funds

N/A N/A

D.1.7 Related Party Transactions Disclosure of Related Party

Transactions

Yes Notes to the Financial

Statements

D.2 ACCOUNTABILITY AND AUDIT - Internal Control

D.2.1 Effectiveness of system of

internal controls

Directors to annually conduct a review

of the effectiveness of the system of

internal controls and report to

shareholders. This responsibility may

be delegated to the Audit

Committee

Yes Audit Committee Report

Risk Management

D.2.2 Functionality Internal Audit Function Yes Corporate Governance

D.2.3 / D.2.4 Continuity of Internal control Maintaining a sound system of internal

control


D.3 AUDIT COMMITTEE

D.3.1 Chairman and Composition of

Audit Committee

Should comprise of a minimum of two

independent, non-executive directors

Audit Committee Chairman should be

a Non-Executive Director appointed by

the Board

Yes Audit Committee Report

D.3.2 Duties of Audit Committee Should include

Review of scope and results of audit

and its effectiveness

Independence and objectivity of the

Auditors

Yes


D.3.3 Terms of Reference / Charter The Audit Committee should have a

written Term of Reference which

define the purpose of the Committee

and its duties and responsibilities



Status


Annual Report


JOHN KEELLS PLC

9

4

D.3.4 Disclosures The Annual Report should disclose

the names of directors serving on the

Audit Committee

The Audit Committee should

determine the independence of the

Auditors and disclose the basis of

such determination

The Annual Report should contain a

report by the Audit Committee setting

out the manner of the compliance of

the Company during the period to

which the Report relates

Yes

Yes

Yes

Corporate Governance &




D.4 CODE OF BUSINESS CONDUCT AND ETHICS

D.4.1 Adoption of Code of Business

Conduct and Ethics

The Company must adopt a Code of

Business Conduct and Ethics for

directors and members of the senior

management team and promptly

disclose any violation of the Code


D.4.2 Chairman’s affirmation The Annual Report must include an

affirmation by the Chairman that he is

not aware of any violation of the Code

of Business Conduct and Ethics

Yes Chairman’s Message /

Director’s Report

D.5 CORPORATE GOVERNANCE DISCLOSURES

D.5.1 Corporate Governance Report The Annual Report should include

a report setting out the manner and

extent to which the Company has

adopted the principles and

provisions of the Code of Best

Practice on Corporate Governance


E. INSTITUTIONAL INVESTORS

E.1 Shareholder Voting

E.1.1 Structured Dialogue with

Shareholders

A regular and structured dialogue

should be conducted with

shareholders and the outcome of

such dialogue should be

communicated to the Board by the

Chairman



Status


Annual Report


9

5

E.2 Evaluation of Governance

Disclosures by Institutional

Investors

Institutional investors should be

encouraged to consider the relevant

factors drawn to their attention with

regard to board structure and

composition


F. OTHER INVESTORS – Investing Divesting decisions

F.1. Individual Investors Individual shareholders should be

encouraged to carry out adequate

analysis and seek professional advice

when making their investment/

divestment decisions


F.2 Shareholder Voting Individual shareholders should be

encouraged to participate in General

meetings and exercise their voting

rights


Form of Proxy

G. Sustainability Reporting

G.1 – G.1.7 Sustainability Reporting Disclosure on adherence to

sustainability principles

Yes Annual Report – GRI

Index

JOHN KEELLS PLC 9

6

Enterprise Risk

Management Overview Risk Management is a pivotal part of the

organizational process at John Keells

PLC (Group). The Group currently

conducts its business operation

segments as produce broking, share

broking and warehousing operations.

John Keells PLC, being a part of its parent

company John Keells Holdings believes

that Enterprise Risk Management (ERM)

is intrinsically interwoven with

Sustainability and Corporate Social

Responsibility (CSR). Risk Management

at John Keells PLC therefore considers

more than the specific operational and

financial risks faced by the organisation

by including potential risks related to the

environment, community and employees.

The Group is exposed to various forms of

industrial, operational, environmental and

financial risks arising from the

environment within which it operates in

and its own operations and transactions.

The objective of the Risk Management

Strategy of the Group is to identify,

manage and mitigate risk, adapt to

changing environment and harness

opportunities which will ensure that the

Group adopts long-term and short-term

strategies which are aligned with the

overall triple bottom-line objectives of the

business and the parent company John

Keells Holdings PLC.

The annual Risk Management cycle at

John Keells PLC begins with a detailed

discussion and identification of risks,

impacts and preventive, detective and

corrective mitigation plans in conjunction

with the parent company of the Group

John Keells Holdings PLC ERM Division,

which constitute the ‘bottom-up’

approach.

The Risk Management process and

information flow adopted by the Group is

depicted below.


9

7

Types of risk

1 2 3 4 5

Priority level Colour code

Score 15-25 9-14 4-8 2-3 1

Ultra High High Medium Low Insignificant

JOHN KEELLS PLC

9

8

Enterprise Risk Management

Risk Universe

Headline Risk

• Political • Reputation and

Brand Image

• Internal Business

Process

• Leadership • Performance

Measurement &

reporting

• Technology

Infrastructure/

Architecture

• Competitor • Capital &

Finance

• Operations –

Planning, Production,

Process

• Skills/

Competency/

Motivation

• Budgeting/

Financial Planning

• Data Relevance

& Integrity

• Catastrophic Loss • Strategy &

Innovation

• Operations –

Technology, Design,

Execution, Continuity

• Change

Readiness

• Accounting/ Tax

Information

• Data

Processing

Integrity

• Customer

Expectations

• Business/

Product

Portfolio

• Resource Capacity &

Allocation

• Communication • External Reporting

& Disclosures

• Technology

Reliability &

Recovery

• Macro Economic • Organization

Structure

• Vendor/Partner

Reliance

• Performance

Incentives

• Pricing / Margins • IT Security

• Foreign

Exchange and

Interest Rates

• Stakeholders • Channel Effectiveness • Accountability • Market Intelligence • IT processes

• Weather &

Climate

• Investment

& Mergers &

Acquisitions

• Interdependency • Fraud & Abuse • Contract

Commitment

• Environment,

Health and

Safety

• Customer Satisfaction • Knowledge/

Intellectual

Capital

• Insurable risks

• Legal, Regulatory

Compliance & Privacy

• Change

Integration

• Innovation • Labor Relations

• Property & Equipment

Damage

• Attrition

• Liability

03. Risk Mitigation Strategy Based on the rating of each identified risk,

the Risk Management Team decides on

the appropriate risk mitigation plans

which are categorized into preventive,

External

Environment

Business

Strategies and

Policies

Business Process Organization and

People

Analyzing and

Reporting

Technology and

Data


9

9

detective and corrective mitigation plans.

Based on the field of expertise all risks

are then assigned to a Risk owner who is

responsible for the implementation and

reporting of the risk mitigating strategy.

04. Risk Reporting

The Business units are the ultimate

owners of their risk, and are responsible

for periodic review of the RCSA. The

Group also follows a well structure

reporting mechanism whereby reviewing

of the RCSA on a quarterly basis is

confirmed by the business unit by signing

off a compliance statement. This

compliance statements are also signed

off by the Presidents of the each business

units prior to been tabled at the Audit

Committee of John keels PLC. The

responsibility of maintaining an effective

system of internal control and risk

management lies with The Board. The

Audit Committee on behalf of the Board

reviews the Risk Management process

adopted and reported by the Group.

05. Monitoring of Controls

It is the responsibility of the CEO and the

Risk Management Team to ensure that

each risk item is tracked over the course

of the year and to ensure the mitigation

actions identified during the risk review

process are being carried out adequately.

The implemented operational and

management controls and mitigation

plans are regularly verified through

independent internal audits as well as

safety audits.

The key risks that may hinder the

achievement of our strategic business

objectives along with control measures

and action plans implemented to mitigate

them are given below;

Risk Item Potential Impact Risk control measure & action plans to mitigate risk

a) Regional Planation

companies investing in broking

companies

- Not meeting service quality

levels

- Potential loss of cash &

Inventory

- Loss of reputation

FY 2013/14 FY 2014/15 FY

2015/2016

Rating Ultra High Ultra High High

The company closely monitors competitor activities and ensure the

Tea & Rubber Brokers operate within the controlled environment.

- Providing manufacturing advice, enterprise management &

marketing advice to producer clients in order that estates are

aligned to market requirements

b) Over Exposure on lending Reduced cash flow and

profitability FY 2013/14 FY 2014/15 FY 2015/16

Rating Low Low Medium

The company deals with mostly recognized, credit worthy clients

who are private Tea factory owners & plantation companies. Credit

risks are minimized as we advance funds based on inventories

available in our warehouse valued at historical prices obtained for

the relevant marks. Over advances granted are made available only

for those clients who have a good track record and are monitored

closely

Enterprise Risk Management


JOHN KEELLS PLC

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c) Increase in interest rates Increase cost of debt

FY 2013/14 FY 2014/15 FY 2015/16


On short term advances, exposure to market risk for changes in

interest rates is minimized, as the companies lending is above the

borrowing rates

d) Foreign Exchange Risk

(Appreciation of the LKR)

Reduced brokerage

FY 2013/14 FY 2014/15 FY

2015/2016

Rating Insignificant Low Low

The fluctuation of exchange rates impacts the export of Tea &

Rubber which directly affects the brokerage due to buyers wanting

to purchase the Tea at a lesser price; the company influences the

buyers to use the spot rate to minimize this risk.

e) Internal control weaknesses

- Loss of revenue/ business

- Negativity impact on

reputation & image built

over many years

FY 2013/14 FY 2014/15 FY

2015/2016

Rating Low Low Low

The company has implemented for all critical functions, authority

limits, segregation of duties and access control. Key controls are

reviewed periodically and internal auditors conduct regular reviews

of areas which are susceptible to fraud

f) Information Technology Risk Adverse impact on efficiency

of operation and loss of

competitive advantage FY 2013/14 FY 2014/15 FY 2015/16

Rating Low Low Low

The company has invested in a security infrastructure appropriate

for our size and scale of operations & security procedures are

constantly updated to take account of the latest knowledge and

technical enhancements. Security regulations cover technical

aspects as well as organizational measures including staff training,

end user computer policies etc. The company has a fully-fledged

disaster recovery location in place and the recovery plan is tested

periodically and found to be satisfactory.

g) Human Resources risk

Adverse impact on efficiency

of operation and loss of

competitive advantage

FY 2013/14 FY 2014/15 FY

2015/2016

Rating Low Low Low

The company attempts to mitigate this risk by encouraging

continues education, providing relevant training and development

opportunities, & fostering a culture where all employees, regardless

of rank, can actively contribute to the business. During the year a

formal succession plan for senior level was also developed


h) Entry of Non CBA Members


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Loss of business due to non

CBA members not adhering

to by laws

FY 2013/14 FY 2014/15 FY 2015/2016

Rating Low Low Low

Lobbying with important authorities and converting the importance

for new entrants to be members of the Colombo Brokers

Association.

i) Brokers not adhering to by

laws Loss of business

FY 2013/14 FY 2014/15 FY 2014/2015

Rating Ultra High Ultra High Ultra High

Canvassing to strengthen the CBA audit.

j) Fire at warehouse

Loss of customers, stocks and

own property

FY 2013/14 FY 2014/15 FY 2015/2016


In order to mitigate this risk John Keells Warehousing (Pvt) Ltd has

installed fire smoke detectors and carries out annual compliance

audits. Further the company has obtained OHSAS & HACCP

certification.

The Board confirms that a process for identifying, evaluating and managing significant risks that compromise the achievement of the

strategic objectives of John Keells PLC has been in place throughout the year in accordance with the guidelines set out by the Institute

of Chartered Accountants of Sri Lanka and industry best practice. Potential Financial Risk in compliance with the Sri Lanka Accounting

Standards (SLFRS) is disclosed on page 121 under notes to the Financial Statement.


JOHN KEELLS PLC

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Introduction


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The Board Audit Committee (BAC) of

John Keells PLC is formally constituted as

a Sub Committee of the Main Board, to

which it is accountable.

The Committee operates pursuant to the

Audit Committee Charter which is

reviewed annually by the Committee.

This report focuses on the activities of the

Audit Committee for the year under

review. A more general description of the

Committee’s functions is also given under

Corporate Governance Report on page

44 to 75.

Role of the Board Audit

Committee The BAC in its role, assist the Board in

fulfilling their responsibilities with

regard to;

- Ensuring the integrity of the financial

statements of the company and that

good financial reporting systems are in

place and is managed in order to give

accurate, appropriate and timely

information to the management,

regulatory authorities and shareholders

in accordance to the financial reporting

standards of The Institute of Chartered

Accountant of Sri Lanka,Companies

Act No. 7 of 2007, the Sri Lanka

Accounting and Auditing Standards and

the continuing Listing Rules of the

Colombo Stock Exchange.

- Ensure compliance with applicable

laws, regulations and policies of the

group and Company

- Assessing the independence and

monitoring the performance of external

auditors and outsourced internal

auditors.

JOHN KEELLS PLC

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- Ensuring the Company’s internal


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0

control and risk management process

efficient and effective.

- Assess the Company’s ability to

continue as a going concern in the

foreseen future.

Composition of the Board Audit

Committee and Meetings:- The Audit Committee comprised of three

Independent Non-Executive Directors for

the financial year 2015/16. The Financial

Controller for the Plantation Services

Sector of John Keells group serves as the

Secretary to the Audit Committee.

The President of the Plantation Services

Sector of John Keells group, Chief

Executive Officer of John Keells PLC

(JK PLC), Finance Manager of JK PLC,

Chief Executive Officer of John Keells

Stock Brokers (Pvt) Ltd (JKSB), Finance

Manager of JKSB and Head of Group

Business Process Review (Group BPR),

John Keells Holdings PLC attend the

meetings of the Audit Committee by

invitation. Other officials are invited to

attend on a needs basis. The External

Auditors and the Outsourced Internal

Auditors also attend meetings on

invitation when required.

The Board Audit Committee (BAC) is

composed of the following Independent

Non-Executive Directors who conduct

Committee proceedings in accordance

with the terms of reference set out in the

Audit Committee Charter.

• Ms S T Ratwatte –

Chairperson

• Mr T De Zoysa – Director•

Ms Y A Hansen– Director

Whilst a detailed profile of the Board of

Directors is given on Page No’s 14 to 15,

a brief description of each Member of the

Board Audit Committee is given below :-

Ms S T Ratwatte serves as the

Chairpersion of the Board Audit

Committee since May 2013 and on the

audit committee since May 2007. She is a

Fellow Member of the Chartered Institute

of Management Accountants in UK and

also holds a Masters in Business

Administration from the University of

Colombo. She also serves as a Non-

Executive Director in MAS Investments

(Pvt) Ltd and is a Trustee of Sunera

Foundation and Trustee and Chairman of

the Federation of Environmental

Organisations.

Mr T De Zoysa, a well-known figure in the

Sri Lankan business community has been

serving the Board and the Audit

committee since July 2005. He also holds

many key positions in both commercial

and non–profitmaking local and

international organization.

Ms Y A Hansen was appointed to the

Board and as a member of the Audit

Committee in July 2005. She is one of the

pioneers in the Tourism industry with over

43 years of industry experience. She

currently serves as the Chief Executive

Officer at Columbus Tours (Pvt) Ltd.

Meetings of the Board Audit

Committee The Audit Committee held four meetings

during the financial year 2015/2016. The

attendance of the Committee members at

these meetings was as follows:

Name of

Director

Atten-

dance

Eligibility

to attend

Ms S T Ratwatte 4 4

Mr T De Zoysa 4 4

Ms Y A Hansen 4 4

JOHN KEELLS PLC

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The activities and views of the Committee


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have been communicated to the Board of

Directors when necessary.

Financial Reporting The Audit Committee has reviewed and

discussed the Company’s quarterly and

annual financial statements prior to

publication with management and the

external auditors, including the extent of

compliance with Sri Lanka Accounting

Standards and the adequacy of

disclosures required by other applicable

laws, rules, and guidelines. The

Committee has also regularly discussed

the operations of the Company and its

future prospects with management and is

satisfied that all relevant matters have

been taken into account in the

preparation of the financial statements.

Internal Audit and control

Assessment The internal audit plans and scope of

work were formulated in consultation with

the internal audit function, which at John

Keells is termed Group Business Process

Review (Group BPR) Division and the

Outsourced Internal Auditors and

approved by the Committee.

The main focus of the Internal Audit was

to provide independent assurance on the

overall system of internal controls, risk

management and governance, by

evaluating the adequacy and

effectiveness of internal controls, and

compliance with laws and regulations and

established policies and procedures of

the company.

JOHN KEELLS PLC

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During the year, reports were received by


1

0

the Committee from the Outsourced

Internal Auditors, which were reviewed

and discussed with management, the

Outsourced Internal Auditors, BDO

Partners and Group Business Process

Review Division. The recommendations

of the Internal Auditors have been

followed up and implemented.

Risk Assessment The Audit Committee has also reviewed

the processes for the identification,

evaluation and management of all

significant operational risks faced by the

Company. The most significant

operational risks and the remedial

measures taken to mitigate them have

been reviewed with management and the

John Keells Group Sustainability and

Enterprise Risk Management Division.

Formal confirmations and assurances

have been received from senior

management quarterly regarding the

efficacy and status of the internal control

systems and risk management systems,

and compliance with applicable laws and

regulations.

External Audit The External Auditors’ letter of

engagement, including the scope of the

audit, was reviewed and discussed by the

Committee with the external auditors and

management prior to the commencement

of the audit.

The External Auditors kept the Committee

advised on an on-going basis regarding

any unresolved matters of significance.

Before the conclusion of the audit, the

Committee met with the external auditors

to discuss all audit issues and agree on

their treatment. The Committee also met

the External Auditors, without

management present, prior to the

finalization of the financial statements.

The External Auditors’ management letter

for the year 2014/15, together with

management’s responses was discussed

with management and the auditors.

The Audit Committee is satisfied that the

independence of the External Auditors

has not been impaired by any event or

service that gives rise to a conflict of

interest. Due consideration has been

given to the level of audit and nonaudit

fees received by the external auditors

from the John Keells Group and

confirmation has been received from the

external auditors of their compliance with

the independence criteria given in the

Code of Ethics of the Institute of

Chartered Accountants of Sri Lanka.

The performance of the External Auditors

has been evaluated and discussed with

the Senior Management of the Company,

and the Committee has recommended to

the Board that Messrs. Ernst & Young be

re-appointed as the External Auditors of

John Keells PLC for the financial year

ending 31st March 2017, subject to

approval by the shareholders at the

Annual General Meeting.

Information Technology Risk

Assessment The company seeks the services of

Information Technology (IT) to provide

value added services to its customers as

well as to make the internal processes

more efficient and effective. The

committee draws conformity from the

Head of IT plantation services sector as

well as Internal Auditors Messer’s BDO

Partners when disseminating this role.

Whistle Blowing Assessment The company has an established

mechanism for employees to report to the

Chairman of John Keells Holdings

Audit Committee

Report

through a communication link named

“Chairman Direct” about any unethical

behavior or any violation of group

values. Employees reporting such

incidents are guaranteed complete

confidentiality. The committee reviews

this process on a periodic basis.

Compliance with Code of Best

Practice on Audit Committee The BAC scope and functions are in

compliance with the requirements of

the Code of Best Practice on Audit

Committee.

Compliance with code of Best Practice on


The BAC has conducted its affairs with

the requirements of the code of best

practice on Corporate Governance.

Compliance with Corporate

Governance Rules as per section 7.10

of the listing Rules of the Colombo

stock Exchange

The BAC has conducted its affairs with

the requirements with Corporate

JOHN KEELLS PLC

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Governance Rules as per section 7.10

of the listing Rules of the Colombo

stock Exchange.

Audit Committee Charter The Audit Committee Charter was

reviewed in October 2015 with the

concurrence of the Board of Directors.

Evaluation of the Board Audit

Committee Evaluation of the BAC is done on a

periodic basis. The committee seeks

the assistance of the Group Business

Process Review Team for this

purpose. The members of the BAC

along with other participants such as

President of the Plantation services

sector, Chief Executive officer

(JKPLC) ,Chief Executive officer

(JKSB) and Financial controller

Plantation service sector assess the

comittee. The assessment is tabled at

the audit committee meeting and

communicated to the board of the

Company.

Conclusion Based on the reports submitted by the

External Auditors and the outsourced

Internal Auditors of the Company, the

assurances and certifications provided by

the senior management, and the

discussions with management and the

auditors both at formal meetings and

informally, the Committee is of the view

that the control environment within the

Company is satisfactory and provides

reasonable assurance that the financial

position of the Company is adequately

monitored and its assets are

safeguarded.

S T Ratwatte

Chairperson of the Audit Committee

27th May 2016

G4-13, G4-14



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Annual Report of the Board of

Directors The Directors have pleasure in

presenting the 69th Annual Report of

your Company together with the Audited

Financial Statements of John Keells

PLC., and the audited Consolidated

Financial Statements of the Group for

the year ended 31st March, 2016.

