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KELANI TYRES PLC ANNUAL REPORT 2010/2011 i

CONTENTS

Page

Corporate Information 01

Chairman’s Review 02 - 03

Annual Report of the Board of Directors of the affairs of the Company 04 - 06

Profile of Directors 07

Statement on Corporate Governance 08 - 09

Statement of Directors’ Responsibility 10

Audit Committee Report 11

Remuneration Committee Report 11

Independent Auditor’s Report 12

Income Statement 13

Balance Sheet 14 Statement of Changes in Equity 15 - 16 Cash Flow Statement 17 Notes to the Financial Statements 18 - 44 Related Party Transactions For the year ended 31-03-2011 45

Information to Shareholders and Investors 46 - 47

Performance Highlights 48

Financial Review of the Group 49

Consolidation Analysis 50 - 51 Statement of Value added 52

Joint Venture (JV) – Performance Highlights 53

Summarized Income Statement – JV 54

Summarized Balance Sheet - JV 55

Performance Highlights - JV 56 Notice of Meeting 57 Form of Proxy

Attendence Slip

KELANI TYRES PLC ANNUAL REPORT 2010/2011ii

KELANI TYRES PLC ANNUAL REPORT 2010/2011 1

Name of CompaNy

Kelani Tyres PLC

LegaL form

A Quoted Public Company with limited liability

CompaNy registratioN No

PQ 123

DireCtors

Chanaka De Silva - Chairman

Rohan T. Fernando - Managing Director

Lasantha P. Fernando - Executive Director

T. Bevan Perera - Executive Director

H.S. De Silva - Director

Ranjit M. S. Fernando - Director

D. S. Kamantha Amarasekera - Director

seCretaries & registrars

P W Corporate Secretarial (Pvt) Ltd

3/17, Kynsey Road

Colombo 08.

Tel: 4640360/3

aUDitors

PricewaterhouseCoopers

Chartered Accountants

100, Braybrooke Place

Colombo 02.

BaNKers

Sampath Bank Plc

Commercial Bank of Ceylon Plc

maNagemeNt

Mr. Vasantha Perera - Director/GM

Ms. Nadeeka Perera - DGM/Finance (Seconded to the JV)

Ms. S.S. Jayatilaka - Secretary to the Board

registereD offiCe

P.O. Box 8, Nungamugoda, Kelaniya.

Corporate offiCe

203, Union Place, Colombo 2.

Tel.: 2434183/5340883, Fax: 2300877

[email protected] / [email protected]

CORPORATE INFORMATION

KELANI TYRES PLC ANNUAL REPORT 2010/20112

period avg.prodcution avg. g.sales avg. profit frm. avg. pat avg. Cost of avg. export avg. Capital

mt operations sales earnings exp.

1999 to 2002 7,497 1,497,331 141,509 10,632 959,783 136,380 183,199

2003 to 2006 10,380 2,914,148 180,723 51,999 2,241,758 628,526 32,461

2007 to 2009 11,515 5,213,191 509,041 246,798 3,738,983 1,345,720 121,046

2010 (10/11) 14,972 8,433,165 829,827 556,829 5,954,487 1,944,290 223,783

On behalf of the Board of Directors, I welcome you to the Annual General Meeting of the Company for the year ended 31st

March 2011.

The Annual Report together with the Audited Statements of the Company/Group and my Review of our activities, I believe will

provide an adequate overview of the business and its direction.

In my last review (2009/2010 Annual Report), I gave a summarized history of our Company and the path it has taken to arrive at

the present juncture. Therefore, I shall not repeat the pertinent events such as the privatization of the Sri Lanka Tyre Corporation,

listing of our shares in the CSE, necessity to make a paradigm shift in areas of operations to compete locally and internationally

with fierce competition, formation of the joint venture with CEAT Tyres Ltd of India etc., etc.

As mentioned before, this journey was definitely not smooth but we weathered all obstacles and impediments to reach the

position we are in today where we have continuously for 2 years achieved a Gross Turnover exceeding Rs. 5 billion.

I give below some of the statistics of our Joint Venture Companies performance which speaks for itself the transformation

successfully achieved over the years.

CHAIRMAN’S REVIEW

During the year some of the significant achievements (by our Group) are as follows :

- Achieving a gross sale exceeding Rs. 8 Billion.

- Our Passenger Car tyre – the CEAT Radial – is today the largest single branded Radial tyre in the market.

- We have invested over Rs. 105 million in upgrading machinery to manufacture high quality truck tyres in line with that of

leading Indian premium bias tyre brands.

- Increasing overall production capacity by approx. 200 MT (+18%).

In the year 2010, our country forged ahead with a GDP growth of 8% which probably is the highest growth rate achieved in the

recent past. The Government has set the base for our industry to thrive in the new post-war economy by placing much emphasis

of its activities for the development of Sri Lanka’s road network and highways.

All amounts are in thousands


In light of these emerging opportunities, we have to continuously make changes by further improvement to the quality of our

products, addition of new sizes and necessary expansion especially in our Radial tyre operations.

A major negative phenomenon that we experienced quite unexpectedly during the year under consideration is the sudden

escalation of Natural Rubber prices in the world market from its steady US$ 2/90 level (pre July 2010) to the current high of US$

5/- per kg (an increase of over 72%). This coupled together with high price of petroleum based raw materials has created total

mayhem in the International tyre markets. Whilst all attempts are being made to absorb these increases in our selling prices, due

to inconsistent policies of competitors we have still not been able to completely hedge against these increases. I am confident

that our loyal team of committed, competent managers will, after careful study face and take necessary action to continue to

keep our Companies as the undisputed leaders of the tyre trade in Sri Lanka.

We are still facing unfair competition from under-invoiced imports to the country. We believe that the representations we have

made in this regard to authorities will be taken seriously and necessary action will be put in place to circumvent this serious

problem which in my opinion is causing an annual loss exceeding Rs. 500 million to the Exchequer.

I thank you our Shareholders for the continuous support you have extended to your Board of Directors which has helped us to

make necessary decisions after deliberations with our Joint Venture Partners in the best interests of your Company.

I also wish to place on record my continuous appreciation for the guidance and support extended to me by my Directors at

all times and that of Mr. Harsh Goenka – Chairman CEAT India, Mr. Paras Chowdhary – Managing Director of CEAT India,

Mr. Randeep Narang (outgoing) MD/CEO of CEAT Sri Lanka and the Management Team of CEAT Sri Lanka Companies. I also take

this opportunity of welcoming Mr. N.C. Venugopalan as the new MD/CEO of CEAT-KELANI Joint Venture Companies.

in closing, i am pleased to inform you that based on the performance of the Company during the year under review and

dividends received subsequently, the Directors have now declared a Dividend of rs. 1/40 (gross) per share amounting

to a net distribution of rs. 101.304 million which would be distributed as an interim Dividend for the year 2011/12.

this dividend, when applying the post sub-division number of ordinary shares of 80,400,000 is more than 10% higher

than our previous year’s dividend declaration which was rs. 1/25 (gross) when the same share number denomination

is used in the calculation.

Chanaka De Silva

10th August 2011

Colombo.

CHAIRMAN’S REVIEW (CONTd)


The Directors of Kelani Tyres PLC have pleasure in presenting their Annual Report together with the Audited Financial Statements for the year ended 31st March 2011.

general

Kelani Tyres PLC is a public limited liability company which was incorporated under the Companies Act, No.17 of 1982 as a limited liability company on 4th October 1990, listed on the Colombo Stock Exchange on 28th January 1994 and re-registered as per the Companies Act, No. 07 of 2007 on 3rd March 2008 with PQ 123 as the new number assigned to the Company.

principal activities

On 30th June 1999, the Company transferred its tyre manufacturing assets to a joint venture company, namely CEAT Kelani Holdings (Private) Limited (CKH), which commenced its activities on 1st July 1999. The Company owns 50% of the equity shares issued by CKH. Associated CEAT (Pvt) Ltd., CEAT- Kelani International Tyres (Pvt) Ltd & CEAT Kelani Radials (Pvt) Ltd. are wholly owned subsidiaries of CKH.

The fully owned subsidiary KTL Executive Hire (Pvt) Ltd., commenced its activity of vehicle hiring on 1st January 2006.

review of performance during the year

The Chairman’s review, which forms an integral part of the Directors’ Report, contains a detailed description of the operations of the Company/Group during the year ended 31st March 2011.

results

The net profit of the Company and the Group amounted to Rs. 91.29 Mn.and Rs. 260.83 Mn respectively as compared to last year’s profit of Rs.12.92 Mn and Rs. 209.13 Mn. The results for the year and changes in equity are set out in the Income Statement and Statement of changes in equity on pages13,15 and 16.

financial statements

The Financial Statements which, include the income statement, balance sheet, statement of changes in equity, cash flow statement and the Notes to the Financial Statements of the Company for the year ended 31st March 2011 are set out on pages 13 to 44.

auditors’ report

The Report of the Auditors on the Financial Statements of the Company is given on page12.

accounting policies

The Accounting Policies adopted by the Company in the preparation of Financial Statements are given on pages 18 to 23 which are consistent with those of the previous year.

Directors

The names of the Directors who held office as at 31st March 2011 are given below and their brief profiles appear on page 7.

executive Directors

Mr. Rohan T. Fernando - Managing Director

Mr. Lasantha P. Fernando - Executive Director

Mr. T. Bevan Perera - Executive Director

Non-executive Directors

Mr. Chanaka De Silva - Chairman

Mr. H. S. De Silva - Director

Mr. Ranjit Fernando - Director (Independent)

Mr. Kamantha Amarasekera - Director (Independent)

At the conclusion of the forthcoming Annual General Meeting, Mr H S De Silva, who is 70 years of age will vacate office in pursuance of Section 210 of the Companies Act, No.07 of 2007. A resolution will be placed before the shareholders in terms of Section 211 of the Companies Act in regard to the re-election of Mr H S De Silva as a Director of the Company.

Mr. L P Fernando retires by rotation at the conclusion of the Annual General Meeting in terms of Articles 84 and 85 of the Articles of Association and being eligible is recommended by the Directors for re-election.

interest register

The Company maintains an interest register in term of the Companies Act, No. 7 of 2007, which is deemed to form part and parcel of this Annual Report and is available for inspection upon request.

All related party transactions which encompasses the transactions of Directors who were directly or indirectly interested in a contract or a related party transaction with the Company during the accounting period are recorded in the Interest Register in due compliance with the applicable rules and regulations of the relevant Regulatory Authorities.

The relevant Interest of Directors in the shares of the Company as at 31st March 2011 as recorded in the Interest Register are given in this Report under Directors’ Shareholding.

ANNuAl REPORT OF THE BOARd OF dIRECTORS ON THE AFFAIRS OF THE COMPANy


ANNuAl REPORT OF THE BOARd OF dIRECTORS ON THE AFFAIRS OF THE COMPANy (CONTd)

Directors’ remuneration and other benefits

Mr. Bevan Perera - Executive Director is paid a remuneration from the Company, and the total payments made to him during the year ended 31st March 2011 amount to Rs. 123,703/-. All other expenses relating to the Directors are included under Management Related Expenses in Note 5 to the Financial Statements on page 24.

Directors’ responsibility for financial reporting

The Directors are responsible for the preparation of the Financial Statements of the Company to reflect a true and fair view of the state of its affairs.

auditors

The Financial Statements for the year ended 31st March 2011 were audited by PricewaterhouseCoopers, Chartered Accountants.

The Auditors have confirmed that they have had no interest in or relationship with the Company than that of Auditors. They confirm that they are independent in accordance with the Code of Ethics of the Institute of Chartered Accountants of Sri Lanka.

The fee payable to the Auditors for the year under review amounts to Rs 175,000/-

The Auditors have expressed their willingness to continue in office. A resolution to re-appoint the Auditors and to authorize the Directors to determine their remuneration will be proposed at the Annual General Meeting.

stated Capital

The Stated Capital of the Company is Rs.402,000,000/- represented by 80,400,000 ordinary shares.

sub-division of shares

In pursuance of a resolution passed by the shareholders on 1st November 2010, each of the Forty Million Two Hundred Thousand (40,200,000) Ordinary issued shares in the capital of the Company, as at the end of trading on 1st November 2010, were sub-divided into Two (02) Ordinary Shares thereby increasing the Ordinary Shares in issue to Eighty Million Four Hundred Thousand (80,400,000) Ordinary Shares without any change to the Stated Capital of the Company of Rupees Four Hundred and Two Million (Rs.402,000,000/-).

Directors’ interest in shares of the Company

The relevant interests of Directors in the shares of the Company as at 31st March 2011 and their corresponding holdings as at the end of the previous financial year are as follows: -

as at 31.03.2011 as at 31.03.2010

Mr. Chanaka De Silva Nil Nil

Mr. Rohan T. Fernando Nil Nil

Mr. Lasantha. P. Fernando Nil Nil

Mr. T. Bevan Perera 1,920 960

Mr. H. S. De Silva 4,560 2,280

Mr. R. M. S. Fernando Nil Nil

Mr. D. S. K. Amarasekera Nil Nil

shareholders

There were 10,677 registered shareholders as at 31st March 2011 (9,169 shareholders as at 31st March 2010). The distribution of shareholding as at 31st March 2011 is given on page 46.

public Holdings

A percentage of 58.30% of the issued shares of the Company are held by the public as at the end of the year (31/03/2010 – 30.25%).

major shareholding

Details of the major shareholders of the Company as at 31st March 2011 are given under largest shareholdings on page 47.

stock market information

Information relating to trading of shares of the Company is given under share valuation on page 46.

property, plant and equipment

Details of property, plant and equipment of the Company and its Group, additions, disposals and revaluation made during the year and depreciation charge for the year are shown in Note 10 to the Financial Statements.