General The Company was incorporated on 01st

April 1960 as a Public Limited Liability

Company and the issued shares of the

Company are listed on the Colombo

Stock Exchange. Pursuant to the

requirements of the Companies Act No. 7

of 2007, the Company obtained a new

Company registration No. PQ11 on 15th

June 2007.

Principal activities Company

The principal activity of the Company

remain unchanged as produce broking.

Subsiditaries

John Keells Stock Brokers (Private)

Limited continues to provide stock

broking services.

John Keells Warehousing (Private)

Limited continues to provide warehousing

facilities.

Business Review A review of the Company and its

subsidiaries (Group’s) performance

during the financial year is given in the

Chairman’s Message and in the

Management Discussion and Analysis.

These reports form an integral part of the

Directors Report and provide a fair review

of the performance of the Group during

the financial year ended 31st March

2016.

Financial statements The Financial Statements of the

Company and the Group are set out on

page 94 to 145 of the Annual Report.

Auditor’s Report The Auditor’s Report on the Financial

Statements are given on page 93 of the

Annual Report.

Significant Accounting Policies The Accounting Policies adopted in the

preparation of the Financial Statements

are given on page 100 to 113 of the

Annual Report.

Going Concern The Board of Directors is satisfied that

the Company, its subsidiaries and

associate, have adequate resources to

continue its operations in the foreseeable

future. Accordingly, the Financial

Statements are prepared based on the

“Going Concern Concept”.

Stated Capital The total stated capital of the Company

as at 31st March 2016 was Rs.152

million (2015 - Rs.152 million).

Revenue Revenue generated by the Company

amounted to Rs. 425 million (2015 - Rs.

559 million), whilst Group revenue

amounted to Rs. 707 million (2015 - Rs.

960 million). Contribution to Group

revenue, from the different business

segments is provided in Note 3.2 to the

Financial Statements on page 114.

Results and Appropriations The profit after tax of the Company was

Rs. 144 million (2015 - Rs.188 million)

whilst the Group profit attributable to

equity holders of the parent Company for

the year was Rs. 53 million (2015 - Rs.

217 million).

Results of the Company and of the Group

are given in the Income Statement on

page 94.

Dividend On 19th June 2015, a First and Final

Dividend of Rs. 3.75 per share (2014 -

Rs.3.40) was paid for the financial year

ended 31st March 2015 amounting to

Rs.228 million (2014 - Rs. 207 million).

Dividend per share has been computed

based on the amount of dividends

recognized as distribution to the equity

holders during the period.

The Directors have recommended a First

and Final Dividend of Rs.1.00 per share

for the year ended 31st March 2016 from

the profits available for appropriation. In

accordance with the Sri Lanka

Accounting Standards, events after the

Reporting Period, the proposed dividend

has not been recognized as a liability as

at 31st March 2016.

As required by Section 56 (2) of the

Companies Act No. 7 of 2007, the Board

of Directors have, certified that the

Company satisfies the solvency test in

accordance with section 57 of the

Companies Act No. 7 of 2007, and have

obtained a certificate from the Auditors,

prior to approving the First and Final

Dividend of Rs.1.00 per share for this

year. The First and Final Dividend will be

paid on 16th June 2016 to those

shareholders on the register as at 6th

June 2016.


JOHN KEELLS PLC 1

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Chartered Valuer as at 31st

March 2016.


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Details of the valuation of Investment

property is provided in Note 15 to the

Financial Statements on page 130.

The real estate portfolio of the Group as

at 31st March 2016 is disclosed on page

130.

Investments Investments of the Company and the

Group in subsidiaries, associate, and

other external investments amounted to

Rs. 2,498 million (2015 - Rs. 2,339

million) and Rs. 2,452 million (2015 - Rs.

2,288 million), respectively.

Detailed description of the long term

investments held as 31st March 2016, are

given in Notes 16, 17 and 20 to the

Financial statements on pages 132 and

135.

Reserves Total reserves as at 31st March 2016 of

the Company and Group amounted to Rs.

2,800 million (2015 - Rs. 2,785 million)

and Rs. 3,160 million (2015 - Rs. 3,239

million), respectively.

The movement and composition of the

Capital and Revenue reserves is

disclosed in the statement of Changes in

equity on page 97.

Events occurring after the

Reporting Date There have been no events subsequent

to the Reporting date, which would have

any material effect on the Company or on

the Group other than those disclosed in

Note 37 to the Financial Statements on

page 145.

Contingent liabilities and Capital

Commitments There have been no commitments or

Contingent liabilities other than those

stated in Note 36 on page 145 of the

Annual Report.

Human Resources The number of persons employed by the

Company and Group as at 31st March

2016 was 64 (2015 - 66) and 96 (2015 -

95), respectively.

The Group is committed to pursuing

various HR initiatives that ensure the

individual development of all our teams

as well as facilitating the creation of value

for themselves, the Company and all

other stakeholders.

There were no material issues pertaining

to employees and industrial relations in

the year under review.

Corporate Governance Corporate Governance

practices and principles with

respect to the Management and

operations of the Company is set out on

page 44 of this report. The Directors

confirm that the Company is in

compliance with the relevant rules on

Corporate Governance contained in the

listing rules of the Colombo Stock

Exchange.

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

activities, which contravene laws and

regulations; and

b) The Directors have declared all

material interest in contracts involving

the Company and refrained from

voting on matters in which they were

materially interested; and

c) The Company has made all

endeavours to ensure the equitable

treatment of shareholders; and

d) The business is a Going Concern with

supporting assumptions or

qualifications as necessary; and

e) The Directors have conducted a

review of internal controls covering

financial operational and compliance

controls and risk management and

have obtained a reasonable

assurance of their effectiveness and

successful adherence herewith.

Risk Management and Internal

Control The Board confirms that there is an

ongoing process for identifying,

evaluating and managing any significant

risks faced by the Group. Risk

assessment and evaluation for each

business unit takes place as an integral

part of the annual strategic planning cycle

and the principle risks and mitigating

actions in place are reviewed regularly by

the Board and the audit Committee. The

Board, through the involvement of the

risk review and Control Division takes

steps to gain assurance on the

effectiveness of control systems in place.

The audit Committee receives reports on

the results of internal control reviews and

the Head of the Group risk review and

Control Department has direct access to

the Chairman of the audit Committee.

Audit Committee The following Independent Non-

Executive, Directors of the Board served

on the Audit Committee of John Keells

PLC

• Ms S T Ratwatte –

Chairman

• Mr T De Zoysa – Director•

Ms Y A Hansen– Director

The report of the Audit Committee is given on page 82 of the Annual Report.


JOHN KEELLS PLC

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Human Resources and

Compensation Committee As permitted by the listing rules of the

Colombo Stock Exchange, the Human

Resources and Compensation

Committee of John Keells Holdings

PLC (JKH), the parent Company of John

Keells PlC functions as the Human

resources and Compensation Committee

of the Company and subsidiaries. The

Human Resources and Compensation

Committee of John Keells Holdings PLC

comprises of five independent Directors.

Mr. E F G Amerasinghe - Chairman

Dr. I Coomaraswamy

Mr. M A Omar

Mr. A N Fonseka

Mr. D A Cabraal

The remuneration policy of the Company

and its subsidiaries is detailed in the

Corporate Governance report on page 56

of the Annual Report.

Nomination Committee As permitted by the listing rules of the

Colombo Stock Exchange, the

Nomination Committee of JKH, functions

as the Nomination Committee of the

Company, The Committee comprises of

five Independent Non-Executive

Directors and one Non Independent

Executive Director

Mr. T Das - Chairman

Mr. M A Omar


Mr. D A Cabraal

Mr. S C Ratnayake

Ms. P Perera

Related Party Transaction

Review share and share trading is

given in Key

Committee Ratios and Information on

pages 150 to

As permitted by the listing rules of the 151 and in the Shareholders Information Colombo

stock Exchange, the related section on pages 146 to 147.

Party Transaction review Committee

of JKH, function as the related party The Company endeavours at all times Transaction

review Committee of the to ensure equitable treatment to all Company. The Committee

comprises shareholders. of four Independent Non-Executive

Substantial shareholdings Directors and one Non Independent

The names of the twenty largest

Executive Director.

Shareholders, the number of shares Mr. A N Fonseka - Chairman held and the percentages held are given Mr. S C Ratnayake on page 147 of the Annual Report. The Mr..E F G Amerasinghe distribution schedule of the Shareholders Mr. D A Cabraal and public holdings are disclosed on Ms. P Perera page 146 of the Annual Report.

The Chairperson is an Independent Non

Directorate –Executive Director of JKH.

As at 31st March 2016 the Board of

Stock market Information Directors of John Keells PLC consisted

An ordinary share of the Company was of eight Directors with wide commercial, quoted

on the Colombo stock Exchange academic knowledge and experience. at Rs. 70.00 as

at 31st March 2016 (31st The Directors profile is given on pages March 2015 - Rs.

92.00). Information 14 and 15 of the Annual Report.

relating to public holding, earnings, The Board of Directors of the Company

dividend, net assets, market value per and its subsidiaries as at 31st March 2016 are listed below.

Name of the Director John Keells PLC John Keells John Keells

Stock Brokers Warehousing

(Private) Limited (Private) Limited

Mr. S C Ratnayake Chairman

Mr. A D Gunewardene*

Mr. J R F Peiris - -

Mr. R S Fernando -

Mr. K N J Balendra -

Mr. T De Zoysa - -

Ms. Y A Hansen - -

Ms. S T Ratwatte - -

Mr. V A A Perera ** - -

* Chairman of John Keells Stock Brokers (Private) Limited

** Mr. V A A Perera was appointed to the Board of Directors with effect from 20th August

2015.


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Retirement of Directors by

Rotation or otherwise and their

Re-Election Mr. J R F Peiris retire by rotation in terms

of Article 83 of the Articles of Association

of the Company, and being eligible offer

himself for re-election.

Ms. Y A Hansen retires by rotation in

terms of Article 83 of the Articles of

Association of the Company. Ms. Y A

Hansen having served on the Board of

the Company for over nine years has

informed the Board that she does not

wish to be re-elected as a director in

terms of Article 83 of the Articles of

Association of the Company.

Mr. V. A. A. Perera retires in terms of the

Article 90 of the Article of Association of

the Company and being eligible is

recommended by the Board for

reelection.

Number of shares

Name of the Director As at 31st

March 2016

As at 31st

March 2015

Mr. S C Ratnayake Nil Nil

Mr. A D Gunewardene Nil Nil

Mr. J R F Peiris Nil Nil

Mr. R S Fernando Nil Nil

Mr. T De Zoysa Nil Nil

Ms. Y A Hansen Nil Nil

Ms. S T Ratwatte Nil Nil

Mr. V A A Perera Nil Nil

Mr. H G R De Mel (Acting CEO) Nil Nil


JOHN KEELLS PLC

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Directors’ and CEO’s


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shareholdings Mr. T De Zoysa having

served as a Director of the Company for

more than 9 years has given notice of his

intention to resign from the Board of

Directors after the forthcoming Annual

General Meeting of the Company.

Ms. S T Ratwatte having completed her

tenure as a director of the Company for 9

years has given notice of her intention to

resign from the Board of Directors after the

forthcoming Annual General Meeting of the

Company.

Directors’ Remuneration Details of the remuneration and other

benefits received by the Directors are set

out in page 115 of the Financial

Statements.

Interest Register The Company maintains an Interests

Register as required by the Companies Act

No. 7 of 2007 and entries have been made

therein.

As both subsidiaries of the Company are

private companies which have dispensed

with the requirement to maintain an

Interest Register, this Annual Report does

not contain particulars of entries made in

the Interests Registers of subsidiaries.

Particulars of Entries in the 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.

b) There have been no disclosures of

share dealings as at 31st March 2016.

c) Indemnities and Remuneration

The Board approved payment to the

executive director of John Keells PLC, Mr.

R. S Fernando, a remuneration comprising

of:

• An increment from 1st July 2015 based

on the individual performance rating

obtained by the executive director in

terms of the performance management

system of the John Keells Group;

• A short term variable incentive based on

the individual performance, organization

performance and role responsibility

based on the results of the financial year

2014/2015,; and


JOHN KEELLS PLC

1

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• A Long Term Incentive Plan in the form


1

1

of Employee Share Options at John

Keells Holdings PLC.

As recommended by the Human

Resources and Compensation Committee

of John Keells Holdings PLC, the holding

company, in keeping with the John Keells

group remuneration policy.

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

endeavours to pay for all items properly

charged in accordance with these agreed

terms. As at 31st March 2016 the trade and

other payables of the Company and Group

amounted

Rs. 520 million (2015 - Rs. 1,285 million)

and Rs. 878 million (2015 - Rs. 1,593

million) respectively.

Environmental protection The Group complies with the relevant

environmental laws, regulations and

endeavours to comply with best practices

applicable in the country of operation.

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

Reporting date have been paid or, where

relevant provided for, except as specified

in Note 36 to the Financial statements on

page 145, covering Contingent liabilities.


JOHN KEELLS PLC

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Auditors This Annual Report is signed for and

behalf of the Board of Directors

Director Director

Keells Consultants (Private) Limited.

Secretaries

27 th May 2016


1

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Messrs. Ernst & Young, Chartered

Accountants, have intimated their

willingness to continue as Auditors of the

Company, and a resolution to re-appoint

them as Auditor and authorising the

Directors to fix their remuneration will be

proposed 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.

Details of Audit fees are set out in Note 8

of the Financial Statement. The Auditors,

do not have any relationship (other than

that of an Auditor) with the Company or any

of its subsidiaries.

Further details on the work of the Auditor

and the Audit Committee are set out in the

Audit Committee Report on page 82.

Annual report The Board of Directors approved the

Company and Consolidated Financial

Statements on 27th May 2016. The

appropriate number of copies of this report

will be submitted to the Colombo stock

Exchange and to the Sri Lanka Accounting

and Auditing Standards Monitoring Board.

Annual General Meeting The annual General Meeting will be held at

the John Keells Auditorium, No. 186

Vauxhall Street, Colombo 2, on 28th June,

2016 (Tuesday) at 9.30 a.m. The notice of

the Annual General Meeting appears on

page 153.

Responsibility


JOHN KEELLS PLC

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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 on page 93.

The Financial Statements comprise of:

• Income statement and statement of

comprehensive income of the

Company and its subsidiaries, which

present a true and fair view of the profit

and loss of the Company and its

subsidiaries for the financial year; and

• A Statement of Financial Position,

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

• A statement of change in equity,

statement of cash flows for the year

ended and notes.

The Directors are required to confirm that

the Financial Statements have been

prepared:

• Using the appropriate Accounting

Policies which have been selected and

applied in a consistent manner and

material departures, if any, have been

disclosed and explained; and

• Presented in accordance with the Sri

Lanka Accounting Standards (SLFRS/

LKAS); and that reasonable and

prudent Judgements and estimates

have been made so that the form and

substance of transactions are properly

reflected and

• Provides the information required by

and otherwise comply with the

Companies Act No. 7 of 2007 and the

Listing Rules of the Colombo Stock

Exchange.

The Directors are also required to ensure

that the Company has adequate

resources to continue in operation to

justify applying the going concern basis

in preparing these financial statements.

Further, the Directors have a

responsibility to ensure that the Company

maintains sufficient accounting records

to disclose, with reasonable accuracy the

financial position of the Company and its

subsidiaries, and to ensure that the

financial statements reflect the

transparency of transactions and

provides an accurate disclosure of its

financial position and comply with the

requirements of the Companies Act No.

7 of 2007.

The Directors are also responsible for

taking reasonable steps to safeguard the

assets of the Company and its

subsidiaries and in this regard to give

proper consideration to the

establishment of appropriate internal

control systems with a view to preventing

and detecting fraud and other

irregularities.

The Directors are required to prepare the

financial statements and to provide the

auditors with every opportunity to take

whatever steps and undertake whatever

inspections they may consider to be

appropriate to enable them to give their

audit opinion.

Further, as required by Section 56(2) of

the Companies Act No. 7 of 2007, the

Board of Directors have confirmed that

the Company, based on the information

available, satisfies the solvency test

immediately after the distribution, in

accordance with Section 57 of the

Companies Act No. 7 of 2007, and has

obtained a certificate from the auditors,

prior to declaring a First and Final

Dividend of Rs.1.00 per share for the

year, which will be paid on 16th June

2016.

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 reporting date have been paid, or

where relevant provided for, except as

specified in note 36 to the financial

statements covering contingent liabilities.

By order of the Board

Keells Consultants (Pvt) Ltd.

Secretaries

27th May 2016


2

INTERIM REPORTS

1st Quarter 24th July 2015

2nd Quarter 23rd October 2015

3rd Quarter 27th January 2016

4th Quarter 27th May 2016

ANNUAL REPORTS

2015/16 (Second Integrated Annual Report) 3rd June 2016

2014/15 (First Integrated Annual Report) 5th June 2015

MEETINGS

JOHN KEELLS PLC 1

2

G4-29, G4-30

Financial Calendar

69th Annual General meeting 28th June 2016

68th Annual General meeting 30th June 2015

DIVIDENDS

First and Final dividend of Rs.1.00 per share will be paid on 16th June 2016


2

JOHN KEELLS PLC

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TO THE SHAREHOLDERS OF

JOHN KEELLS PLC

Report on the Financial

Statements We have audited the accompanying

financial statements of John Keells PLC

(“Company”), and the consolidated

financial statements of the Company and

its subsidiaries (“Group”), which comprise

the statement of financial position as at

31 March 2016, and the income

statement, statement of comprehensive

income, statement of changes in equity

and cash flow statement for the year then

ended, and a summary of significant

accounting policies and other explanatory

information set out on pages 100 to 145.

Board’s Responsibility for the

Financial Statements The Board of Directors (“Board”) is

responsible for the preparation of these

financial statements that give a true and

fair view in accordance with Sri Lanka

Accounting Standards and for such

internal controls as Board determines is

necessary to enable the preparation of

financial statements that are free from

material misstatement, whether due to

fraud or error.

Auditor’s Responsibility 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 comply with ethical requirements and

plan and perform the audit to obtain

reasonable assurance about whether the

financial statements are free from

material misstatement.

An audit involves performing procedures

to obtain audit evidence and disclosures

in the financial statements. The

procedures selected depend on the

auditor’s judgment, including the

assessment of the risks of material

misstatement of the financial statements,

whether due to fraud or error. In making

those risk assessments, the auditor

considers internal control relevant to the

entity’s preparation of the financial

statements that give a true and fair view

in order to design audit procedures that

are appropriate in the circumstances, but

not for the purpose of expressing an

opinion on the effectiveness of the

entity’s internal controls. An audit also

includes evaluating the appropriateness

of accounting policies used and the

reasonableness of accounting estimates

made by the Board, as well as evaluating

the overall presentation of the financial

statements.

We believe that the audit evidence we

have obtained is sufficient and

appropriate to provide a basis for our

audit opinion.

Opinion In our opinion, the consolidated financial

statements give a true and fair view of the

financial position of the Group as at 31

March 2016, and of its financial

performance and cash flows for the year

then ended in accordance with Sri Lanka

Accounting Standards.

Report on Other Legal and

Regulatory Requirements As required by Section 163(2) of the

Companies Act No. 7 of 2007, we state

the following:

a) The basis of opinion and scope and

limitations of the audit are as stated

above.

b) In our opinion :

- we have obtained all the information

and explanations that were required

for the audit and, as far as appears

from our examination, proper

accounting records have been kept by

the Company,

- the financial statements of the

Company give a true and fair view of

its financial position as at 31 March

2016, and of its financial performance

and cash flows for the year then

ended in accordance with Sri Lanka

Accounting Standards, and

- the financial statements of the

Company and the Group comply with

the requirements of section 151 and

153 of the Companies Act No 07 of

2007

27 May 2016

Colombo


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Income Statement

Group Company

For the Year Ended 31st March Note 2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Continuing Operations

Rendering of Services

706,664 959,925 424,529 558,765

Revenue 3.1 706,664 959,925 424,529 558,765

Cost of Sales

(251,190) (283,398) (127,179) (136,964)

Gross Profit

455,474 676,527 297,350 421,801

Dividend Income 4 - - 124,996 49,034

Other Operating Income 5 3,030 2,921 2 2,656

Selling and Distribution Expenses (196,130) (68,826) (192,165) (65,104)

Administrative Expenses (238,153) (251,718) (106,785) (111,885)

Results from Operating Activities 24,221 358,904 123,398 296,502

Finance Expenses 6 (65,182) (77,643) (64,979) (77,394)

Finance Income 7 51,589 34,330 29,652 14,109

Net Finance Expenses (13,593) (43,313) (35,326) (63,285)

Changes in Fair Value of Investment Properties 45,292 15,098 45,292 15,098

Share of Results of Associate 7,546 2,290 - -

Profit Before Tax 8 63,466 332,979 133,364 248,315

Tax Expense 9 (9,253) (101,132) 10,943 (60,024)

Profit for the Year 54,213 231,847 144,307 188,291

Attributable to:

Equity Holders of the Parent

52,746 217,401

Non- Controlling Interests 1,467 14,446

54,213 231,847

Rs.. Rs.. Rs.. Rs.

Earnings per share

Basic 10 0.87 3.58 2.37 3.10

JOHN KEELLS PLC

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Dividend per share 11 3.75 3.40 3.75 3.40

Figures in brackets indicate deductions.

The Accounting Policies and Notes as set out in pages 100 to 145 form an integral part of these Financial Statements.


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JOHN KEELLS PLC

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Statement of Comprehensive Income

Group Company

For the year ended 31st March Note 2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Profit for the period

54,213 231,847 144,307 188,291

Other comprehensive income

Other comprehensive income to be reclassified

to income statement in subsequent periods

Net (loss) / gain on available-for-sale financial assets

158,766

137,151

158,766

137,151

Share of other comprehensive income of equity accounted investees 17.3 592 512 - -

Net other comprehensive income to be reclassified to income

statement in subsequent periods.

159,358 137,663 158,766 137,151

Revaluation of land and buildings 14.1 7,703 11,852 - -

Re-measurement gain /(loss) on defined benefit plans 31 (2,213) 5,877 (2,462) 4,011

Net other comprehensive income not to be reclassified to income

statement in subsequent periods.

5,490 17,729 (2,462) 4,011

Income tax on other comprehensive income 9.2 (163) (2,799) 689 (1,123)

Other Comprehensive Income for the period, Net of Tax 164,685 152,593 156,993 140,039

Total Comprehensive Income for the period, Net of Tax 218,898 384,440 301,300 328,330

Attributable to:

Equity Holders of the Parent

217,431 369,994

Non- Controlling Interests 1,467 14,446

218,898 384,440




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Statement of Financial Position

Group Company

As at 31st March Note 2016 Rs. 000’s

2015 Rs. 000’s

2016 Rs. 000’s

2015 Rs. 000’s

Assets Non-Current Assets Property, Plant and Equipment 14 339,448 334,816 23,949 31,976 Investment Property 15 182,420 137,128 182,420 137,128 Investments in Subsidiaries 16 - - 120,380 120,380 Investments in Associates 17.2 97,736 92,792 24,000 24,000 Lease Rentals Paid in Advance 18.1 39,113 40,202 - - Intangible Assets 19 587 1,404 - - Non-Current Financial Assets 20 2,434,275 2,317,269 2,422,004 2,303,460 Deferred Tax Assets 21 27,662 14,542 21,738 9,495 Other Non - Current Assets 4,207 5,383 2,399 2,812

3,125,448 2,943,536 2,796,890 2,629,251

Current Assets

Inventories 22 484

397

344

285

Trade and Other Receivables 23 1,489,846 2,458,140 1,269,296 2,265,939 Amounts due from Related Parties 35.1 2,635 1,260 2,700 1,260 Income Tax Refunds 33 14,276 1,685 13,948 - Other Current Assets 24 4,030 1,631 1,056 330 Short Term Investments 25 246,256 378,114 - - Cash in Hand and at Bank 26.1 99,452 289,623 86,379 279,762

1,856,979 3,130,850 1,373,723 2,547,576 Total Assets 4,982,427 6,074,386 4,170,613 5,176,827

EQUITY AND LIABILITIES Capital and Reserves Stated Capital 27 152,000

152,000 152,000 152,000 Revenue Reserves 2,602,606 2,859,793 2,452,151 2,610,820

Other components of equity

28 557,792 367,640 348,266 174,124 3,312,398 3,379,433 2,952,417 2,936,944

Non-Controlling Interests 23,820 46,644 - -

Total Equity 3,336,218 3,426,077 2,952,417 2,936,944

Non-Current Liabilities

Deferred Tax Liabilities 30 35,168

40,384 - - Employee Benefit Liabilities 31 72,126 68,305 41,945 41,456

107,294 108,689 41,945 41,456 Current Liabilities Trade and Other Payables 32 878,009

1,593,095 520,465 1,285,435

Amounts due to Related Parties 35.2 2,821 10,976 5,802 6,797 Income Tax Liabilities 33 958 24,008 - 701 Other Current Liabilities 34 5,012 3,211 1,213 1,688 Bank Overdrafts 26.2 652,115 458,330 648,771 453,806 Short Term Borrowings 29 - 450,000 - 450,000

1,538,915 2,539,620 1,176,251 2,198,427 Total Equity and Liabilities 4,982,427 6,074,386 4,170,613 5,176,827

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

JOHN KEELLS PLC

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A P P Perera Financial Controller

The Board of directors is responsible for the preparation and presentation of these Financial Statements.

J.R.F.Peiris Director Director

The Accounting Policies and Notes as set out in pages 100 to 145 form an integral part of these Financial Statements. 27th

May 2016

A.D.Gunewardene


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JOHN KEELLS PLC

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Statement of Changes in Equity

Group

Attributable to Equity Holders of Parent

Other Components of Equity

Notes Available Stated Revenue Revaluation for sale

capital Reserves Reserves Reserves Rs.

000’s Rs. 000’s Rs. 000’s Rs. 000’s

Other Capital

Reserves Rs. 000’s

Total

Rs. 000’s

Non Controlling

Interest

Rs. 000’s Total

Rs. 000’s

As at 31 March 2014

152,000 2,844,849 171,396 7,039 15,409 3,190,693 37,435 3,228,128

Profit for the year - 217,401 - - - 217,401 14,446 231,847

Other Comprehensive Income - 4,263 10,667 137,663 - 152,593 - 152,593

Total Comprehensive Income - 221,664 10,667 137,663 - 369,994 14,446 384,440

Share based payment - - - 25,466 25,466 1,963 27,429

Final Dividend Paid - 2013/14 11 - (206,720) - - - (206,720) - (206,720)

Subsididiary Dividend to Non- Controlling

Interest

- - - - - - (7,200) (7,200)

As at 31 March 2015 152,000 2,859,793 182,063 144,702 40,875 3,379,433 46,644 3,426,077

Reinstatement of useful life of fully

depreciated assets 14.7 - 11,175 - - - 11,175 - 11,175

Adjusted balance as 1 st April 2015 152,000 2,870,968 182,063 144,702 40,875 3,390,608 46,644 3,437,252

Super Gains Tax paid for 2013/2014 - (91,502) - - - (91,502) (2,737) (94,239)

Profit for the year - 52,746 - - - 52,746 1,467 54,213

Other Comprehensive Income -

6,933 159,358 - 164,685 - 164,685

Total Comprehensive Income - 6,933 159,358 - 125,929 (1,270) 124,659

Share based payment - - - - 23,861 23,861 2,446 26,307

Final Dividend Paid - 2014/15 11 - (228,000) - - - (228,000) - (228,000)

Subsididiary Dividend to Non- Controlling

Interest

- - - - - - (24,000) (24,000)

As at 31 March 2016 152,000 2,602,606 188,996 304,060 64,736 3,312,398 23,820 3,336,218

Company

Other Components of Equity

Notes Stated

capital

Rs. 000’s

Revenue Reserves Rs. 000’s

Available

for sale Reserves Rs. 000’s

Other Capital

Reserves

Rs. 000’s Total

Rs. 000’s

As at 31 March 2014

152,000 2,626,361 6,927 11,485 2,796,773

Profit for the year - 188,291 - - 188,291

Other Comprehensive Income - 2,888 137,151 - 140,039

Total Comprehensive Income - 191,179 137,151 - 328,330


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Share based payment 18,561 18,561

Final Dividend Paid- 2013/14 11 - (206,720) - - (206,720)

As at 31 March 2015 152,000 2,610,820 144,078 30,046 2,936,944

Super Gains Tax paid for 2013/2014 - (73,203) - - (73,203)

Profit for the year - 144,307 - - 144,307

Other Comprehensive Income - (1,773) 158,766 - 156,993

Total Comprehensive Income - 69,331 158,766 - 228,097

Share based payment 15,376 15,376

Final Dividend Paid - 2014/15 11 - (228,000) - - (228,000)

As at 31 March 2016 152,000 2,452,151 302,844 45,422 2,952,417



JOHN KEELLS PLC

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Cash Flow Statement

Group Company

For the Year Ended 31st March Note 2016 Rs. 000’s

2015 Rs. 000’s

2016 Rs. 000’s

2015 Rs. 000’s

CASH FLOWS FROM OPERATING ACTIVITIES

Operating Profit Before Working Capital Changes A 87,365 418,009 29,160 278,840

(Increase) in Inventories

(87) (107) (60) (125)

Decrease in Trade and Other Receivables 968,294 296,185 996,644 415,706

(Increase) / Decrease in Other Non-Current Assets 30,896 (37,228) 40,637 (34,941)

(Increase) / Decrease in amounts Due from Related Parties (1,439) 1,846 (1,439) 1,846

(Increase) in Other Current Assets (2,399) (430) (726) (54)

Increase / (Decrease) in Trade and Other Payables (715,086) 94,487 (764,970) (87,870)

Increase / (Decrease) in amounts Due to Related Parties (8,090) 6,838 (995) 855

Increase / (Decrease) in Other Current Liabilities 1,801 (297) (477) (135)

Cash Generated from Operations 361,255 779,303 297,775 574,122

Interest Received

26,114 22,750 4,177 2,529

Finance Expenses Paid 6 (65,182) (77,643) (64,979) (77,394)

Dividend Received 25,475 11,580 124,996 49,034

Income Tax Paid (50,751) (89,573) (15,259) (77,862)

Super Gain Tax Paid 9.4 (93,924) - (73,203) -

Gratuity paid/Transfers(Net) (9,305) (2,911) (8,464) (1,416)

Net Cash Flow (Used in) Operating Activities 193,681 643,506 265,043 469,013

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

Acquisition of Property, Plant and Equipment 14.1 (7,554) (15,234) (871) (9,997)

Dividend Received - - 25,475 11,580

Proceeds from Sale of Property Plant & Equipment 59 2,770 5 2,770

Net cash flow from/(used in) Investing Activities (7,495) (12,464) 24,609 4,353

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES

Dividend Paid

(228,000) (206,720) (228,000) (206,720)

Dividend Paid to Non Controlling Shareholders (24,000) (7,200) - -

Repayment of Short Term Borrowings 29 (450,000) (550,000) (450,000) (550,000)

Net cash flow From /(Used in) Financing Activities (702,000) (763,920) (678,000) (756,720)

JOHN KEELLS PLC

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NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS

(515,814) (132,878) (388,348) (283,354)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

209,407 342,285 (174,044) 109,310

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (306,407) 209,407 (562,392) (174,044)

ANALYSIS OF CASH AND CASH EQUIVALENTS

Favourable balances

Cash in hand and at bank 26.1 99,452 289,623 86,379 279,762

Short Term Investments 25 246,256 378,114 - -

345,708 667,737 86,379 279,762

Unfavourable balances

Bank Overdrafts 26.2 (652,115) (458,330) (648,771) (453,806)

Cash and cash equivalents (306,407) 209,407 (562,392) (174,044)




1

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JOHN KEELLS PLC

1

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Note Group Company

For the Year Ended 31st March 2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

A Profit before working capital changes

Profit before tax

63,466

332,979

133,364

248,315

Adjustments for:

Associate Companies

Share of Profit 17.3 (7,546) (2,290) - -

Interest income (26,114) (22,750) (4,177) (2,529)

Dividend income 7 (25,475) (11,580) (150,471) (60,614)

Finance expenses 6 65,182 77,643 64,979 77,394

Change in fair value of

investment properties

15 (45,293) (15,098) (45,293) (15,098)

Depreciation of property,

plant and equipment

14.2 22,940 20,822 8,893 8,818

Amortisation of Lease Charges 18 1,089 1,089 - -

Amortisation of Intangible Assets 19 818 847 - -

Amotisation of prepaid staff cost 1,034 555 - -

(Profit) / loss on sale of

property, plant and equipment

43 (2,656) (2) (2,656)

Share base payment expenses 28.2 26,307 27,429 15,376 18,561

Gratuity provision and related

costs

31.1 10,914 11,019 6,491 6,649

87,365 418,009 29,160 278,840


1

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Notes to the Financial Statements

1.1. CORPORATE INFORMATIONParent Entity and Ultimate Parent currency, which is

the primary economic

Reportin

John Keells PLC is a public limited liability The Company’s parent entity is John Company operates. Each entity in the

company incorporated and domiciled Keells Holdings PLC in the opinion of Group uses the currency of the primary in Sri

Lanka and listed on the Colombo the directors, which is incorporated in Sri economic environment in which they

Stock Exchange. The registered office Lanka.operate as their functional currency. of the company is located

at No. 117,

Responsibility for Financial All values Sir Chittampalam A. Gardiner Mawatha, are rounded to the nearest Colombo 2

and principal place of Statementsrupees thousand (Rs. ’000) except when business of the company is located at

The responsibility of the Directors in otherwise indicated.

No. 186, Vauxhall Street, Colombo 2.relation to the financial statements is set out in ‘The statement of director’s The significant accounting policies are

Ordinary shares of the company are responsibility on Page 91 to in the

Annual discussed in Note 1.4 below.

listed on the Colombo Stock Exchange.report.

Basis of consolidation

Consolidated Financial StatementsStatement of complianceThe consolidated financial

statements

comprise the financial statements of The financial statements for the year The financial statements which comprise

ended 31 March 2016, comprise “the the statement of financial position, the Group and its subsidiaries as at 31 Company”

income, statement of March 2016. Control is achieved when

referring to John Keells the statement of

PLC as the holding company and “the comprehensive income, statement of the Group is exposed, or has rights, to

Group” referring to the companies changes in equity and the statement of variable returns from its involvement with

whose accounts have been consolidated cash flows, together with the accounting the investee and has the ability to

affect therein.policies and notes (the “financial those returns through its power over the statements”)

Approval of Financial have been prepared in investee. Specifically, the Group controls

Statementsaccordance with Sri Lanka Accounting an investee if, and only if, the Group has:

The Financial statements for the year Standards (SLFRS/LKAS) as issued by • Power over the investee (i.e., existing

ended 31 March 2016 were authorised the Institute of Chartered Accountants of rights that give it the current ability for

issue by the directors on 27th May Sri Lanka (ICASL) and the requirement of to direct the relevant activities of the

2016.the Companies Act No. 7 of 2007. investee)

Principal Activities and Nature of 1.2. BASIS OF PREPARATION• Exposure, or rights, to variable returns

OperationsBasis of Measurementfrom its involvement with the investee

Holding companyThe consolidated financial statements • The ability to use its power over the

The Principal Activity of John Keells PLC have been prepared on an accrual basis investee to affect its returns is

Produce Broking. and under the historical cost convention

Subsidiaries and Associate and except for investment properties, land Generally, there is a presumption that a

buildings and available-for-sale majority of voting rights result in control. The companies within the Group and its

financial assets that

JOHN KEELLS PLC

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have been measured To support this presumption and when business activities are disclosed in the

at fair value. the Group has less

than a majority of the Group Structure on page 4 of the Annual voting or similar rights of an investee, the

Report.Presentation and Functional Group considers all relevant facts and

Currencycircumstances in assessing whether it

There were no significant changes in The consolidated financial statements has power over an investee, including:

the nature of the principal activities of are presented in Sri Lankan Rupees, the Company

and the Group during the the Group’s functional and presentation financial year under

review.


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JOHN KEELLS PLC

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• The contractual arrangement with the If the Group loses control over a going concern and is satisfied that it has other vote

holders of the investee subsidiary, it derecognises the related the resources to continue in business for assets (including

goodwill), liabilities, the foreseeable future.

• Rights arising from other contractual non- controlling interest and other arrangements components of equity while any resultant Furthermore, management is not aware of

• The Group’s voting rights and potential gain or loss is recognised in profit or loss. any material uncertainties that may

cast voting rights Any investment retained is recognised at significant doubt upon the Company’s fair value. ability to

continue as a going concern. The Group re- assesses whether or Therefore, the Financial Statements not it

controls an investee if facts and 1.3. ACCOUNTING POLICIES continue to be prepared on a

going circumstances indicate that there are The accounting policies adopted by the concern basis.

changes to one or more of the three group are consistent with those used in

year.Revaluation of property, plant and elements of control. Consolidation of the previous

a subsidiary begins when the Group equipment and investment properties

Comparative informationThe Group obtains control over the subsidiary and measures land and buildings

ceases when the Group loses control of The presentation and classification of the at revalued amounts with

changes the subsidiary. Assets, liabilities, income financial statements of the previous years in fair value being

recognised in the and expenses of a subsidiary acquired or have been amended, where relevant for statement of

equity. In addition, it disposed of during the year are included better presentation and to be comparable carries its

investment properties at fair in the consolidated financial statements with those of the current year. value, with

changes in fair value being from the date the Group gains control recognised in the income statement. The until the date

the Group ceases to control 1.3.1 Significant accounting Group engaged independent valuation the

subsidiary. judgements, estimates and assumptionsinvestment specialists to determine fair value of

properties and certain

Profit or loss and each component of The preparation of the financial statements identified land and buildings as

at 31 other comprehensive income (OCI) of the Group require the management March 2016.

are attributed to the equity holders of to make judgments, estimates and the parent of the Group and to the non-

assumptions, which may affect the The valuer has used valuation techniques controlling interests, even if this results

amounts of income, expenditure, assets , such as market values and discounted in the non- controlling interests having

liabilities and the disclosure of contingent cash flow methods where there was lack a deficit balance. When necessary,

liabilities, at the end of the reporting of comparable market data available adjustments are made to the financial period. In

the process of applying the based on the nature of the property.

statements of subsidiaries to bring Group’s accounting policies, the key (Note 14)

their accounting policies into line assumptions made relating to the future

with the Group’s accounting policies. and the sources of estimation at the The determined fair values of

investment All intra-group assets and liabilities, reporting date together with the related properties, using investment

method, are equity, income, expenses and cash judgments that have a significant risk most sensitive to the

estimated yield as flows relating to transactions between of causing a material adjustment to well as the long term

occupancy rate. members of the Group are eliminated in the carrying amounts of assets and The methods used

to determine the fair full on consolidation. liabilities within the next financial year are value of the investment properties, are

discussed below.further explained in Note 15.

A change in the ownership interest of a

subsidiary, without a loss of control, is Going ConcernShare-based payment transactions accounted for as

an equity transaction. The management has made an The Group measures the cost of equity-

assessment of its ability to continue as a settled transactions with employees by


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reference to the fair value of the equity timing and the level of future taxable Where this is not feasible, a degree of

instruments at the date at which they are profits together with future tax planning judgment is required in establishing

granted. Estimating fair value for share- strategies.fair values. The judgments include based payment transactions

requires considerations of inputs such as liquidity determining the most appropriate Further details on taxes are disclosed

in risk, credit risk and volatility. Changes in valuation model, which is dependent on Note 9.assumptions about these

factors could the terms and conditions of the grant. This affect the reported fair value of financial estimate also requires the

determination Contingent Liabilities

instruments (see Note 12).

of the most appropriate inputs to the Contingent liabilities are possible

and 1.4 SUMMARY OF valuation model including the expected obligations that arise from past events

SIGNIFICANT life of the share option, confirmed only by ACCOUNTING volatility and whose existence will be

POLICIES

1.4.1 Business combinations & dividend yield and making assumptions the occurrence or non occurrence of one

about them. or more uncertain future events not wholly goodwill

are Transfer Pricing within the control of the entity. All contingent Acquisitions of subsidiaries

Regulationliabilities are disclosed in note 36 to the accounted for using the acquisition The Company is subject to

income taxes financial statement in page 145 unless method of accounting. The Group and other taxes including

transfer pricing the possibility of an outflow of resources measures goodwill at the acquisition regulations. Prevailing

uncertainties with embodying economic benefit is remote.date as the fair value of the consideration respect to the

regulations, necessitated Employee

interpretation of respective transferred including the recognized transfer pricing

Benefit Liabilityamount of any non- judgment to

The employee benefit controlling interests using management

liability of the Group in the acquiree, less the transfer

is based on the actuarial net recognized determine the impact of

valuation carried amount (generally fair Accordingly critical

out by independent value) of the pricing regulations.

actuarial specialist. identifiable assets were used

The actuarial valuations acquired and judgments and estimates

involve making liabilities assumed, all regulations in aspects

assumptions measured as of in applying the

about discount rates and the acquisition limited to identifying

future salary date. When the excess including but not

increases. The complexity of is negative, a undertakings, estimation

the valuation, bargain purchase gain is associated

the underlying assumptions recognized respective arm’s length prices

and its immediately in the income of the

long term nature, the defined statement.

and selection of appropriate pricing benefit obligation is highly sensitive mechanism. The current tax charge is to changes in

judgments. Differences assumptions

these assumptions. All The Group selects on a transaction-bysubject to such

are reviewed at each transaction basis whether to measure between estimated income tax charge reporting date.

arise as a result assumptions used in

Details of the key non-controlling interests at fair value, and actual payable may

the estimates are or at their proportionate share of the of management’s interpretation and contained in Note

31.2.recognized amount of the identifiable application of transfer pricing regulation. net assets, at the acquisition date.