During the year, the Group invested Rs. 206.3 Mn. in property, plant and equipment.

material foreseeable risk factors

The ultimate responsibility of the Board of Directors of your Company is to monitor and review the Group internal control system and the associated risks of the Business and will update the relevant risks and action plans via Business Review Committee chaired by your Chairman and the joint venture companies’ Audit Committee chaired by one of the independent directors of your Company.


ANNuAl REPORT OF THE BOARd OF dIRECTORS ON THE AFFAIRS OF THE COMPANy (CONTd)

Land Holdings

The Company’s land holdings referred to in Note 10 of the accounts comprise a land of an extent of two (2) acres with buildings situated in Nungamugoda, Kelaniya. The said land and building are carried at it’s book value of Rs 125 Mn. and Rs. 80 Mn. respectively.

The freehold land and buildings have been revalued on 31st July 2010 at Rs. 125 Mn. and Rs. 82 Mn. respectively by an independent professional valuer. Further details of such revaluation are given in Note 10 to the financial statements.

reserves

The reserves of the Company with the movements during the year are given in Note 24 to the Financial Statements.

Charitable Contributions

Although the mandate was given to Directors, the Company made no contributions for charitable purposes during the year.

industrial relations

During the year under review, the industrial relations of the Company have been excellent.

statutory payments

All statutory payments of the Company as at the balance sheet date have been paid or where necessary provision has been made in the Financial Statements.

Dividend

An interim dividend of Rs.2/50 (gross) per share for the year under review was paid on 27th August 2010.

The Directors have approved the payment of an interim dividend of Rs.1.40 (gross) per share for the year 2011/12, payable on 11 August 2011, subject to obtaining a Certificate of Solvency from the Auditors. As required by Section 56 of the Companies Act, the Directors have certified that the Board is satisfied that the Company will immediately after the distribution is made, satisfy the solvency test in accordance with the provisions of the Companies Act, No. 07 of 2007

going Concern

The financial statements are prepared on going concern principles. After making adequate enquiries from management, the Directors are satisfied that the Company has adequate resources to continue its operations in the foreseeable future.

events occurring after the Balance sheet date

No other events of significance occurred since the Balance Sheet date, which would require adjustments to or disclosure in the Financial Statements.

Corporate governance

The Board of Directors are responsible for the governance of the Company. The Board has placed considerable emphasis on developing rules, structures and processes to ensure integrity and transparency in all the dealings of the Company and adopting good governance in managing the affairs of the Company. The Board in the discharge of its responsibilities aforesaid had been guided by the Code of Best Practice, on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the Listing Rules of the Colombo Stock Exchange.

The Board of Directors confirm that the Company is compliant with the Listing Rules of the Colombo Stock Exchange.

The Board comprises of three Executive Directors and four Non-Executive Directors, two of whom are Independent.

An Audit Committee and a Remuneration Committee function as Board Sub Committees with Directors who possess the requisite qualifications and experience.

annual general meeting

The Notice of the Seventeenth Annual General Meeting appears on page 57.

By Order of the Board Kelani Tyres PLC.

Chanaka De Silva Lasantha P. FernandoChairman Executive Director

P W Corporate Secretarial (Pvt) Ltd.,Secretaries

This 10th day of August 2011Colombo.


mr. Chanaka De silvaChairman

Mr. Chanaka De Silva possess over 40 years management experience of which more than 30 years has been at Director/Chairman level.

He has been the Chairman of Kelani Tyres PLC since privatisation (in 1992) and the Chairman of Ceat Sri Lanka Group Companies since the formation of the Joint Venture (in 1998).

At present he is also the Chairman of Union Commodities Group (one of the leading tea exporters in Sri Lanka) and he is also the Director of Asian Alliance Insurance PLC and ASCOT Holding PLC.

He has been the former Chairman of Sri Lanka Insurance Corporation, TransAsia Hotel, Club Robinson, Union Bank of Colombo Ltd and a former director of Sri Lankan Airlines.

mr. rohan t. fernandoManaging Director

Mr. Rohan Fernando is one of the most experienced persons in the tyre trade in Sri Lanka having been actively involved in the tyre trade for more than 25 years.

In addition to his position as Managing Director of Kelani Tyres PLC he also holds the position of Executive Director of Ceat Sri Lanka Group Companies.

He is also the Managing Director of Silverstock Holdings Group of Companies - the major shareholders of Kelani Tyres PLC.

mr. L.p. fernandoExecutive Director

Mr. Lasantha Fernando has been a senior plantation executive counting over 40 years of private sector management experience.

He was a former General Manager Administration of Janatha Estate Development Board (JEDB) and prior to nationalisation served in many Sterling & Rupee Company estates in Sri Lanka.

In addition to his directorates in Kelani Tyres PLC/Ceat Sri Lanka Group Companies/Silverstock Holdings Group Companies he is also a Founder Director of Hotel Sigiriya Ltd.

mr. t. Beven pereraExecutive Director

Mr. Beven Perera is a well known businessman and counts over 25 years experience in the field of tyres in Sri Lanka. He was the Director of Sri Lanka Tyre Corporation (prior to privatisation) and continued holding his board position post privatisation to present.

He was a former director of C.W.E. (2001-2004) and STC General Trading Company (2004-2008).

PROFIlE OF dIRECTORS

mr. H.s. De silvaDirector

Mr. Harendra de Silva is a well known company director/Chairman having more than 33 years experience in the field of international marketing of natural rubber and value added rubber products.

He was the former Chairman of Sherman Sons Group Companies (one of the largest exporters of natural rubber) and of Ceylon Chamber of Commerce.

mr. r.m.s. fernandoFCMA-UK, Companion-CIM, FCIB, LLB (Hons), , Attorney-at-Law Director

Mr. Ranjit Fernando is a former Secretary of the Ministry of Enterprise Development, Investment Promotion, Industrial Policy and Constitutional Affairs and a former CEO/Director of the National Development Bank in Sri Lanka.

He is also currently the Chairman of United Motors PLC, Unimo Enterprises Ltd., Orient Motor Company Ltd., UML property Developments Ltd and UML Agencies & Distributors (Pvt) Ltd., and also the Chairman of Latex Green Ltd.

Mr. Fernando is also a Director of TVS Lanka (Pvt) Ltd., TVS Automotives (Pvt) Ltd., Ceat Kelani Radials (Pvt) Ltd., Sierra Cables PLC., Piramal Glass Cylon PLC and ICICI International Ltd.

mr. D.s.K. amarasekeraACA, B.Sc., Attorney-at-law

Director

Mr. Kamantha Amarasekera is an eminent tax consultant and the Senior Tax and Legal Partner of Amarasekera & Company – a leading tax consultancy firm in the country.

He is a member of the Institute of Chartered Accountants of Sri Lanka and is an Attorney-at-Law of the Supreme Court of Sri Lanka.

He graduated in Business Administration from the University of Sri Jayawardenapura.

Mr. Kamantha Amarasekera is also a Director of Associated Ceat (Pvt) Ltd, Inside the Jungle (Pvt) Ltd, Colombo Land Exchange Ltd, Lanka Milk Food PLC, Madulsima Plantation PLC, Balangoda Plantation PLC, The Tea Leaf Resort Holding (Pvt) Ltd, Eden Hotels PLC, Riverina Hotels PLC, Confifi Hotels Holdings PLC, Tropical Villas (Pvt) Ltd, Finco Holding Ltd, Agstar Fertilizer (Pvt) Ltd, Sunsun Boutique Hotels Ltd, Sierra Group of Companies, Browns Investment (Pvt) Ltd, Hydropower Freelanka PLC, Freelanka Power Holding (Pvt) Ltd, Freelanka Management Company (Pvt) Ltd, Freelanka Plantation Company (Pvt) Ltd and Freelanka Capital Properties (Pvt) Ltd.


Corporate Governance is the system by which companies are directed, managed and controlled towards setting up its vision, mission and strategic goals.

the Board of Directors

The prime responsibilities of the Board of Directors are setting up the Company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The Board of Directors is also responsible to create value for its shareholders, potential shareholders and stakeholders through actions that are in compliance with laws and regulations, and, to promote a culture that rewards integrity, transparency, fair dealings and accountability.

Your Board has placed high priority on following the Code of Best Practice issued by the Institute of Chartered Accountants of Sri Lanka, new rules of disclosure requirements for listed companies as mandated by the Colombo Stock Exchange, Securities and Exchange Commission of Sri Lanka and the Companies Act, No 07 of 2007 in carrying out its business.

The Directors who have expertise in varied business fields bring along many years of diverse experience at the board level. They participate actively in defining goals, strategies and business aims of the Company and its Group collectively through their expertise in varied business fields and bring along many years of diverse experience at the board level.

The key corporate governance practices followed by your Board of Directors during the year under review are summarized as follows: Composition of the Board and independence

The Board of Directors is structured with three Executive Directors and four Non-Executive Directors.

The Board has determined that two Non-Executive Directors, namely, Messrs R M S Fernando and D S K Amarasekera are ‘Independent’ as per the criteria set out in the Listing Rules of the Colombo Stock Exchange and the said Directors have submitted signed declarations in this regard.

The Board has overall collective responsibility for better performance and in carrying out activities for the best interest of the Company as well as its shareholders. In particular, Non executive Directors are responsible for:

• Usingtheirun-biasedwiderangeofskills,experienceand recent relevant knowledge based on independent judgment on issues faced by the business;

STATEMENT ON CORPORATE GOVERNANCE

• Constructively challenging and helping to develop proposals on strategy.

• Scrutinisemanagementperformanceinmeetingagreedgoals and monitor performance reporting.

• Satisfy themselves on the integrity of financialinformation and that financial controls and system of risk management are robust and defensible.

• Determining appropriate levels of remuneration forExecutive Directors, and also appointment, removal and succession planning.

The Directors are required to update the Board with any new information in relation to their independence and to satisfy the Board that any outside commitments are not in conflict with the duties as a Director of the company.

Chairman and managing Director

The roles of the Chairman and the Managing Director are separate with a clear distinction of responsibilities, which ensure balance of power and authority.

Board meetings

The Board meets regularly to review and approve the set objectives, monitor performance against set objectives and also ensure compliance with the statutory obligations. The Board met on nine (9) occasions during the year under review.

The Directors receive a comprehensive package of relevant information of the Company and joint venture investee companies on all issues prior to each meeting. The Board monitors and oversees the business performance of the Company and its investments. Subject to formal and transparent procedures, approvals relating to key appointments and capital expenditure are granted at Board meetings. There were also written Board Minutes relating to discussions and key decisions of the meetings and are available at any time. All the Directors have access to details of Board Minutes through the Board Secretary.

appointments to the Board

The Board collectively decides on the appointment of Directors. Each year, a member of the Board retires by rotation and becomes eligible for re-election as prescribed by the Company’s Articles of Association.

Board sub Committees

An Audit Committee and a Remuneration Committee function as sub-committees of the Board.


STATEMENT ON CORPORATE GOVERNANCE (CONTd)

audit Committee

The Audit Committee consists of two Independent Non-Executive Directors, as named below;

Mr Ranjit M. S. Fernando - Chairman Mr D S Kamantha Amarasekera

remuneration Committee

The Remuneration Committee consists of two Independent Non-Executive Directors, as named below;

Mr Ranjit M. S. Fernando - Chairman Mr D S Kamantha Amarasekera

shareholder interest/relations

Your Board has always given priority to establish policies to protect and promote the shareholders rights to ensure that all shareholders will be treated fairly and equally and values the importance of equitable treatment to them. The Board is accountable on its activities delivering value through good governance of the business and ensures to make available information on strategies, performance and the financial status of the Company at the Annual General Meeting each year.

Your Board always encourages maximizing attendance of shareholders at General Meetings and gives opportunities to ask questions and the Directors are always ready to answer reliably and maintain an appropriate dialogue with them.

oversight on the performance of investee Companies

Since your Company is only a vehicle to carry the investment in the three Ceat-Kelani production entities which handle all production and commercial operations vis-à-vis the manufacture of motor vehicle tyres, the oversight function of the Audit and Remuneration Committees ought to be and was in fact directed on the operation of these three production companies.

This task was affected via the Business Review Committee chaired by your Chairman and the joint venture companies’ Audit Committee chaired by one of the independent directors of your Company.

The functions of the Remuneration Committee for the three production companies are also carried out by the Business Review Committee.

The Directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future. Your Board has ensured to make available accuracy, integrity and the reliability of financial statements and reports through maintaining an efficient, proper internal control system.

Company secretaries/Legal officers

P W Corporate Secretarial (Pvt) Ltd, who act as secretaries to the Company are qualified to act as secretaries as per the provisions of the Companies Act, No. 07 of 2007.

All Directors have access to the advice and services of the Company Secretaries as well as the Company Lawyers and the Tax Consultants.

Compliance with Legal requirements

The Board through the Company Secretaries and the finance division makes every endeavor to ensure that the Company complies with laws and regulations. The Board of Directors ensures that in all possible aspects, the financial statements of the Company are prepared in accordance with Sri Lanka Accounting Standards and the relevant Statutes. The Company has regular communication with shareholders through quarterly updates of performance. Maximum possible information is provided to shareholders and full disclosure is made subject only to any sensitive information, which could directly impact the business of the Company.