JOHN KEELLS PLC

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Fair value of financial instrumentsTransaction costs, other than those Deferred Tax Assets/ LiabilitiesWhere the fair value

of financial assets associated with the issue of debt or

Deferred tax assets are recognised for and financial liabilities recorded in the

equity securities, that the Group incurs in all unused tax

losses to the extent that statement of financial position cannot

connection with a business combination it is probable that taxable profit

will be be derived from active markets, their

are expensed as incurred.

available against which the losses can fair value is determined using valuation be utilised. Significant management techniques

including the discounted When the Group acquires a business, judgment is required to determine the cash flow model. The inputs to

these it assesses the financial assets and amount of deferred tax assets that can

models are taken from observable liabilities assumed

for appropriate be recognized, based upon the likely markets where possible.

classification and designation in


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JOHN KEELLS PLC

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Name Country of

Incorporation

Keells Realtors Ltd Sri Lanka

or more 1.4.2. accordance with the contractual terms, for impairment, annually

Investment in Associate economic circumstances and pertinent frequently if events or changes in An

associate is an entity over which conditions as at the acquisition date. circumstances indicate that the

carrying the Group has significant influence. value maybe impaired.Significant influence is the power to This

includes the separation of participate in the financial and operating embedded derivatives in

host contracts For the purpose of impairment testing, policy decisions of the investee, but is not by the

acquiree.goodwill acquired in a business control or joint control over those policies.

combination is, from the acquisition date,

If the business combination is achieved allocated to each of the Group’s cash Associate company of the Group

which in stages, the acquisition date fair value generating units that are expected

to has been accounted for under the equity of the acquirer’s previously held equity

benefit from the combination, irrespective method of accounting is:

interest in the acquiree is remeasured to of whether other assets or liabilities of the fair

value at the acquisition date through acquiree are assigned to those units.

profit or loss.

Impairment is determined by assessing Any contingent consideration to be the recoverable amount of the

cashtransferred by the acquirer will be generating unit to which the goodwill The investments in associates are carried

recognized at fair value at the acquisition relates. Where the recoverable amount in the statement of financial position

date. Contingent consideration which is of the cash generating unit is less than at cost plus post acquisition changes

deemed to be an asset or liability, which is the carrying amount, an impairment in the Group’s share of net assets of a

financial instrument and within the scope loss is recognized. The impairment loss the associates. Goodwill relating to

an of LKAS 39, is measured at fair value with is allocated first to reduce the carrying associate is included in the

carrying changes in fair value either in profit or loss amount of any goodwill allocated to the amount of the investment and

is neither or as a change to other comprehensive unit and then to the other assets pro- rata amortised nor individually tested

for income. If the contingent consideration to the carrying amount of each asset in impairment. After application of the is

classified as equity, it will not be the unit. equity method, the Group determines remeasured. Subsequent settlement

is whether it is necessary to recognise

accounted for within equity. In instances Goodwill and fair value adjustments any additional impairment loss with

where the contingent consideration does arising on the acquisition of a foreign respect to the Group’s net investment in

not fall within the scope of LKAS 39, operation area treated as assets and the associate. The Group determines at

it is measured in accordance with the liabilities of the foreign operation and each reporting date whether there is any

appropriate SLFRS/LKAS.translated at the closing rate.

objective evidence that the

investment in the associate is

impaired. If this is the

Goodwill is initially measured at cost Where goodwill forms part of a cashcase, the Group calculates the amount

being the excess of the consideration generating unit and part of the operation of impairment as the difference between

transferred over the Group’s net within that unit is disposed of, the goodwill the recoverable amount of the associate identifiable assets acquired and liabilities associated with the operation disposed and its carrying value and recognises the assumed. If this consideration is lower of is included in the carrying amount amount in the ‘share of results of equity than the fair value of the net assets of the of the operation when determining the accounted investees’ in the income subsidiary acquired. The difference is gain or loss on disposal of the operation. statement.


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recognized in the income statement. Goodwill disposed in this circumstance is measured based on

the relative values of

The income statement reflects the After initial recognition, goodwill is the operation disposed of and the portion share of the results of operations of the measured at cost less any accumulated of the cash-generating unit retained. associate. Changes, if any, recognised impairment losses. Goodwill is reviewed

directly in the equity of the associate, the

JOHN KEELLS PLC

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Group recognises its share and discloses at the amount expected to be recovered Deferred tax assets are recognised for

this, when applicable in the statement from or paid to the taxation authorities. all deductible temporary differences, and

of changes in equity. Unrealised gains The tax rates and tax laws used to unused tax credits and tax losses carried and

losses resulting from transactions compute the amount are those that are forward, to the extent that it is probable between

the Group and the associate are enacted or substantively enacted, at the that taxable profit will be available eliminated to the

extent of the interest in reporting date in the countries where the against which the deductible temporary the

associate.Group operates and generates taxable differences and the unused tax credits

income.and tax losses carried forward can be The share of profit of an associate is shown utilized except:

on the face of the income statement. This Current income tax relating to items is the profit attributable to equity holders

recognised directly in equity is • Where the deferred income tax asset of the associate and therefore is profit

recognised in equity and not in the relating to the deductible temporary after tax and non-controlling interests in income

statement. Management difference arises from the initial the subsidiaries of the associate.periodically evaluates

positions taken in recognition of an asset or liability in the tax returns with respect to situations a transaction that is not a

business The Group ceases to recognise further in which applicable tax regulations are combination and, at the time of

losses when the Group’s share of losses subject to interpretation and establishes the transaction, affects neither the in an

associate equals or exceeds the provisions where appropriate.accounting profit nor taxable profit or

interest in the undertaking, unless it has loss; and· incurred obligations or made payments

Deferred tax

• in respect of deductible temporary on behalf of the entity.Deferred tax is provided using the liability differences associated with method

on temporary differences at the

The accounting policies of associate reporting date between the tax bases of investments in subsidiaries, associates

companies conform to those used for assets and liabilities and their carrying and interests in joint ventures, deferred

similar transactions of the Group. amounts for financial reporting purposes.tax assets are recognized only to the

extent that it is probable that the

temporary differences will reverse in Equity method of accounting has been Deferred tax liabilities are recognized for

applied for associate financial statements all taxable temporary differences, except:the foreseeable future and

taxable using their respective 12 month financial profit will be available against which period. • where the deferred tax

liability arises the temporary differences can be from the initial recognition of goodwill utilised.

Upon loss of significant influence over or of an asset or liability in a transaction The carrying amount of deferred tax the

associate, the Group measures and that is not a business combination assets is reviewed at each reporting recognises

any retaining investment at and, at the time of the transaction, date and reduced to the extent that it is its fair value. Any

difference between the affects neither the accounting profit nor no longer probable that sufficient taxable carrying amount

of the associate upon taxable profit or loss and profit will be available to allow all or part loss of significant influence and the

fair

value of the retaining investment and differences associated with Unrecognised deferred tax assets are proceeds from disposal is recognised in investments in subsidiaries, associates reassessed at each reporting date and profit or loss

JOHN KEELLS PLC

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1.4.3 Taxwhere the timing of the reversal of become probable that future taxable Current taxthe temporary differences can be profit

will allow the deferred tax asset to

Current tax assets and liabilities for the controlled and it is probable that the be recovered.

current and prior periods are measured temporary differences will not reverse in the

foreseeable future.


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JOHN KEELLS PLC

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Disclosures for valuation

methods, significant

estimates and assumptions

Note

15.2,

14.9,12.3

Quantitative disclosures of

fair value measurement

hierarchy note

Note

15.2

14.9

Investment in unquoted

equity shares note

Note

12.3

Deferred tax assets and liabilities are 1.4.4 Current versus non-current 1.4.5 Fair Value Measurement

classification The Group measured at tax rates that are expected measures financial instruments to

apply to the year when the asset is The Group presents assets and liabilities such as quoted investments, and

nonrealised or liability is settled, based on in statement of financial position based financial assets such as

investment the tax rates and tax laws that have been on current/non-current classification. An properties, at fair

value at each reporting enacted or substantively enacted as at asset as current when it is: date. Fair value related

disclosures for the reporting date.financial instruments and non-financial

• Expected to be realised or intended to

relating to items recognised sold

assets that are measured at fair value Deferred tax

or consumed in normal operating or where fair values are disclosed are outside

profit or loss is recognised cycle

summarized in the following notes: outside profit or

loss. Deferred tax items • Held primarily for the purpose of are recognised in

correlation to the trading

underlying transaction either in other

• Expected to be realised within twelve comprehensive income or directly in months after the reporting period equity.

Or

Deferred tax assets and deferred

• Cash or cash equivalent unless tax liabilities are offset, if a legally restricted from being exchanged or enforceable right exists to set off current used to settle a liability for at least

twelve tax assets against current tax liabilities months after the reporting period and when the deferred taxes relate to Fair value is the price that would the same taxable entity and the same All other

assets are classified as non-be received to sell an asset or paid taxation authority.current. to transfer a liability

in an orderly transaction between market participants

Sales taxA liability is current when: at the measurement date. The fair

Revenues, expenses and assets are value measurement is based on the

• It is expected to be settled in normal recognised net of the amount of sales tax presumption that the transaction to sell operating cycle

except: the asset or transfer the liability takes

• It is held primarily for the purpose of place either:

• where the sales tax incurred on a trading • In the principal market for the asset or purchase of a assets or services is

liability or in the absence of a principal

• It is due to be settled within twelve

not recoverable from the taxation market.

months after the reporting period

authority, in which case the sales tax • In the most advantageous market for is recognised as part of the cost of Or

the asset or liability. acquisition of the asset or as part of the • There is no unconditional right to defer expense

item as applicable; andthe settlement of the liability for at The principal or the most advantageous

• Receivables and payables that are least twelve months after the reporting market must be accessible by the stated with

the amount of sales tax period company.

included. The Group classifies all other liabilities as The fair value of an asset or a liability is The net amount of sales tax recoverable

non-current. measured using the assumptions that from, or payable to, the taxation authority market participants would use when is

included as part of receivables or Deferred tax assets and liabilities are pricing the asset or liability, assuming that payables in the

statement of financial classified as non-current assets and market participants act in their economic position.liabilities. best interest.


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A fair value measurement of a non- measurement as a whole) at the end of recognised in the carrying amount of

the financial asset takes into account a each reporting period.plant and equipment as a replacement market participant’s

ability to generate if the recognition criteria are satisfied. economic benefits by using the asset in The Group determines the

policies All other repair and maintenance costs its highest and best use or by selling it and procedures for both

recurring are recognised in the income statement to another market participant that would fair value measurement,

such as as incurred. The present value of the use the asset in its highest and best use. investment properties and

unquoted AFS expected cost for the decommissioning financial assets, and for non-recurring of the asset after its

use is included in The Company uses valuation techniques measurement, such as assets held for the cost of the

respective asset if the that are appropriate in the circumstances sale in discontinued operations.recognition criteria for a

provision are and for which sufficient data are available met.

to measure fair value, maximising the External valuers are involved for valuation use of relevant observable

inputs and of significant assets, such as land and Buildings are measured at fair value less minimising the use of

unobservable building and investment properties, and accumulated depreciation on buildings inputs.

significant liabilities, such as insurance and impairment charged subsequent to

contracts. Selection criteria for external the date of the revaluation.

All assets and liabilities for which fair valuers include market knowledge, value is measured or disclosed in the

reputation, independence and whether The carrying values of property, plant financial statements are categorised

professional standards are maintained. and equipment are reviewed for within the fair value hierarchy described impairment

based on the lowest level 1.4.6 Property, plant and circumstances when events or changes in as follows,

equipmentvalue may not be indicate that the carrying input that is significant to the fair value

recoverable.

measurement as a whole: Basis of recognition

Property, plant and equipment are Where land and buildings are Level 1 —

Quoted (unadjusted) market recognized if it is probable that future subsequently revalued, the entire class prices in

active markets for identical economic benefits associated with of such assets is revalued at fair value

on assets or liabilities the asset will flow to the company and the date of revaluation. the cost of the asset can

be reliably

Level 2 — Valuation techniques for which measured.Any revaluation surplus is recognised the lowest level input that is

is directly or Basis of significant to in other comprehensive income and the fair value measurement

measurementaccumulated in equity in the asset indirectly observable Plant and equipment are stated at cost

revaluation reserve, except to the less accumulated depreciation and any extent that it reverses a revaluation Level 3 —

Valuation techniques for accumulated impairment loss. Such cost decrease of the same asset previously which the

lowest level input that is includes the cost of replacing component recognised in the income statement, in significant to the

fair value measurement parts of the plant and equipment and which case the increase is recognised is

unobservableborrowing costs for long-term construction in the income statement. A revaluation projects if the recognition

income For assets and liabilities that are

criteria are deficit is recognised in the met. When significant parts of plant and

recognised in the financial statements on statement, except to the extent that it equipment are required to be replaced

offsets an existing surplus on the same a recurring basis, the Group determines

at intervals, the Group derecognises

whether transfers have occurred between asset recognised in the asset revaluation the replaced part, and recognises the

reserve.

JOHN KEELLS PLC

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levels in the hierarchy by reassessing new part with its own associated useful categorisation (based on the lowest level life and

depreciation. Likewise, when a Accumulated depreciation as at the input that is significant to the fair value major inspection is

performed, its cost is revaluation date is eliminated against the


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JOHN KEELLS PLC

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Assets Years

Buildings on leasehold land

over the Lease period

36

Plant and machinery 2-10

Equipment 6-8

Furniture and fittings 8

Motor vehicles 5

Computer Equipment 5

Other 5

gross carrying amount of the asset and 1.4.7 Lease rentals paid in value at the date of change in use. If the

net amount is restated to the revalued advance owner occupied property becomes an amount of the asset. Upon

disposal, Prepaid lease rentals paid to acquire investment property or inventory (WIP), any revaluation reserve

relating to the land use rights are amortised over the the Group accounts for such property in particular asset being sold is

transferred lease term in accordance with the pattern accordance with the policy stated under to retained earnings.of

benefits provided. property, plant and equipment up to the

date of change in use.

DerecognitionDetails of Leasehold Property are given

An item of property, plant and equipment in Note 18 to the Financial Statements. Where Group companies occupy a

are derecognised upon replacement, significant portion of the investment disposal or when no future economic

1.4.8 Investment propertiesproperty of a subsidiary, such investment benefits are expected from its use. Any

Investment properties are measured properties are treated as property, plant gain or loss arising on derecognition of the

initially at cost, including transaction and equipment in the consolidated asset is included in the income statement costs.

The carrying value of an investment financial statements, and accounted in the year the asset is

derecognised.property includes the cost of replacing using Group accounting policy for part of an existing investment

property, property, plant and equipment.

Depreciationat the time that cost is incurred if the

criteria are met, and excludes 1.4.9 Intangible assets a Depreciation is calculated by using recognition

to-day servicing of the Basis of recognition valuation of all straight-line method on the cost or the costs of day-

property, plant and investment property. Subsequent to initial An Intangible asset is recognised if it is equipment, other than

freehold land, in recognition, the investment properties probable that future economic benefits order to write off such

amounts over the are stated at fair values, which reflect associated with the asset will flow to the estimated useful

economic life of such market conditions at the reporting date.company and the cost of the asset can assets.be

reliably measured.

Gains or losses arising from changes

The estimated useful life of assets is as in fair value are included in the

Basis of measurement income

follows:statement in the year in which they arise. Intangible assets

acquired separately are

Fair values are evaluated at frequent measured on initial recognition

at cost.

intervals by an accredited external,

independent valuer.Following initial recognition, intangible assets

are carried at cost less any

Investment properties are derecognised accumulated amortisation and

any when disposed, or permanently accumulated impairment losses.

withdrawn from use because no future

economic benefits are expected. Any Internally generated intangible assets, gains or losses on retirement or

disposal excluding capitalised development costs,

are recognised in the income statement are not capitalised, and

expenditure is in the year of retirement or disposal.charged against income statement in the year in which

the expenditure is incurred.

The asset’s residual values and useful Transfers are made to or from investment lives are reviewed, and adjusted if property only

when there is a change Useful economic lives, amortization appropriate, at each financial year end. in use. For a transfer from

investment and impairment


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property to owner occupied property The useful lives of intangible assets are or inventory

(WIP), the deemed cost assessed as either finite or indefinite for subsequent accounting

is the fair lives. Intangible assets with finite lives are

JOHN KEELLS PLC

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1.4.10 Financial instruments — amortised over the useful economic life such financial assets are subsequently

initial recognition and subsequent and assessed for impairment whenever measured at amortised cost using the

measurementeffective interest rate there is an indication that the intangible method (EIR), less asset may be

impaired. The amortisation i) Financial assetsimpairment. Amortised cost is calculated period and the amortisation

method for Initial recognition and measurementby taking into account any discount an intangible asset with a finite

useful life Financial assets within the scope of or premium on acquisition and fees is reviewed at least at each financial year-

LKAS 39 are classified as financial or costs that are an integral part of the end and such changes are treated as assets at

fair value through profit or EIR. The EIR amortisation is included in accounting estimates. The amortisation loss, loans

and receivables, held-to-finance income in the income statement. expense on intangible assets with maturity

investments, available-for-The losses arising from impairment are finite lives is recognised in the income sale financial

assets, or as derivatives recognised in the income statement in statement.designated as hedging

instruments in finance costs.

an effective hedge, as appropriate. The

Group determines the classification of its Available-for-sale financial Intangible assets with indefinite useful

financial assets at initial recognition.investments lives are not amortized but tested for

impairment annually, or more frequently Available-for-sale financial investments when an indication of impairment All

financial assets are recognised initially include equity and debt securities. Equity exists either individually or at the cash-

at fair value plus, in the case of assets not investments classified as available- forgenerating unit level. The useful life

of an at fair value through profit or loss, directly sale are those, which are neither classified intangible asset with an

indefinite life is attributable transaction costs. Purchases as held for trading nor designated at fair reviewed annually to

determine whether or sales of financial assets that require value through profit or loss.

indefinite life assessment continues to delivery of assets within a time frame be supportable. If not, the change in the

established by regulation or convention After initial measurement, availableuseful life assessment from indefinite to in the

marketplace (regular way trades) for-sale financial investments are finite is made on a prospective basis.are recognised

on the trade date, i.e., the subsequently measured at fair value with

date that the Group commits to purchase unrealised

gains or losses recognised

Software licenseor sell the asset.as other comprehensive income in Software license costs are recognised as the

available-for-sale reserve until the an intangible asset and amortised over The Group’s financial assets include

investment is derecognised, at which the period of expected future usage of cash and short-term deposits, trade time the

cumulative gain or loss is related ERP systems.and other receivables, loans and other recognised in other operating

income, receivables, quoted and unquoted or determined to be impaired, at which Gains or losses arising from de

of an intangible asset are financial financial instruments and derivative time the cumulative loss is reclassified recognition

instruments.to the income statement in finance costs measured as the difference between the and removed from the

and the carrying Subsequent measurementreserve. Interest available-for-sale net disposal proceeds

income on availableamount of the asset and are recognised The subsequent measurement of financial for-sale debt

securities is calculated in the income statement when the asset assets depends on their classification as using

the effective interest method and is is derecognised.follows:recognised in the income statement.

JOHN KEELLS PLC

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Loans and receivablesThe Group evaluates its available-for-sale

Loans and receivables are non-derivative financial assets to determine whether the

financial assets with fixed or determinable ability and intention to sell them in the near

payments that are not quoted in an term is still appropriate. When the Group is active

market. After initial measurement, unable to trade these financial assets due


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JOHN KEELLS PLC

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to inactive markets and management’s substantially all the risks and rewards of Evidence of impairment may include

intention to do so significantly changes the asset, or (b) the Group has neither indications that the debtors or a Group in the

foreseeable future, the Group may transferred nor retained substantially of debtors is experiencing significant elect

to reclassify these financial assets all the risks and rewards of the asset, financial difficulty, default or delinquency in rare

circumstances. Reclassification to but has transferred control of the asset.in interest or principal payments, the

loans and receivables is permitted when probability that they will enter bankruptcy the financial assets meet the

definition When the Group has transferred its rights or other financial reorganisation and of loans and receivables and the

Group to receive cash flows from an asset or has where observable data indicate that has the intent and ability to hold

these entered into a pass-through arrangement, there is a measurable decrease in assets for the foreseeable future or

until and has neither transferred nor retained the estimated future cash flows, such maturity. Reclassification to

the held-to-substantially all of the risks and rewards as changes in arrears or economic maturity category is permitted

only when of the asset nor transferred control of it, conditions that correlate with Financial the entity has the ability and

intention to the asset is recognised to the extent of assets carried at amortised cost.

hold the financial asset accordingly.the Group’s continuing involvement in it.

For financial assets carried at amortised For a financial asset reclassified out of the In that case, the Group also

recognises cost, the Group first assesses whether available-for-sale category, any previous an associated liability. The

transferred objective evidence of impairment exists gain or loss on that asset that has been asset and the associated

liability are individually for financial assets that are recognised in equity is amortised to measured on a basis that

reflects the individually significant, or collectively for profit or loss over the remaining life of the rights and obligations that the

Group has financial assets that are not individually investment using the EIR. Any difference retained.significant. If the

Group determines that between the new amortised cost and the no objective evidence of impairment expected cash

flows is also amortised Continuing involvement that takes the

exists for an individually assessed over the remaining

life of the asset using form of a guarantee over the transferred

financial asset, whether significant or the EIR. If the

asset is subsequently asset is measured at the lower of the

not, it includes the asset in a Group of determined to be impaired,

then the original carrying amount of the asset and

financial assets with similar credit risk amount recorded in equity is

reclassified the maximum amount of consideration

to the income statement. that

characteristics and collectively assesses

the Group could be required to repay.them for impairment. Assets that are

individually assessed for impairment i) Derecognitionii) Impairment of financial assetsand for which

an impairment loss is,

A financial asset (or, where applicable The Group assesses at each reporting or continues to be, recognised are not a

part of a financial asset or part of date whether there is any objective included in a collective assessment of a Group of

similar financial assets) is evidence that a financial asset or a impairment. derecognised when:Group of financial

assets is impaired.

A financial asset or a Group of financial If there is objective evidence that an

• The rights to receive cash flows from assets is deemed to be impaired if, and impairment loss has been incurred, the

asset have expiredonly if, there is objective evidence of the amount of the loss is measured impairment as a

result of one or more as the difference between the assets

• The Group has transferred its rights events that has occurred after the initial carrying amount and the present value

to receive cash flows from the asset recognition of the asset (an incurred ‘loss of estimated future cash flows (excluding or

has assumed an obligation to pay event’) and that loss event has an impact future expected credit losses that have the received

cash flows in full without on the estimated future cash flows of the not yet been incurred). The present material delay to a third party

under financial asset or the Group of financial value of the estimated future cash flows a ‘pass-through’ arrangement; and assets

that can be reliably estimated. is discounted at the financial asset’s either (a) the Group has transferred

original effective interest

rate. If a loan


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has a variable interest rate, the discount investment and ‘prolonged’ against the measured at amortised cost using the

rate for measuring any impairment loss is period in which the fair value has been effective interest rate method. Gains

the current effective interest rate.below its original cost. Where there is and losses are recognised in the evidence of

impairment, the cumulative income statement when the liabilities The carrying amount of the asset is loss

measured as the difference between are derecognised as well as through reduced through the use of an allowance the

acquisition cost and the current the effective interest rate method (EIR) account and the amount of the loss is fair value, less

any impairment loss on amortisation process.

recognised in the income statement. that investment previously recognised

Interest income continues to be accrued in the income statement is removed Amortised cost is calculated by taking

on the reduced carrying amount and is from other comprehensive income and into account any discount or premium

accrued using the rate of interest used recognised in the income statement. on acquisition and fees or costs that to

discount the future cash flows for the Impairment losses on equity investments are an integral part of the EIR. The EIR

purpose of measuring the impairment are not reversed through the income amortisation is included in finance

costs loss. The interest income is recorded statement; increases in their fair value in the income statement.

as part of finance income in the income after impairments are recognised directly

comprehensive income.Derecognition statement. Loans together with the in other

there is no realistic prospect of iii) associated allowance are written off A financial liability is derecognised when

Financial liabilitieswhen the obligation all collateral has Initial recognition under the liability is future recovery and

and measurementdischarged or cancelled or expires.

been realised or has been transferred to Financial liabilities within the scope the Group. If, in a subsequent year, the of

LKAS 39 are classified as financial When an existing financial liability is

amount of the estimated impairment loss liabilities at

fair value through profit or loss, replaced by another from the same

increases or decreases because of an loans and

borrowings, or as derivatives lender on substantially different terms,

event occurring after the impairment was

designated as hedging instruments in or the terms of an existing liability

recognised, the previously recognised an effective

hedge, as appropriate. The are substantially modified, such an

impairment loss is increased or reduced Group

exchange or modification is treated as by determines the classification of its adjusting the allowance account. If

financial liabilities at initial recognition.a derecognition of the original liability

a future write-off is later recovered, the

and the recognition of a new liability, and recovery is credited to finance costs in All financial liabilities are recognised the

difference in the respective carrying the income statementinitially at fair value and, in the case amounts is recognised

in the income of loans and borrowings, carried at statement.

Available-for-sale financial amortised cost. This includes directly

investmentsattributable transaction costs.iv) Offsetting of financial instruments For available-for-sale

financial Financial assets and financial liabilities investments, the Group assesses at each The Group’s financial

liabilities include are offset and the net amount reported reporting date whether there is objective trade and other

payables, bank in the consolidated statement of financial evidence that an investment or a Group overdrafts,

loans and borrowings.position if, and only if, there is a currently of investments is impaired.enforceable legal right to

offset the

Subsequent measurementrecognised amounts and there is an

JOHN KEELLS PLC

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In the case of equity investments The measurement of financial liabilities intention to settle on a net basis, or to classified as available-

for-sale, objective depends on their classification as follows:realise the assets and settle the liabilities evidence would include a

significant or simultaneously. prolonged decline in the fair value of the Loans and borrowings

investment below its cost. ‘Significant’ is After initial recognition, interest bearing evaluated against

the original cost of the loans and borrowings are subsequently


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JOHN KEELLS PLC

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Other inventories At actual cost

v) Fair value of financial instrumentsFor the purpose of the cash flow the form of shares from 2014/15 financial

The fair value of financial instruments statement, cash and cash equivalents year onwards.

that are traded in active markets at each consist of cash and short-term deposits reporting date is determined by

Equity-settled transaction to quoted reference as defined above, net of outstanding market prices or dealer price

bank overdrafts.The cost of equity-settled transactions quotations (bid price for long positions is recognized,

- corresponding increase in without 1.4.13 Defined benefit plan together with a and ask price for short positions),

other capital any deduction for transaction costs.gratuityreserves in equity, over the period in

The liability recognised in the statement which the performance and service For financial instruments not traded in an of

financial position is the present value conditions are fulfilled. The cumulative active market, the fair value is determined of

the defined benefit obligation at expense recognized for equity-settled using appropriate valuation techniques. the

reporting date using the projected transactions at each reporting date until Such techniques may include using unit credit

method. Any actuarial the vesting date reflects the extent to recent arm’s length market transactions; gains or losses

arising are recognised which the vesting period had expired reference to the current fair value of immediately in other

comprehensive and the Group’s best estimate of the another instrument that is substantially income. Such actuarial gains

and losses number of equity instruments that will the same; a discounted cash flow are also immediately recognized in

ultimately vest. The income statement analysis or other valuation models.retained earnings and are not reclassified

expense or credit for a period represents to profit or loss subsequent periods.the movement in cumulative expense

An analysis of fair values of financial recognized as at the beginning and end instruments and further details as to how

1.4.14 Defined contribution plan of that period and is recognized in the they are measured are provided in

Note 12. - Employees’ Provident Fund and Employees’ Trust Fund share based payment plan note.

1.4.11 InventoriesEmployees are eligible for Employees’ No expense is recognized for awards that

Inventories are valued at the lower of cost Provident Fund contributions and do not ultimately vest, except for equityand net

realisable value. Net realisable Employees’ Trust Fund contributions settled transactions where vesting is value is the

estimated selling price less in line with respective statutes and conditional upon a market or non-vesting estimated costs of

completion and the regulations. The companies contribute Condition, which are treated as vesting estimated costs

necessary to make the the defined percentages of gross irrespective of whether or not the market sale.emoluments of

employees to an approved or non-vesting condition is satisfied,

Employees’ Provident Fund and to the provided that all other performance and The costs incurred in bringing inventories

Employees’ Trust Fund respectively, service conditions are satisfied. to its present location and condition, are

which are externally funded.

accounted for as follows:Where the terms of an equity-settled

1.4.15 Employee share option transaction award are modified, the

planminimum expense recognized is the

1.4.12 Cash and cash Employees of the Group receive expense as if the terms had not been

equivalentsremuneration in the form of share based modified, if the original terms of the payment transaction, whereby

employees award are met. An additional expense

Cash and short-term deposits in the render services as consideration for is recognized for any modification that statement of financial position comprise equity instruments (equity-settled increases the total fair value of the cash at banks and on hand and shorttransactions) The company, applied share-based payment transaction, or is term deposits with a maturity of three

SLFRS 02 Share Based Payments in otherwise beneficial to the employee as months or less. accounting for employee

remuneration in measured at the date of modification.


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Where an equity-settled award is All contingent liabilities are disclosed cannot be measured reliably, revenue

cancelled, it is treated as if it vested as a note to the financial statements is recognised only to the extent that the

on the date of cancellation, and any unless the outflow of resources is expenses incurred are eligible to be expense not

yet recognized for the award remote. A contingent liability recognised recovered.

is recognized immediately. This includes in a business combination is initially any award where non-vesting conditions

Turnover based taxes within the measured at its fair value. Subsequently, control of either the entity or it is

measured at the higher of:Turnover based taxes include value the employee are not met. However, if a added tax, economic

service charge, new award is substituted of the cancelled • The amount that would be recognised nation building tax and

turnover tax. award, and designated as a replacement in accordance with the general Companies in the Group pay

such award on the date that it is granted, the guidance for provisions above (LKAS taxes in accordance with the respective

cancelled award and the new award are 37) orstatutes. treated as if they were a modification

Dividend the previous paragraph, of the original award, as described in • Contingent assets are disclosed, where

(further details inflow of economic benefit is probable. Dividend income is recognised when the given in note 28.2).Group’s

right to receive the payment is

1.4.17 Revenue recognitionestablished.

1.4.16 Provisions, contingent assets and Revenue is recognised to the extent that

contingent liabilitiesit is probable that the economic benefits Interest income

Provisions are recognised when the will flow to the Group, and the revenue For all financial instruments measured Group

has a present obligation (legal and associated costs incurred or to at amortised cost and interest bearing or

constructive) as a result of a past be incurred can be reliably measured. financial assets classified as available

event, it is probable that an outflow of Revenue is measured at the fair value of for sale, interest income or expense is

resources embodying economic benefits the consideration received or receivable, recorded using the effective interest will

be required to settle the obligation net of trade discounts and value added rate (EIR), which is the rate that exactly and

a reliable estimate can be made of taxes, after eliminating sales within the discounts the estimated future cash the

amount of the obligation. Where the Group.payments or receipts through the

Group expects some or all of a provision expected life of the financial instrument

The following specific criteria are used to be reimbursed, for example under an or a shorter period, where appropriate, to for recognition of revenue: insurance contract, the reimbursement the net carrying amount of the financial is recognised as a separate asset but asset or liability. Interest income is

Brokerage Incomeincluded in finance income in the income only when the reimbursement is virtually

Revenue from the sale of goods is statement. certain. The expense relating to any recognised when the significant risk

rewards of ownership of the goods Gains and losses provision is presented in the income and statement net of any reimbursement. have passed to the buyer with the Net gains and losses of a revenue nature

Group retaining neither a continuing

arising from the disposal of property, If the effect of the time value of money

material, provisions are discounted plant and equipment and other non-

managerial involvement to the degree is usually associated with ownership, nor using a current pre-tax rate that reflects, current assets, including investments,

accounted for in the income statement, are an effective control over the goods sold. where appropriate, the risks specific to

the liability. Where discounting is used, after deducting from the proceeds on

Rendering of servicesdisposal, the carrying amount of such

the increase in the provision due to

JOHN KEELLS PLC

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Revenue from rendering of services is assets and the related selling expenses. the passage of time is recognised as a recognised

by reference to the stage of finance cost.

completion. Where the contract outcome


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JOHN KEELLS PLC

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Gains and losses arising from activities 1.5 SEGMENT INFORMATIONsegment.

main revenue generating 1.5.1 Reporting segmentson The Income taxes are managed incidental to the

Group basis and are not allocated to activities and those arising from a group The group’s internal organisation and

operating segments.

of similar transactions, which are not management is structured based on

products and services which 2. SRI LANKA material are aggregated, reported and individual

ACCOUNTING presented on a net basis.are STANDARDS similar in nature and process and

(SLFRS/LKAS) where the risk and return are similar. ISSUED BUT NOT YET

EFFECTIVE are accounted Any losses arising from guaranteed rentals The primary segments represent this

for in the year of incurring business structure.Certain new accounting standards and the same. A provision is recognised if the

amendments / improvements to existing projection indicates a loss.Since the individual segments are located

standards have been published, that close to each other and operate in the are not mandatory for 31 March 2016

Other incomesame industry environment, catering

Other income is recognised on to reporting period. None of these have

an clientele from the same geographical been early adopted by the group.

accrual basis. location, the need for geographical

segmentation does not ariseSLFRS 9 -Financial Instruments

1.4.18 Expenditure recognitionSLFRS 9 replaces the existing guidance

Expenses are recognised in the income 1.5.2 Segment informationin LKAS 39 Financial Instruments:

statement on the basis of a direct Segment information has been prepared Recognition and

Measurement. SLFRS association between the cost incurred

in conformity with the accounting policies 9 includes revised

guidance on the and the earning of specific items of

adopted for preparing and presenting classification and

measurement of the income. All expenditure incurred in the the consolidated financial statements of financial

instruments, a new expected running of the business and in maintaining the group.credit loss model for calculating the

property, plant and equipment in a impairment on financial assets, and new state of efficiency has been charged to

No operating segments have been general hedge accounting requirements.

the income statement.aggregated to form the above reportable It also carries forward the guidance on operating

segments. An individual recognition and derecognition of financial For the purpose of presentation of the segment

SLFRS 9 is income statement, the “function of

each operating manger is determined for instruments from LKAS 39.

reporting periods expenses” method has been adopted,

are regularly segment and the results effective for annual

January 2018, on the basis that it presents fairly the

Directors. reviewed by the Board of beginning on or after 01

permitted. elements of the Company and Group’s

the operating results The Board of Directors monitors with early adoption

of its business units

performance.separately for the purpose of making SLFRS 15 Revenue from Contracts decisions about resource

allocation and with Customers

Borrowing costs performance assessment. Segment SLFRS 15 establishes a comprehensive Borrowing costs directly attributable to the performance is evaluated based on framework for determining whether, how acquisition, construction or production operating profit or loss which in certain much and when revenue is recognized. of an asset that necessarily takes a respects, as explained in the operating It replaces existing revenue recognition substantial period of time to get ready for segments information, is measured guidance, including LKAS 18 Revenue, its intended use or sale are capitalised as differently from operating profit or loss LKAS 11 Construction Contracts and part of the cost of the respective assets. in the consolidated financial statements. IFRIC 13 Customer Loyalty Programmes. All other borrowing costs are expensed

However, except for Financial Services SLFRS 15 is effective for annual reporting in the period they occur. Borrowing costs segment other segments’ financing periods beginning on or after 01 January


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consist of interest and other costs that activities are managed on a Group 2018, with early adoption permitted. the Group incurs in connection with the basis and are not allocated to operating borrowing of funds.

JOHN KEELLS PLC

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3. REVENUE

3.1 Revenue

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Gross Revenue 706,664 959,925 424,529 558,765

Revenue 706,664 959,925 424,529 558,765

3.2 SEGMENT INFORMATION Segment Revenue

Group

Produce Broking Warehousing Share Broking Total


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Revenue

Third Parties 424,529 558,765 93,534 104,334 193,101 301,117 711,164 964,216

Inter Segment Sales - - (4,500) (4,291) - - (4,500) (4,291)

Revenue 424,529 558,765 89,034 100,042 193,101 301,117 706,664 959,925

Segment Results (1,598) 247,468 29,265 39,492 (3,446) 71,944

24,221

358,904

Finance Income 29,652 14,109 3,176 2,094 18,761 18,127 51,589 34,330

Finance expenses (64,979) (77,394) (10) (33) (193) (216) (65,182) (77,643)

Net Finance Expenses (35,327) (63,285) 3,166 2,061 18,568 17,911 (13,593) (43,313)

Changes in fair value of Investmen

Property

t 45,292 15,098 - - - - 45,292 15,098

8,367 199,280 32,431 41,553 15,122 89,856 55,920 330,689

Share of results of Associate - - - - - - 7,546 2,290

Profit Before Tax - - - - - - 63,466 332,979

Tax Expense 10,943 (60,024) (4,465) (49) (9,011) (29,665) (2,533) (89,738)

Unallocated Tax Expenses - - - - - - (6,720) (11,394)

JOHN KEELLS PLC

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Total Tax Expenses - - - - - - (9,253) (101,132)

Profit After Tax - - - - - - 54,213 231,847

Segment Assets 4,120,539 5,121,263 378,657 394,841 483,231 558,282

4,982,427

6,074,386

Segment Liabilities 1,222,019 2,197,482 42,559 66,928 381,631 383,899 1,646,209 2,648,309


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JOHN KEELLS PLC

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Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

4. DIVIDEND INCOME

Income from investments in related parties - - 124,996 49,034

- - 124,996 49,034

5. OTHER OPERATING INCOME

Sundry income 3,028 265 - -

Profit/(Loss) on sale of Property, Plant and Equipment 2 2,656 2 2,656

3,030 2,921 2 2,656

6. FINANCE EXPENSES

Interest expense on borrowings

Short term 65,182 77,643 64,979 77,394

65,182 77,643 64,979 77,394

7. FINANCE INCOME

Dividend Income from Available for Sale Investments 25,475 11,580 25,475 11,580

Interest Income from Fixed Deposits & Repo Investment 19,668 17,892 - -

Other Interest Income 6,446 4,858 4,177 2,529

51,589 34,330 29,652 14,109

8. PROFIT BEFORE TAX

Profit before tax is stated after charging all expenses including the following;

Remuneration to Executive Director 9,797 10,373 9,797 10,373

Remuneration to Non Executive Directors 10,998 10,562 7,200 6,750

Audit Fees 2,204 2,415 1,100 1,662

Non Audit Expenses - 319 - 319


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Personnel costs Includes-

Defined Benefit Plan Cost 10,914 11,019 6,491 6,649

Defined Contribution Plan Cost - EPF and ETF 25,190 26,945 13,021 12,583

Other Staff Cost 235,413 262,915 97,589 99,439

Depreciation of Property, Plant and Equipment 22,940 20,823 8,893 8,818

Donations 8,312 14,812 2,302 6,812

JOHN KEELLS PLC

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Group Company

For the Year Ended 31st March Note 2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

9. TAX EXPENSE

Current income tax

14,981 97,104 610 61,186

Over Under/(Provision) in respect of previous year 130 (14) - -

10% Withholding Tax on Inter Company Dividends 13,884 5,446 - -

Deferred income tax

Relating to origination and reversal of temporary differences 9.2

(19,742)

(1,404)

(11,553)

(1,162)

9,253 101,132 (10,943) 60,024

9.1 Reconciliation between tax expense and the

product of accounting profit Profit before tax

63,466 332,979 133,364 248,315

Dividend income from group companies (150,471) (60,613) (150,471) (60,613)

Share of results of associate 7,546 2,290 - -

(79,459) 274,656 (17,107) 187,702

Exempt profits

- -

Profits not charged to income tax 20,051 - - -

Profits not charged to income tax (revaluation of investment property) (45,292) (15,097) (45,292) (15,097)

Accounting profit / (loss) chargeable to income taxes (104,700) 259,559 (62,400) 172,605

Tax effect on chargeable profits (9,834) 78,246 (17,472) 48,329

Tax effect on non deductible expenses 12,781 17,311 7,710 12,416

Tax effect on deductions claimed (1,508) 189 (1,181) 484

Tax effect on rate differentials 956 649 - -


Current and deferred tax share of associate (7,165) 5,318 -

Income tax on other comprehensive income (163) (2,799) 689 (1,123)

(Over)/Under provision for previous years 130 (97) - (82)

9,081 104,263 (10,254) 60,024

Income tax charged at

Standard rate 28% 11,946 92,905 610 61,186

Concessionary Rate of 10% 3,035 3,570 - -

JOHN KEELLS PLC

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(Over)/Under provision for previous years 130 (14)

Share of Associate Company Income Tax Expenses - 629 - -


Charge for the year 28,995 102,536 610 61,186

Deferred Tax Charge/(Reversal) (19,742) (1,404) (11,553) (1,162)

Total income tax expense 9,253 101,132 (10,943) 60,024

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.