The Board is satisfied with its level of compliance with the governance requirements and recognizes that practicing its procedures creates a good corporate culture that will satisfy reliability of the shareholders towards the Company and your Board will assure to continue the same with timely and relevant changes of governance requirements in the future. The Company has adopted a Code of Business Conducted and Ethics for Directors and Members of the Senior Management.

The Company has complied with the Colombo Stock Exchange Listing Rules and the best practices set out in 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. The Directors’ confirmation on complying with all statutory dues is given in the report of the directors on page 6.

By Order of the BoardKeLaNi tyres pLC

P W Corporate Secretarial (Pvt) Ltd.,Secretaries

This 10th day of August 2011Colombo


STATEMENT OF THE dIRECTORS’ RESPONSIBIlITy

statemeNt of tHe DireCtors’ respoNsiBiLity for tHe

preparatioN of fiNaNCiaL statemeNts

The Board of Directors is responsible for preparing and

presenting the Financial Statements, which are set out on

pages 13 to 44.

As per the provisions of the Companies Act No. 07 of 2007,

the Directors are required to prepare Financial Statements for

each financial year giving a true and fair view of the state of

affairs of the Company as at the end of the financial year and

of the profit or loss of the Company.

In preparing the Financial Statements, the Directors have

selected appropriate accounting policies and applied them in

a consistent manner. Such policies are supported by reasonable

and prudent judgment and all applicable Accounting Standards

have been followed.

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 that the Financial Statements presented comply with the

requirements of the Companies Act No. 07 of 2007.

The Directors have taken reasonable steps to safeguard the

assets of the Company and to establish appropriate internal

control systems with a view to preventing and detecting fraud

and other irregularities.

The Directors are confident that they have discharged their

responsibility as set out in this statement.

By Order of the Board

KeLaNi tyres pLC

P W Secretarial (Pvt) Ltd

Director/Secretaries.

This 10th day of August 2011

Colombo


REPORT OF THE REMuNERATION COMMITTEE

The Remuneration Committee is a sub committee of the main

Board to which it is accountable. The Committee consists of

the following two Independent non-executive directors namely,

Mr. Ranjit M. S. Fernando and Mr. D. S. Kamantha Amarasekera.

Mr. Ranjit M. S. Fernando functions as the Chairman of the

Remuneration Committee.

The Committee met twice during the year to review the

compensation pakages applicable to senior staff.

Mr. Rohan T. Fernando – Managing Director attends the

meetings by invitation.

None of the Directors draw any salary other than one Executive

Director. The Committee reviews the Executive Director’s salary

and other benefits periodically.

The objective of the remuneration policy of the Company is to

attract and retain a qualified and experianced workforce and

to compensate employees who contribute to the success of

the Company.

ranjit m. s. fernando

Chairman - Remuneration Committee

AudIT COMMITTEE REPORT

The Audit Committee is a sub committee of the main Board to

which it is accountable. The Committee consists of the following

two Independent non-executive directors:

Ranjit M. S. Fernando- Chairman

D. S. Kamantha Amarasekera

The Chairman of the Audit Committee is a fellow member

of Chartered Institute of Management Accountants of UK.

Mr. D.S. Kamantha Amarasekera is a member of the Institute

of Chartered Accountants of Sri Lanka.

The Committee met three times during the year under review.

The Managing Director attends the meetings at the invitation

of the Committee. Discussions also are held with the

representatives of the external auditors, as and when required.

the main role and responsibilities of the audit Committee

are;

• Review the Quarterly Financial Statements and the

Annual Financial Statements to ensure compliance with

mandatery and statutary requirments, and the integrity of

the statements.

• Review the internal controls of the company and their

effectiveness.

• TheCommitteehasrecommendedtotheBoardofDirectors

the appointment M/S. PricewaterhouceCoopers as its

external auditors for the financial year ending 31st March

2012 subject to the approval of the shareholders at the

Annual General Meeting. The Audit Committee has also

made its recommandation to the Board on the fee payable

to the Auditors for approval by the Board.

• ToassurethattheCompanyisincompliancewithalllaws

and regulations applicable to the business.

• Toensurethatgoodgovernancepracticesareinforcewithin

the Company.

ranjit m. s. fernando

Chairman - Audit Committee


to the shareholders of Kelani tyres pLC

Report on the Financial Statements

1. We have audited the accompanying financial

statements of Kelani Tyres PLC, its subsidiary and the

joint venture and its subsidiaries (the Group), which

comprise the balance sheets as at 31 March 2011, and

the income statements, statements of changes in equity

and cash flow statements for the year then ended, and

a summary of significant accounting policies and other

explanatory notes set out on pages 13 to 44.

management’s responsibility for the financial

statements

2. Management is responsible for the preparation and

fair presentation of these financial statements in

accordance with Sri Lanka Accounting Standards. This

responsibility includes: designing, implementing and

maintaining internal control relevant to the preparation

and fair presentation of financial statements that are

free from material misstatement, whether due to fraud

or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are

reasonable in the circumstances.

scope of audit and Basis of opinion

3. Our responsibility is to express an opinion on these

financial statements based on our audit. We conducted

our audit in accordance with Sri Lanka Auditing

Standards. Those Standards require that we plan and

perform the audit to obtain reasonable assurance

whether the financial statements are free from material

misstatement.

An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the

accounting principles used and significant estimates

made by management, as well as evaluating the overall

financial statement presentation.

We have obtained all the information and explanations

which to the best of our knowledge and belief were

necessary for the purposes of our audit. We therefore

believe that our audit provides a reasonable basis for

our opinion.

opinion

4. In our opinion, so far as appears from our examination,

the Company maintained proper accounting records

for the year ended 31 March 2011 and the financial

statements give a true and fair view of the Company’s

state of affairs as at 31 March 2011 and of its profit

and cash flows for the year then ended in accordance

with Sri Lanka Accounting Standards.

5. In our opinion, the Group financial statements give a

true and fair view of the states of affairs as at 31 March

2011 and of the profit and cash flows for the year then

ended, in accordance with Sri Lanka Accounting

Standards, of the Company and its subsidiary and joint

venture and subsidiaries dealt with thereby, so far as

concerns the shareholders of the Company.

Report on Other legal and Regulatory

Requirements

6. These financial statements also comply with the

requirements of Section 153 (2) to 153 (7) of the

Companies Act, No. 07 of 2007.

CoLomBo CHartereD aCCoUNtaNts

INdEPENdENT AudITOR’S REPORT


INCOME STATEMENT

(all amounts in sri Lanka rupees thousands) Note group Company year ended 31 march year ended 31 march

2011 2010 2011 2010

Sales 3 3,924,340 2,729,800 129,512 22,262

Cost of sales (3,097,756) (2,042,318) (118,412) (20,355)

Gross profit 826,584 687,482 11,100 1,907

Other operating income 4 15,697 11,383 112,695 35,366

Distribution costs (255,550) (196,849) Nil Nil

Administrative expenses (164,047) (101,284) (28,546) (21,476)

Depreciation on property, plant and equipment (6,929) (3,571) (2,435) (2,187)

Other operating expenses (14,417) (5,674) Nil Nil

Operating profit 5 401,338 391,487 92,814 13,610

Finance costs 6 (40,018) (57,558) (1,217) (558)

Profit before tax 361,320 333,929 91,597 13,052

Tax 7 (98,433) (91,338) (307) (135)

Profit from ordinary activities 262,887 242,591 91,290 12,917

Minority interest 8 (2,051) (33,458) Nil Nil

Net profit 260,836 209,133 91,290 12,917

Earnings per share - basic Rs 9 3.24 2.60 1.14 0.16

The notes on pages 18 to 44 form an integral part of these financial statements.


BAlANCE SHEET


assets 2011 2010 2011 2010

Non-current assets Property, plant and equipment 10 1,116,041 897,377 205,902 163,607 Investments in joint venture 11 (a) Nil Nil 139,607 139,607 Investment in preference shares 11 (b) Nil Nil Nil 60,000 Investment in subsidiary 11 (c) Nil Nil 10 10 Receivable from subsidiary 12 Nil Nil 13,493 13,493 Deferred taxation 19 3,520 4,850 Nil Nil 1,119,561 902,227 359,012 376,717 Current assets Inventories and consumables 13 482,766 282,892 Nil Nil Trade and other receivables 14 661,717 408,678 141,728 33,070 Cash and cash equivalents 15 75,679 41,906 46,339 16,071 1,220,162 733,476 188,067 49,141 total assets 2,339,723 1,635,703 547,079 425,858 eQUity aND LiaBiLities Capital and reserves Stated capital 23 402,000 402,000 402,000 402,000 Revaluation and other reserves 24 435,682 378,743 241,724 199,233 Retained earnings / (accumulated losses) 173,588 1,045 (183,218) (186,215) 1,011,270 781,788 460,506 415,018 minority interest Preference shares 8 5,684 22,579 Nil Nil Non-current liabilities Borrowings 17 135,403 96,108 Nil Nil Deferred taxation 19 39,273 10,850 Nil Nil Defined benefit obligations 18 31,828 25,289 1,213 871 206,504 132,247 1,213 871 Current liabilities Trade and other payables 16 517,160 338,039 3,923 3,679 Borrowings 17 577,151 312,907 81,437 6,290 Current tax payable 20 21,954 48,143 Nil Nil 1,116,265 699,089 85,360 9,969 total liabilities 1,322,769 831,336 86,573 10,840 total equity and liabilities 2,339,723 1,635,703 547,079 425,858

managing Director Director general manager financeDate: 23rd June 2011 Date: 23rd June 2011


I certify that these financial statements have been prepared in compliance with the requirements of the Companies Act, No. 07 of 2007.

The Board of Directors is responsible for the preparation and presentation of these financial statements. These financial statements were authorised for issue by Board of Directors on 23rd June 2011


STATEMENT OF CHANGES IN EquITy - GROuP

(all amounts in sri Lanka rupees thousands)

Note stated revaluation retained total capital and other earnings/ reserves (accumulated losses)

Balance at 1 April 2009 402,000 384,072 (213,417) 572,655

Net profit - - 209,133 209,133

Depreciation transfers 24 - (5,329) 5,329 -

Balance at 31 march 2010 402,000 378,743 1,045 781,788

Balance at 1 April 2010 402,000 378,743 1,045 781,788

Deferred tax on revaluation surplus - (10,631) - (10,631)

Profit for the year - - 260,836 260,836

Revaluation surplus 24 - 69,727 - 69,727

Dividends paid 26 - - (90,450) (90,450)


Balance at 31 march 2011 402,000 435,682 173,588 1,011,270



STATEMENT OF CHANGES IN EquITy - COMPANy

(all amounts in sri Lanka rupees thousands)

Note stated revaluation accumulated total capital and other losses reserves

Balance at 1 April 2009 402,000 204,562 (204,461) 402,101

Net profit - - 12,917 12,917


Balance at 31 march 2010 402,000 199,233 (186,215) 415,018

Balance at 1 April 2010 402,000 199,233 (186,215) 415,018

Net profit - - 91,290 91,290

Revaluation - 44,648 - 44,648


Dividends paid - - (90,450) (90,450)

Balance at 31 march 2011 402,000 241,724 (183,218) 460,506



CASH FlOW STATEMENT


2011 2010 2011 2010

Cash flows from operating activities

Cash generated from / (used in) operations 27 187,742 481,732 (122,478) (19,390)

Interest received 6 1,765 688 1,349 592

Interest paid 6 (41,783) (58,246) (2,566) (1,150)

Defined benefit obligations 18 (1,463) (1,965) Nil Nil

Tax paid 20 (105,500) (24,248) (307) (289)

Net cash generated from / (used in) operating activities 40,761 397,961 (124,002) (20,237)

Cash flows from investing activities

Purchases of property, plant and equipment 10 (206,357) (63,912) (1,222) Nil

Proceeds from sale of property, plant and equipment 5,226 4,032 1,850 714

Dividends received 4 Nil Nil 108,945 32,040

Redemption of investment Nil Nil 60,000 Nil

Net cash (used in) / generated from investing activities (201,131) (59,880) 169,573 32,754

Cash flows from financing activities

Redemption of preference shares 8 (16,895) (22,421) Nil Nil

(Repayment of ) /proceeds from long term borrowings 44,617 (53,276) Nil Nil

(Repayment of ) /proceeds from short term borrowings 270,135 (34,142) 71,729 Nil

Payment of lease principals (4,210) (4,849) Nil Nil

Dividends paid 26 (90,450) Nil (90,450) Nil

Preference dividends paid to minority shareholders 8 (2,051) (33,458) Nil Nil

Net cash generated from / (used in) financing activities 201,146 (148,146) (18,721) Nil

increase in cash and cash equivalents 40,776 189,935 26,850 12,517

movement in cash and cash equivalents

At start of year (7,669) (197,604) 9,781 (2,736)

Increase 40,776 189,935 26,850 12,517

at end of year 15 33,107 (7,669) 36,631 9,781



(in the notes all amounts are shown in sri Lanka rupees

thousands unless otherwise stated)

1. general information

(a) Company

The Company is a limited liability company

incorporated in accordance with the Companies

Act, No. 17 of 1982 and re-registered under the

Companies Act, No. 7 of 2007. The address of

its registered office is, P.O. Box. 8, Nungamugoda,

Kelaniya. The Company is listed on the Colombo

Stock Exchange.