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JOHN KEELLS PLC

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Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

9.2 Deferred tax expense

Income statement

Deferred tax expense arising from;

Accelerated depreciation for tax purposes 468 (4,896) 614 (303)

Deferred tax assets recognized on account of carry forward tax losses (12,030) - (12,030) -

Employee benefit liabilities (1,015) (1,826) (137) (859)

Undistributed Profits of Investment in Associate & Subsidiaries (7,165) 5,318 - -

Deferred tax charge (19,742) (1,404) (11,553) (1,162)

Statement of Comprehensive Income

Deferred tax expense arising from;

Revaluation of building at fair value

770 1,185 - -

Total deferred tax /(reversal) recognised in other Comprehensive income

arising from Actuarial gain/(loss)- Defined benefit plans

(607) 1,614 (689) 1,123

163 2,799 (689) 1,123

Total deferred tax charge (19,579) 1,395 (12,242) (39)

Deferred tax has been computed at 28% for all standard rate companies (including listed companies).and at 10% for John Keells

Warehousing (Pvt) Ltd

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

9.3 Tax losses carried forward

Tax losses brought forward - - - -

Tax loss for the year 44,138 - 44,138 -

Tax loss set off against Statutory Income (1,173) - (1,173) -

Tax losses carried forward 42,965 - 42,965 -

9.4 As per the provisions of Part III of the Finance Act,No. 10 of 2015, the Group was liable for Super Gain tax of Rs.93.9Mn. According

to the Act, the super gain tax shall be deemed to be an expenditure in the financial statements relating to the year of assessment

which commenced on 1 April 2013.The Act supersedes the requirements of the Sri Lanka Accounting Standards and hence the

expense of Super gain tax is accounted in accordance with the requirements of the said Act as recommended by the Statement of

Alternative Treatment (SoAT) on Accounting for Super Gain Tax issued by the Institute of Chartered Accountants of Sri Lanka, dated

24 November 2015.


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Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

10. EARNINGS PER SHARE

10.1 Basic earnings per share

Profit attributable to equity holders of the parent 52,746 217,401 144,307 188,291

Weighted average number of ordinary shares ( In 000"s) 60,800 60,800 60,800 60,800

Rs Rs Rs Rs

Basic earnings per share 0.87 3.58 2.37 3.10

10.2 Amount used as denominator Ordinary shares at the beginning of the year ( In 000”s) 60,800 60,800 60,800 60,800

Ordinary shares at the end of the year ( In 000”s) 60,800 60,800 60,800 60,800

For the Year Ended 31st March 2016 2015

Rs Rs. 000’s Rs Rs. 000’s

11. DIVIDEND PER SHARE

Equity dividend on ordinary shares

Declared and paid during the year

Out of Dividends received - Free of tax 2.39 145,225 0.55 33,146

Out of Profits - Liable for tax 1.36 82,775 2.85 173,574

Total dividend 3.75 228,000 3.40 206,720

*Previous year’s final dividend paid in the current year.

12 FINANCIAL INSTRUMENTS

12.1 Financial Assets and Liabilities by Categories

Financial assets and liabilities in the tables below are split into categories in accordance with LKAS 39.

Group Loans and Available for sale Total

Receivables Financial Assets

As at 31 st March 2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Financial Instruments in Non Current Assets

Other Non - Current Financial Assets 80,449 122,210 2,353,825 2,195,059 2,434,274 2,317,269

Financial Instruments in Current Assets

Trade & Other Receivables 1,489,846 2,458,140 - - 1,489,846 2,458,140

JOHN KEELLS PLC

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Amount Due from Related Parties 2,635 1,260 - - 2,635 1,260

Cash in Hand and at Bank 99,452 289,623 - - 99,452 289,623

Short Term Investments 246,256 378,114 - - 246,256 378,114

Total 1,918,638 3,249,347 2,353,825 2,195,059 4,272,463 5,444,406


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JOHN KEELLS PLC

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Company

Loans and Available for sale Total

Receivables Financial Assets


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Financial Instruments in Non Current Assets

Other Non - Current Financial Assets 68,179 108,401 2,353,825 2,195,059 2,422,004 2,303,460

Financial Instruments in Current Assets

Trade & Other Receivables 1,269,296 2,265,939 - - 1,269,296 2,265,939

Amount Due from Related Parties 2,700 1,260 - - 2,700 1,260

Cash in Hand and at Bank 86,379 279,762 - - 86,379 279,762

Total 1,426,554 2,655,362 2,353,825 2,195,059 3,780,379 4,850,421

12.2 Financial Liabilities by Categories

Group

Financial liabilities Total

measured at amortised cost


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Financial Instruments in Current Liabilities

Trade and Other Payables 878,009 1,593,095 878,009 1,593,095

Amount Due from Related Parties 2,821 10,976 2,821 10,976

Bank Overdrafts 652,115 458,330 652,115 458,330

Short Term Borrowings - 450,000 - 450,000

Total 1,532,945 2,512,401 1,532,945 2,512,401


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12 FINANCIAL INSTRUMENTS (Contd.)

12.2 Financial Liabilities by Categories (Contd.)

Company

Financial liabilities Total

measured at amortised cost


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Financial Instruments in Current Liabilities

Trade and Other Payables 520,465 1,285,435 520,465 1,285,435

Amount Due from Related Parties 5,802 6,797 5,802 6,797

Bank Overdrafts 648,771 453,806 648,771 453,806

Short Term Borrowings - 450,000 - 450,000

1,175,038 2,196,038 1,175,038 2,196,038

The management assessed that cash and short-term deposits, trade and other receivables, amounts due from related parties, trade

and other payables, amounts due to related parties,bank overdraft, short term borrowings and other current financial liabilit ies

approximately their carrying amounts largely due to the short term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current

transaction between knowledgeable and willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Fair value of quoted equities based on price quotations in an active market at the reporting date.

The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, as well as

other non current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar

terms, credit risk and remaining maturities.

12.3 Financial Assets and Liabilities by Fair Value Hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly

observable.

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

The Company held the following financial instruments carried at fair value in the statement of financial position.

JOHN KEELLS PLC

1

9

Financial Assets

Group

Level 1 Level 2 Level 3


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Available for sale

Investment in Equity Securities 437,443 278,677 - - - -

Total 437,443 278,677 - - - -

Financial Assets

Company



Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Available for sale

Investment in Equity Securities 437,443 278,677 - - - -

Total 437,443 278,677 - - - -

During the reporting period ended 31 March 2016 and 2015 , there were no transfers between Level 1 and Level 2 fair value

measurements.

13. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group and Company has loans and other receivables, trade receivables, and cash that arise directly from its operations. The

Group and Company also holds available-for-sale investments. The Group’s and Company’s principal financial liabilities, comprise of

loans and borrowings, trade and other payables, and financial guarantee contracts.

The main purpose of these financial liabilities is to finance the Group and Company’s operations and to provide guarantees to support

its operations. The Group and Company is exposed to market risk, credit risk and liquidity risk.

13.1 Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a

financial loss. The Group and Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its

financing activities, including deposits with banks and financial institutions and other financial instruments.


1

9


13. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Contd.)

13.1 Credit risk (Contd.) The Group and Company trades only with recognised, creditworthy third parties. It is the Group’s and Company’s policy that al l clients

who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an

ongoing basis and proactive steps taken to reduce the risk.

With respect to credit risk arising from the other financial assets of the Group and Company, such as cash and cash equivalents,

available-for-sale financial investments, the exposure to credit risk arises from default of the counterparty. The Group and Company

manages its operations to avoid any excessive concentration of counterparty risk and the Group and Company takes all reasonable

steps to ensure the counterparties fulfil their obligations.

13.1.1 Risk exposure

The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying amounts (without

consideration of collateral, if available).Following Table shows the maximum risk positions.

Group

2016

Notes

Other non

current

financial

assets Rs.

000’s

Cash

in hand

and at

bank Rs.

000’s

Trade

and other Other

receivables investments

Rs. 000’s Rs. 000’s

Amounts

due from

related

parties

Rs.

000’s

Total

Rs. 000’s

% of

allocation

Rs. 000’s

Government securities 13.1.1.1 - - - 246,256 - 246,256 13%

Loans to executives 13.1.1.2 18,528 - 9,560 - - 28,088 1%

Trade receivables 13.1.1.3 - - 1,475,178 - - 1,475,178 77%

Loans and Other receivables 13.1.1.4 58,422 - 5,108 - - 63,530 3%

Amounts due from related parties 13.1.1.5 - - - - 2,635 2,635 0%

Cash in hand and at bank 13.1.1.6 - 99,452 - - - 99,452 5%

Deposit 3,500 - - - - 3,500 0%

Total credit risk exposure 76,950 99,452 1,489,846 246,256 2,635 1,918,639 100%

2015

Notes

Other non

current

financial

assets Rs.

000’s

Cash

in hand

and at

bank Rs.

000’s

Trade

and other

receivables

Rs. 000’s

Other

investments

Rs. 000’s

Amounts

due from

related

parties

Rs.

000’s

Total

Rs. 000’s

% of

allocation

Rs. 000’s

Government securities 13.1.1.1 - - - 378,114 - 378,114 12%


JOHN KEELLS PLC

1

9





Deposit 3,500 - - - - 3,500 0%

Total credit risk exposure 122,210 289,623 2,458,140 378,114 1,260 3,249,347 100%


1

9

JOHN KEELLS PLC

1

9

Company

2016

Notes

Other non

current

financial

assets Rs.

000’s

Cash

in hand

and at

bank Rs.

000’s

Trade and

other

receivables

Rs. 000’s

Other

investments

Rs. 000’s

Amounts

due from

related

parties

Rs.

000’s

Total

Rs. 000’s

% of

allocation

Rs. 000’s






Total credit risk exposure 68,179 86,379 1,269,296 - 2,700 1,426,554 100%

2015

Notes

Other non

current

financial

assets Rs.

000’s

Cash

in hand

and at

bank Rs.

000’s

Trade and

other

receivables

Rs. 000’s

Other

investments

Rs. 000’s

Amounts

due from

related

parties

Rs.

000’s

Total

Rs. 000’s

% of

allocation

Rs. 000’s



Loans and Other receivables 13.1.1.4 101,373 - 796 - - 102,169 4%



Total credit risk exposure 108,401 279,762 2,265,939 - 1,260 2,655,362 100%

13.1.1.1 Government securities

As at March 2016 as shown in table above 13% (2015 - 12%) of debt securities comprises investment in government securities consist

of treasury bills and reverse repo investments. Government securities are usually referred to as risk free due to sovereign nature of

the instrument.

13.1.1.2 Loans to executives

Loans to executive portfolio is largely made up of vehicle loans which are given to staff at assistant manager level and above. The

respective business units have obtained the necessary Power of Attorney/promissory notes as collateral for the loans granted.


1

9



13.1 Credit risk (Contd.) Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

13.1.1.3 Trade and other receivables

Neither past due nor impaired 1,199,780 2,287,247 985,790 2,102,067

Past due but not impaired - 125 - -

30–60 days 1,504 34,543 948 33,835

61–90 days 11 59,558 1 59,388

91–180 days 85,658 50,045 85,624 49,985

> 181 days 188,225 14,180 188,214 13,831

impaired 258,517 92,585 258,517 92,513

Gross carrying value 1,733,695 2,538,283 1,519,094 2,351,619

Less: impairment provision

Individually assessed impairment provision (Note 13.1.1.3.1)

(258,517)

(92,585)

(258,517)

(92,513)

Total 1,475,178 2,445,698 1,260,577 2,259,106

13.1.1.3.1 Movement in the provision for impairment of receivables

Group Company

Rs. 000’s Rs. 000’s

As at 01 April 2014

Charge for the year

41,148

52,105

41,134

52,047

Utilized (668) (668)

As at 31 March 2015 92,585

92,513

Charge for the year 179,416

179,069

Utilized (13,484)

(13,065)

As at 31 March 2016 258,517

258,517

The Group and Company has advance/loaned money to tea/rubber client by reviewing their past performance and credit worthiness,

as collateral.

The requirement for an impairment is analysed at each reporting date on an individual basis for all clients. The calculation is based on

actual incurred historical data.

13.1.1.4 Loans and Other receivables

JOHN KEELLS PLC

1

9

The Group and Company has loaned money to Tea producers by reviewing their past performance and credit worthiness, as

collateral.

13.1.1.5 Amounts due from related parties

The Group’s and Company’s amount due from related party mainly consists of the balance from affiliate companies and companies

under common control.


1

9

JOHN KEELLS PLC

1

9

13.1.1.6 Credit risk relating to cash and cash equivalents

In order to mitigate the concentration, settlement and operational risks related to cash and cash equivalents, the Group consciously

manages the exposure to a single counterparty taking into consideration, where relevant, the rating or financial standing of the

counterparty, where the position is reviewed as and when required, the duration of the exposure in managing such exposures and the

nature of the transaction and agreement governing the exposure.

13.2 Liquidity Risk

The Group’s & Company’s policy is to hold cash and undrawn committed facilities at a level sufficient to ensure that the Company has

available funds to meet its medium term capital and funding obligations, including organic growth and acquisition activities, and to

meet any unforeseen obligations and opportunities. The Company holds cash and undrawn committed facilities to enable the Company

to manage its liquidity risk.

The Group & Company monitors its risk to a shortage of funds using a daily cash management process. This process considers the

maturity of both the Company’s financial investments and financial assets (e.g. accounts receivable, other financial assets) and

projected cash flows from operations.

The Group’s & Company ’s objective is to maintain a balance between continuity of funding and flexibility through the use of multiple

sources of funding including bank loans, loan notes, & overdrafts.

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

13.2.1 Net (debt)/cash

Cash in hand and at bank 99,452 289,623 86,379 279,762

Liquid Assets 99,452 289,623 86,379 279,762

Short Term Borrowings - (450,000) - (450,000)

Bank Overdrafts (652,115) (458,330) (648,771) (453,806)

Liquid Liabilities (652,115) (908,330) (648,771) (903,806)

(Net debt) Cash (552,663) (618,707) (562,392) (624,044)


1

9



13.2 Liquidity Risk (Contd.)

13.2.2 Liquidity risk management The mixed approach combines elements of the cash flow matching approach and the liquid assets approach. The business units

attempts to match cash outflows in each time bucket against a combination of contractual cash inflows plus inflows that can be

generated through the sale of assets, repurchase agreement or other secured borrowing.

Maturity analysis

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

Group

As at 31 st March 2016 2015

Less than

3 Months

Rs. 000’s

3 to 12

Months

Rs. 000’s

More than

12 months

Rs. 000’s

Total

Rs. 000’s

Less than

3 Months

Rs. 000’s

3 to 12

Months

Rs. 000’s

More than

12 months

Rs. 000’s

Total

Rs.

000’s

Trade and Other Payables 878,009 - - 878,009 1,593,095 - - 1,593,095

Amounts due to Related

Parties

2,821 - - 2,821 10,976 - - 10,976

Short Term Borrowings - - - - 450,000 - - 450,000

Bank Overdrafts 852,115 - - 852,115 458,330 - - 458,330

Total 1,532,945 - - 1,532,945 2,512,401 - - 2,512,401

Company

As at 31 st March 2016 2015

Less than

3 Months

Rs. 000’s

3 to 12

Months

Rs. 000’s

More than

12 months Total

Rs. 000’s Rs. 000’s

Less than

3 Months

Rs. 000’s

3 to 12

Months Rs.

000’s

More than

12 months

Rs. 000’s Total

Rs. 000’s

Trade and Other Payables 520,465 - - 520,465 1,285,435 - - 1,285,435

Amounts due to Related

Parties

5,802 - - 5,802 6,797 - - 6,797

Short Term Borrowings - - - - 450,000 - - 450,000

Bank Overdrafts

- - 648,771 453,806 - - 453,806

Total - - 1,175,038 2,196,038 - - 2,196,038

13.3 Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.

Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk,such as equity price

risk. The financial instruments affected by the Company is available-for-sale investments which include equity securities.

Accordingly no interest rate risk, curreny risk and commodity price risk to the Company.

JOHN KEELLS PLC

2

0

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while

optimizing the return.


2

0

JOHN KEELLS PLC

2

0

13.3.1 Equity price risk

The Company’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values

of the investment securities.

13.3.2 Available-for-sale investments

All quoted equity and unquoted equity investments are made after obtaining Board of Directors approval.

13.3.3 Sensitivity analysis

The following table demonstrates the sensitivity to a reasonably possible change in the market index, with all other variables held

constant, of the Company’s profit before tax & equity due to changes in the fair value of the listed equity securities.

Group Rs 000's

2016 10% - 43,744

-10% - (43,744)

2015 10% - 27,868

-10% - (27,868)

Company

2016 10% - 43,744

-10% - (43,744)

2015 10% - 27,868

-10% - (27,868)

13.4 Capital management The primary objective of the Company’s capital management is to ensure that it maintains a strong financial position and healthy capital

ratios to support its business and maximise shareholder value.

The Company manages its capital structure, and makes adjustments to it, in the light of changes in economic conditions. To maintain

or adjust the capital structure, the Company may issue new shares, have a rights issue or buy back of shares.

Group Company

As at 31 st March 2016 2015 2016 2015

Debt/Equity 19.68% 26.88% 21.97% 30.77%

As at 31 st March Change in year end

market price index

Effect on profit

before tax

Effect on equity

Rs. 000’s


2

0


14. PROPERTY, PLANT AND EQUIPMENT

Buildings on

Leasehold Plant and Furniture

Land machinery and fittings

Rs. 000’s Rs. 000’s Rs. 000’s

Motor Computer Office

vehicles equipment equipment

Rs. 000’s Rs. 000’s Rs. 000’s

Others

Rs.

000’s

Total

2016

Rs.

000’s

Total

2015

Rs.

000’s

Group

14.1 Cost/Valuation

At the beginning of the year 285,000 34,348 83,485 23,220 22,457 3,314 5,229 457,053 464,492

Additions - 5,818 20 - 1,580 - 136 7,554 15,234

Revaluation 7,703 - - - - - - 7,703 11,852

Disposals - (878) (291) (15) (3,059) (200) (13) (4,456) (19,903)

Transfers (7,703) 3,707 - - 38 - (3,745) (7,703) (14,622)

At the end of the year 285,000 42,995 83,214 23,205 21,016 3,114 1,607 460,151 457,053

14.2 Accumulated

depreciation and

impairment At the beginning of the year -

(27,683) (61,992) (9,422)

(17,757)

(2,654)

(2,729) (122,237) (135,800)

Charge for the year (7,703) (1,635) (7,057) (3,566) (1,985) (295) (699) (22,940) (20,823)

Disposals 780 291 15 3,056 199 13 4,354 19,764

Transfers - (2,104) - - (32) - 2,136 - -

Reinstatement of Assets - - 12,417 - - - - 12,417 -

Transfer of accumulated

depreciation on asset

revaluation 7,703 - -

- - - 7,703 14,622

At the end of the year - (30,642) (56,341) (16,718) (2,750) (1,279) (120,703) (122,237)

14.3 Carrying value

As at 31 March 2016 285,000 12,353 26,873 10,232 4,298 364 328 339,448 -

As at 31 March 2015 285,000 6,665 21,493 13,798 4,700 660 2,500 - 334,816

JOHN KEELLS PLC

2

0

Plant and Furniture

machinery and fittings

Rs. 000’s Rs. 000’s

Motor Computer Office

vehicles equipment equipment

Rs. 000’s Rs. 000’s Rs. 000’s

Others

Rs.

000’s

Total

2016

Rs.

000’s

Total

2015

Rs.

000’s

Company

14.4 Cost At the beginning of the year 232 26,250 23,219 10,675 685 1,016 62,078 61,010

Additions - 20 - 746 - 105 871 9,997

Disposals - - (15) (562) (11) (13) (602) (8,929)

At the end of the year 232 26,270 23,204 10,859 674 1,108 62,347 62,078

14.5 Accumulated depreciation

and impairment At the beginning of the year (111) (10,981) (9,422) (8,226) (543) (819) (30,102) (30,100)

Charge for the year (23) (4,349) (3,566) (848) (41) (66) (8,893) (8,818)

Disposals -

15 559 11 13 597 8,816

At the end of the year (134) (12,973) (8,515) (573) (872) (38,398) (30,102)

14.6 Carrying value

As at 31 March 2016 98 10,940 10,231 2,344 101 236 23,949 -

As at 31 March 2015 121 15,269 13,797 2,449 143 197 - 31,976

14.7 The Company has estimated the remaining useful life of revenue genarating fully depriciated assets and reinstate the cost and

accumulated depreciation at amounts which would have been reflected in the statement of financial position on 01 April 2015

had the entity measured depreciation from date of acquisition of the assets based on the total useful life including the estimated

remaining useful life and adjust the difference under retained earnings.

Rs

000's

Cost of the reassessed property, plant and equipments 31,937

Accumulated depreciation 31,937

Accumulated depreciation should have been 19,521

Adjusted in accumulated depreciation 12,417

Deferred tax impact 1,242

Adjustment to retained earnings (net of tax) 11,175

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

14.8 Carrying value

At cost 54,448 49,816 23,949 31,976

At valuation 285,000 285,000 - -

339,448 334,816 23,949 31,976


2

0


14. GROUP (Contd.)

14.9 Details of group’s buildings stated at valuation are indicated below

Property Location Valuation Significant Estimates for Sensitivity of Property valuer Effective technique unobservable unobservable

fair value to date of

inputs inputs un observable valuation

inputs

Building on 93, 1st Lane, Contractors’ Estimated price Rs. 2,000 to Positively K. T. D. Tissera 31 st

March leasehold land Mthurajawela Method per sq. ft. Rs. 2,500 correlated Chartered 2016

John Keells Hendala, sensitivity Valuation

Warehousing Wattala

(Pvt) Ltd

14.10 The carrying amount of revalued land and buildings if they were carried at cost less depreciation, would be as follows;

Group


Rs. 000’s

2015

Rs. 000’s

Cost 123,956 123,956

Accumulated depreciation and impairment (31,573) (29,094)

92,383 94,862

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

15. INVESTMENT PROPERTY

At the beginning of the year 137,128 122,030 137,128 122,030

Change in fair value during the year 45,292 15,098 45,292 15,098

At the end of the year 182,420 137,128 182,420 137,128

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

Owner Company/Location Land in Perches Valuation

Amount Rs.

Date Name of Valuer

John Keells PLC

50, Minuwangoda Road

603.90 181,170,000

31.03.2016

Mr P B Kalugalagedera

Ekala, Ja- Ela (Chartered Valuer)

58, Kirulapone Avenue 12.56 1,250,000 31.03.2016 Mr P B Kalugalagedera

Colombo 6 (Chartered Valuer)

182,420,000

JOHN KEELLS PLC

2

0

Investment Properties are stated at fair value which has been determind based on a valuation performed by

Mr P B Kalugalagedera Chartered Valuer, using the open market value method of valuation as at 31 March 2016.


2

0

JOHN KEELLS PLC

2

0

Non Financial Assets -Group


As at 31 st March Date of Valuation 2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

15.2 Fair Value Hierarchy Non

Financial Assets

Assets Measured at fair value

Investment Property 31.03.2016 - - - - 182,420 137,128

Buildings on Leasehold land 31.03.2016 - - - - 285,000 285,000

Non Financial Assets- Company

15.2 Fair Value Hierarchy Non

Financial Assets

Assets Measured at fair value

Investment Property 31.03.2016 - - - - 182,420 137,128

In determining the fair value, highest and best use of the property has been considered including the current condition of the properties

, future usability and associated redevelopment requirements have been considered. Also the valuers have made reference to market

evidence of the transaction prices for similar properties, with appropriate adjustments for the size and location.

The appraised fair value are rounded within the range of values.

Location Valuation Significant Estimates for Sensitivity of fair value to

technique unobservable inputs unobservable inputs un observable inputs

50, Minuwangoda Road, Ekala, Ja- Ela Market Estimated price per Rs 300,000/- Positively correlated

comparable perch sensitivity

Method

58, Kirulapone Avenue, Colombo 6 Market Estimated price per Rs 100,000/- Positively correlated

comparable perch sensitivity

Method

(no vacant possession)


2

0


Company

As at 31 st March Note 2016

Rs. 000’s

2015

Rs. 000’s

16. INVESTMENTS IN SUBSIDIARIES

16.1 Carrying value

Investments in subsidiaries

Unquoted 16.2 120,380 120,380

120,380 120,380

Number of

shares

(000’s)

Effecive

holding

%

2016

Rs. 000’s

2015

Rs. 000’s

16.2 Group unquoted investments In Subsidiaries

John Keells Stock Brokers (Pvt) Ltd.

570 76 380 380

John Keells Warehousing (Pvt) Ltd. 12,000 100 120,000 120,000

120,380 120,380

Directors’ valuation of unquoted investments amount to Rs.120.38 mn (2015 - Rs.120.38 mn).

Group Company

As at 31 st March Number of

shares

(000’s) Holding

%

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

17. INVESTMENTS IN ASSOCIATES

17.1 Carrying value

Unquoted ordinary shares

Keells Realtors Ltd 2,400 32 24,000 24,000 24,000 24,000

Share of Profit

as at the beginning of the year

68,792 68,299

Cumulative profit accruing to the group net

of dividend

4,666 (19) - -

Cumulative adjustment on account of

associate company share of net assets

592 512 - -

JOHN KEELLS PLC

2

1

Super Gains Tax (314) - - -

Net of Dividend 73,736 68,792 - -

Net Assets at the end of the year 97,736 92,792 - -


2

1

JOHN KEELLS PLC

2

1

Group


Rs. 000’s

2015

Rs. 000’s

17.2 Summarised financial information of Associate

Revenue 8,798 8,107

Cost of sales (2,813) (813)

Gross Profit 5,985 7,294

Dividend income 297 135

Administration Expenses (1,283) (639)

Financial Income 222 437

Change in fair value of Investment Property 19,848 (70)

Income Tax Expenses (1,488) (1,966)

Profit for the year 23,581 5,191

Group share of profit for the year 7,546 1,661

Group share of other comprehensive income 592 512

Share of results of equity accounted investee 8,138 2,173

Non - Current Assets 305,548 283,857

Current Assets 7,896 13,432

Total Assets 313,444 297,289

Non - Current Liabilities (6,282) (5,791)

Current Liabilities (1,739) (1,523)

Total Liabilities (8,021) (7,314)

Net Assets 305,423 289,975

Group Share of net Assets 97,736 92,792


2

1


Group


Rs. 000’s

2015

Rs. 000’s

18. LEASE RENTALS PAID IN ADVANCE

18.1 Summary

At the beginning of the year 40,202 41,291

Amortisation for the year (1,089) (1,089)

At the end of the year 39,113 40,202

18.2 Amortisation of Leasehold Property Muthurajawela

Land

Rs. 000’s

To be amortised in 2016

To be amortised in 2017 -2021

1,089

5,445

To be amortised from 2022-2052 32,579

39,113

John Keells Warehousing (Pvt) Ltd has entered into a 50 year lease agreement with Sri Lanka Land Reclamation and Development

Corporation to lease a land in Muthurajawela for a total lease rent of Rs 54,450,000/-.

Group

As at 31 st March Software licenses

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

19. INTANGIBLE ASSETS

19.1 Cost At the beginning of the year 4,594 4,594 4,594

Additions - - -

Derecognition - - -

At the end of the year 4,594 4,594 4,594

19.2 Accumulated amortisation and impairment At the beginning of the year (3,190) (3,190) (2,343)

Amortisation (817) (817) (847)

Derecognition - - -

At the end of the year (4,007) (4,007) (3,190)

Carrying value

As at 31 March 2016 587 587 -

As at 31 March 2015 - - 1,404

JOHN KEELLS PLC

2

1

Group Company

As at 31 st March

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

20. NON CURRENT FINANCIAL ASSETS

Other quoted equity investments

437,443 278,677 437,443 278,677

Other unquoted equity investments 1,916,382 1,916,382 1,916,382 1,916,382

Other non equity investments 80,450 122,210 68,179 108,401

2,434,275 2,317,269 2,422,004 2,303,460

Number of

shares

000’s

Holding

%

134,599 134,599 134,599 134,599

20.1 Other quoted equity investments

Keells Food Products PLC

At the beginning of the year 2,573 10.09

At the end of the year 2,573 10.09 134,599 134,599 134,599 134,599

Market Value

Other quoted investments

437,443 278,677 437,443 278,677

Keells Food Products PLC 437,443 278,677 437,443 278,677

The market value of quoted investments amounts to Rs. 437.44mn (2015 - 278.68mn ).

Group Company


Number of

shares in

000’s

2015

Number of

shares in

000’s

2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

20.2 Other unquoted equity investments

Ceylon Cold Stores PLC - Preference Share

1 1 1 1 1 1

Waterfront Properties (Pvt) Ltd 191,638 191,638 1,916,381 1,916,381 1,916,381 1,916,381

1,916,382 1,916,382 1,916,382 1,916,382

Waterfront Properties (Pvt) Ltd

John Keells Holdings PLC (JKH), the Parent Company, made an announcement to the Colombo Stock Exchange in January 2016

that the project encountered some unforeseen delays, during the year under review, and as such, the construction of “Cinnamon Life”

is now expected to be completed in the calendar year 2019. JKH also announced in June 2015. that the facility agreement for the

USD 395 million syndicated project development facility with Standard Chartered Bank was finalised, thus concluding the required

debt financing for the project. The changes to the facility agreement was necessitated subsequent to the changes in the status and

scope of the project arising from the interim budget proposals announced in January 2015.


2

1


20. NON CURRENT FINANCIAL ASSETS (Contd.)

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

20.3 Other non equity investments

Loans to executives 18,528 17,337 9,757 7,028

Loans Given to Tea Clients 58,422 101,373 58,422 101,373

Deposits with Colombo Stock Exchange 3,500 3,500 - -

80,450 122,210 68,179 108,401

20.4 Loans to executives


Loans granted 8,602 2,028 4,780 100

Recoveries/ Transfers (7,080) (6,817) (2,051) (3,282)


Receivable within one year 9,560 9,229 6,037 6,037

Receivable after one year

Receivable between one and five years 18,528 17,337 9,757 7,028

28,088 26,566 15,794 13,065

21. DEFERRED TAX ASSET


Charge and (release) 12,520 623 11,553 (301)

Charge and (release) Other - Comprehensive Income 600 (134) 689 340


The closing deferred tax asset balances relate to the following;

Carried forward losses 12,030 - 12,030 -

Accelerated depreciation for tax purposes (3,028) (3,250) (2,037) (2,113)

JOHN KEELLS PLC

2

1

Employee retirement benefit liability 18,660 17,792 11,745 11,608

27,662 14,542 21,738 9,495


2

1

JOHN KEELLS PLC

2

1

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

22. INVENTORIES

Consumables and Spares

484 397 344 285

484 397 344 285

23. TRADE AND OTHER RECEIVABLES

Trade Receivables

1,733,695 2,538,283 1,519,094 2,351,619

Less: Provision for Doubtful Debts (258,517) (92,585) (258,517) (92,513)

Other Receivables 5,108 3,213 2,682 796

Loans to Executives 20.4 9,560 9,229 6,037 6,037

1,489,846 2,458,140 1,269,296 2,265,939

24. OTHER CURRENT ASSETS

Prepayments and non cash receivable

4,030 1,631 1,056 330

4,030 1,631 1,056 330

25. SHORT TERM INVESTMENTS

Government Securities (less than 3 months)

246,256 378,114 - -

246,256 378,114 - -

26. CASH IN HAND AND AT BANK

26.1 Favourable cash and bank balances

Cash in hand and at bank

99,452 289,623 86,379 279,762

99,452 289,623 86,379 279,762

26.2 Unfavourable cash and bank balances

Bank Overdrafts

652,115 458,330 648,771 453,806


2

1

652,115 458,330 648,771 453,806

JOHN KEELLS PLC

2

2


2

2


2016 2015

As at 31 st March Number of

shares

000’s

Value of

shares

Rs. 000’s

Number of

shares

000’s

Value of

shares

000’s

27. STATED CAPITAL

Fully paid ordinary shares



Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

28. OTHER COMPONENTS OF EQUITY

Available for sale reserve 304,060 144,702 302,844 144,078

Revaluation Reserve 188,996 182,063 - -

Other Capital reserves 64,736 40,875 45,422 30,046

557,792 367,640 348,266 174,124

28.1 Available for sale reserve includes changes on fair value of financial instruments designated as available for sale financial

assets.

28.2 Other Capital Reserves

Share Based Payments- Employee Share Option Scheme Under the John Keells Group’s Employees share option scheme (ESOP), share options of the parent are granted to senior executives

of the Company with more than 12 months of service. The exercise price of the share options is equal to the 30 day volume weighted

average market price of the underlying shares on the date of grant. The share options vest over a period of four years and is dependent

on a performance critera and a service criteria. The performance criteria being a minimum performance acheivement of “Met

Expectations” and service criteria being that the employee has to be in employment at the time the share options vest. The fa ir value

of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions

upon which the share options were granted.

The contractual term for each option granted is five years. There are no cash settlement alternatives. The Group does not have a past

practice of cash settlement for these share options.

JOHN KEELLS PLC

2

2

The expense recognised for employee services received during the year is shown in the following table:

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Expense arising from equity-settled share-based payment transactions 26,307 27,429 15,376 18,561

Total expense arising from share-based payment transactions 26,307 27,429 15,376 18,561

Movements in the year The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options

during the year:

Group Company

2016

No.

2016

WAEP

Rs.

2015

No.

2015

WAEP

Rs.

2016

No.

2016

WAEP

Rs.

2015

No.

2015

WAEP

Rs.

Outstanding at the beginning of the year 1,140,283 241.96 563,887 253.16 789,814 241.96 390,354 253.16

Granted during the year 438,472 171.25 574,051 229.93 283,897 171.25 386,619 229.93

Exercised during the year - - - - - - - -

Adjusted -Sub division 219,242 200.00 - - 153,377 201.02 - -

Adjusted -Warrants 25,920 219.03 - - 18,704 219.03 - -

Lapsed/Forfeited during the year (90,272) 199.44 (24,193) 243.19 (90,272) 199.44 (13,697) 243.19

Transfers in /(out) During the year (43,923) 211.34 26,538 253.16 - - 26,538 253.16

Outstanding at the end of the year 1,689,722 199.44 1,140,283 241.96 1,155,520 200.50 789,814 241.96

Exercisable at the end of the year 444,632 213.12 140,973 253.16 315,056 213.27 97,589 253.16

Fair value of the share option and assumptions

The fair value of the share options is estimated at the grant date using a binomial option pricing model, taking into account the terms

and conditions upon which the share options were granted.

The valuation takes into acount factors such as stock price, expected time to maturity, exercise price, expected volatility of share price,

expected dividend yield and risk free interest rate.


2

2


Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

29. BORROWINGS At the beginning of the year 450,000 1,000,000 450,000 1,000,000

Additions - 2,350,000 - 2,350,000

Repayments (450,000) (2,900,000) (450,000) (2,900,000)

Net Proceeds from borrowings (450,000) (550,000) (450,000) (550,000)

At the end of the year - 450,000 - 450,000

Repayable within one year - 450,000 - 450,000

Repayable more than one year - - - -

- 450,000 - 450,000

30. DEFERRED TAX LIABILITIES

At the beginning of the year 40,384 38,501 - -

Charge and (release) (6,458) 1,883 - -

Impact from Reinstated Fully Depreciated Assets 14.7 1,242 - - -

At the end of the year 35,168 40,384 - -

The closing deferred tax liability balances relate to the following;

Accelerated depreciation for tax purposes 28,464 26,444 - -

Employee Retirement benefit liability (548) (476) - -

Others 7,252 14,416 - -

35,168 40,384 - -

31. EMPLOYEE BENEFIT LIABILITIES


Current service cost 4,384 3,751 2,345 2,223

Transfers (62) 1,299 (62) 1,299

Interest cost on benefit obligation 6,529 7,268 4,146 4,426

JOHN KEELLS PLC

2

2

Payments (9,243) (4,210) (8,402) (2,715)

(Gain)/Loss arising from changes in assumptions or due to (over)/under

provision in the previous year 2,213 (5,877) 2,462 (4,011)



2

2

JOHN KEELLS PLC

2

2

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

31.1 The expenses are recognised in the income statement

in the following line items; Cost of Sales 6,794 8,770 4,253 6,193

Administrative Expenses 3,140 2,249 1,244 456

Cost reimbusement for shared employees 980 - 994 -

10,914 11,019 6,491 6,649

The employee benefit liability of listed company and the group is based on the actuarial valuations carried out by Messrs. Actuarial &

Management Consultants (Pvt) Ltd., actuaries.

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

Group Company

2016 2015 2016 2015

Discount rate 10.5% 10% 10.5% 10%

Future salary increases 9% 8% 9% 8%

31.3 Sensitivity of assumptions used

A one percentage change in the assumptions would have the following effects:

Group Company

Discount

rate

2016

Rs. 000’s

Discount

rate

2015

Rs. 000’s

Salary

increment

2016

Rs. 000’s

Salary

increment

2015

Rs. 000’s

Discount

rate

2016

Rs. 000’s

Discount

rate

2015

Rs. 000’s

Salary

increment

2016

Rs. 000’s

Salary

increment

2015

Rs. 000’s

Effect on the defined benefit obligation

liability

Increase by one percentage point 68,751 64,777 76,058 72,400 39,528 38,944 44,752 44,373

Decrease by one percentage point 75,859 72,183 68,513 64,521 44,627 44,245 39,374 38,788


2

2


31. EMPLOYEE BENEFIT LIABILITIES (Contd.)

31.4 Maturity analysis of the payments

The following payments are expected on employee benefit liabilities in future years.

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

Future Working Life Time Defined Benefit

Obligation

Defined Benefit

Obligation

Defined Benefit

Obligation

Defined Benefit

Obligation

Within the next 12 months 5,703 4,116 2,853 1,426

Between 1-2 years 15,101 16,405 5,547 5,226

Between 2-5 years 27,250 13,852 20,069 10,133

Between 5-10 years 16,568 27,330 7,335 18,651

Beyond 10 years 7,503 6,602 6,141 6,020

Total 72,125 68,305 41,945 41,456

The average duration of the defined benefit plan obligation at the end of the reporting period is 6.70 years for the company.

The average duration of the defined benefit plan obligation at the end of the reporting period is 5.00 years for John Keells Stock Brokers

(Pvt) Ltd.

The average duration of the defined benefit plan obligation at the end of the reporting period is 1.96 years for John Keells Warehousing

(Pvt) Ltd

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

32. TRADE AND OTHER PAYABLES

Trade payables 810,482 1,524,334 488,767 1,255,075

Sundry creditors including accrued expenses 67,527 68,761 31,698 30,360

878,009 1,593,095 520,465 1,285,435

33. INCOME TAX LIABILITIES

At the beginning of the year 24,008 17,121 701 17,377

Charge for the year 15,110 96,460 610 61,186

Super Gains Tax 93,924 - 73,203 -

Payments and set off against refunds (146,360) (89,573) (88,462) (77,862)

JOHN KEELLS PLC

2

2

At the end of the year (13,318) 24,008 (13,948) 701

Income Tax Refund 14,276 1,685 13,948 -

Income Tax Liability 958 24,008 - 701


2

2

JOHN KEELLS PLC

2

3

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

34. OTHER CURRENT LIABILITIES

Other tax payables 5,012 3,211 1,213 1,688

5,012 3,211 1,213 1,688

35. RELATED PARTY TRANSACTIONS

The Group and Company carried out transactions in the ordinary course of business with the following related entities.

Group Company


Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

35.1 Amounts due from related parties

Ultimate Parent 192 27 192 27

Companies Under Common Control 2,444 1,233 2,508 1,233

Key management personnel - - - -

Close family members of KMP - - - -

2,635 1,260 2,700 1,260

35.2 Amounts due to related parties

Ultimate Parent 1,966 2,181 1,664 1,860

Companies Under Common Control 855 8,795 4,138 4,937

Key management personnel - - - -

Close family members of KMP - - - -

Companies controlled / jointly controlled / significantly influenced by KMP

and their close family members

- - - -

2,821 10,976 5,802 6,797


2

3


35. RELATED PARTY TRANSACTIONS (Contd.)

Group Company

For the year ended 31st March 2016

Rs. 000’s

2015

Rs. 000’s

2016

Rs. 000’s

2015

Rs. 000’s

35.3 Transactions with related parties

Ultimate Parent

Receiving of Services for which fees are paid 27,990 26,587 16,350 15,525

Providing of Services for which fees are received (316) - (316) -

Subsidiaries

Renting of stores space for which rent is paid - - 4,500 4,291

Companies under Common Control

Purchase of goods for a fee 1,344 1,917 689 380

Receiving of Services for which fees are paid 11,203 14,744 7,546 11,817

Lending Money for which interest is received (14,559) (13,396) - (372)

Renting of office space for which rent is received (893) (273) (893) (273)

Proceeds Received for transfer of Fixed Assets 14 30 - -

Providing of Services for which fees are received (20,295) (30,933) (20,293) (26,194)

4,488 (1,324) 7,583 5,174

35.4 Key management personnel Receiving of Services for which fees are paid 27,990 26,587 16,350 15,525

Short Term Employee Benefits 20,795 20,935 16,997 17,123

Share Based Payments 14,076 14,381 14,076 14,381

Brokerage Commission earned on share transactions (2,488) (5,218) - -

60,373 56,685 47,423 29,906

35.5 Close family members of KMP

(Receiving) / Rendering of services - (105) - -

Post employment benefit plan

Contributions to the provident fund 11,741 11,262 11,741 11,262

JOHN KEELLS PLC

2

3

35.6 Terms and conditions of transactions with related parties

Transactions with related parties are carried out in the ordinary course of the business. Outstanding current account balances at year

end are unsecured, interest free and settlement occurs in cash.


2

3

JOHN KEELLS PLC

2

3

36. COMMITMENTS & CONTINGENT LIABILITIES

36.1 Capital Commitments The Company does not have any capital commitments as at the reporting date.

36.2 Financial Commitments

The Company does not have any financial commitments as at the reporting date.

36.3 Contingencies

There are no contingent liabilities as at the reporting date.

36.4 Assets Pledged

There are no assets pledged as security against borrowings as at 31 st March 2016.

37. EVENTS AFTER THE REPORTING PERIOD


2

3

The Board of Directors of the Company has declared a first and final dividend of Rs.1.00 per share for the financial year ended 31

JOHN KEELLS PLC

2

3

March 2016. As required by section 56 (2) of the Companies Act no 07 of 2007, the Board of Directors has confirmed that the Company

satisfies the solvency test in accordance with section 57 of the companies Act No.07 of 2007, and has obtained a certificate from

auditors, prior to declaring a first and final dividend which is to be paid on the 16 June 2016


2

3

JOHN KEELLS PLC

2

3

Information to Shareholders and Investors

1 STOCK EXCHANGE LISTING The issued ordinary shares of John Keells PLC are listed with the Colombo Stock Exchange of Sri Lanka. The Audited Accounts of

the Company and the Consolidated Accounts for the year ended 31st March 2016 have been submitted to the Colombo Stock

Exchange.