(b) group

The Group’s principal activity is the manufacture

of tyres and tubes locally and its sale thereof

locally and internationally. In addition, the Group

imports tyres of certain sizes to meet the market

deficit. The Group manufactures cross ply rubber

tyres for trucks, buses and three-wheelers at their

factories at Nagoda, Kalutara district and

Kelaniya, Gampaha district.

On 1 July 1999 a joint venture was formed after

entering into an agreement between Associated

Ceat (Private) Limited (ACPL), Ceat Limited India

and the Kelani Tyres PLC. Ceat Kelani International

Tyres (Private) Limited (CKITL) was incorporated

to carry on the tyre manufacturing operations

and the assets and facilities of Kelani Tyres PLC

were transferred to CKITL. Associated Ceat

(Private) Limited (ACPL) shares were transferred

to Associated Ceat Holdings (Private) Limited

(ACH), a new company. Another company was

incorporated, Ceat Kelani Holdings (Private)

Limited [previously known as Ceat Kelani

Associated Holdings (Private) Limited (hereafter

referred to as CKHPL)] to acquire and hold

eventually all of the shares of ACPL and CKITL.

NOTES TO THE FINANCIAl STATEMENTS

The consideration for such acquisition was the

issuance by CKHPL of its shares to both ACHPL

and KTPLC in equal proportion. Ceat Kelani

Radials (Private) Limited [previously known as

Associated Ceat Kelani Radials (Private) Limited

(hereafter referred to as CKRPL)] which was

incorporated on 9 September 2005 is also a fully

owned subsidiary of CKHPL.

In 2006, the vehicle hire business of the Kelani

Tyres PLC was transferred to a fully owned

subsidiary KTL Executive Hire (Private) Limited,

which was incorporated on 1 January 2006.

2. summary of significant accounting policies

The principal accounting policies applied in the

preparation of these consolidated financial statements

are set out below. These policies have been consistently

applied to all the years presented, unless otherwise

stated.

2.01 Basis of preparation

The consolidated financial statements of Kelani Tyres

PLC Group have been prepared in accordance with Sri

Lanka Accounting Standards (SLASs). The consolidated

financial statements have been prepared under the

historical cost convention, as modified by the

revaluation of land and buildings at fair value through

profit or loss. The preparation of financial statements

in conformity with Generally Accepted Accounting

Principles requires the use of estimates and assumptions

that affect the reported amounts of assets and

liabilities and disclosure of contingent assets and

liabilities at the date of the financial statements and

the report of amounts of revenue and expenses during

the reporting period. Although these estimates are

based on management’s best knowledge of current

events and actions, actual results ultimately may differ

from those estimates.


2.02 Consolidation

(a) The Group financial statements comprise a

consolidation of accounts of the Company, its

fully owned subsidiary KTL Executive Hire (Private)

Limited (KEH) and its joint venture company Ceat

Kelani Holdings (Private) Limited (CKHPL) and

CKHPL’s fully owned subsidiaries Associated Ceat

(Private) Limited (ACPL), Ceat Kelani International

Tyres (Private) Limited (CKITL), Associated Ceat

Tyres (Private) Limited and Ceat Kelani Radials

(Pr ivate) L imited (CKRPL) which were

proportionately consolidated.

(b) subsidiaries

Subsidiaries are all entities over which the Group

has the power to govern the financial and

operating policies generally accompanying a

shareholding of more than one half of the voting

rights. The existence and effect of potential

voting rights that are currently exercisable or

convertible are considered when assessing

whether the Group controls another entity.

Subsidiaries are fully consolidated from the date

on which control is transferred to the Group.

They are de-consolidated from the date that

control ceases. Inter-company transactions,

balances and unrealised gains on transactions

between group companies are eliminated.

Unrealised losses are also eliminated but

considered an impairment indicator of the asset

transferred. Accounting policies of subsidiaries

have been changed where necessary to ensure

consistency with the policies adopted by the

Group.

(c) Joint ventures

The Group’s interests in jointly controlled entities

are accounted for by proportionate consolidation.

The Group combines its share of the joint

ventures’ individual income and expenses, assets

and liabilities and cash flows on a line-by-line

basis with similar items in the Group’s financial

statements. The Group recognises the portion of

gains or losses on the sale of assets by the Group

to the joint venture that is attributable to the

other venture. The Group does not recognise its

share of profits or losses from the joint venture

that result from the Group’s purchase of assets

from the joint venture until it resells the assets

to an independent party. However, a loss on the

transaction is recognized immediately if the loss

provides evidence of a reduction in the net

realisable value of current assets, or an impairment

loss.

2.03 foreign currency translation

(a) functional and presentation currency

Items included in the financial statements of each

of the Group’s entities are measured using the

currency of the primary economic environment

in which the entity operates (‘the functional

currency’). The consolidated financial statements

are presented in Sri Lanka Rupees, which is the

Company’s functional and presentation

currency.

(b) transactions and balances

Foreign currency transactions are translated into

the measurements currency using the exchange

rates prevailing at the dates of transactions.

Foreign currency gains and losses resulting from

the settlement of such transactions and from the

translation of monetary assets and liabilities

denominated in foreign currencies, are recognised

in the income statement. Such balances are

translated at the year-end exchange rates.

NOTES TO THE FINANCIAl STATEMENTS (CONTd)


2.04 investment

Investments by the Company in the subsidiary and

joint venture are accounted for by using the cost

method of accounting.

2.05 property, plant and equipment

All property, plant and equipment is initially recorded

at cost. Freehold land and buildings are shown at fair

value based on valuations by external independent

valuers, less subsequent depreciation for buildings.

Any accumulated depreciation at the date of

revaluation is eliminated against the gross carrying

amount of the asset, and the net amount is restated

to the revalued amount of the asset.

All other property, plant and equipment is stated at

historical cost less depreciation. Historical cost includes

expenditure that is directly attributable to the

acquisition of the items. All other repairs and

maintenance are charged to the income statement

during the financial period in which they are

incurred.

Subsequent costs are included in the asset’s carrying

amount or recognised as a separate asset, as

appropriate, only when it is probable that future

economic benefits associated with the item will flow

to the group and the cost of the item can be measured

reliably. The carrying amount of the replaced part is

derecognised. All other repairs and maintenance are

charged to the income statement during the financial

period in which they are incurred.

Increases in the carrying amount arising on revaluation

of land and buildings are credited to revaluation

reserves in shareholders’ equity. Decreases that offset

previous increases of the same asset are charged

against other reserves directly in equity; all other

decreases are charged to the income statement.

Land is not depreciated and depreciation on other

assets is calculated using the straight-line method to

write-off their cost or revalued amounts to their

residual values over their estimated useful lives, from

the year in which the assets are first used (except for

motor vehicles purchased on or after 1 April 2003 for

which depreciation is calculated from the month of

use) as follows:

(a) Company and subsidiary

Buildings 50 years

Equipment 8 years

Motor vehicles 6 years

Motor vehicles (purchased on

or after 1 April 2003) 4 years

(b) Joint venture and its subsidiaries

Buildings 20 years

Plant and machinery 20 years

Equipment 10 years

Motor vehicles 5 years

Interliner materials 8 years

Freehold land is not depreciated as it is deemed to

have an indefinite life.

An asset’s carrying amount is written down immediately

to its recoverable amount if the asset’s carrying amount

is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by

comparing proceeds with carrying amount.

When revalued assets are sold, the amounts included

in revaluation reserves are transferred to retained

earnings.



2.06 impairment of assets

Assets that have an indefinite useful life are not subject

to amortisation and are tested annually for impairment.

Assets that are subject to amortisation are reviewed

for impairment whenever events or changes in

circumstances indicate that the carrying amount may

not be recoverable. An impairment loss is recognised

for the amount by which the asset’s carrying amount

exceeds its recoverable amount. The recoverable

amount is the higher of an asset’s fair value less costs

to sell and value in use. For the purposes of assessing

impairment, assets are grouped at the lowest levels

for which there are separately identifiable cash flows

(cash-generating units).

2.07 accounting for leases

(a) finance lease

The Group leases certain property, plant and

equipment. Leases of property, plant and

equipment where the Group has substantially all

the risks and rewards of ownership are classified

as finance leases. Finance leases are capitalised

at the lease’s commencement at the lower of the

fair value of the leased property and the present

value of the minimum lease payments. Each lease

payment is allocated between the liability and

finance charges so as to achieve a constant rate

on the finance balance outstanding. The

corresponding rental obligations, net of finance

charges, are included in other long-term

payables. The interest element of the finance cost

is charged to the income statement over the lease

period. The property, plant and equipment

acquired under finance leases is depreciated over

the useful life of the asset.

(b) operating lease

Leases in which a significant portion of the risks

and rewards of ownership are retained by the

lessor are classified as operating leases. Payments

made under operating leases (net of any

incentives received from the lessor) are charged

to the income statement on a straight-line basis

over the period of the lease.

2.08 inventories

Inventories are stated at the lower of cost or net

realisable value. Cost is determined using the first-in,

first-out (FIFO) method. The cost of finished goods

and work in progress comprises raw materials, direct

labour, other direct costs and related production

overheads, but excludes borrowing costs. Net

realisable value is the estimated selling price in the

ordinary course of business, less the costs of

completion and selling expenses. Provision is made

where necessary, for slow moving, defective and

obsolete stocks.

2.09 trade receivables

Trade receivables are carried at anticipated realisable

value. A provision for impairment of trade receivables

is established when there is objective evidence that

the Company will not be able to collect all amounts

due according to the original terms of the receivables.

Significant financial difficulties of the debtor,

probability that the debtor will enter bankruptcy or

financial reorganisation and default payments are

considered indicators that the trade receivable is

impaired. The carrying amount of the asset is reduced

through the use of an allowance account, and the

amount of the loss is recognised in the income

statement within distribution cost. When a trade

receivable is uncollectible, it is written off against the

allowance account for trade receivable. Subsequent

recoveries of amounts previously written-off are



credited against distribution cost in the income

statement.

2.10 Cash and cash equivalents

Cash and cash equivalents includes cash in hand,

deposits held at call with banks, other short-term

highly liquid investments with original maturities of

three months or less, and bank overdrafts. Bank

overdrafts are shown within borrowings in current

liabilities on the balance sheet.

For the purposes of the cash flow statement, cash and

cash equivalents comprise cash in hand and at bank

net of bank overdrafts.

2.11 stated capital

Ordinary shares are classified as equity.

2.12 trade payables

Trade payables are obligations to pay for goods or

services that have been acquired in the ordinary course

of business from suppliers. Accounts payable are

classified as current liabilities if payment is due within

one year or less (or in the normal operating cycle of

the business if longer). If not, they are presented as

non-current liabilities.

Trade payables are recognised initially at fair value.

2.13 Borrowing costs

Borrowing costs are recognised as an expense in the

period in which they are incurred.

2.14 Current and deferred income tax

The tax expense for the period comprises current and

deferred tax. Tax is recognised in the income

statement. The charge for current tax is based on the

results for the years as adjusted for disallowable items

calculated on the basis of the tax laws enacted at the

balance sheet date.

Deferred income tax is provided in full, using the

liability method, on temporary differences arising

between the tax bases of assets and liabilities and their

carrying amounts in the consolidated financial

statements.

However, the deferred income tax is not accounted

for if it arises from initial recognition of an asset or

liability which at the time of the transaction affects

either accounting nor taxable profit or loss. Deferred

income tax is determined using tax rates that have

been enacted or substantially enacted at the balance

sheet date and are expected to apply when the related

deferred income tax asset is realised or the deferred

income tax liability is settled.

Deferred income tax assets are recognised to the extent

that it is probable that future taxable profit will be

available against which the temporary differences can

be utilised.

2.15 provisions

Provisions are recognised when the Company has a

present legal or constructive obligation as a result of

past events, it is probable that an outflow of resources

embodying economic benefits will be required to settle

the obligation, and a reliable estimate of the amount

of the obligation can be made.

2.16 Defined benefit obligations

Defined benefit plans define an amount of benefit

that an employee will receive on retirement, usually

dependent on one or more factors such as age, years

of service and compensation.



The liability recognized in the balance sheet in respect

of defined benefit plans is the present value of the

defined benefit obligation at the balance sheet date,

together with adjustments for unrecognized past

service cost. The defined benefit obligation is

calculated annually by the Company using the

projected unit credit method based on the formula

prescribed in Sri Lanka Accounting Standard 16;

Employee Benefits. The present value of the defined

benefit obligation is determined by discounting the

estimated future cash flows using the interest rates of

high quality corporate bonds that are denominated in

the currency in which the benefits will be paid, and

that have terms to maturity approximating to the terms

of the related pension liability.

Gains and losses arising from experience adjustments

and changes in actuarial assumptions are charged or

credited to equity in the statement of recognized

income and expense in the period in which they

arise.

Past service costs are recognized immediately in the

income statement, unless the changes to the plan are

conditional on the employees remaining in service for

a specific period of time (the vesting period). In this

case, the past service costs are amortised on a straight-

line basis over the vesting period.

2.17 Defined contribution plans

All employees of the Company are members of the

Employees’ Provident Fund and the Employees’ Trust

Fund, to which the Company contributes 12% and

3% respectively of such employees’ basic or

consolidated wage or salary.

2.18 revenue recognition

Revenue comprises the fair value of the consideration

received or receivable for the sale of goods and services

in the ordinary course of the Group’s activities.

Revenue is shown, net of value-added tax, rebates and

discounts and after eliminating sales within the Group.

Revenue is recognised as follows:

(a) sale of goods

Sale of goods are recognised when a Group entity

has delivered products to the customer; the

customer has accepted the products and

collectability of the related receivables is

reasonably assured.

(b) interest income

Interest income is recognised on a time-

proportion basis using the effective interest

method, unless collectability is in doubt.

(c) rent income

Rent income is recognised as it accrues, unless

collectability is in doubt.

(d) Hire income

Hire income is recognised as it accrues, unless

collectability is in doubt.

(e) Dividend income

Dividend income is recognised when the shareholder’s

right to receive payment is established.

2.19 Dividend distribution

Dividend distribution to the Company’s shareholders

is recognised as a liability in the Group’s financial

statements in the period in which the dividends are

approved by the Company’s shareholders.



3. Sales

group Company

year ended 31 march year ended 31 march

2011 2010 2011 2010

Export turnover 972,145 847,253 Nil Nil

Local turnover 3,394,740 2,170,206 146,348 25,184

4,366,885 3,017,459 146,348 25,184

Taxes

- Value Added Tax (363,120) (231,973) (15,541) (2,673)

- Nations Building Tax (75,641) (54,337) Nil Nil

- Turnover Tax (3,784) (1,349) (1,295) (249)

(442,545) (287,659) (16,836) (2,922)

Net turnover 3,924,340 2,729,800 129,512 22,262

4. Other operating income

group Company


2011 2010 2011 2010

Rent income 1,611 1,597 1,791 1,957

Profit on disposal of property, plant and equipment 3,500 964 710 714

Manufacturing charges 113 25 Nil Nil

Duty rebate 582 2,468 Nil Nil

Profit on sale of other miscellaneous items 5,993 519 Nil Nil

Dividend income Nil Nil 108,945 32,040

Other income 3,898 5,810 1,249 655

15,697 11,383 112,695 35,366

5. Operating profit

The following items have been charged / (credited) in arriving at operating profit:

group Company


2011 2010 2011 2010

Directors’ emoluments 55,348 7,443 124 124

Auditors’ remuneration

- Audit 765 809 175 181

- Non audit 123 62 90 62

Depreciation on property, plant and equipment (Note 10) 55,694 45,674 2,435 2,187

Profit on disposal of property plant and equipment (3,500) (964) (710) (714)

Repair and maintenance expenditure 703 126 703 126

Staff costs [Note 5 (a)] 214,213 181,442 3,042 2,547

Management related expenses 10,887 10,135 10,887 10,135

Provision for engineering stocks 5,550 6,082 Nil Nil

(Reversal)/provision for bad and doubtful debts (3,732) 3,813 Nil Nil

Impairment of assets 7,498 Nil Nil Nil



(a) staff costs

group Company year ended 31 march year ended 31 march

2011 2010 2011 2010

Wages and salaries 189,077 159,930 2,465 2,281

Defined benefit plans (Note 18) 8,002 6,540 342 62

Defined contribution plans 17,134 14,973 235 204

214,213 181,442 3,042 2,547

Average monthly number of persons employed

during the year :

Full time 895 763 8 6

6. Finance costs


2011 2010 2011 2010

Interest expense

- bank borrowings (38,573) (54,292) (2,566) (1,150)

- finance leases (3,210) (3,954) Nil Nil

Interest income 1,765 688 1,349 592

(40,018) (57,558) (1,217) (558)

7. Tax


2011 2010 2011 2010

Current tax 77,575 70,038 307 135

Under provision 1,736 Nil Nil Nil

Deferred tax (Note 19) 19,122 21,300 Nil Nil

98,433 91,338 307 135

5. Operating profit (Contd)



The tax on the Company’s and the Group’s profit before tax differ from the theoretical amount that would arise

using the tax rate applicable to profits of the Company and the Group as follows :


2011 2010 2011 2010


Tax calculated at the tax rate of

- Company at 35% Nil Nil 32,059 4,503

- Group 126,462 66,727 Nil Nil

Tax on income not subject to tax purposes (10,603) (14,377) (33,586) (11,476)

Tax on expenses not deductible for tax purposes 34,386 42,198 1,998 7,179

Utilization of previously unrecognized tax losses (29,820) (11,034) (165) (72)

Effect of changes in effective tax rate (24,852) Nil Nil Nil

Under provision 1,736 7,682 Nil Nil

Social responsibility levy 1,124 142 1 1

tax charge 98,433 91,338 307 135

Company

Current tax of the Company wholly consists of tax on interest income at the rate of 35 %. No income tax arises

from trade during the year due to tax losses. Tax losses of the Company available for carryforward amounted to

Rs 189,083,001 (2010 - Rs 175,846,016) as at the balance sheet date.

group

(i) associated Ceat (private) Limited

As per the agreement the Company has entered into with the Board of Investments of Sri Lanka (BOI) on 11

November 1999, the Company is entitled to 5 years exemption commencing from 15 October 2002 and after

the expiry of the tax holiday on 15 October 2007, the Company is entitled to a concessionary tax rate of 15% for

further 15 years if at least 50% of its production are exported. Further, the Company is liable to Social Responsibility

Levy at 1.5% on tax expenses for the year.

The deferred tax liability has been provided at 15%.

(ii) Ceat Kelani international tyres (private) Limited

The Company is liable to income tax at 35%. Further, Company is liable to Social Responsibility Levy at 1.5% on

tax expenses for the year.


7. Tax (Contd)


(iii) Ceat Kelani Holdings (private) Limited

The Company is liable to income tax at 35%. Further Company is liable to Social Responsibility Levy at 1.5% on

tax expenses for the year.

No provision has been made for income tax for the year, in view of the tax losses incurred by the Company. Tax

losses available for carryforward amounted to Rs 3,031,504 as at 31 March 2011 (2010 - Rs 2,437,609).

Deferred tax asset has not been recognised in respect of tax losses available for carryforward amounting to

Rs 3,031,504

(iv) Ceat Kelani radials (private) Limited

Since the Company is engaged in industrial manufacturing, as per the section 17 of Inland Revenue Act, No. 10

of 2006, the Company’s trading profit shall be exempted from income tax for a period of five years from the

commencement of the year of assessment in which Company commences to make profits or any year of assessment

not later than two years from the date on which the Company commences to carry on commercial operations

whichever is earlier. Accordingly, tax exemption period commenced from year of assessment 2008/2009.

Tax loss available for carryforward which incurred prior to the commencement of tax exemption period amounted

to Rs 131,319,065 as at 31 March 2010. The total tax loss available to carryforward as at 31 March 2011 amounted

to Rs 144,386,134.

During the year a deferred tax asset of Rs 7,040,000 recognised in the financial statements. Differed tax has been

computed at future effective tax rate of 25.7%

8. Minority interest in preference shares

group 31 march

2011 2010

At beginning of year 22,579 45,000

Redemption of preference shares (16,895) (22,421)

Share of profit for the year 2,051 33,458

Distribution (2,051) (33,458)

5,684 22,579

Preference shares of the Group represents preference shares issued by Ceat Kelani Radials (Private) Limited. These

shares are redeemable cumulative, convertible preference shares.


7. Tax (Contd)


8. Minority interest in preference shares (Contd)

The preference shares of the Company are entitled to receive dividends at the following rates on a quarterly basis:

1st year - AWPR + 4%

2nd year - AWPR + 5%

3rd year - AWPR + 6%

4th year - AWPR + 7%

During the year the Company redeemed 3,378,960 preference shares amounting to Rs 33,789,600.

During the year the Company paid a dividend in arrears amounting to Rs 9,101,404 on the preference shares

issued.

Preference dividends in arrears amounting to Rs 7,334,777.

9. Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average

number of ordinary shares in issue during the year.

group Company


2011 2010 2011 2010

Net profit attributable to shareholders 260,836 209,133 91,290 12,917

Weighted average number of ordinary

shares in issue (thousands) 80,400 80,400 80,400 80,400

Earnings per share - (Rs) 3.24 2.60 1.14 0.16

(a) Weighted average number of ordinary shares

Number of shares held as at 31 March 2010 was 40,200. However, it was restated as 80,400 in the comparative

column as a result of the event described below.

(b) sub division of shares

Share held by the shareholders was sub-divided on 1 November 2010 in to two and the number of shares was

increased by 100% from 40,200 to 80,400. Due to this, there was no increase in the stated capital.




10. Property, plant and equipment

group

freehold freehold plant/ motor Capital total land building and machinery and vehicles work-in installation equipment progress

at 31 march 2009

Cost or valuation 255,660 155,332 730,253 34,323 2,403 1,177,971

Accumulated depreciation Nil (33,268) (235,512) (26,984) Nil (295,764)

Net book amount 255,660 122,064 494,741 7,339 2,403 882,207

year ended 31 march 2010

Opening net book amount 255,660 122,064 494,741 7,339 2,403 882,207

Additions Nil 3,314 48,794 8,622 3,182 63,912

Transfers Nil Nil 1,256 Nil (1,256) Nil

Disposals Nil Nil (12) (3,056) Nil (3,068)

Depreciation (Note 5) Nil (5,951) (34,117) (5,606) Nil (45,674)

Closing net book amount 255,660 119,427 510,662 7,299 4,329 897,377

at 31 march 2010



Net book amount 255,660 119,427 510,662 7,299 4,329 897,377


Opening net book amount 255,660 119,427 510,662 7,299 4,329 897,377

Additions 100 1,874 87,662 3,970 112,751 206,357

Transfers Nil 276 22,062 Nil (22,338) Nil

Cost of disposals Nil Nil (954) (12,412) Nil (13,366)

Accumulated depreciation

related to disposals Nil Nil 429 11,211 Nil 11,640

Revaluation surplus (Note 24) 32,135 12,513 25,079 Nil Nil 69,727

Depreciation (Note 5) Nil (6,420) (45,787) (3,487) Nil (55,694)

Closing net book amount 287,895 127,670 599,153 6,581 94,742 1,116,041

at 31 march 2011



Net book amount 287,895 127,670 599,153 6,581 94,742 1,116,041


Company

freehold freehold equipment motor total land building and vehicles installation

at 31 march 2009

Cost or valuation 93,160 78,239 1,126 3,247 175,772

Accumulated depreciation Nil (5,962) (769) (3,247) (9,978)

Net book amount 93,160 72,277 357 Nil 165,794


Opening net book amount 93,160 72,277 357 Nil 165,794

Cost of disposals Nil Nil Nil (640) (640)


related to disposals Nil Nil Nil 640 640

Depreciation (Note 5) Nil (2,100) (87) Nil (2,187)

Closing net book amount 93,160 70,177 270 Nil 163,607

at 31 march 2010





Opening net book amount 93,160 70,177 270 Nil 163,607

Additions Nil Nil 82 1,140 1,222

Cost of disposals Nil Nil Nil (1,890) (1,890)


related to disposals Nil Nil Nil 750 750

Revaluation surplus (Note 24) 32,135 12,513 Nil Nil 44,648

Depreciation (Note 5) Nil (2,350) (85) Nil (2,435)

Closing net book amount 125,295 80,340 267 Nil 205,902

at 31 march 2011





10. Property, plant and equipment (Contd)


Company

(a) The freehold land and building have been revalued on 21 July 2010 at Rs 125,295,000 and Rs 81,991,544

respectively by independent professional valuers. The valuations were made on the basis of the market

value for existing use. The book values of the revalued freehold land and buildings were adjusted to the

revaluation and the resultant surplus of Rs 44,648,462 was credited to revaluation reserve in shareholders’

equity.

(b) Assets relating to the tyre manufacturing business of the Company were transferred to another Company,

namely Ceat Kelani International Tyres (Private) Limited on 1 July 1999. The assets were transferred at net

book value.

(c) If land and buildings of the Company were stated on the historical cost basis, the amounts would be as

follows:

freehold freehold

land building and

installation

as at 31 march 2011

Cost 2,855 17,083

Depreciation Nil (7,334)

2,855 9,749

(d) The Company has transferred motor vehicles costing to Rs 36,324,000 to KTL Executive Hire (Private) Limited

on 1 January 2006.

group

Ceat Kelani international tyres (private) Limited [CKitL]

(a) The buildings, plant and machinery and motor vehicles are stated at a valuation as valued by the directors

of Kelani Tyres PLC and Associated Ceat (Private) Limited at the time of transfer of the tyre manufacturing

assets of Kelani Tyres PLC to Ceat Kelani International Tyres (Private) Limited on 1 July 1999.

(b) The freehold land of CKITL has been revalued on 3 March 2006 at Rs 314,990,000 by independent professional

valuers. The valuations were made on the basis of the market value for existing use. The book value of the

revalued asset was adjusted to the revaluation and the resultant surplus of Rs 245,755,588 was credited to

revaluation reserves in shareholders’ equity.

(c) If freehold land and buildings of CKITL were stated on the historical cost basis, the amounts would be as

follows:




group (contd)

Ceat Kelani international tyres (private) Limited [CKitL] freehold freehold

land building and

installation

as at 31 march 2011

Cost 39,625 69,839

Depreciation Nil (41,164)

39,625 28,675

(d) Property, plant and equipment include computers and machinery acquired under finance leases the net

book value of which is made up as follows :

2011 2010

Cost 40,985 52,505

Accumulated depreciation (4,419) (4,577)

36,566 47,928

(e) Cost of fully depreciated assets in use at the balance sheet date amounts to Rs 300,366 (2010 - Rs

259,974).

(f) Plant and machinery had been revalued on 31 December 2007 at Rs 384,747,312 by independent professional

valuers. Books of account have been adjusted on above revaluation during the year ended 31 March 2009.