Stock Symbol-JKL.N0000

ISIN - LK0093N00001

2 DISTRIBUTION OF SHAREHOLDINGS

31st March 2016 31st March 2015

No. of Shares held Shareholders Holdin gs Shareholders Holdings

Number % Number % Number % Number %

less than 1,000 715 63.61 191,376 0.32 676 61.45 195,562 0.32

1,001 - 10,000 301 26.78 1,102,240 1.81 314 28.55 1,127,416 1.85

10,001 - 100,000 86 7.65 2,639,903 4.34 89 8.09 2,819,668 4.64

100,001 - 1,000,000 21 1.87 4,031,697 6.63 20 1.82 3,822,570 6.29

1,000,001 and over 1 0.09 52,834,784 86.90 1 0.09 52,834,784 86.90

Total 1,124 100.00 60,800,000 100.00 1,100 100.00 60,800,000 100.00

3 ANALYSIS OF SHAREHOLDERS

31st March 2016 31st March 2015

Categories of

Shareholders

Shareholders Holdin gs Shareholders Holdings

Number % Number % Number % Number %

Individuals 1,037 92.26 5,524,408 9.09 1,019 92.64 5,672,966 9.33

Institutions 87 7.74 55,275,592 90.91 81 7.36 55,127,034 90.67

Total 1,124 100.00 60,800,000 100.00 1,100 100.00 60,800,000 100.00

Residents 1,112 98.93 60,568,254 99.62 1,088 98.91 60,568,254 99.62

Non Residents 12 1.07 231,746 0.38 12 1.09 231,746 0.38

Total 1,124 100.00 60,800,000 100.00 1,100 100.00 60,800,000 100.00

John Keells Holdings

and Subsidiaries 1 0.09 52,834,784 86.90 1 0.09 52,834,784 86.90

Public 1,123 99.91 7,965,216 13.10 1,099 99.91 7,965,216 13.10

Total 1,124 100.00 60,800,000 100.00 1,100 100.00 60,800,000 100.00

No shares are held by directors and the chief executive officer at the end of the year.

lowest Market Price 68.00 66.00

Closing Price as at 31st of March 70.00 92.00


2

3

4 SHARE PERFORMANCE AT COLOMBO STOCK EXCHANGE

Highest Market Price

5 DIVIDEND PAYMENTS

First and Final Dividend of Rs. 3.75 per share was paid on 19th June 2015.

6 TWENTY LARGEST SHAREHOLDERS 31st March 2016 31st March 2015

NAME OF SHAREHOLDERS No. of Shares Holding % No. of Shares Holding %

1 John Keells Holdings PlC 52,834,784 86.90 52,834,784 86.90

2 Dr. H.S.D. Soysa 620,160 1.02 620,160 1.02

3 Bank of Ceylon No. 2 A/C 338,800 0.56 338,800 0.56

4 Bank of Ceylon No. 1 A/C 250,200 0.41 250,200 0.41

5 Mrs. H.G.S. Ansell 240,000 0.39 240,000 0.39

6 EST of LAT M .Radhakrishnan 232,800 0.38 232,800 0.38

7 Mr. H.A.Van Starrex 226,477 0.37 248,352 0.41

8 Mrs. M.L. De Silva 207,872 0.34 207,872 0.34

9 Mr. W.R.H. Perera 184,040 0.30 184,040 0.30

10 Mr. A M Weerasinghe 179,792 0.30 94,208 0.15

11 Catholic Bishops Conference in Sri Lanka 171,416 0.28 171,416 0.28

12 Employees Trust Fund Board 169,988 0.28 186,341 0.31

13 Waldock Mackenzie Ltd/Dr. H.S.D. Soysa 137,844 0.23 93,506 0.15

14 Miss N S De Mel 137,115 0.23 137,115 0.23

15 Mrs. N. Tirimanne 133,580 0.22 133,580 0.22

16 People’s Leasing & Finance PLC/L.P. Hapangama 130,886 0.22 67, 641 0.11

17 Waldock Mackenzie Ltd/Mrs. G.Soysa 126,868 0.21 105,000 0.17

18 Sisira Investors Limited 114,272 0.19 114,272 0.19

19 Commercial Bank Of Ceylon PLC/Colombo Fort Investments PLC 112,000 0.18 112,800 0.19

20 Pinnacle Trust (Pvt) Ltd 110,587 0.18 110,587 0.18

56,659,481 93.19 56,483,474 92.90

7 MARKET INFORMATION ON ORDINARY SHARES OF THE COMPANY

2015/2016 Q4 Q3 Q2 Q1 2014/2015

Share Information

High 100.00 85.00 92.50 100.00 100.00 97.90

Low 68.00 68.00 81.00 85.00 85.00 66.00

Close

Trading Statistics of John Keells PLC

70.00 70.00 82.10 88.10 86.30 92.00

Number of transactions 774 145 162 206 261 1,634

Number of Shares traded 467,141 35,334 92,398 146,618 192,791 1,731,382

Value of the Shares traded (Rs. Mn) 42.68 2.62 8.12 13.41 18.53 147.34

Market Capitalisation (Rs. Mn) 4,256.00 4,256.00 4,991.68 5,356.48 5,247.04 5,593.60

JOHN KEELLS PLC

2

4

For the year ended 31 st March 2016

Rs.000’s

2015

Rs.000’s

2014

Rs.000’s

2013

Rs.000’s

2012

Rs.000’s

OPERATING RESULTS

Gross Revenue 706,664 959,925 908,241 858,097 891,499

Operating Profit 21,191 355,983 235,408 412,691 433,594

Other Income 3,030 2,921 13,324 5,153 2,727

Dividend Income - - - - -

Changes in Fair Value of Investment Property 45,292 15,098 42,466 483,515 581,191

Finance Charges (65,182) (77,643) (101,172) (64,024) (39,654)

Finance Income 51,589 34,330 30,870 33,290 39,843

Sahe of Results of Associate 7,546 2,290 2,270 11,454 7,666

Profit before Taxation 63,466 332,979 223,166 882,079 1,025,367

Taxation based thereon (9,253) (101,132) (66,956) (129,242) (135,457)

Profit after Taxation 54,213 231,847 156,210 752,837 889,910

Non-controlling interests (1,467) (14,446) (5,959) (10,786) (29,675)

Profit attributable to John Keells PLC 52,746 217,401 150,251 742,051 860,235

CAPITAL EMPLOYED

Stated Capital 152,000 152,000 152,000 152,000 152,000

Revenue Reserves 2,602,606 2,859,793 2,844,849 2,907,893 2,408,199

Other components of equity 557,792 367,640 193,844 216,348 51,632

3,312,398 3,379,433 3,190,693 3,276,241 2,611,831

Non-controlling interests 23,820 46,644 37,435 54,354 61,568

Total Equity 3,336,218 3,426,077 3,228,128 3,330,595 2,673,399

ASSETS EMPLOYED

Current Assets 1,856,979 3,130,850 3,182,677 2,408,888 1,969,784

Current Liabilities (1,538,915) (2,539,620)

(1,812,454) (1,291,735)

Net Current Assets/(Liabilities) 318,064 591,230 596,434 678,049

Fixed Assets and Investments 3,125,448 2,943,536 2,753,187 2,869,978 2,090,667

Long Term Liabilities - - - - (1,957)

Non-current liabilities (107,294) (108,689) (104,575) (135,817) (93,360)

3,336,218 3,426,077 3,228,128 3,330,595 2,673,399

CASH FLOW

Net cash flows from / (used in) operating activites 193,681 643,506 (210,387) (92,692) (80,660)

Net cash flows from / (used in) investing activites (7,495) (12,464) 8,017 (88,417) 19,508


2

4

Five Year Summary

Group

Net cash flows from / (used in) financing activites (702,000) (763,920) 761,243 (282,787) (217,480)

Net increase / (decrease) in cash and cash equivalents (515,814) (132,878) 558,873 (463,896) (278,632)

JOHN KEELLS PLC

2

4

Group PBT Composition

Rs. Mn

800

600

400

200

Company

-200

0

1000

1200

Revenue EBIT Finance Charges Profit before Taxation Revenue to Government

2016 2015 2014 2013 2012


2

4

2016

Rs.000’s

2015

Rs.000’s

2014

Rs.000’s

2013

Rs.000’s

2012

Rs.000’s

424,529 558,765 611,310 572,940 492,077

(1,599) 244,812 181,673 348,258 243,336

2 2,656 12,673 998 1,415

124,996 49,034 96,914 73,442 163,800

45,292 15,098 42,466 483,515 581,191

(64,979) (77,394) (98,925) (61,375) (28,708)

29,652 14,109 7,850 3,847 3,161

- - - - -

133,364 248,315 242,651 848,685 968,195

10,943 (60,024) (39,050) (83,593) (64,711)

144,307 188,291 203,601 765,092 903,484

- - - - -

144,307 188,291 203,601 765,092 903,484

152,000 152,000 152,000 152,000 152,000

2,452,151 2,610,820 2,626,361 2,635,191 2,114,270

348,266 174,124 18,412 45,525 51,344

2,952,417 2,936,944 2,796,773 2,832,716 2,317,614

- - - - -

2,952,417 2,936,944 2,796,773 2,832,716 2,317,614

1,373,723 2,547,576 2,867,632 1,587,623 1,232,187

(2,198,427) (2,471,584) (1,233,082) (813,993)

349,149 396,048 354,541 418,194

2,796,890 2,629,251 2,440,958 2,553,147 1,967,552

- - - - -

(41,945) (41,456) (40,233) (74,972) (68,132)

2,952,417 2,936,944 2,796,773 2,832,716 2,317,614

JOHN KEELLS PLC

2

4

Group-Finance cost Utilisation

Rs. Mn No. of Times

Finance Expenses Interest Coverage

Group-Earnings Rates

Key Ratios and Information Group

KEY INDICATORS

(A) Profitability & Return to Shareholders

Annual Turnover Growth (%) (26.38) 9.73 5.84 (3.75) (15.72)

Net Profit Ratio (%) 7.67 24.15 17.20 87.83 96.49

Earnings per share (Rs.) * 0.87 3.58 2.47 12.22 14.15

Returns on Shareholders' Funds (%) 1.59 6.43 4.65 25.11 37.90

Return on Capital Employed (%) 3.24 9.58 7.59 23.13 34.40

Dividend per share (Rs.)* 3.75 3.40 3.50 4.00 2.50

265,043 469,013 (180,726) (22,896) 105,181

24,609 4,353 20,075 (113,317) (1,150)

(678,000) (756,720) 787,200 (243,200) (152,000)

(388,348) (283,354) 626,549 (379,413) (47,969)

0

20

40

60

80

100

120

0

5

10

15

20

25

30

2016 2015 2014 2013 2012

0

4

8

12

16 Rs. %

EPS

DPS

Profit Before tax Margin %

0

30

60

90

120

2016 2015 2014 2013 2012

2016 2015 2014 2013 2012


2

4

Debt Equity Ratio (%)

(B) Liquidity

19.68 26.88 33.84 18.60 11.77

Current Ratio (No. of Times) 1.21 1.23 1.22 1.33 1.52

Interest Cover (No. of Times)

(C) Investor Ratios

1.97 5.29 3.21 14.27 25.85

Net Assets per share at year end (Rs.)* 54.48 55.58 52.48 53.89 42.96

Price-Earnings Ratio (Times)* 80.69 25.73 28.34 5.02 4.68

Enterprise Value (Rs. 000) 3,949,592 5,353,007 3,598,285 3,508,495 4,248,724

Dividend (Rs. 000's) 228,000 206,720 212,800 243,200 152,000

Dividend Cover (Times)*

(D) Share Valuation

0.23 1.05 0.71 3.05 5.66

Market price per share (Rs) 70.00 92.00 70.00 61.30 66.20

Market Capitalisation (RS. 000)

(E) Other Information

4,256,000 5,593,600 4,256,000 3,727,040 4,024,960

Number of Employees** 96 96 95 109 115

Turnover per employee (Rs. 000's) 7,361 9,999 9,560 7,872 7,752

Value Added per Employee (Rs. 000's) 8,480 10,568 10,497 12,766 13,243

Note:

*Earnings per share ,Dividends per share & Net Assets per share is based on 60,800,000 number of shares in issue as at

31st March, 2016

**Excluding contract employees

Company

(24.02) (2.90) 6.70 16.43 0.50

33.99 33.70 33.31 133.37 183.61

2.37 3.10 3.35 12.57 14.86

4.89 6.41 7.23 27.42 39.87

5.51 8.45 8.83 26.50 38.71

3.75 3.40 3.50 4.00 2.50

21.97 30.77 38.37 20.58 11.01

1.17 1.16 1.16 1.29 1.51

3.05 4.21 4.38 14.75 34.62

48.56 48.31 46.00 46.59 38.12

29.49 29.71 20.90 4.88 4.45

3,693,608 4,969,556 3,365,310 3,209,802 3,887,135

228,000 206,720 212,800 243,200 152,000

0.63 0.91 0.96 3.14 5.94

70.00 92.00

70.00 61.30 66.20

4,256,000 5,593,600

4,256,000 3,727,040

4,024,960

64 66

65 79 80

6,633 8,466

9,405 7,252 6,151

JOHN KEELLS PLC

2

4

7,804 8,949 10,374 13,434 13,473

Group - Value Addition 14 Rs.Mn.

Group - Revenue and Profits

Rs.Mn

Return on Shares

Glossary of

Financial

Terms

Turnover per employee

Value Added per Employee

0

2

4

6

8

10

12

2016 2015 2014 2013 2012

0

200

400

600

800

1000

1200

Revenue Profit Before Tax Revenue to Government

0

5

10

15

20

25

30

2016 2015 2014 2013 2012

Net assets per share - Company Net assets per share - Group Market Price per share

0

20

40

60

80

100

2016 2015 2014 2013 2012

Rs. 2016 2015 2014 2013 2012


2

4

ACCRUAL BASIS Recording Revenues and Expenses in

the period in which they are earned or

incurred regardless of whether cash is

received or disbursed in that period.

CAPITAL EMPLOYED

Shareholders’ Funds plus Debt

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. The obligation is crystallised by the

occurrence or non occurrence of one or

more future events or,

2. A probable outflow of economic

resources is not expected or,

3. It is unable to be measured with

sufficient reliability

CURRENT RATIO

Current Assets over Current Liabilities

DEBT/EQUITY RATIO Debt as a percentage of Shareholders

Funds

DIVIDEND COVER Earnings per Share over Dividends per

Share

DIVIDEND PAYOUT RATIO Total Dividend interest and Tax as

percentage of Capital Employed

EARNINGS PER SHARE (EPS) Profit after tax attributable to ordinary

shareholding over weighted average

numbers of shares in issue during the

period

EARNINGS YIELD Earnings per Share as a percentage of

Market price per Share end of the period.

EFFECTIVE RATE OF

TAXATION Income Tax, including deferred tax over

Profit before Tax

ENTERPRISE VALUE Market Capitalization plus net debt/(net

cash)

INTEREST COVER Profit before Interest and Tax over

Finance Expenses

MARKET CAPITALISATION Number of Shares in issue at the end of

the period multiplied by the Market price

at end of period

NET ASSETS Total assets minus Current Liabilities

minus Long Term Liabilities minus

Minority Interest

NET ASSET PER SHARE Net Assets, over number of Ordinary

Shares in issue

NET DEBT Net Debt minus (Cash plus Short Term

Deposits)

NET TURNOVER PER

EMPLOYEE Net Turnover over average number of

employees

PRICE EARNINGS RATIO Market Price per Share over Earnings

per Share

QUICK ASSET RATIO Cash plus Short Term Investments plus

Receivables, Dividend by Current

Liabilities

QUICK RATIO Cash plus Short Term Investments plus

Receivables over Current Liabilities

RETURN ON ASSETS

Profit after Tax over Average Total Assets

RETURN ON EQUITY Profit after Tax as a percentage of

Average Shareholder’s Funds

RETURN ON CAPITAL

EMPLOYED Earning before interest and tax as

percentage of Capital Employed

SHAREHOLDERS FUNDS Stated Capital plus other components of

equity Plus Revenue Reserves

TOTAL ASSETS Fixed Assets plus Investments plus Non

Current Assets plus Current Assets

TOTAL DEBT Long Term Loans plus Short Term Loans

and Overdrafts

TOTAL EQUITY Shareholders’ funds plus non-controlling

interest

TOTAL VALUE ADDED The difference between revenue

(including other income) and expenses,

cost of materials and services purchased

from external sources

WORKING CAPITAL Capital required finance the day-to-day

operations Current Assets minus Current

Liabilities

JOHN KEELLS PLC

2

4

Notice of Meeting Notes: Notice is hereby given that the Sixty

Ninth Annual General Meeting of John their i. A member unable to attend is

entitled Keells PLC will be held on Tuesday to appoint a Proxy to attend and

vote 28th June 2016 at 9.30 a.m. at the John in his/her place.

Keells Auditorium, 186 Vauxhall Street, ii. A Proxy need not be a member of the Colombo 02.

Company.

The business to be brought before the iii. A member wishing to vote by Proxy at

meeting will be:the Meeting may use the Proxy Form

enclosed.

• To read the Notice Convening the

Meeting.iv. In order to be valid, the completed

Proxy Form must be lodged at the

• To receive and consider the Annual

Registered Office of the Company

Report and Financial Statements of the not less than 48 hours before the

company for the financial year ended meeting.

31 March 2016 with the Report of the

Auditors thereon.v. If a poll is demanded, a vote can be taken on a

show of hands or by a poll.

• To re-elect as Director, Mr. J R F Peiris Each share is entitled to one vote.

who retires in terms of Article 83 of the Votes can be cast in person, by proxy

Articles of Association of the Company. or corporate representatives.

In the A brief profile of Mr. J R F Peiris is event an individual shareholder and

contained in the Board of Directors his proxy holder are both present at

section

on page 14 of the Annual the meeting, only the shareholder’s

Report.vote is counted. If the proxy holder’s

appointor has indicated the manner of • To re-elect as Director, Mr. V. A. A.

Perera who retires in terms of Article voting, only the appointor’s indication 90

of the Articles of Association of of the manner to vote will be used.

the

Company. A brief profile of Mr. V. A. A. Perera is contained in the Board of

Directors Section on page 14 of the Annual Report.

• To re-appoint Auditors and to authorize

the Directors to determine

remuneration.

• To consider any other business of which

due notice has been given in terms of

the relevant laws and regulations.

By order of the Board

John Keells PLC

Keells Consultants (Private) Limited

Secretaries

Colombo

03 rd June 2016


2

4

Notes

JOHN KEELLS PLC

2

5

Form of Proxy I/We ...........................................................................................................................................................................................of

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

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

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

Mr. Susantha Chaminda Ratnayake of Colombo, failing him

Mr. Ajit Damon Gunewardene of Colombo, failing him

Mr. James Ronnie Felitus Peiris of Colombo, failing him

Mr. Tilak de Zoysa of Colombo, failing him

Ms. Yolande Ann Hansen of Colombo, failing her

Ms. Sharmini Tamara Ratwatte of Colombo, failing her

Mr. Ravinath Sanjeeva Fernando of Colombo, failing him

Mr. Vithanage Anil Augustine Perera of Colombo


2

5

as my/our proxy to represent me/us and vote on my/our behalf at the Sixty Ninth Annual General Meeting of the Company to

be held on Tuesday, 28th June 2016 at 9.30 a.m. and at any adjournment thereof, and at every poll which may be taken on

consequence thereof.

I/We, the undersigned, hereby direct my/our proxy to vote for me/us and on my/our behalf on the specified Resolution as

indicated by the letter “X” in the appropriate cage:

FOR AGAINST

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

Association of the Company

ii) To re-elect as Director, Mr. V. A. A. Perera who retires in terms of Article 90 of the Article of

Association of the Company.

iii) To re-appoint Auditors and to authorize the Directors to determine their remuneration.

Signed this ……..………………….. day of …………………...Two Thousand and Sixteen.

Signature/s of Shareholder/s

NOTE:

INSTRUCTIONS AS TO COMPLETION OF PROXY FORM ARE NOTED ON THE REVERSE.

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.

2. The completed Form of Proxy should be deposited at the Company’s

registered address at No. 117, Sir Chittampalam A. Gardiner Mawatha

Colombo 2, not later than 48 hours before the time appointed for the

holding of the Meeting.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of

Attorney should accompany the completed Form of Proxy for registration,

if such Power of Attorney has not already been registered with the

Company.

4. If the appointer is a company or Corporation, the Form of Proxy should be

executed under its Common Seal or by a duly authorised officer of the

company or Corporation in accordance with its Articles of Association or

Constitution.

JOHN KEELLS PLC

2

5

5. If this Form of Proxy is returned without any indication of how the person

appointed as Proxy shall vote, then the Proxy shall exercise his/her

discretion as to how he/she votes or, whether or not he/she abstains from

voting.

Please fill in the following details:

Name : ...........................................................................................................

Address : ........................................................................................................

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

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

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

Jointly with : ....................................................................................................

Share Folio No : ..............................................................................................

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