The valuation was based on current market prices. The book value of the revalued asset was adjusted to the

revaluation and the resultant surplus of Rs 53,159,803 was credited to a revaluation reserve in shareholders

equity.

(g) During the year an impairment charge of Rs 14.9 million was made on plant and machineries that were

identified as non performing assets.

associated Ceat (private) Limited [aCpL]

(a) The freehold land of ACPL had been revalued on 15 March 2006 at Rs 10,010,000 by independent professional

valuers. The valuations were made on the basis of the market value for existing use. The book value of the

revalued asset was adjusted to the revaluation and the resultant surplus of Rs 5,704,647 was credited to

revaluation reserves in shareholders’ equity.

(b) If freehold land of ACPL was stated on the historical cost basis, the amounts would be as follows:

frehold

land

as at 31 march 2011

Cost 4,305

Depreciation Nil

4,305




(c) Property, plant and equipment include motor vehicles and machinery acquired under finance leases, the

net book value of which is made up as follows :

2011 2010

Cost Nil 1,635

Accumulated deprecation Nil (1,308)

Nil 327

(d) Land and building and machinery have been pledged to obtain loan facilities from Hatton National Bank

PLC and State Bank of India.

Ceat Kelani radials (private) Limited

(a) Building was constructed on land which belongs to Ceat Kelani International Tyres (Private) Limited for

which no rent has been paid.

The plant and machinery were revalued on 31 January 2011 by an independent professional valuer. Books

of account have been adjusted on above revaluation during the year ended 31 March 2011. The valuation

was based on current market prices. The book value of the revalued asset was adjusted to the revaluation

and the resultant surplus of Rs 3,344,164 was credited to a revaluation reserve in shareholders equity.

(b) Plant and machinery have been pledged to obtain loan facility from DFCC Bank.

11. Investments

(a) investment in joint venture

Investment in joint venture represents the 50% holding in Ceat Kelani Holdings (Private) Limited, a Company

incorporated in Sri Lanka to acquire shares of Associated Ceat (Private) Limited, Ceat Kelani International

Tyres (Private) Limited and Ceat Kelani Radials (Private) Limited.

group Company

31 march 31 march

2011 2010 2011 2010

(b) investment in preference shares

Investment in preference shares Nil Nil Nil 60,000

(c) investment in subsidiary

Investment in subsidiary Nil Nil 10 10

The Company acquired ordinary shares of KTL Executive Hire (Private) Limited on 1 January 2006. KTL Executive

Hire (Private) Limited is considered as a wholly owned subsidiary of the Company.




The Company was invested in preference shares of the Ceat Kelani International Tyres (Private) Limited (CKITL)

and during the year CKITL has redeemed the preference shares.

12. Receivable from subsidiary

Receivable from subsidiary mainly consists of purchase consideration for motor vehicle transferred to KTL Executive

Hire (Private) Limited. This loan is unsecured, interest free with no repayment terms.

13. Inventories and consumables

group Company

31 march 31 march

2011 2010 2011 2010

Consumables 136,769 68,262 Nil Nil

Work in progress 63,929 56,173 Nil Nil

Finished goods 206,154 115,886 Nil Nil

Machinery spares / miscellaneous items 75,914 42,571 Nil Nil

482,766 282,892 Nil Nil

14. Trade and other receivables

group Company

31 march 31 march

2011 2010 2011 2010

Trade receivables

- Related company [ See (a) below] Nil Nil 100,258 16,345

- Other 597,468 344,018 Nil Nil

597,468 344,018 100,258 16,345

Prepayments 8,468 22,364 325 576

Receivable from related companies [Note 28 (iii)] 8,739 11,872 9,057 8,896

Other receivables and deposits [ See (b) below] 47,042 30,424 32,088 7,253

661,717 408,678 141,728 33,070

(a) Trade receivables wholly consist of receivables from Wheels (Private) Limited.

(b) Other receivables of the Company includes Value Added Tax (VAT) receivable Rs 3,214,092 (2010 -

Rs 1,967,065) and advance on imports Rs 24,426,678 (2010 - Rs 4,150,584)


11. Investments (Contd)


15. Cash and cash equivalents

group Company

31 march 31 march

2011 2010 2011 2010

Cash at bank and in hand 32,044 31,404 6,704 5,569

Fixed deposits 43,635 10,502 39,635 10,502

75,679 41,906 46,339 16,071

For the purposes of the cash flow statement, the year end cash and cash equivalents comprise the following :

group Company

31 march 31 march

2011 2010 2011 2010

Cash and bank balances 75,679 41,906 46,339 16,071

Bank overdrafts (Note 17) (42,572) (49,575) (9,708) (6,290)

33,107 (7,669) 36,631 9,781

16. Trade and other payables

group Company

31 march 31 march

2011 2010 2011 2010

Trade payables 225,761 97,203 Nil Nil

Amounts due to related companies [Note 28 (ii)] 525 7,921 Nil Nil

Accrued expenses 109,076 100,518 1,015 737

Other payables 181,798 132,397 2,908 2,942

517,160 338,039 3,923 3,679

Other payables of the Company includes / consists of dividend payable Rs 2,908 (2010 - Rs 2,939).

17. Borrowings

group Company

31 march 31 march

2011 2010 2011 2010

Current

Bank overdrafts 42,572 49,575 9,708 6,290

Bank borrowings 529,088 258,953 71,729 Nil

Lease liabilities 5,491 4,379 Nil Nil

577,151 312,907 81,437 6,290

Non-current

Bank borrowings 127,637 83,020 Nil Nil

Lease liabilities 7,766 13,088 Nil Nil

135,403 96,108 Nil Nil

total borrowings 712,554 409,015 81,437 6,290



Maturity of non-current borrowings (excluding finance lease liabilities):

group Company 31 march 31 march

2011 2010 2011 2010

Non-current

Between 1 and 2 years 45,161 74,453 Nil Nil

Between 2 and 5 years 82,476 8,567 Nil Nil

127,637 83,020 Nil Nil

group Company

31 march 31 march

2011 2010 2011 2010

Finance lease liabilities - minimum lease payments

Gross lease liability 15,541 23,630 Nil Nil

Future finance charges on finance leases (2,284) (6,163) Nil Nil

present value of finance lease liabilities 13,257 17,467 Nil Nil

group Company

31 march 31 march

2011 2010 2011 2010

Representing lease liabilities

- current 5,491 4,380 Nil Nil

- non current 7,766 13,087 Nil Nil

13,257 17,467 Nil Nil

group Company

31 march 31 march

2011 2010 2011 2010

The present value of finance lease liabilities

may be analysed as follows:

Not later than 1 year 5,491 4,380 Nil Nil

Later than 1 year and not later than 5 years 7,766 13,087 Nil Nil

13,257 17,467 Nil Nil

Non current borrowings of the Group are secured as follows:


17. Borrowings (Contd)

Kelani tyres pLC

Lender rate of Balance as at terms of security interest 31 march 2011 repayment (rs’000)

Commercial Bank AWPR*+2% 71,729 At maturity Land and building situated at period of 152 Kelaniya. - Import loan facilities days.



17. Borrowings (Contd)

associated Ceat (private) Limited

Lender rate of Balance as at terms of security interest 31 march 2011 repayment (rs’000) per month (rs’000)

State Bank of India LIBOR*+5% 37,340 947 Land, building and machinery State Bank of India LIBOR+2.25% 44,627 1,915 Land, building and machinery State Bank of India LIBOR+1.9% 22,334 1,915 Land, building and machinery DFCC Bank WAPR*+5.4% 2,865 260 Corporate guarantee by Ceat Kelani International Tyres (Private) LimitedCeat Kelani radials (private) Limited Lender rate of Balance as at terms of repayment security interest 31 march 2011 (rs’000)

DFCC Bank AWPR+6.5% 52,830 60 instalments after a grace Primary mortgage over

period of 12 months from 1st machinery and equipment

disbursement.

Ceat Kelani international tyres (private) Limited

Lender rate of Balance as at terms of repayment security interest 31 march 2011 per month (rs’000) (rs’000)

Commercial Bank 11.87% 35,043 1,500

DFCC Bank 13.00% 14,493 500

Sampath Bank 16.00% 9,747 833

Sampath Bank 16.00% 15,000 313

State Bank of India LIBOR+2.75% 111,709 2,323

Nations Trust Bank LIBOR+2.5% 54,646 1,858

Primary and secondary mortgage

for Rs 172.5 million executed over

immovable assets and land of the

Company.

Primary mortgage over machinery

Mortgage over machinery to be

imported and financed under the

term loan facility. Mortgage to be

executed once the machinery is

commissioned.

}* AWPR - Average Weighted Prime Lending Rate

* LIBOR - London Interbank Offered Rate

* WAPR - Weighted Annual Percentage Rate



18. Retirement benefit obligations

The amounts recognised in the balance sheet are determined as follows:

group Company

31 march 31 march

2011 2010 2011 2010

Present value of unfunded obligation 31,828 25,289 1,213 871

Liability in the balance sheet 31,828 25,289 1,213 871

The movement in the defined benefit obligation over the year is as follows:

group Company

31 march 31 march

2011 2010 2011 2010

At 1 April 25,289 20,714 871 809

Current service costs 3,788 3,086 127 51

Interest costs 2,361 2,242 87 93

Loss / (gain) arising due to

over / under provision in the previous years 1,853 1,212 128 (82)

Benefits paid (1,463) (1,965) Nil Nil

at 31 march 31,828 25,289 1,213 871

group Company 31 march 31 march 2011 2010 2011 2010

Discount rate 10% 12% 10% 12%

Future salary increases 10% 12% 10% 12%

Retiring age 55 years 55 years 55 years 55 years

The amounts recognised in the income statement are as follows:

group Company

31 march 31 march

2011 2010 2011 2010

Current service cost 3,788 3,086 127 51

Interest cost 2,361 2,242 87 93

Transitional adjustment 1,853 1,212 128 (82)

Total included in the staff costs [Note 5 (a)] 8,002 6,540 342 62

The principal actuarial assumptions used were as follows.



19. deferred taxation

group 31 march 2011 2010

(a) Deferred tax asset


Release / (charge) for the year (Note 7) 9,301 (21,750)

Deferred tax on revaluation reserve (10,631) Nil

at end of year 3,520 4,850

(b) Deferred tax liability


Charge / (release) for the year (Note 7) 28,423 (450)

at end of year 39,273 10,850

20. Current tax payable group Company 31 march 31 march 2011 2010 2011 2010

At beginning of the year 48,143 2,353 Nil 154

Provision for the year (Note 7) 77,575 70,038 307 135

Under provision in respect of previous year 1,736 Nil Nil Nil

Payments during the year (105,500) (24,248) (307) (289)

Balance at the end of the year 21,954 48,143 Nil Nil

21. Commitments

Capital commitments

There were no capital commitments at the balance sheet date.

financial commitments

Associated Ceat (Private) Limited and Ceat Kelani International Tyres (Private) Limited, subsidiary Companies of

Ceat Kelani Holdings (Private) Limited have an annual commitment to pay technology royalty to Ceat Limited,

India calculated on the basis of ex-factory sales value of products sold by the companies at the rate of 1%.

Ceat Kelani Radials (Private) Limited, subsidiary Company of Ceat Kelani Holdings (Private) Limited has an annual

commitment to pay technology royalty to Ceat Limited, India calculated on the basis of ex-factory sales value of

products sold by the companies at the rate of 2%.

22. Contingencies

Ceat Kelani Holdings (Private) Limited has given a corporate guarantee to Indian Bank on behalf of Associated Ceat

(Private) Limited, on the bank facilities obtained from Indian Bank, which was Rs 80 million and Hatton National

Bank which was Rs 144 million, as at 31 March 2011 (2010 - Rs 240 million).


23. Stated Capital

Company

Number of ordinary ordinary shares shares rs

At 31 March 2010 40,200 402,000

Sub division of shares 40,200 -

at 31 march 2011 80,400 402,000

Number of shares as at 31 March 2011 increased to 80,400 from 40,200 as at 31 March 2010, due to the effect

of the subdivision of shares given in Note 9.

24. Revaluation and other reserves


2011 2010 2011 2010

At 1 April 303,116 308,445 150,806 156,135

Revaluation surplus 69,727 Nil 44,648 Nil

Deferred tax on revaluation surplus (10,631) Nil Nil Nil

Transfers (2,157) (5,329) (2,157) (5,329)

at 31 march 360,055 303,116 193,297 150,806

Capital reserve (Note 25) 75,627 75,627 48,427 48,427

435,682 378,743 241,724 199,233

25. Capital reserve

Company

Sri Lanka Tyre Corporation had retained earnings of Rs 209,226,000 on 3 October 1990, the date on which the

Sri Lanka Tyre Corporation was converted to a public limited company. Of this amount, Rs 184,459,000 was

transferred during the year ended 31 March 1991 to the share capital account, to increase the share capital to Rs

260,000,000. The balance of the retained earnings of Rs 24,767,000 had been transferred to the capital reserve

account in the books of the Company as it represents profits prior to the incorporation of the Company.

A sum of Rs 23,660,000 included in capital reserve represents an amount over provided as taxation during the

period before the conversion of the Sri Lanka Tyre Corporation into a public Company.

group

Capital reserves of the group includes Rs 27,200,000, which represents the Capital Redemption Reserve Fund

(CRRF) transferred from retained profit on redemption of preference shares in Associated Ceat (Private) Limited.




2011 2010 2011 2010

Capital reserves 75,627 75,627 48,427 48,427

26. dividend per share

group Company


2011 2010 2011 2010

Dividend declared to shareholders 90,450 Nil 90,450 Nil

Number of shares in issue (thousands) 80,400 40,200 80,400 40,200

Dividend per share - (Rs) 1.13 Nil 1.13 Nil

27. Cash generated from / (used in) operations

Reconciliation of profit before tax to cash generated from / (used in) operations:

group Company

31 march 31 march

2011 2010 2011 2010


Adjustments for:

Depreciation (Note 10) 55,694 45,674 2,435 2,187

Profit on disposal of property,

plant and equipment (3,500) (964) (710) (714)

Net interest expense (Note 6) 40,018 57,558 1,217 558

Dividend income (Note 4) Nil Nil (108,945) (32,040)

Changes in working capital :

- trade and other receivables (253,039) 20,801 (108,658) (2,258)

- inventories (199,874) (43,006) Nil Nil

- payables 179,121 61,200 244 (237)

Defined benefit obligations (Note 18) 8,002 6,540 342 62

Cash generated from / (used in) operations 187,742 481,732 (122,478) (19,390)


25. Capital reserve (Contd)


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28 directors’ interests in contracts with the Company (contd)


2011 2010 2011 2010

(i) sale of goods and services

Wheels (Private) Limited 130,943 26,998 130,943 23,848

Ceat Kelani International Tyres (Private) Limited 360 360 360 360

Silver Stock Limited Nil 695 Nil 10,135

Hercules Motor Company (Private) Limited Nil 41 Nil 11

(ii) outstanding balances arising from sale /

purchase of goods and services

payable to related parties

Associated Ceat Holdings (Private) Limited 525 525 Nil Nil

Ceat Limited - India Nil 7,396 Nil Nil

525 7,921 Nil Nil

(iii) receivable from related parties

Wheels (Private) Limited 1,113 2,331 834 1,569

Silver Stock Limited 6,510 8,286 5,830 6,377

KTL Executive Hire (Private) Limited Nil Nil 1,593 Nil

Hercules Motor Company (Private) Limited 1,116 1,105 800 800

KTL Employee Trust Fund Nil 150 Nil 150

8,739 11,872 9,057 8,896




2011 2010 2011 2010

Salaries and other short term employee benefits 44,010 7,443 304 124

Termination benefits 1,198 Nil Nil Nil

Post employment benefits Nil Nil Nil Nil

Other long term benefits Nil Nil Nil Nil

45,208 7,443 304 124

There were no other related party transactions, other than those disclosed in Note 28 above during the year ended

31 March 2011.

30. Post balance sheet events

No events have occurred since the balance sheet date which would require adjustments to, or disclosure in the

financial statements.


29. Related party transactions

Key management compensation

Key management includes directors (executive and non-executive). The compensation paid or payable to key

management for employee services is shown below:


RElATEd PARTy TRANSACTIONS F0R THE yEAR ENdEd 31-03-2011

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31/1

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8,4

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9,4

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1

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21.7

7%

1

01,0

34

18.4

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21.9

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Com

mon

Dire

ctor

s -

Mr.

Cha

naka

de

Silv

a (C

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an),

Mr.

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n T.

Fer

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Dire

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ha P

. Fe

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}}


1. STOCK EXCHANGE lISTING

The issued Ordinary shares of Kelani Tyres PLC are listed with Colombo Stock Exchange.

2. SHAREHOldING AS AT 31st MARCH 2011

2010/2011 2009/2010

No. of Holders No. of shares % No. of Holders No. of shares %

FROM 1 - 1,000 7,770 2,609,781 3.25 8,313 2,101,071 5.23

1,001 - 10,000 2,619 7,410,938 9.22 777 1,892,989 4.71

10,001 - 100,000 245 7,451,901 9.27 63 1,880,980 4.68

100,001 - 1,000,000 36 10,442,280 12.99 12 2,408,960 5.99

OVER 1,000,001 7 52,485,100 65.28 4 31,916,000 79.39

10,677 80,400,000 100.00 9,169 40,200,000 100.00

3. CATEGORIES OF SHAREHOldERS AS AT 31st MARCH 2011

2010/2011 2009/2010

No of Holders No. of shares % No of Holders No. of shares %

Local Individuals 10,323 29,068,394 36.15 8,951 6,011,944 14.96

Local Institutions 280 42,016,570 52.26 162 29,733,416 73.96

Foreign Individuals 66 794,636 0.99 50 319,840 0.80

Foreign Institutions 8 8,520,400 10.60 6 4,134,800 10.29

10,677 80,400,000 100 9,169 40,200,000 100

5. PuBlIC SHARE HOldING AS AT 31st MARCH 2011 - 58.30% (AS AT 31.03.2010 - 30.25%)

6. SHARE VAluATION

2010/2011 (rs.) 2009/2010 (rs.)

Market value of Ordinary Shares 31st Mar 2011 52.60 31st Mar 2010 63.50

Highest value recorded 03rd Sep. 2010 138.70 10th Feb. 2010 74.75

Lowest value recorded 29th Nov. 2010 40.00 03rd Apr. 2009 24.00

INFORMATION TO SHAREHOldERS ANd INVESTORS


FORTy lARGEST SHAREHOldERS AS AT 31 MARCH 2011

2010/2011 2009/2010

No of shares % Holding No of shares % Holding

Silverstock Limited 20,400,000 25.373 10,200,000 25.373

Avon Lanka Limited 13,120,000 16.318 6,560,000 16.318

HSBC INTL Nom Ltd-UBS AG Zurich 7,228,800 8.991 3,879,400 9.650

Mr. M M Udeshi 4,871,700 6.059 - 0.000

Mr. N Ganarajah 4,436,600 5.518 - 0.000

HSBC INTL Nominees Ltd- HSBC Trinkaus & Burkhard 1,222,400 1.520 200,000 0.498

Mr. N Pusparaj 1,205,600 1.500 - 0.000

Amethyst Leisure Ltd 685,400 0.852 - 0.000

Mr. T L M Imtiaz 637,800 0.793 - 0.000

Lexinton Holdings (Pvt) Ltd 635,800 0.791 - 0.000

A K Investments (Pvt) Ltd 630,000 0.784 398,200 0.991

Bank of Ceylon No 01 Account 582,500 0.725 - 0.000

Commercial Bank of Ceylon PLC/V Saraswathy 504,000 0.627 - 0.000

Mr. A Sithampalam 481,400 0.599 208,200 0.518

Mr. G Dangampola & Mrs. N P Dangampola 450,000 0.560 - 0.000

Pan Asia Banking Corporation PLC/Aruna Enterprises 437,600 0.544 - 0.000

Mr. H G Carimjee 351,080 0.437 175,540 0.437

Mrs. S N Senanayake 350,000 0.435 - 0.000

Mr. B Pobran 344,040 0.428 172,060 0.428

Associated Electrical Corporation Ltd 304,500 0.379 - 0.000

Mrs. V R Jayasinghe 300,120 0.373 - 0.000

Ransri Enterprises Pvt Ltd 268,200 0.334 134,100 0.334

Bank of Ceylon A/C Ceybank Unit Trust 257,000 0.320 - 0.000

Commercial Bank of Ceylon PLC/S Vasudevan 250,000 0.311 - 0.000

Mr. A N Esufally 247,400 0.308 73,700 0.183

Freudenberg Shiping Agencies Ltd 226,200 0.281 - 0.000

Ms. A M Udeshi 203,300 0.253 - 0.000

Mr. N Rajapaksha 200,000 0.249 - 0.000

Pan Asia Banking Corporation PLC/Mr. A F Munas & Mrs. N M Munas 183,300 0.228 - 0.000

Sithlanka (Private) Ltd 172,000 0.214 86,000 0.214

Ms. S Durga 167,400 0.208 83,700 0.208

Mr. A V Dadlani 165,060 0.205 41,680 0.104

Mr. S Ramesh 155,000 0.193 - 0.000

Kalday (Pvt) Ltd 149,760 0.186 74,880 0.186

Pan Asia Banking Corporation PLC/Mr. Radhesh Eyaan Sellamuttu 145,500 0.181 - 0.000

Waldock Mackenzie Ltd/Mrs. M M Udeshi 133,000 0.165 66,500 0.165

Mouldex Limited 131,000 0.163 - 0.000

Pan Asia Banking Corporation PLC/Mrs. U Sithampalam 130,000 0.162 - 0.000

Mrs. N D Mulji 125,500 0.156 - 0.000

Mr. V Sivapothanathan 123,320 0.153 81,160 0.202


PERFORMANCE HIGHlIGHTS

groUp CompaNy

2010/11 2009/10 2008/09 2007/08 2006/07 2010/11 2009/10 2008/09 2007/08 2006/07

(amounts in sri Lanka rupees thousands)

gross sales (after discounts)

Local 3,394,740 2,170,206 1,928,958 1,759,104 1,435,520 146,348 25,184 9,089 - -

Export 972,145 847,253 477,597 693,730 426,517 - - - - -

trading profitability

Net Sales 3,924,340 2,729,800 2,164,846 2,224,130 1,675,285 129,512 22,262 8,034 - -

Cost of Sales (3,097,756) (2,042,318) (1,759,644) (1,894,608) (1,438,518) (118,412) (20,355) (7,213) - -

Gross Profit 826,584 687,482 405,201 329,522 236,767 11,100 1,907 821 - -

other operating income

Rent Income 1,611 1,597 2,086 2,606 1,788 1,791 1,957 2,446 2,786 1,968

Hire Income - - - - - - - - - -

Interest Income - - - - - - - - 7,925

Dividend Income - - - - - 108,945 32,040 33,850 600 27,200

Others 14,086 9,786 15,874 21,229 12,628 1,959 1,369 829 615 1,467

expenditure

Distribution cost (255,550) (196,849) (119,672) (95,745) (58,137) - - - - -

Administrative Expenditure (170,976) (104,855) (117,985) (105,673) (83,201) (30,981) (23,663) (13,102) (19,708) (17,953)

Other Operating Expenses (14,417) (5,674) (7,218) (3,343) (2,283) - - - - -

Finance Cost (40,018) (57,558) (118,934) (111,124) (72,976) (1,217) (558) (436) (868) (108)

Minority Interest (2,051) (33,458) - - - - - - - -

Net profit (after tax) 260,836 209,133 40,653 40,083 16,366 91,290 12,917 24,254 (16,620) 19,532

Market value per share as at 31 March Rs. 52.60 63.50 24.25 24.00 23.00 52.60 63.50 24.25 24.00 23.00


FINANCIAl REVIEW OF THE GROuP

2010/2011 2009/2010 2008/2009 2007/2008 2006/2007

rs. ‘000 rs. ‘000 rs. ‘000 rs. ‘000 rs. ‘000

sales 3,924,340 2,729,800 2,164,846 2,224,130 1,675,285

gross profit 826,584 687,482 405,201 329,522 236,767

operating profit Before tax & interest 401,338 391,487 178,288 148,596 107,562

profit after taxation & minority interest 260,836 209,133 40,654 40,083 16,366

share Capital & reserves

Stated Capital 402,000 402,000 402,000 402,000 402,000

Revaluation & other reserve 435,682 378,743 384,072 361,858 305,540

Accumulated Profit/ (losses) 173,588 1,045 (213,417) (235,120) (275,203)

shareholders’ funds 1,011,270 781,788 572,655 528,738 432,337

Minority Interest 5,684 22,579 45,000 45,000 45,000

1,016,954 804,367 617,655 573,738 477,337

assets & (Liabilities)

Current Assets 1,220,162 733,476 693,873 713,915 595,815

Current Liabilities (1,116,265) (699,089) (798,435) (785,057) (705,529)

Net Current assets 103,897 34,387 (104,562) (71,142) (109,714)

Non Current Assets 1,119,561 902,227 908,807 856,145 795,926

Non Current Liabilities (206,504) (132,247) (186,591) (211,265) (208,875)

1,016,954 804,367 617,655 573,738 477,337

ratio analysis

Gross Profit Margin 21% 25% 19% 15% 14%

Earnings per Share(Rs) - Pre subdivision 6.49 5.20 1.01 1.00 0.41

Earnings per Share(Rs) - Post subdivision 3.24 2.60 0.51 0.50 0.20

Net Assets per Share(Rs) - Pre subdivision 25.16 19.45 14.25 13.15 10.75

Net Assets per Share(Rs) - Post subdivision 12.58 9.72 7.12 6.58 5.38

Assets Uitilization -(Times) 3.51 3.03 2.41 2.60 2.10

Current Ratio (Times) 1.09 1.05 0.87 0.91 0.84

Bank Borrowings as a % of Total Assets 28% 21% 27% 33% 37%

Interest Cover- ( Times) 10.40 7.21 1.50 1.34 1.47

Note: Earning per Share and Net Asset value per Share has been calculated based on both Pre and Post Subdivision of Shares. Refer

Notes 9 & 23 of pages 28 & 40.


CONSOlIdATION ANAlySIS

Income Statement

CKaH (50%) Company KeH group twelve months twelve months twelve months twelve months ended ended ended ended 31st mar. 2011 31st mar. 2011 31st mar. 2011 31st mar. 2011

Sales 3,790,834,218 129,512,026 4,321,745 3,924,339,989

Cost of Sales (2,977,243,479) (118,411,938) (2,100,440) (3,097,755,857)

Gross Profit 813,590,739 11,100,088 2,221,305 826,584,132

Other Operating Income 9,552,288 112,694,596 2,739,315 15,696,098

Distribution Cost (255,549,540) Nil Nil (255,549,540)

Administrative Expenses (94,462,895) (28,547,472) (2,404,546) (164,047,812)

Depreciation (43,799,845) (2,435,318) Nil (6,929,163)

Other Operating Expenses (14,417,308) Nil Nil (14,417,308)

operating profit 414,913,439 92,811,894 2,556,074 401,336,407

Finance Income/(Costs) (38,876,462) (1,216,511) 75,865 (40,017,108)

Profit before tax 376,036,977 91,595,383 2,631,939 361,319,299

Income Tax (97,622,500) (306,924) (503,341) (98,432,765)

profit from ordinery activities 278,414,477 91,288,459 2,128,598 262,886,534

Minority Interest Nil Nil Nil (2,050,702)

Net profit 278,414,477 91,288,459 2,128,598 260,835,832

Basic earnings per share - Rs. 13.92 1.14 2,128.60 3.24


Balance sheet

CKaH (50%) Company KeH group twelve months twelve months twelve months twelve months ended ended ended ended 31st mar. 2011 31st mar. 2011 31st mar. 2011 31st mar. 2011assetsNon-current assets Property, Plant & Equipment 814,101,279 205,902,849 3,860,544 1,021,299,584 Capital Work - in - Progress 94,743,131 Nil Nil 94,743,131 Differed Tax Asset 3,520,000 Nil Nil 3,520,000 Investment in Joint Venture Nil 139,606,988 Nil Nil Investment in Preference Shares Nil Nil Nil Nil Investment in Subsidiary Nil 10,000 Nil Nil Receivable from Subsidiary Nil 13,493,324 Nil Nil 912,364,410 359,013,161 3,860,544 1,119,562,715 Current assets Inventories and Consumables 482,766,017 Nil Nil 482,766,017 Trade and Other Receivables 520,306,328 141,728,172 1,275,137 661,717,209 Amounts Due form Related Companies Nil Nil Nil Nil Cash and Cash Equivalents 23,055,574 46,338,751 6,284,814 75,679,139 1,026,127,918 188,066,923 7,559,951 1,220,162,365 total assets 1,938,492,328 547,080,084 11,420,495 2,339,725,079 eQUity aND LiaBiLities Capital and reserves Stated Capital 100,000,000 402,000,000 10,000 402,000,000 Capital Reserves 27,200,000 48,427,322 Nil 75,627,322 Revaluation Reserves 166,757,833 193,297,412 Nil 360,055,245 Retained Earnings/(Accumulated Losses) 403,755,163 (183,217,824) (4,943,217) 173,587,045 697,712,995 460,506,910 (4,933,217) 1,011,269,612 minority interest Preference Shares in Subsidiary 5,684,400 Nil Nil 5,684,400 5,684,400 - - 5,684,400 Non - Current Liabilities Borrowings 135,403,471 Nil Nil 135,403,471 Defined Benefit Obligations 30,615,080 1,213,122 Nil 31,828,202 Deferred Taxation 39,273,500 Nil Nil 39,273,500 Loan from Parent Company Nil Nil 13,493,323 Nil 205,292,051 1,213,122 13,493,323 206,505,173 Current Liabilities Trade and Other Payables 512,406,000 3,923,095 2,860,389 517,432,057 Amounts Due to Related Companies 524,998 Nil Nil 524,998 Provision for Taxation 21,157,832 Nil Nil 21,157,832 Borrowings 462,850,061 71,729,035 Nil 534,579,096 Bank Overdraft 32,863,992 9,707,921 Nil 42,571,913 1,029,802,882 85,360,051 2,860,389 1,116,265,895 total Liabilities 1,235,094,932 86,573,173 16,353,712 1,322,771,067 total equity and Liabilities 1,938,492,328 547,080,084 11,420,495 2,339,725,079

Net Asset value per Share - Rs. 34.89 5.73 (4,933.22) 12.58

CONSOlIdATION ANAlySIS


To Employees as remunaration

3%

To Providers of funds asinterest

1% To State as taxes

14%

Retained in the business

82%

STATEMENT OF VAluE AddEd

2010/2011 % 2009/2010 %

Turnover 145,053 127.19% 24,935 116.58%

Other Income 112,910 99.00% 35,738 167.09%

Cost of Material & Services Purchased (143,916) (126.19%) (39,284) (183.67%)

114,047 100.00% 21,388 100.00%

Distributed as follows

To Employess as remuneration 3,042 2.67% 2,547 11.91%

To Providers of funds as interest 1,217 1.07% 558 2.61%

To State as taxes 16,063 14.08% 3,179 14.86%

To Shareholders as dividens - 0.00% - 0.00%

Retained in the business

Depreciation 2,435 2.14% 2,187 10.23%

Reserves 91,290 80.05% 12,917 60.39%

114,047 100% 21,388 100%


JoiNt VeNtUre

PERFORMANCE

HIGHLIGHTS


(amounts in sri Lanka rupees thousands) 2010/11 2009/10 2008/09 2007/08 2006/07

Production (MT) 14,972 12,853 9,762 11,929 10,883

Total Sales (MT) 14,902 13,057 9,726 12,288 10,675

Domestic Sales 5,637,378 3,710,808 3,345,389 3,035,913 2,470,647

Export Sales 1,944,290 1,694,506 955,195 1,387,461 853,033

Total Sales 7,581,668 5,405,314 4,300,584 4,423,374 3,323,679

Cost of Sales (5,954,487) (3,959,171) (3,490,971) (3,766,806) (2,851,356)

Contribution 1,627,181 1,446,143 809,613 656,568 472,323

Distribution/Administrative Cost (816,459) (642,974) (461,184) (367,093) (255,630)

Finance Cost (77,753) (114,193) (239,001) (221,623) (146,967)

Other Operating Income 19,105 16,639 27,645 41,766 24,088

PBT 752,074 705,616 137,074 109,618 93,814

Taxation (195,245) (182,068) (36,300) 6,456 (33,642)

PAT 556,829 523,547 100,774 116,073 60,172

PBDT 839,674 783,360 213,098 183,263 147,034

SuMMARISEd INCOME STATEMENTCeat Kelani associated Holdings (pvt) Ltd - Consolidated


31-03-2011 31-03-2010 31-03-2009 31-03-2008 31-03-2007

Non-Current Assets 1,817,689 1,466,565 1,454,993 1,347,732 1,301,971

Current Assets 2,052,256 1,357,606 1,316,412 1,382,671 1,149,069

total assets 3,869,945 2,824,171 2,771,405 2,730,403 2,451,040

Capital and Reserves 1,395,426 1,030,703 638,272 552,039 437,165

Minority Interest 11,369 165,158 210,000 210,000 210,000

Non-Current Liabilities 403,544 253,051 348,965 421,014 416,605

Current Liabilities 2,059,606 1,375,259 1,574,168 1,547,351 1,387,270

total assets 3,869,945 2,824,171 2,771,405 2,730,403 2,451,040

SuMMARISEd BAlANCE SHEETCeat Kelani associated Holdings (pvt) Ltd - Consolidated


PERFORMANCE HIGHlIGHTS - JOINT VENTuRE

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

2800

3000

2006/07 2007/08 2008/09 2009/10 2010/11

Rs. M

n

Last Five Years

Total Assets Employed

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

2006/07 2007/08 2008/09 2009/10 2010/11

Rs. M

n

Last Five Years

Total Borrowings

0

100

200

300

400

500

600

2006/07 2007/08 2008/09 2009/10 2010/11

Rs. M

n

Last Five Years

Profit After Tax

0

20

40

60

80

100

120

140

160

180

200

220

2006/07 2007/08 2008/09 2009/10 2010/11

Rs. M

n

Last Five Years

Ordinary Dividends

0

2000

4000

6000

8000

10000

12000

14000

16000

2006/07 2007/08 2008/09 2009/10 2010/11

in M

etr

ic T

on

es

Production

0

2000

4000

6000

8000

10000

12000

2006/07 2007/08 2008/09 2009/10 2010/11

in M

etr

ic T

on

es

Exports/Local


NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Seventeenth Annual General Meeting of Kelani Tyres PLC will be held at the Capri Club No. 62, Dharmapala Mawatha Colombo 3 on 15th September 2011 at 9.30 am for the following purposes;

1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and the Statement

of Accounts for the year ended 31st March 2011 and the Report of the Auditors thereon.

2. To pass the Ordinary Resolution set out below to re-elect Mr H S De Silva who is 70 years of age, in pursuance of

the provisions of the Companies Act, No.7 of 2007, as a Director of the Company :

“IT IS HEREBY RESOLVED that the age limit stipulated in Section 210 of the Companies Act, No.07 of 2007 shall not

apply to Mr H S De Silva who is 70 years of age and that he be and is hereby re-elected a Director of the Company

in terms of Section 211 of the Companies Act, No.7 of 2007.”

3. To re-elect Mr L P Fernando who retires by rotation in terms of Articles 84 and 85 of the Articles of Association, as

a Director of the Company.

4. To re-appoint Messrs. PricewaterhouseCoopers, Chartered Accountants, as the Auditors of the Company and to

authorize the Directors to determine their remuneration.

5. To authorize the Directors to determine donations for the year ending 31st March 2012 and up to the date of the

next Annual General Meeting.

By Order of the Board

KeLaNi tyres pLC

p W Corporate seCretariaL (pVt) LtDSecretaries

This 10th day of August 2011

Colombo

Notes: 1. A shareholder entitled to attend and vote at the above Meeting is entitled to appoint a Proxy to attend, speak

and vote on behalf of him/her.

2. A Proxy need not be a shareholder of the Company.

3. A Form of Proxy is enclosed for this purpose.

4. The completed Form of Proxy must be deposited at the Registered Office of the Company, P O Box 8,

Nungamugoda, Kelaniya by 9.30 am on 13th September 2011.


FORM OF PROXy

I/We*…….………………….….................................................(holder of NIC No………………………..) of………………

………………………………………………………………………………………………….........................................……..

being a shareholder/s* of KELANI TYRES PLC hereby appoint …………………………………………………..……………

…………………………of…………………………………………………………………………………………or failing him*;

Mr Ruwanpura Chanaka Dharmajith De Silva of Colombo or failing him*

Mr Rohan Thilak Fernando of Colombo or failing him*

Mr Lasantha Premalal Fernando of Colombo or failing him*

Mr Harendra Sherman De Silva of Colombo or failing him*

Mr Tuduwage Bevan Perera of Colombo or failing him*

Mr Ranjit Michael Samuel Fernando of Colombo or failing him*

Mr Don Soshan Kamantha Amarasekera of Colombo*

as my/our *proxy to represent me/us* to speak on my /our behalf and to vote as indicated hereunder for me/us* on my/our* behalf at the Seventeenth Annual General Meeting of the Company to be held at Capri Club No. 62, Dharmapala Mawatha Colombo 3 on 15th September 2011 at 9.30 am and at any adjournment thereof and at every poll which may be taken in consequence thereof. for against

1. To receive and consider the Annual Report of the Board of Directors on the Affairs

of the Company and the Financial Statements for the year ended 31st March

2011 with the Report of the Auditors thereon.

2. To pass the Ordinary Resolution set out under item 2 of the Notice of Meeting

to re-elect Mr H S De Silva who is 70 years of age, as a Director of the Company.

3. To re-elect Mr L P Fernando, who retires by rotation in terms of Articles 84 and

85 of the Articles of Association, as a Director.

4. To re-appoint Messrs. PricewaterhouseCoopers, Chartered Accountants, as the

Auditors of the Company and to authorize the Directors to determine their

remuneration.

5. To authorize the Directors to determine donations for the year ending 31st March

2012 and up to the date of the next Annual General Meeting.

In witness my/our* hand this .................. day of .......................... Two Thousand and Eleven.

................................................Signature of Shareholder/s

* Please delete what is inapplicable.

Note: Instructions as to completion appear on the reverse hereof.


INSTRuCTIONS AS TO COMPlETION

1. Kindly perfect the Form of Proxy by filling in legibly your Full Name, Address and the National Identity Card Number

and by signing in the space provided and filing in the date of signature.

2. If the Form of Proxy is signed by an Attorney, the relative Power of Attorney should accompany the Form of Proxy

for registration if such Power of Attorney has not already been registered with the Company.

3. If the appointer is a Company/Incorporated body, the Proxy Form must be executed in accordance with the Articles

of Association/Statute.

4. If you wish to appoint a person other than the Chairman or a Director of the Company as your Proxy, please insert

the relevant details in the space provided.

5. Please indicate with an ‘X’ in the space provided how your Proxy is to vote on the resolution. If no indication is

given, the Proxy in his discretion will vote as he thinks fit.

6. The completed Form of Proxy should be deposited at the Registered Office of the Company, P.O. Box 8,

Nungamugoda, Kelaniya, by 9.30 am on 13th September 2011.


Please bring this Attendance Slip and your National Identity Card when attending the Seventeeth Annual General Meeting

to be held at Capri Club No. 62, Dharmapala Mawatha Colombo 3 on 15th September 2011 at 9.30 am.

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

Shareholder’s Full Name .....................................................................................................

Shareholder’s NIC Number .....................................................................................................

Number of Shares .....................................................................................................

Signature of Proxy Holder .....................................................................................................

(If applicable)

Proxy Holder’s Full Name .....................................................................................................

Proxy Holder’s NIC Number .....................................................................................................

ATTENdANCE SlIP

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